One of Robert Lucas’ most notable insights is that human capital (unlike, say, oil) moves from where it is scarce to where it is plentiful. (I thought Lucas had a very quotable line to this effect, but it doesn’t seem to google.) But why would human capital behave in this counter-intuitive way?
Here’s an interesting answer from Gogol’s Dead Souls. In this passage, a nephew tells his uncle that he wants to move back to his rural estate from the big city, and his uncle tries to dissuade him:
“That is not the point, uncle,” said the nephew. “…I have another duty—three hundred souls of peasants, an estate in disorder, and a fool as a steward. The empire will suffer very little loss if another man is set to copying documents in the office in my stead, but there will be a vast loss if three hundred men do not pay their taxes. What do you think about it? I am a landowner; if I busy myself with improving and caring for those who are intrusted to me, and if I present the empire with three hundred upright, sober, and industrious subjects, will my service be in any way inferior to that of any head of department—Lyenitzuin, for instance?”
The actual councillor of state stood with his mouth wide open in amazement. He had not expected such a reply. After reflecting for a short time, he began again in this fashion: “But still, my friend, how can you bury yourself in the country? What sort of society can there be among the moujiks? Here, at all events, you may encounter a general or a prince in the street. You will pass someone there; well, and there’s the gaslights, and busy Europe hard by, whereas, in the country, everyone you meet is either a peasant or a woman. And why condemn yourself to barbarity for your whole life?”
In short, Gogol’s answer to Lucas is similar to my response to Tim Harford: Human capital clusters because people who have lots of human capital think that people who don’t have lots of human capital are boring.
Update: According to Chat, Lucas doesn’t have any punchy pull quote on this, but Paul Romer gives one to him. “Lucas’s (1988) observation, that people with human capital migrate from places where it is scarce to places where it is abundant, is as powerful a piece of evidence as all the cross-country growth regressions combined.”
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The Economic Gravity Model (Reilly's Law adapted)
Just like physical gravity, the economic attraction between two places is directly proportional to their "mass" (population, GDP, or concentration of human capital) and inversely proportional to the distance between them.
A massive pool of human capital exerts a massive "gravitational pull" that easily yanks solo individuals out of smaller, distant pools.
Human capital moves toward existing human capital because skills and ideas compound when people gather closely together, much like musical instruments tuning together in an orchestra.
It's not exactly like Gresham's Law, which was the first thing that came to mind.
More like the "network effect": Where there are more people generally like you, the better off you'll be.
Or like what happens when two partially-inflated balloons are connected by a valve, and the valve is opened: the balloon with the least air in it loses air to the one that is more distended.
Hmm. Usually I'm better at analogies than this.