There are lot of topics we try to keep our eye on in the creative economy, among them: community leadership, changing educational practices, bridging knowledge/income gaps and the rebuilding of New Orleans. Though the finger-snapping might be a bit much, this story by NPR inspires thoughts on all of them.
Posted by Amanda
The best big, small and medium size cities for the arts (hat tip: Steve Dahlberg).
"Minority" just isn’t going to work much longer.
Minority Population Tops 100 Million
The nation’s minority population reached 100.7 million, according to the national and state estimates by race, Hispanic origin, sex and age released today by the U.S. Census Bureau. A year ago, the minority population totaled 98.3 million.
“About one in three U.S. residents is a minority,” said Census Bureau Director Louis Kincannon. “To put this into perspective, there are more minorities in this country today than there were people in the United States in 1910. In fact, the minority population in the U.S. is larger than the total population of all but 11 countries.”
Full release from U.S. Census Bureau here.
Y, la versión española está disponible aqui. (hat tip Babel Fish).
posted by Kevin Stolarick
PR Week asks:
The FDA has just pulled your edgy (read: irresponsible) product from shelves for being a little too edgy (read: dangerous). What do you do?
Posted by Rana
From the Consumerist Blog, a nice little posting about the backlash brewing over the suspension of Opie and Anthony by XM Radio Management. While I have never listened to the potty-mouthed pair in my 2 years of subscribing to XM and I don’t plan to cancel my subscription, I can understand the anger that is growing as XM now seems to be censoring itself and conforming to the rules of yesteryear. Whats next, the cancellation of the 80’s channel? From the piece,
My colleague Tyler Cowen weighs into the ongoing debate on education and inequality. It’s clear that returns to education have grown. Educated people also marry each other. So, the gap between college educated households and others is growing.
But there’s two issues that are worth adding. The first is the role of personality and skills that go beyond formal learning. Some are simply more ambitious and talented, especially at mobilizing resources, than others. Kevin Stolarick’s quick look at the educational background of the world’s self-made billionaires reveals that more than 40 percent did not finish college.
The second is the role of geographic mobility. Those that move are able to reap far greater economic rewards than those that do not – case in point immigrants to the United States. I wonder how this effect compares to that of education, especially on a global scale. My sense is that these two factors are related.
My first hunch is what these economists are picking up is not just an education effect, but an effect of those who can succeed and win in the current education “race.” My second hunch is that the education effect will likely weaken over time as the economy evolves in ways that leverages these other skills and as we develop better ways to measure them.
Here’s Freakonomics’ Steve Levitt on the creative class and economic development.
It’s
an optimistic view of the world, but I’m not sure its right. I don’t
really know but I think it’s a question of causality. What attracts the
creative class to a place are the same sorts of features that likely
make that place successful in the first place. Let me put it this way.
If Detroit passed a new policy that gave huge subsidies to artists
instead of corporations I doubt you would get a renaissance. I really
think that a desirable class of people move into a place because of
correlation, not causality. The same set of factors that make a place
attractive to those people makes it attractive to businesses and other
people.
I think I more or less agree, because I think that’s more or less what the book says. But, economic revitalization of places that have suffered decay and disinvestment has to start somewhere. It’s a cycle of sorts, and it does start somewhere. Taking Levitt’s causality point, let me put it out there as a question.
Who do you think is more likely to move into Detroit’s urban core at this point: a) traditional middle-class families with young children, b) established businesses from other regions, c) startup companies in media, design and tech, d) young women straight out of college, e) gay men, f) artists, designers and musicians? Feel free to add groups I’ve left off.
Which large metros are the leaders in media, arts and design? Who leads in research and science?
For this week’s "By the Numbers," we have taken another pass at the top talent clusters for large metros. In doing so, we have listed the top three metros for every creative talent cluster. To rank these, we’ve examined three 2005 criteria:
Granted, we can refine these criteria and look at the increases over time. However, this basic approach provides a quick look at the top talent clusters:
In the weeks ahead, we will examine the top medium, mid-sized, and small metros for creative clusters.
If you’d like more detail about these rankings or a complete list, contact David or Steven.
Georgetown graduate Jim Kaminski assisted with this post.
Download CreativeClassGroupTopLargeMetros.pdf
posted by Steven
Note: “In this map, each red, green, or blue pixel represents 1,000 votes for Bush, Nader, or Kerry respectively. When there are too many votes to fit in an area, they “spill over” to nearby land. For example, Florida’s votes “spill over” into Georgia. This means that votes are not necessarily exactly where they belong, but they will be in the right general area and no block of votes will “hide” any other block.”
