By Jonathan Woetzel, McKinsey & Company

Cities are productivity engines. They create productivity by enhancing the number and frequency of interactions. Higher population density equals higher frequency of interactions, and the more interactions there are, the more you can figure out what you’re good at and what you’re not. Then, we stop doing what’s not good, and we become better at the good. That’s specialization. That’s productivity. Doing that with as many people as you can creates the opportunity for growth.

The cities that are able to spread that interaction experience across their entire population are the ones that grow best and fastest. That’s because a city is not just a place to live. It’s a place to be employed and to experience having a new job and learning new skills. And if people aren’t able to do that—because they don’t have a home in the city, or they live too far from their work, or they have a sick parent for whom there’s no healthcare, or they have children for whom there’s no day care—those are people who are not experiencing as much productivity as they could. That’s a cost to the city. If they can’t be included, they will not be able to contribute.

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Jonathan Woetzel is a director of the McKinsey Global Institute and a director in McKinsey’s Shanghai office.