The current campus for Yale’s School of Management consists of four Hillhouse Avenue mansions, built for titans of New Haven industry more than a century ago, and a small modernist structure at 135 Prospect St. The result is genteel fragmentation, with handsome faculty offices, cramped classrooms, awkward technology and no student study space to speak of. Replacing it with the proposed 230,000 square-foot, $230 million design on Whitney Avenue is a great idea for SOM, for Yale and for the City of New Haven.

A little history helps show why.

In the half century from the Civil War to World War I, New Haven became something of a business juggernaut. The city grew from under 40,000 to more than 130,000. Manufacturers such as Winchester Repeating Arms, the Sargent Company and New Haven Clock dominated the local economy.

Within that humming economy, Yale was a wonderful and famous college — but a minor component of New Haven’s economy. Even famed football coach Walter Camp had a day job: He was president of New Haven Clock.

Things are very different now. The manufacturers are gone. “Meds and Eds” dominate. Yale is by far the city’s largest employer with roughly 12,000 jobs (and the fourth largest private employer in Connecticut). Together, Yale and Yale-New Haven Hospital employ more people than the next 15 private New Haven firms combined.

During the industrial era, Yale’s rivals were busily founding business schools: Penn in 1881, Chicago and UC Berkeley in 1898, Dartmouth and NYU in 1900, Harvard in 1908, MIT in 1914, Columbia in 1916 and Stanford in 1925. These early starters are (not coincidentally) the strongest of Yale SOM’s competitors. Starting half a century late (in 1976) has been one challenge for Yale SOM, but one it has worked to overcome. It has become a leader in many fields and will continue to improve under the tutelage of Ted Snyder, the renowned dean of Chicago’s business school, who has agreed to lead the school, beginning in 2011.

But to progress, SOM must increase in size. All except Dartmouth’s Tuck School are at least twice their Yale counterpart’s size, and some, like HBS, are monsters.

Yale’s tradition in professional schools, as in the college, is to limit size and focus on quality. But reaching competitive scale is important — witness the decision to build two new undergraduate colleges. One major purpose of the new campus is to allow SOM to expand by 50 percent, from roughly 400 students to about 600. Though the school will remain small by business school standards, it will be big enough to compete for the best of the best.

With a new physical plant comparable to those found in places like Cambridge and Philadelphia, SOM’s quality will show itself more effectively. The University’s commitment to achieving the best in business education will be signaled by the dynamic new campus, replete with superb classrooms, focused community space, a library, excellent recruitment facilities and generous study space for an enlarged student body.

Yale will profit handsomely in the long run from having a top-tier business school, but so will New Haven. Most obviously, the expansion of SOM will add a few million dollars in local spending. More importantly, a great business school will become a catalyst for business investment and innovation in New Haven and its region.

These benefits to New Haven will not come without an occasional point of friction. Not everyone loves the Norman Foster design; some will prefer to preserve the buildings now standing on the SOM site. But the balance of benefits and costs for our city are clear, and we must make the right choice on behalf of New Haven’s future.

As the late Bart Giamatti once said, “Human beings made and make cities, and only human beings can kill cities, or let them die. And human beings do both — make and unmake them — by the same means: by acts of choice.”

Let’s choose the best for SOM, for the university and for New Haven.

Doug Rae is the Richard S. Ely Professor of Management.