There are few things that are a must read, but this is surely one: Noble-prize winning economist Robert Solow on Joseph Schumpeter (after the jump).
I knew Joseph Schumpeter only in the last five years of his life, from 1945 until his death in 1950, at the age of sixty-six. To say that I knew him is
actually a bit of an exaggeration. First as a returning undergraduate
and then as a doctoral student in economics at Harvard, I attended his
courses on advanced economic theory and the history of economic thought. The theory lectures bordered on incoherent; they alluded to everything but analyzed nothing. He would say: “Of course you know about X or Y, so I do not have to go into detail.” But we didn’t know about X or Y, as he must
have realized. The history lectures were also disappointing. I do not
remember where they began, but at the end of the term they had barely
reached Adam Smith. The course felt like a stage display of
multilingual erudition.
More generally, Schumpeter seemed to be
playing the role of grand seigneur, and he tended to flatter where
flattery was not due, no doubt satirically. All this went along with
his reputation as a casual and easy grader. We used to say that he
threw the exam books up a staircase: the ones that stuck at the top got
an A, the ones that fell to the bottom an A minus. I was surprised to
learn that in Austrian universities he had the reputation of a stern
taskmaster.
You would not gather any of this from
Thomas K. McCraw’s account of those last years. He records that
Schumpeter was troubled by the slow course of his own work, and unhappy
about his relations with his departmental colleagues; but he says that
Schumpeter was enthusiastic about his teaching and successful at it.
McCraw may have been misled because Schumpeter’s style was always
flamboyant, entertaining, and exotic, and many students enjoyed the
spectacle. Maybe it is just as well to slide over Schumpeter’s failings
at the end. He was past his peak; and the economics profession was
moving in a direction–rigorous theory couched in mathematical
terms–that he had always professed to admire but simply could not
practice himself. There is good evidence that earlier cohorts of
Harvard students found a slightly younger Schumpeter inspiring and a
force for high intellectual standards.
In 1940 Schumpeter seriously
contemplated leaving Harvard to accept a financially equivalent and
organizationally more attractive offer from Yale. His senior colleagues
at Harvard–some able, more of them drab–sent him a letter urging him
to stay; it said the right things, but was perhaps a little
perfunctory. A much more urgent, heartfelt, and mind-felt letter was
signed by twenty-six junior faculty and advanced graduate students. The
authors included the flower not only of Harvard-trained economists of
that time, but of the future of American economics. You have to admire
the man who evoked those words from those people.
I wish I had known him then. It is to
Schumpeter’s eternal credit that, at a time when mediocrity often
cottoned to mediocrity in Harvard economics, he stood always for
intellectual quality and energy, regardless of ideology, ethnicity, or
social position. McCraw makes this very clear, and understands its
importance.
n recollecting
Schumpeter, it is hard to tear oneself away from the exotic manner, the
dubious politics, the carefully crafted image, the hidden self-doubts,
the convoluted life story, the complicated relations to three wives and
several non-wives. McCraw covers all these in great and often
fascinating detail. He makes full use of Schumpeter’s diaries, which is
where we learn of his self-doubt; it certainly was not evident in his
public manner. On some issues–in his politics especially–he tends to
give Schumpeter the benefit of the doubt, though not foolishly or
blindly. One could have been harsher about Schumpeter’s belief that
Franklin Roosevelt was aiming at dictatorship, even if there were
respectable members of the Union League Club who agreed. Still, what
really matters are Schumpeter’s writings–the books and a couple of
essays; and that is where I have something to add. I do not fully agree
with McCraw’s judgments.
In my view–and that of most
contemporary economists, I believe–Schumpeter’s most original and most
lastingly significant book was Theory of Economic Development,
which appeared in 1911 (and was translated into English in 1934). It
was at the University of Czernowitz, not far from the beginning of his
career as an economist, that he worked out his conception of the
entrepreneur, the maker of “new combinations,” as the driving force and
characteristic figure of the fits-and-starts evolution of the
capitalist economy. He was explicit that, while technological
innovation was in the long run the most important function of the
entrepreneur, organizational innovation in governance, finance, and
management was comparable in significance.
