Driving back to Boston from the Midwest, I am always struck by the extent to which geography is destiny -- specifically, by the inevitability of the victory of New York over Boston in so many contests. 

Is Boston's triumph over New York equally inevitable, at least in certain other respects? I think perhaps it is

It is easy to forget today that, for its first hundred years or so, Boston was a bigger and more prosperous city than New York.  So were Philadelphia and Charleston. By the eve of the American Revolution, however, on the strength of its great natural harbor, New York had surged past Boston and Charleston and caught up with Philadelphia in terms of economic significance. 

It only requires barreling down the New York State Thruway beside the Mohawk River to understand what happened next -- that is, to comprehend the logic of the Erie Canal.  The gorge through the mountains at Little Falls is one of only two abrupt drops in the Mohawk with which canal builders had to contend in order to join the Hudson River with Lake Erie, via the Mohawk, Wood Creek and various lakes and rivers in the west. It is, in fact, the only point in the 2,000-mile length of the Appalachian mountain chain of easy passage to the west.

Thus while Canadians struggled with the tortuous and highly seasonal passage of the St. Lawrence River, and while Virginians sought in vain to turn the Potomac River into an effective alternative to Daniel Boone's trail through the Cumberland Gap,  New Yorkers in the years between 1817 and 1825 opened a two-way passage to the rich farmlands of the interior. Boston, Baltimore and Philadelphia sought to catch up by building railroads to the west, but it was too late. Within a few years of the opening of the canal, New York's advantage had become insuperable. The New York Central Railroad followed. Gov. Dewitt Clinton's prophecy of 1825 would be fulfilled:

(Plenty of readers know that Peter Bernstein is author of a trio of splendid books on finance, Capital Ideas:  The Improbable Origins of Modern Wall Street; Against the Gods: The Remarkable Story of Risk; and The Power of Gold: The History of an Obsession. Less well known is that last year he published Wedding of the Waters: The Erie Canal and the Making of a Great Nation, a superlative account of how the power of an extensive transportation network set New York on the path to become the world's greatest city.) 

All this history is on display as you approach Albany. Then, driving further east, crossing the Hudson River, the Taconic range and the Berkshire Mountains soon rise up like a heavily-forested wall to a gated kingdom -- New England. I always feel the same excitement then, as though I were passing through a fortress door. Historically, this barrier has been both a curse and a blessing for New England.

It has meant that there is no easy way to connect to the markets of the rest of the country, other than by its seacoast.  But it has forced the region to live by its wits.  For the first three hundred years, that largely meant depending on its merchant traders to range widely over the world, picking up new ideas and turning them to a profit. And in due course, Boston became the intellectual capital of North America, Edinburgh to New York's London.

Twice before, New England has succeeded in erecting great industries behind the wall -- textile and shoe manufacturing in the nineteenth century, real-time computers in the twentieth century, in the years after World War II.  The first business it lost eventually to the American South and Japan, where manufacturing costs were lower. The second it lost all too quickly to California, where firms were much quicker to adapt to changing technologies.   

These days, Boston is under siege. It is not just the Red Sox, whose supercession in the twentieth century was foreordained, at least statistically, by the opening of the Erie Canal in the nineteenth century. With a much bigger internal market on which to draw, New York could afford to pay more for the best ballplayers. Only the recent purchase of the Boston club by a syndicate led by John Henry, a speculator in the broadest and deepest markets in the world, the currency markets, has permitted the Red Sox to remain competitive in the new world of player free agency.

But the so-called "Curse of the Bambino" should be understood in its more general case. Just as owner Harry Frazee sold Babe Ruth's contract to the New York Yankees after the 1919 season in order to finance a Broadway musical (and thereby sent the Red Sox crashing to the bottom of the standings for the next two years to finance his New York ambitions), so textile magnate Tom Yawkey returned from the South (he had been born in Detroit), bringing his prejudices with him. Separated from the rest of the world by the Berkshires, he passed up Jackie Robinson and Willie Mays. The Red Sox, which he owned from 1933 until he died in 1976, were the last team in the major leagues to field an African American player.

(The Boston Celtics, on the other hand, were just the opposite: the first professional basketball team to start a black ballplayer, to name one captain, to field an all-black starting five, to have an African-American coach.  But cosmopolitanism is part of Boston, too.)     

Boston parochialism, much more than that the mystic loss of Babe Ruth, accounts for the historic failure of the Red Sox team. The old attitudes are mostly gone now, but in the 1970s court-ordered busing to achieve school integration and resistance to it heavily damaged the city's schools. Nor is it simply a distinctive prickliness about class, race and ethnicity that characterized New England. There is no better symbol of a certain bloody-mindedness than the general absence of road signs in the region, until in the 1970s the feds forced them into compliance with the National Defense Highway Act. They don't call it New England for nothing.

Threatening more serious harm to Boston's reputation is the Big Dig. A giant ceiling tile fell and killed a woman last summer; portions of a tunnel connector have been closed since the accident while inspections and repairs are made. Milena Del Valle's death was heart-rending in the extreme. But the episode is no more likely to recur than the deaths that occurred when bridges spanning the north branch of the Pentwater River, the Schoharie Creek, a portion of Interstate 95 in Connecticut and a bridge in New Jersey collapsed during rainstorms in recent years, sending automobiles and their drivers and passengers hurtling into the void.

