Creative Class

This fascinating  report by Robert Lang and Thomas Sanchez of Virgina Tech’s Metropolitan Institute shows how regional dynamics are shaping American politics today.

The full report is here.

A recent report from the Urban Land Institute and Columbia University’s Milstein Center for Real Estate examines what globalization and demographic trends mean for the world’s real estate markets.  Download the report here.

Wall Street Journal (sub required) writer Evan Ramstad has a piece in today’s paper about South Korean home prices spiraling higher. According to the piece, homes in and around Seoul are up 20% just this year and the government doesn’t seem to know exactly how to handle this issue.

"Housing is particularly tight in Seoul, the hub of
administration, business, culture, and education in the country — and
that centrality attracts a stream of migrants. The capital and its
environs are now home to 20 million people out of the country’s
population of 49 million. In the most popular neighborhoods, apartment
prices have tripled since the start of 2003.

The rising prices are prompting frenzied guesswork
over the most profitable way to negotiate the fast-moving market. In
2004, Moon Myung Hee and her husband sold an apartment they’d bought
two years earlier for a 30% profit. She believed at the time that
real-estate prices had risen too fast and were due to fall. Now, after
renting for two years, she and her husband have just bought a new
place. They could no longer afford the most desirable neighborhoods but
bought in one that they believe is improving.

Sharp but uneven jumps in home value are creating
social divisions between people who own pricey real estate and those
who don’t. But government efforts to rein in prices have flopped so
far. In August 2005, the government raised capital-gains taxes; they
will reach 50% next year for owners of multiple apartments. It also
loosened restrictions on buying homes overseas. Property taxes are
scheduled to rise sharply next year.

Other measures might have exacerbated the trouble,
like a decision by the government, which controls housing development,
to cut back on new-home construction. The reasoning: When people heard
about new development projects, they bought up older apartments in the
area, hoping to sell these off at a profit when developers moved in.
Because of this, the government canceled a plan to redevelop Kangnam,
the neighborhood that grew in the 1980s near the sites of the 1988
Summer Olympics."

posted by David

The recent UN report on the global distribution of wealth has gotten a lot of media attention, focussed mainly on the startling fact that just 2% of the world’s population account for more than half of all wealth; the top 10 percent own more than 85%.

Overlooked however is the extreme geographic concentration of that wealth.  "Almost all of the world’s richest individuals live in North America, Europe, and rich Asia-Pacfiic countries," the study finds, which account for more than 90% of all global wealth.   37% of the world’s richest 1% live in the US, 27% in Japan, most of the rest in Europe.

The study finds that  wealth is "more unequally distributed than income across countries. High income countries tend to have a bigger share of wealth than of GDP."

I can only imagine how this distribution looks within countries – how tall the world’s richest regional peaks are?

Full study is here

Download the powerpoint

Press release

Have a look at this recent Urban Institute report which examines "cultural vitality" in large US regions (hat tip: Gary Gates).  The authors "develop and recommend an
initial set of arts and culture indicators derived from nationally
available data, and compare selected metropolitan areas based on these
measures."  The full report is here.

Larry Littlefield has a new essay entitled, "Labor Scarcity, Business Location and the Creative Class."  His focus on talent shortage and concentration hits at a key element of the shift to a creative economy. 

I agree with lot’s of whats he argues. The central theme – that talent is driving urban growth – is at the very core of my own work.  The remaining issue then is to explain why talent concentrates some places and not others.  There is the classic Lucas-Jacobs human capital externalities effect, and clearly talent attracts talent. I have fashioned adaptive agent models with Robert Axtell of George Mason, Brookings and Santa Fe which show the power of this effect. But it is clear that talent is mobile and that human capital levels have diverged significantly by region according to the research of Berry and Glaeser.  My recent paper with Charltotta Mellander, "The Creative Class versus Human Capital" (posted to this site earlier this week) attempts to parse this out for the Swedish case and finds that three factors – universities, amenities and the diversity of consumer services, and diversity – play complementary roles in accounting for the geographic concentration of talent. We are now replicating these models for the United States and should have results in a couple of months.

Littlefield is right about "prosperity leaders" Austin and Raleigh-Durham. These two regions are also leaders on my creativity measures, ranking  2 and 3 in terms of creative class concentration and 1 and 6 on my creativity index.  We may define amenities differently but to my accounting, even though none of these places are New York or London, all of them offer substantial natural and constructed amenities. Austin is an outdoor athletes’ paradise and boasts one of the most authentic music scenes in the world. Raleigh-Durham was voted by Rolling Stone to be one of the nation’s best music scenes as well. Ann Arbor is a classic college town, and it too scores off the chart on my creativity measures. I taught at Ohio States and have been long been struck by Columbus’s authentic urban neighborhoods (I lived in German Village),  its lifestyle amenities, openness to young people and immigrants, and vibrant gay scene.