Innovation is not the same thing as
invention. Anyone can invent a new product or a new technique of
production. The entrepreneur is the one who first sees its economic
viability, bucks the odds, fights or worms his way into the market, and
eventually wins or loses. Each win means profit for the entrepreneur
and his backers, and it also means a jog upward for the whole economy.
In the course of this process, which cannot possibly run smoothly, many
businesses, individuals, and institutions, themselves founded on
earlier successful innovations, will be undermined and swept away.
Schumpeter called this birth-and-death process “creative destruction,”
and realized before anyone else that it was the main source of economic
growth. There is no feasible alternative for capitalism; this is
capitalism. Here is a characteristically strong statement: “Without
innovations, no entrepreneurs; without entrepreneurial achievement, no
capitalist returns and no capitalist propulsion. The atmosphere of
industrial revolutions–of ‘progress’–is the only one in which
capitalism can survive.”
The picture generated by classical and
neoclassical economics had none of this dynamism, turbulence, and
intrinsic uncertainty. (Malthus was perhaps a partial exception.)
Smooth trends and stationary states, equilibria of one kind or another,
predominated. There is a sense in which Schumpeter could claim to have
been the progenitor of a torrent of modern research that analyzes the
dynamics of profit-driven innovation and innovation-driven economic
growth. Even creative destruction has been translated into equations.
(The pioneers were Philippe Aghion and Peter Howitt, and others have
followed.)
Schumpeter derived from this analysis a
lasting bias in favor of big business. “American opinion is so antibig
business,” he wrote, “precisely because big business has made the
country what it is now and in doing so it has set the standard of the
American soul: who is not a part of big business feels he does not meet
the standard and by compensation turns against it.” Clearly a
successful innovation confers, in his view, at least a temporary
monopoly. Without the lure of those monopoly profits, there would be no
incentive for anyone to bear the risks of entrepreneurship. Schumpeter
believed that large firms were both the source and the result of
successful innovation; and so tampering with them would be dangerous.
But the issue is more subtle than that. The English economist John
Hicks once remarked that “the best of all monopoly profits is a quiet
life,” meaning that a seller with monopoly power might settle for less
than the largest possible profit in order to avoid attracting rivals
who would have to be beaten off amid turmoil and uncertainty. There is
much evidence that having to compete with best practice is itself an
important spur both to innovation and to other aspects of industrial
performance. Maybe there is an optimal intensity of competition.
I think that this is Schumpeter’s main
legacy to economics: the role of technological and organizational
innovation in driving and shaping the growth trajectory of capitalist
economies. Whole subfields of economics now pursue the subject of the
care, feeding, and consequences of innovation, using qualitative and
quantitative, historical and mathematical methods. McCraw gives only a
few pages to Theory of Economic Development. He certainly understands that it is fundamental, but he does not place it as the summa that it is.
I agree with him, however, that the two-volume Business Cycles
of 1939 was a massive failure, in both senses of the phrase. (I still
have the yellowing copy that I bought as a student. It was, and still
is, essentially unreadable.) Schumpeter probably intended it as his
entry in a competition with Keynes’s General Theory, which
appeared three years earlier, but it made no visible impression on the
profession or the public. The book is full of detail about the rise and
fall of firms, technologies, and industries, but it does not rise to
the status of a theory of business cycles. It is more like a map on the
scale of one foot equals two feet: you see the potholes, but you do not
learn much about the scenery.
McCraw does not really discuss the main
piece of new intellectual machinery that Schumpeter hoped to impose on
the jumble of business-cycle history to convert it into a
comprehensible tale. That was a system of three oscillations or waves
superimposed on one another: a forty-month Kitchin cycle, a roughly
ten-year Juglar cycle, and a long Kondratieff cycle of about fifty
years. (Kitchin and Juglar were economists of considerable obscurity,
and Kondratieff only a little less.) I don’t suppose that anyone under
the age of eighty remembers any of this, though there remain a few
devotees of the Kondratieff cycle. To see six complete cycles, you
would have to go back nearly three hundred years. It makes for good
stories, maybe too easily.
This three-cycle scheme is a pointer to
the main theoretical flaw in the book. Schumpeter wanted to place the
entrepreneurial innovation process at the heart not only of episodic
growth but
also of the repetitive “business cycle” (or at least of the two longer
species of cycles). McCraw seems to go along. But it does not work.
