It's remarkable how few new ideas most economists get. They look at the world the way they always have and worry about the same things they've always worried about, chasing the same rabbits down the same burrows.
They analyse the world using their standard model and see those things the model is designed to highlight, but don't see anything that's outside its scope.
What most economists rarely think about is the spatial dimension of the economy. It's ignored by their model, so it's ignored by them. Could it have something to tell us about why the economy isn't functioning as well as it could? Who knows?
Jane-Frances Kelly and Paul Donegan, that's who. They've been studying the economics of our cities for the Grattan Institute, and their eye-opening findings are explained in their new book, City Limits: Why Australia's cities are broken and how we can fix them. Here's my version of their message.
Despite our self-image as sun-bronzed sons and daughters of the soil, we are a nation of city-dwellers. Australia is one of the most urbanised countries in the world.
Our capital cities are growing and most of our income is being generated in them, notwithstanding the big expansion in mining, which is more about additional structures and capital equipment than workers.
For at least the past 40 years, all the net increase in employment has been in the services sector, and the services sector exists mainly in cities. The arrival of the knowledge economy will only heighten this trend.
Most of the economic action in our capitals is occurring near the centre of the city. Just the Sydney and Melbourne central business districts – occupying a combined area of a mere 10 square kilometres - account for about a quarter of each city's production.
Businesses crowd into the CBD because it gives them the easiest access to desirable employees and because they benefit from being close to the other firms in their industry and their suppliers. It facilitates the transfer of knowledge. Get it? They think that crowding together increases their productivity.
The biggest trend in city property prices is not just big rises over time, but the way inner-city prices are rising so much faster than outer-city prices as people seek "proximity" – closeness to the centre, with all its facilities and jobs.
Researchers at the Reserve Bank have shown that if you draw a graph with home prices on the vertical axis and distance from the CBD on the horizontal axis and then plot actual prices, you get an almost perfectly downward-sloping curve for Sydney, Melbourne, Perth or Brisbane. On average, prices are highest close in and lowest far out.
For the five mainland state capitals, 60 per cent of all the employment growth over the five years to 2011 occurred within 10 kilometres of the centre. But here's the problem: no doubt because inner-city house prices were so high, about 55 per cent of the population growth occurred 20 kilometres or more from the centre.
In other words, we've been developing a big economic and social problem few economists have noticed: a growing spatial divide between where the jobs are and where people live.
It's an economic problem because it increases the economy-wide costs of each day's production of goods and services. It's a social problem because, for the most part, those costs fall on the less-wealthy working families living in outer suburbs. Some of the costs come as dollars paid, some as time wasted and some as opportunities forgone.
The growing distance between where we live and where we work means car travel in peak periods is getting slower in all capital cities. Traffic is slowest on inner-suburban roads, because that's where most people are travelling to or from.
Over the past decade, the proportion of people spending more than 10 hours a week commuting has increased by about half. One in four full-time employees spends more time commuting than with their children.
Women caring for children in outer suburbs face tough choices, with a lack of accessible jobs forcing some out of the workforce altogether.
So what can we do about it? We need to reduce congestion and make it easier, quicker and cheaper to move across the city. To me that means improving access to public transport – which is excellent in the inner-city and woeful in the outer suburbs – not returning to our earlier delusion that building more expressways will fix it.
One day we'll have the courage to use time-of-use tolling to encourage those who have the flexibility to avoid travelling in peak periods to stop doing so.
But improving public transport is expensive and can be only part of the solution. The authors stress the need to increase the supply of semi-detached homes – terraces, townhouses and low-rise blocks of flats – in inner and middle suburbs.
This would require changes to complex planning and zoning regulations – and a lot of public consultation if the changes are to stick. But if so many people want to live closer in, we need to accommodate their wishes.
With the release of another intergenerational report this week, we'll be hearing much agonising by politicians and economists about why our productive efficiency isn't improving fast enough. But don't hold your breath waiting for them to acknowledge that a fair part of their problem is spatial.