I have long argued that universities act as key hub institutions of the creative economy. My piece "The University and the Creative Economy" (available at creativeclass.org) shows how communities with large universities have substantial advantages across all 3 Ts. And my research with Mellander shows that the university is significantly associated with both human capital and the creative class.  I am on record on this blog and elsewhere, as saying that the future of the Detroit metro lies in more in Ann Arbor’s talent and technology base  as opposed to a refurbished Renaissance center downtown of casinos, stadiums, and office towers.

A debate is ongoing between “creative class” proponent Richard Florida
and Joel Kotkin, prophet of suburban and exurban growth. Florida,
seeking to explain the revival of some older cities, asserts that
educated, talented, creative young people like such places, and that if
communities attract such people, business will follow. Kotkin has
responded that the young follow jobs, not the other way around,
although he himself had earlier asserted that the most desirable
environment for business-desirable workers is exurban “nerdistans”
characterized by a lack of economic diversity and, therefore, income
transfers.

For years, businesses have been in a position to dictate to even the
most highly educated and skilled workers where they would go to obtain
the limited number of jobs. But now, for the first time in 40 years, it
is businesses that have to think of where to locate to attract and
retain qualified workers.

To be sure, a business can always attract labor anywhere by paying
enough money, but that would mean either lower profits or higher
prices. So the location where new labor force entrants prefer to go,
and where younger cohorts want to live, has become a major key factor
in businesses’ decision-making.

Right now the two most prosperous regions in the
United States are Austin, Texas and Raleigh-Durham, North Carolina.
Each boasts huge numbers of university students – at Duke, North
Carolina and North Carolina State in Raleigh-Durham and at the massive
University of Texas at Austin … Fidelity Investments has just agreed to relocate extensive
operations from Boston to Raleigh-Durham, following several other
companies moving to that area. Meanwhile, Ann Arbor, Michigan, home of
the massive University of Michigan and Columbus, Ohio, home of the
equally massive Ohio State University, are faring much better than
other Midwestern Metros. The former just attracted the second
“Gogleplex” planned by Google. Apparently, businesses have concluded
that the best way to attract college graduates is to locate in the
places where lots of them graduate.

None of these places, unlike those identified by the U.S. Census
Bureau, have the kind of urban amenities touted by Florida, but in
Austin and Raleigh-Durham the ever optimistic real estate industry is
bent on creating them, inventing walkable “downtowns” with high density
living in places that never had them, to keep the kids in town and
bring the empty-nesters back. Meanwhile, good news for Boston: as it’s
real estate market has tanked, its economy (aside from construction and
retail sales) has started to pick up.

Then there is New York City, which combines high
taxes with low school spending and high housing prices. Nonetheless,
thanks to its extensive and increasingly popular colleges and
universities, mass transit system, parks and free cultural events, and
existing concentration of young people supporting the market-provided
services they prefer, the city and region continue to attract the
young, ranking first among MSAs in total net migration of young,
single, college-educated people attracted with a high positive net. The
in-migration has continued despite 9/11 and a recession, pushing up
average educational attainment in the city despite the low attainment
of those who come through the city’s own schools. The educated and
otherwise skilled and ambitious young will seemingly put up with
anything in order to live there, even being treated as cash cows.

Given
labor scarcity, I agree with Florida that business will have to follow
skilled labor, unless it is willing to pay enough to attract it where
it does not want to go. But its location appears to be as much about
agglomeration per se than about any particular urban form. Otherwise
the Philadelphia MSA, which has a walkable urban form, would be doing
better than Raleigh-Durham, which is only now trying to create one. A
large concentration of students appears to be an asset, except that,
again, it hasn’t been for Philadelphia, which has cheap suburban
housing for when the parenting phase is available, and has not been
recently for Boston, which has a shortage of such housing.

It appears that such an agglomeration is hard to screw up, because
otherwise New York City would have done so. It may also be hard to
create.

Read the whole thing here.

Here’s an oped by Jim Wunderman, president and CEO of the Bay Area Council, a federation of the CEOs of hundreds of the largest employers in the Bay Area in today’s San Jose Mercury News.

"We suddenly live in a truly global world  … the Bay Area Council released a
survey in which 36 percent of the region’s CEOs said their company now
actively participates in the global marketplace, buying or selling
goods or services. Among small companies with one to 49 workers, an
astonishing 26 percent said they are now ‘global.’"

"Our region’s companies are rapidly "going global,” but our laws,
policies and infrastructure are not keeping pace… Other regions — such as Shanghai, London,
Sydney, Bangalore and even South Florida — … are making big changes
to maximize the benefits that their region and their companies accrue
from the economic change. Their gain could be the Bay Area’s loss as
companies either move to, expand in or get their start in regions more
friendly to global economic competition."

"To respond, the Bay Area Council — and the hundreds of employers we
represent — proposes that our region focus on a three-part vision:"

"First, attract the creative class. Innovative, knowledge-based
workers choose to live in areas with a high quality of life, which also
offer superior educational opportunities — both for themselves and
their children."

