Cities form at sites where large property owners have decided to live. Specialization of labor expands to meet the demands of the wealthy. Cities grow even larger when manufacturing industries produce for export, and whose workers are essentially supported by the production of foreign lands. Cantillon placed a great deal of emphasis on transportation costs. He found that property owners who lived far from their lands would experience a reduction in income proportional to the cost of transporting their production to market.
THE PROPERTY OWNERS who only have small estates usually reside in market towns and villages near their lands and farmers. The transportation of their production to distant cities would not enable them to live there comfortably. However, property owners that own several large estates have the means to live at a distance from them and enjoy a pleasant society with other property owners and nobility of the same species.
If a prince or noble, who has received large grants of land at the time of a conquest or discovery of a country, fixes his residence in some pleasant spot, and several other lords come to live there to be within reach of each other and to enjoy a pleasant society, this place will become a city. Great houses will be built for the nobility in question, and many more will be built for the merchants, artisans, and people of all sorts of professions who will be attracted there. These noblemen will require bakers, butchers, brewers, wine merchants, and manufacturers of all kinds to service their needs. These entrepreneurs will, in turn, build houses in this location or will rent houses built by other entrepreneurs. There is no great nobleman whose expense upon his house, his retinue and servants, does not maintain merchants and artisans of all kinds, as may be seen from the detailed calculations that I had made for the supplement of this essay.5
All these artisans and entrepreneurs serve each other, as well as the nobility. The fact that their upkeep ultimately falls on property owners and nobles is often overlooked. It is not perceived that all the little houses in a city, such as we have described, depend upon and subsist at the expense of the great houses. However, it will be shown later that all the classes and inhabitants of a state live at the expense of the property owners.6 The city in question will grow larger if the king, or the government, establishes law courts to which the people of the market towns and villages of the province must have recourse. An increased number of entrepreneurs and artisans of every sort will be needed for the maintenance of the judges and lawyers.
If in this same city workshops and factories are established to manufacture beyond home consumption, for export and sale abroad, the city will be large in proportion to the workmen and artisans who live there at the expense of foreigners.
However, if we put aside these considerations, in order to not complicate our subject, we may say that the gathering of several rich property owners living in the same place suffices to form what is called a city. Many cities in Europe, mainly in the interior, owe the number of their inhabitants to this assemblage. In this case, the size of a city is naturally proportioned to the number of property owners living there, or rather to the production of the land which belongs to them, minus the cost of transportation to those whose lands are the furthest away, and the part that they are obliged to give to the king or the government, which is usually consumed in the capital.