After considerable experimentation, economics has given up on any such
periodicities. Whatever was true of the more distant past (when the
data were poor anyway), the texts of modern history do not fall into a
pattern of regular, repetitive cycles. Instead, “the business cycle”
has become shorthand for the series of irregular, short-run,
aggregative fluctuations of varying duration, magnitude,
and–probably–causation that we call prosperity and recession.
Schumpeter had a rise-and-fall
mechanism in mind. The monopoly profits collected by a successful
entrepreneurial firm attract imitators and competitors, many of which
are financed by fresh credit. This activity eventually erodes the
initial profits; and then the time is ripe for another innovation, if
one comes along. There is obvious truth to this story, but it is far
from being a theory of economy-wide fluctuations.
Business Cycles was surely a
great disappointment to its author. Schumpeter had, essentially
single-handedly, written this detailed 1,100-page narrative of events
in Britain, Germany, and the United States as seen through the lens of
creative destruction. It must have used up a dreadful amount of even
his enormous energy. And the world of economics just kept on arguing
about Keynes.
n 1942, Schumpeter published Capitalism, Socialism, and Democracy,
which was reprinted and translated many times. It was his most
successful book by a wide margin, and it is certainly a big canvas.
McCraw thinks of it as a landmark of twentieth-century
social science, and gives it many pages of description and discussion.
I do not think it comes close to being that important; but I have to
admit that I have a general distrust of ambitious, overarching attempts
to capture a whole socioeconomic system in a few grand generalizations.
The book reiterates the standard
Schumpeterian vision of capitalist turmoil and transformation, with the
entrepreneurs as the indispensable heroes. This time he suggests a
mechanism within capitalist society that (inevitably?) causes it to
undermine itself. The children and grandchildren of successful
entrepreneurs, precisely the people with the right DNA, are seduced by
inherited wealth into intellectual pursuits, the arts, aristocratic
habits, perhaps even into left-wing or at least anti-capitalist
ideologies. It is not the proletariat that blows up the capitalist
edifice, which is in fact good for the proletariat. It is the second
generation of successful entrepreneurs that lets the ground floor decay.
Is this in fact a common pattern? Is it
more likely than simple chance would imply? Schumpeter can tell good
tales, but it is hard to know if they are the only, or the typical,
tales. He also makes the rather paradoxical argument that, with long
habit, even the process of innovation itself becomes routinized and
depersonalized, and therefore weakened. Can he really have believed
that successful capitalism is essentially a romantic virtue? There is little doubt that the heroic view of entrepreneurship came naturally to Schumpeter. Capitalism, Socialism, and Democracy is the kind of swan song that yields willingly to Schumpeter’s “vision” without a lot of critical analysis.
The chapters on socialism are written
almost ironically. Many passages accept, mock-seriously, the benefits
in efficiency and equity that have always been claimed for socialism
and public-spirited central planning; but then come all the
qualifications, Orwellian and worse, often drawn from the experience of
the Soviet Union. Saving, for instance, can simply be extracted by the
state. “Hardships and abstinence’ have been imposed such as in
capitalist society could ever have enforced.” Under socialism, however,
this rigor “presumably will command that moral allegiance which is
being increasingly returned to capitalism.” Capitalism, Socialism, and Democracy
is a well-done polemic from a supremely sophisticated Central European.
I don’t know if it can be classified as social science, but I do think
that most of it is true.
Which brings us to the “democracy” in
Schumpeter’s title. He was not a democrat by instinct or by reflection.
He had little confidence in the ability of the average citizen to vote
intelligently, or even in his own long-run interest. His book asks if
democratic socialism is possible. The conclusion is that perhaps it is
possible in principle, but almost surely not in practice. Democratic
capitalism is what we have, but democratic resentment and demo-
cratic ignorance tend to work against capitalist success, either by
accepting socialism or by fostering over-regulation.
For these reasons, Schumpeter could not
conceive that a permanent mixed economy was a viable proposition. He
called it “capitalism in an oxygen tent.” For him, capitalism is the
civilization of a few family fortunes and broad inequality. Democracy,
he thought, must turn out to be “laboristic,” and therefore inimical to
capitalist success. This conclusion was a major error, as McCraw says.
It has been soundly contradicted empirically by the sixty years and
counting since World War II. Nor was this a mere slip of judgment.
Schumpeter’s mistake was rooted in his political and social attitudes
and even, to some extent, in his characterization of entrepreneurship
and the dynamics of capitalism.