"Second, fuel the innovation pipeline. Economically successful
regions in the future will be defined by distinctive public and private
research facilities, a solid supply of risk capital to finance ideas
generated at research facilities, and a deep pool of business
management talent to run companies founded on these ideas."

"Third, improve trade capacity. The greater the global connectivity,
the greater the benefit in the global economic competition. This
includes physical trade through airports and seaports, as well as
electronic trades of information over fiber-optic lines and wireless
systems."

The rest is here.

Also have a look at the Bay Area Council’s report, Bay Area 3.0: Global Competitiveness Initiative (hat tip: David Miller). 

You can feel the energy building there, as the dialogue continues about how to make Savannah a truly creative and inclusive community which harnesses the energy of each and every one of its people. Here’s a great oped piece by Bill  Dawers in the Savannah Morning Newsl.

Florida’s challenge to Savannah to be the first city in the
country with a "creative economy that includes everyone" struck many of
us as little more than a laudable goal for, say, the year 2100. I was especially interested to hear Florida refer so often to Jane
Jacobs, the urban theorist whose book "The Death and Life of Great
American Cities" revolutionized urban planning…

Throughout the downtown area, young professionals and artists have
been largely squeezed out of the housing market by high prices and
luxury condo conversions aimed at part-time residents…The way
the city is marketed encourages the notion that Savannah is only a
quaint relic of yesteryear.

From the enthusiastic reaction to Florida’s lecture, it seems like
Savannah is – or could be – a city "where you can feel the energy of a
community in the throes of creative transformation."

The rest is here.

Fred and Harry Siegel are blogging over at the Manhattan Institutes‘ new site:  Cities on a Hill. Worth checking out.  I did earlier and found much to argue with, including a link to this interesting morsel.

"… Thomas D’Alesandro Jr. (former mayor of Baltimore), Philadelphia’s
Frank Rizzo or San Francisco’s Joe Alioto  –  weren’t pretty boys …They earned their ink in a garrulous, Archie Bunker kind of
way…"

"In contrast, many of today’s rising mayors are sleek and fashionable in
ways that appeal to those who don’t have to live under their rule. Baltimore’s
O’Malley, for example, wowed the media with his good looks, wit and membership
in a local band …"

"Denver’s
Hickenlooper, who owns an inner-city pub, has charmed the media and runs one of
America’s better cities. He has cultivated a constituency among developers of
downtown lofts, promoters of light rail systems, gays and artists"…

"Like O’Malley, (San Francisco’s) Newsom is young. He’s
handsome. He exudes a hip-and-cool image that commands attention from local
media, members of the opposite sex and political elites. …"

"Los Angeles’ Villaraigosa …has been successful in appealing to "hip cools" and cultural
leftists with his upbeat style and good looks."

"Over time, however, some less attractive realities could catch up with our
Prince-Charming mayors. Newsom’s now-ended tryst with a 20-year-old certainly
could damage him, if not in joie de vivre San Francisco then in the more
uptight outlying areas. Similarly, Villaraigosa much ballyhooed downtown revival, already
losing steam, may eventually leave him open to charges of mismanagement and
misplaced use of civic resources… "

"In our media age, being telegenic, hip and cool, and on the same
cultural wavelength with the reporter class may prove more effective than a
mere record of real accomplishment…".

Wow. Maybe it’s me, but that’s quite the hit job on some of  America’s most interesting mayors. Time Magazine named O’Malley and Hickenlooper, along with Chicago’s Daley, New York’s Bloomberg and Atlanta’s Shirley Franklin, to its select list of the five best big city mayors while Newsom garnered the sole honorable mention. And btw, a large scale Gallup survey I collaborated on shows incredible levels of enthusiasm (in  the 70-90% range) for the leadership of  Hickenlooper, OMalley and Newsom across virtually all socio-economic segments.

It’s hard for me to believe that the person who wrote this is often referred to as a "leading urbanist." Care to guess who it is?  Click here for the answer and a link to the whole article.

We are going through a “second demographic transition," according to the demographer, Ron Lesthaeghe of Belgium’s University of Ghent. The first demographic transition occurred during the early to mid 20^th century and brought with a golden age of marriage and family life. During this period, more people were married, divorce rates were low, and the age of first marriage actually declined for both men and women to the lowest levels since the Renaissance. The second demographic transition which began in the 1960s and accelerated during the 1980s is marked by declining rates of marriage, rising divorce rates, falling fertility, and a sharp rise in the age of marriage for both men and women. In a fascinating, data-rich analysis with University of Michigan researcher, Lisa Neidert, published this month in Population and Development Review, Lesthaeghe lays out how the second demographic transition is shaping politics, economics and culture in the United States (hat tip: Bill Bishop).

Download the article.

Maps for the second demographic transition.

Second demographic transition website.