The basic fact of the Big Dig is that it remains an impressive engineering success (and an appropriations debacle).  As Thomas Hughes, a distinguished historian of technology, wrote last week in The Boston Globe, "Responsible retrospective will, in time, reveal the causes of the local project's failures, and then other cities can learn from its flawed, yet still heroic, history."

Most worrisome is the corporate hollowing-out that has taken place in recent years in Boston and Worcester, the land-locked wonder which for centuries was New England's second biggest city. (Coastal Providence, R.I. passed it during the 1990s. The local banking industry has collapsed, insurance companies and mutual funds have been acquired, manufacturing companies have closed their doors or sold out to their competitors. The Atlantic Monthly has moved to Washington, and the Globe was sold to The New York Times, which is said to be operating it at a loss.  

The significance of the disappearance locally owned media can hardly be overestimated.  The canny Boston lending practices long exemplified by various family trusts, investment banks and the old First National Bank of Boston (it helped start the modern movie business) has long since been spun off to other institutions, notably the venture capital firms. But nothing yet has grown up to replace the once-distinctive voices of the Providence Journal, the Worcester Telegram and Gazette, the Hartford Courant, the Berkshire Eagle and the Boston Globe, all them sold to out-of-towners. It's an unfortunate city that looks to its colonial rivals for its defense.

The mainstays of New England traditionally have been its entrepreneurs, its educators and its politicians and moralizers. Here the situation is not so bad.  True, the entrepreneurial companies associated with "the greatest generation," Polaroid and Digital Equipment are gone now, rolled up by technological revolutions that Edwin Land and Kenneth Olsen failed to anticipate. But the life sciences industry is growing rapidly today, thanks in large measure to a marriage of mathematics and molecular biology that was more or less invented at MIT by Eric Lander and David Botstein -- genomics, the systematic use of information contained in an organism's genes. The basic text on industry in New England is still that of the historian Daniel Boorstin, who pointed out that, for a crucial twenty years or so in the early nineteenth century, when they had little else to sell, its merchants made a good living exporting its ice (for drinks) and rocks (for building) around the world.

Spatial propinquity is a big part of this story. The political capital of Massachusetts was never separated from its chief commercial city, as it was in most other states.  Short lines of communication mean that strengths tend to be nourished and preserved. Harvard College was not founded by John Harvard, as is commonly supposed (he contributed some books and some money), but by an act of the Massachusetts legislature. MIT, just across the river from Boston and a pleasant walk from Harvard at the other end of Cambridge, is itself a land-grant university -- it split the money from the Morrill Act of 1862 with the agricultural school in Amherst that became the University of Massachusetts.

Propinquity explains the alacrity with which Massachusetts politicians used some $400 million in aid which might otherwise have been lost as one strut in a program that creates a universal health care system in the state. Boston's three academic medical centers -- medical schools and affiliated hospitals operated by Harvard, Tufts and Boston University -- are in relatively good shape, too, thanks to indefatigable representation by Sen. Edward M. Kennedy Jr.

The close relationship between money and influence also explains the exaggerated presence of Massachusetts pols on the national stage. Gov. Mitt Romney, a Republican, is the latest candidate to prepare to launch a presidential bid, after Kennedy, Michael Dukakis, Paul Tsongas, and John Kerry (John Silber and William Weld tried but failed to make it to that stage); he may be the longest shot yet. On the other hand, the future of the Massachusetts congressional delegation seems promising. If the Democrats succeed in retaking a majority in the House of Representatives, look for Barney Frank and Michael Capuano (who represents the district that sent Tip O'Neill and Jack Kennedy to Congress) each to play a role. 

And the universities? In general, they are doing well. MIT is still settling down under its new president Susan Hockfield, who arrived nearly two years ago from Yale. Joseph Aoun has taken the reins at Northeastern University. Boston University and Tufts found their presidents, Robert Brown and Lawrence Bacow, at MIT.  Boston College may have problems under William P. Leahy, but you can't tell it from alumni giving. Wellesley College is searching for a new head. Jehuda Reinharz has led Brandeis since 1994. Harvard, which took a flyer in 2001 on former Treasury Secretary Lawrence Summers, is looking for a president again, after a bruising battle over his suitability. Summers, raised in Philadelphia and possessing no visceral connection to New England, may yet opt to go to New York or Washington, places where spatial propinquity is important in other industries -- markets, influence, governance, fashion, news. Boston is about something else again:  education, science, innovation, strategy, conscience, good works.

Somehow it all works out in the end. People sort themselves out according to where they want to be. From the Boston suburb of Medford, New York obtained Michael Bloomberg, first as media tycoon, then as mayor. Boston got genomics' founders Lander and Botstein from New York (Botstein has since decamped to Stanford, California).  The terms of trade are fair. Thanks to the Erie Canal and the Berkshires, they are likely to endure.

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Economic Principals is unaccustomed to vacations. It turns out that certain transition costs are involved.  As Adam Smith put it, "A man commonly saunters a little in turning his hand from one sort of employment to another." Back to technical economics next week.