Creative Class

Matt Yglesias, blogger-extraordinaire and author of the this immensely thoughtful new book on US foreign policy, jumps into the  fray (while paying one of the nicest complements of my life – opening clause):

When titans clash, I think of a more trivial point to raise
(non-trivial point — environmental sustainability should be considered
here), namely that I don’t understand why Florida calls these things mega-regions.

The so-called “mega-region” in which I live — Florida calls it
BosNyWash, I think, while Krugman uses the more felicitous term
Acelaland — is geographically smaller than a traditional
“region” like New England or the Pacific Northwest. The true
mega-regions of the United States are longstanding geographic and
cultural concepts like “the South” that are composed of distinct
sub-regions and are much, much larger than Florida’s multi-focal urban
clusters.

Yglesias has a good point here: What to call regions of various scales. To clarify, I am not the inventor of the term which has entered into the lexicon of economic geographers and urban economists.  Mega-region, as I understand it, evolved from the  Jean Gottman’s classic Megalopolis, referring to a combination or amalgamation of metropolitan, or metro, regions. Various studies by Glaeser, Lang, and the RPA all use the term, mega-region, though not everyone agrees on whether to hyphenate or not.

Ryan Avent weighs in over at The Economist:

I find Mr Krugman’s conclusion here rather surprising given his previous work
on the subject. As a principle figure in the development of the new economic
geography, Mr Krugman has written–often–that the forces pulling people
together into economic agglomerations are threefold: there are the benefits of
labour pooling and information spillovers, as he mentions. But he fails to
discuss the importance of forward and backward linkages–that is, the importance
of being near to suppliers and customers in a world where transportation costs
are non-negligible.

This is a key consideration, giving rise to a measure called market
potential. One of Mr Krugman’s co-authors on the groundbreaking book The
Spatial Economy, Anthony Venables, co-wrote a similarly seminal
paper (PDF) with Stephen Redding which noted that market potential–the
nearness of a place to other economically vibrant places–can explain quite a
bit of differences in global wealth.

This seems very relevant to the mega-region discussion. Why, for instance,
have places like Baltimore and Philadelphia performed much better in recent years
than similar cities in America’s distressed Rust Belt? Obviously, many factors
are at work, but it seems odd to suggest that the nearness of those places to
the dynamic economies of New York and Washington are unimportant. Distance still
matters for the movement of both goods and people. Being in Philadelphia confers
an advantage on firms, who then have fairly good access to nearby economic
centres, and also to the tens of millions of people surrounding them.

The density and connectedness of economic activity in America’s northeastern
corridor increases the returns to operations all throughout the region. The Rust
Belt cannot duplicate this market potential, being poorer and more dispersed. I
think Mr Florida is right to call this a factor worthy of policy
consideration.

Paul Krugman has more to say on megas:

My basic view is that at a point in time the economic geography we
see is more or less an equilibrium — that is, the individual costs and
benefits of moving from one place to another are roughly balanced.
Suppose that we see two regions, M (the mega) and N (a not so mega). M
will have higher productivity and wages, offset by higher commuting
costs and/or higher housing prices. An individual considering a move
from N to M will take these into account, so that roughly speaking the
two locations will be equally attractive.

Now we know that’s not the whole story. Adding to M’s work force
will reinforce the positive spillovers from a large concentration of
talent etc.. That’s the argument for encouraging more people to move to
M.

But there are other considerations. For one thing, there are
negative spillovers too, such as traffic congestion. For another, there
are spillovers in N as well. For example, reducing the smaller city’s
work force may deprive it of the critical mass needed to support some
amenities, or maintain a cost-competitive position in some industries.

Do we know enough about these cross-cutting effects to be sure that
moving people from Des Moines to Acelaland makes America better off? I
don’t think we do. And as anyone who’s tried to study positive
externalities knows, it’s very hard to pin them down.

Hmmmmm. Seems to me a good deal of recent research in economic geography suggests that regions are diverging. Berry and Glaeser find powerful evidence of human capital divergence over time. It is also increasingly clear that urbanization, in general, is an important component of productivity.  Careful studies of US-Canadian regional productivity and competitiveness by my colleague Roger Martin and the Institute for Competitiveness and Prosperity show that urbanization is a key component of the difference. Anyway you slice it urbanization is important to economic growth. (BTW, no one is suggesting “moving people from Des Moines to Aceleland,” that’s the way China and Russia did it: just that existing conditions are moving people worldwide to mega-regions and we need a public policy regime that takes that into account in various ways and across various dimensions).

Furthermore, the Jacobs-Lucas theory of human capital externalities provides the basic microfoundations as to why.  In his book with Fujita and Venables, The Spatial Economy the authors essentially admit that conventional economic models are unable generate the Zipf rank-size distribution of cities and regions. This is exactly the problem that Axtell and Florida, Emergent Cities takes on and generates using a basic Jacobs-Lucas framework to undergird agent-based models which show how clusters, then cities, then metros and then mega-regions form based on these human capital externalities. The Santa Fe Institute PNAS paper on urban scaling also shows how urban metabolic rates essentially speed up to offset “negative spillovers” like traffic congestion which Krugman mentions.

