Creative Class

Governing Magazine’s Allan Ehrenhalt reviews Bill Bishop’s new book in today’s Wall Street Journal.

The more diverse America becomes, the more homogeneous it becomes. No, that’s not a misprint; it is the thesis of “The
Big Sort,” Bill Bishop’s rich and challenging book about the ways in
which the citizens of this country have, in the past generation,
rearranged themselves into discrete enclaves that have little to say to
one another and little incentive to bother trying. “As Americans have
moved over the past three decades,” Mr. Bishop proclaims, “they have
clustered in communities of sameness, among people with similar ways of
life, beliefs and in the end, politics.”

I read the book in galleys and have collaborated with Bill and Bob Cushing, his statistician counterpart over the years. This is a remarkable book detailing the multidimensional sorting of the American population and the increasing importance of geography and location for every facet of our lives.  Go out and grab yourself a copy of this book, read it from cover to cover – if you want to understand the forces that have shaped and will continue to shape American politics and the culture of everyday life.

Obama-Clinton signals a massive change in political campaigns, writes Ron Brownstein:

“But now the ability to inspire large numbers of supporters to work on
your behalf—by contributing financially, participating in outreach
programs organized by the campaign, or informally talking to friends
and family—is joining and, perhaps, eclipsing those television-inspired
skills in importance. The change is still incipient, but the
unprecedented scale of the Clinton-Obama race suggests that
presidential politics may be moving from the television-based network
era to an Internet-based networked era in which candidates who can
attract and inspire vast networks of supporters will enjoy potentially
decisive advantages over those who cannot.”

UPDATE:  I wanted to say something like this yesterday but was too rushed.  Matt Yglesias is absolutely right about this: “Clinton and (even more so) Obama are improving on many models
and ideas that Howard Dean used in 2004 and were even to some extent
present in the McCain 2000 campaign.”  Obama has taken it much further, but is not the first.

The video of Ed’s recent talk is here. Well worth a watch.  Here’s one take by Charity Vogel of the Buffalo News.  Your thoughts?

Harvard macro-economist, Greg Mankiw growing economic inequality and its causes in the NY Times (pointed from Mark Thoma):

The best data on the superrich comes from Thomas Piketty … and Emmanuel
Saez… They report that … the superrich have been getting an increasing slice
of the economic pie. In 1980, the top 0.01 percent of the population had 0.87
percent of total income. By 2006, their share had more than quadrupled to 3.89
percent, a level not seen since 1916 …

Also, the trend toward increasing inequality has been fairly steady, despite
changing political winds. The income share of the richest families increased
substantially both during Ronald Reagan’s eight years in office and during Bill
Clinton’s.

The best diagnosis so far comes from … Claudia Goldin and Lawrence F.
Katz… Their bottom line: “the sharp rise in inequality was largely due to an
educational slowdown.” According to Professors Goldin and Katz, for the past century technological
progress has been a steady force not only increasing average living standards,
but also increasing the demand for skilled workers relative to unskilled
workers. …

But recently things have changed. Over the last several decades, technology
has kept up its pace, while educational advancement has slowed down. …

While education is the key to understanding broad inequality trends, it is
less obvious whether it can explain the incomes of the superrich. Simply going
to college and graduate school is hardly enough to join the top echelons…

Education can explain part of growing inequality: the fact that a household of two college-educated earners has gained considerably on a family of one blue-collar breadwinner or two service-economy workers. It explains the growing economic distance between the Northern Virgina suburbs and say western Pennsylvania. But it does not explain the difference between Central Park West or the Upper West Side in Manhattan, Beverly Hills or Malibu in greater LA, and Palo Alto and the upscale suburbs of Silicon Valley and everywhere else. The fact of the matter remains that a significant percentage of the self-made richest people in America and around the world do not have college degrees, Bill Gates being the most obvious case in point. So what accounts for the incredibly rising tail of the income distribution – the fact that Bill Gates and company are so much richer than a family with two college-degree wage earners? Education fails to explain this.

Periods of economic transformation, like the one we are going through from the industrial to the creative economy, or from agriculture to industry a century or two ago, are marked by rising economic inequality.  The reason is that the mechanisms for generating wealth change dramatically during such periods. MIT economists Frank Levy and Peter Temin make the important point that a key reason for rising economic inequality is the breakdown of old institutions (the New Deal broadly construed) that mitigated economic inequality.

But what most ignore is that the basis for economic wealth-creation and thus inequality have shifted massively today. That’s Mankiw’s main point, really – the massive growth not in the upper-middle class or even the growing numbers of “millionaires” but the incredible growth in the distance between the super-rich and everybody else.

In today’s idea-driven, creative economy super-wealth comes increasingly from control over royalties derived from specialized intellectual property in one from or another (new technology, new forms of entertainment, new investment vehicles and so on). And it is the growing distance between those at the commanding heights of the royalty economy and the rest of us who derive income from wages that is a key dimension of growing economic inequality.

In my view, the key to mitigating economic inequality rests on a two part strategy. On the one hand, new institutions are needed that can generate less skewed distribution of the proceeds from royalties. On the other new mechanisms will have to be found to increase the earnings of those at the very bottom by improving the productivity and in turn the wages, benefits and working conditions of those who work in the low-wage service economy (as was done in the previous era for blue-collar work).