As against McCraw, I cannot see this
book as a major work of “social economics.” My guess is that Schumpeter
did not really think so either. (He said as much, but that could have
been false modesty.) When the publisher asked for new material for
later editions, Schumpeter was content to tack on minor things that he
had written about the postwar economy, especially the view that the
Soviet Union had been the big winner, having picked the pockets of
Churchill and Roosevelt (whom Schumpeter hated anyway). This is not how
you treat your life’s great work.
will not discuss History of Economic Analysis,
edited and published after his death by his wife Elizabeth Boody
Schumpeter. It is very long and very recondite. Instead, I think one
can learn more about Schumpeter from two books that he did not write.
During his prime years, he was episodically working at a book about
money. One can see why he might have tried. He had spent some years in
private banking, and a shorter unsuccessful interval as minister of
finance in Austria. He had published
a couple of relevant essays; and Theory of Economic Development
emphasizes the creation of credit by the banking system as part of the
process by which banks finance would-be entrepreneurs. But he did not
have much aptitude for monetary theory, or any important idea to
transmit. When the bits he had written down were published as a book in
the 1970s, it attracted little attention.
Then, in his later years, he thought
about writing a treatise that would summarize “Schumpeterian
economics.” Most especially he contemplated a “preliminary volume” that
would summarize the treatise to come, and would tell his story
in a style that could reach a broader
professional and non-professional audience. This was clearly intended
as his answer to Keynes. The internalized rivalry with Keynes, his
exact contemporary, for the title of World’s Leading Economist seems to
have nagged frequently at Schumpeter.
But he seemed not to understand what
Keynesian economics was about, or why it won over the younger
generation. For example, he described Keynes as the apostle of consumer
spending (in contrast to his own emphasis on innovational investment).
But in fact consumer spending is passive in Keynes’s General Theory.
The driving force of the aggregate economy is actually investment
spending; and Keynes put great causal weight on “animal spirits” and
“the state of long-run expectations,” both of which are much more akin
to entrepreneurial drive.
Similarly, Schumpeter charged Keynes
with being a “stagnationist” (in contrast to his own belief that there
was no natural limit to entrepreneurial energy and innovation). This is
a more complicated matter. The Keynesian framework could accommodate
stagnationist ideas about the drying-up of profitable investment
opportunities; and in other hands it did. Keynes certainly did not
admire “money-grubbing,” and he would have classified a hot-to-trot
Schumpeterian entrepreneur as a money-grubber. That is not
stagnationism. It is probably more accurate to say that Keynes erred in
a different way, by thinking that consumers might become satiated as
their incomes rose and could be left with neither the wish to spend nor
the capacity to enjoy leisure.
It is possible to see Keynesian and
Schumpeterian ideas as complementary. Keynes is about short-run
economic fluctuations brought about by erratic variations in the
willingness of investors and governments to spend; Schumpeter is about
the long-run trajectory driven by the erratic march of technological
progress. This complementarity only became clear later, after both men
had died, when economic growth became an explicit objective of public
policy and topic of systematic analysis. Schumpeter was left frustrated
by the younger generation’s affinity for his rival. In any case, the
“preliminary volume” never materialized.
The world turns. Today, some sixty
years after their deaths, Schumpeter’s star probably outshines
Keynes’s. The business cycle has receded in importance, partly because
the large industrial economies have sprouted a more stable structure,
and partly because the lessons that Keynes taught have been learned by
central banks and finance ministries. Instead, long-term economic
growth has moved to the top of the political and intellectual agenda,
and that was Schumpeter’s topic. As Robert Lucas memorably put it, once
you have begun to think about economic growth, it is hard to think
about anything else. It is a pity that troubled old Schumpeter did not
live to see the triumph of his obsession.
There was another source of
Schumpeter’s unhappiness during that last decade, and of his tendency
to withdraw from his colleagues. He had been ambivalent–worse than
ambivalent, some thought–about the war itself. His wife had many
associations with Japan, where she had done research. More importantly,
Schumpeter believed that a strong Germany was all that kept western
civilization from being overrun by the Bolshevik hordes. He did not
exactly want to see Germany win; but he did not want to see Germany
lose. He would certainly have preferred to see Western Europe and the
United States join Germany in a struggle against the Soviet Union.
Would he have swallowed Hitler if that were necessary? There is no way
to know, but the fact that one can ask the question exposes the
problem. The man was all problems, and one very important idea.