Your thoughts.

With real estate running scarce and increasingly expensive in cities around the world, here’s a way to still live in an urban environment – albeit in a very, very small space! It’s all about the backpack apartment which consists of a cube-made element. The backpack apartment is constructed with a welded steel cage and a light birch veneered plywood interior cladding. The height of the top floor of the cube element is approximately 11 feet and the total weight of the sculpture is about two tons.

What do you think – is this something you would like to see in your city and would you consider living in a backpack apartment? Note to City Zoning-by-law inspectors: Beware!

Aleem Kanji

Are American suburbs a model for the world – especially its emerging nations? USA Today says maybe so.  I find it highly doubtful particularly given traffic congestion and rising oil prices.  Some talk of peak oil. To my mind, it’s the suburban model that’s “peaked.”

UPDATE:  NPR’s Morning Edition (H/T: Alison Kemper) reports that in some markets suburban real estate prices are in free fal, while urban, in-city or close-in markets are stable or even increasing.

Economists say home prices are nowhere near hitting bottom. But even in regions
that have taken a beating, some neighborhoods remain practically unscathed. And
a pattern is emerging as to which neighborhoods those are.
The ones with short commutes are faring better than places with long drives
into the city. Some analysts see a pause in what has long been inexorable —
urban sprawl …

At a recent auction of foreclosed homes north of Washington, in the Maryland
suburbs, there weren’t many takers. All of the addresses are far from downtown,
and average commute times are among the highest in the nation. It’s a different story for properties that are closer to the city’s center —
in areas of Montgomery County that are on the edge of Washington … Inside the city, median home prices are actually up 3.5 percent from a year
ago …

David Stiff, chief economist for the company that produces the Case-Shiller
Home Price Index, saw the trend in other cities, as well — including Los
Angeles, San Francisco, New York, San Diego, Miami and Boston. Stiff recently matched home resale values against commute times and found
that in most of these major metropolitan areas, the trend is the same. The
longer the commute, the steeper the drop in prices …

“We don’t live in the Ozzie and Harriet era anymore,” Goldberg said.
“We live more in the Seinfeld, Sex in the City era, in which young
people find cities to be compelling.”

You can listen here. The key factor here is time, more than cost of gas or lifestyle preferences.

Foreigners are propping up NYC’s economy according to the New York Times, filling up top restaurants and buying up real estate. But the Times adds, “the number of customers dining in chain restaurants like Applebee’s and Outback Steakhouse in the metropolitan area dropped by 3.4 percent in February.”

It’s 2:20am EST in the Lufthansa Frankfurt lounge. I am rolling on the floor having just read Rana’s post.  On the slightly more serious side of things, here’s a new paper by Bill Frey and Ruy Teixeira on the political economy of Pennsylvania and its upcoming primary.

I had the rare pleasure of flying Lufthansa, classe primo.  What an amazing experience.  Not only was the food delicious and the cabin spacious but the flight attendants were not surly!  And the best part of all..every seat had a ROSE!

So typically after I fly, I rename the airlines.  For example.

Aeroflot – AeroFLOP

American – Ameri-CANT

Continental – Conti-HELL-tal

Delta – Schmelta

Jet Blue = Jet Blues

Northwest= NorthWORST

Southwest = SouthWORSTEST

Spirit = Fear It

United is U-FRIGHTED

US Air = US SCARE

So for now, Lufthansa gets to keep its name.  Please share your monikers for the airline carriers.

In early March, under the leadership of SOCHE, Richard, Steven, Lou, Rana, and I worked with 32 catalysts in Dayton, Ohio. The energy of the people, the strength of the art community, the leading universities, and the culture of innovation (from the Wright Brothers to Wright-Patterson) made for an exciting couple of days.

I recently came across a great example of the Dayton’s creative assets in action. This article from the University of Dayton highlights the winner of their recent business plan competition.

From the piece:

Salud del Sol, an innovative new business from a team of University of Dayton
students aimed at bringing the ‘health of the sun’ to medical treatment
in developing countries, took home the $10,000 first prize to help get
the venture off the ground.

Winning the 2008 University of Dayton Business Plan Competition, the team of
Lauren Dokes, Lori Hanna, Daniel Hensel and Anna Young
created a business plan to develop and market solar cookers and
solar-powered sterilizers.

Salud del Sol tapped other expertise at the University including
engineering, international development and social entrepreneurship,
according to project member Lori Hanna, a mechanical engineering major.
The project – the basis of her senior honors thesis – grew from an
internship in rural Nicaragua through UD ’s Engineers in Technical
Humanitarian Opportunities of Service-learning (ETHOS) program.

“Nurses have to travel to bigger health centers or hospitals to use
sterilizers, sometimes traveling long distances by bus and spending
precious time and money to have access to the equipment,” she said.

This type of social entrepreneurship is becoming more and more of a calling card/career choice of members of the creative class and places that offer combinable creative assets – including universities, mega region/international linkages, entrepreneurial institutions, and scientific talent – will see sustainable growth and improvements in quality of place.