But let me get to the nub of the matter. Nations are political jurisdictions. Metros are constructed from data on commuting patterns and the like.  Mega-regions, as we define them, reflect an observable physical reality.  If an alien were to descend from space into the earth’s atmosphere what would he see?  He would not be able to discern the world’s 191 or so nation-states, nor would he be able to easily pick up metros (which blur into megas). He would see mountains and oceans in the daytime, and mega-regions at night. Mega-regions of all man-made geographic phenomena are a readily observable unit.

Furthermore, there is no logical reason to believe that the basic Jacobs-Lucas microfoundations for city formation and economic growth stop at the (arbitrary borders) of a cluster or metro, especially when we observe mega units in real space.  In fact, there is good evidence that suggests that those micro-foundational processes can and do scale from Axtell-Florida and the Santa Fe Institute research.

I’m the first to admit that there is a lot more to do on this issue. But the fact remains that mega regions produce the lion’s share of the world’s economic output and innovation.  Developing policy for a spiky world seems like a pretty big issue, and not just from a competitiveness point of view. Krugman is very concerned about inequality. As Who’s Your City points out, the divergence between mega-regions and other places makes geography an increasingly important component of economic and social inequality.

Paul Krugman is a mega skeptic.

It’s not at all clear to me that world competition is between mega-regions.

I’d say that there are two things that arguably define an economic
unit for the purposes of economic geography. One is labor mobility: a
region over which there’s high mobility of labor will be a region in
which everyone with the same set of skills is paid more or less the
same real wage (which may differ in money terms because of differences
in the cost of living etc.). By that definition, the United States as a
whole is the relevant unit: workers are as mobile between Chicago and
Boston as they are between Baltimore and Boston.

The other definition is the reach of spillovers — positive
externalities, for the econowonks. That’s probably much more localized:
there’s a reason investment bankers cluster in expensive Wall Street or
City of London locations. But again, it’s hard to see that this makes
the Northeast Corridor, as opposed to individual metro areas within the
corridor, a relevant unit.

I’ll have more to say later (it’s a busy weekend), but this paper has more on why the mega-region, alongside the cluster and the nation-state, is an increasingly relevant and important economic unit and why it needs to be considered as such from a policy-making perspective.  But let me just say that when 40 of these megas which account for less than a fifth of world population account for roughly two-thirds of economic activity and 85 percent of global innovation, something is going on.  Another piece of the explanation (micro-foundations if you will) is outlined in this paper with George Mason’s Rob Axtell, which uses adaptive agent models to suggest that mega-regions are in fact emergent economic units, emerging that is from the evolution of localized clusters and city-regions. At the end of the day, mega-regions have large geographically defined markets, and people are more mobile across mega-regions than across nations (Krugman even calls his own mega, Acelaland, after the fast train).  My hunch is that people are also much more likely to relocate within megas than across them, say from NY to Boston or to DC, and in fact recent conversations with many journalists, non-fiction writers and editors suggest a shift from NY to DC, Krugman’s Times colleague, David Leonhardt being a case in point, though more research needs to be done on this issue of mega-mobility.

II’m in good company: Krugman’s also also skeptical of the new paper on place-making policy by Ed Glaeser and Joshua Gotltlieb (unfortunately gated by Brookings).  It’s always great to have Krugman applying his ever facile intellect to these issues.

Your thoughts?

My piece in today’s Wall Street Journal is here.

The problem is that much of our public policy not only
ignores the rise of the mega-regions, it actually works against them.
If we want to bolster economic competitiveness and ensure long-run
prosperity, we must pursue policies that take mega-regions into account.

Above all, this means remaining committed to open
global trade. Mega-regions thrive on trade, which is why their leaders
– from business officials to mayors – strongly support it. While
political candidates may find it attractive to bash trade agreements
like the North American Free Trade Agreement, this will only weaken
mega-regions in both the advanced and developing world.

Second, it’s time to stop transferring wealth from our
most productive mega-regions to lagging places. In the U.S., the past
50 years have seen a massive transfer of tax money from innovative and
prosperous mega-regions on the East and West coasts to the South. While
this transfer may be a boon to local politicians and developers, such
misguided policy has diverted economic resources away from the core
mega-regions where they can be used most productively.

Third, our public policy must work toward, not
against, density. Nearly every expert on the subject agrees that
innovation and productivity are driven by density. For the better part
of a century, we’ve subsidized suburbanization. That stimulated
consumption of cars and appliances, which drove the industrial economy
and allowed families to buy affordable homes. But it also diffused the
density that is increasingly required for innovation and growth. Of
course, every place does not have to be like Tokyo or Manhattan.
Silicon Valley-style density would probably be sufficient. We can still
have suburbs, but our economic policy has to start to encourage
density, not sprawl.

Fourth, our urban policy should not be aimed only at
improving schools, creating affordable housing and redistributing
income. Urban policy must also start to address economic
competitiveness. It must strengthen mega-regions by improving fast-rail
transit between their nodes, modernizing airports, and achieving
greater cross-border flows of goods and people.

Mark Gimein in Slate on the “eligible-bachelor paradox”:

This is how you come to the Eligible-Bachelor Paradox, which is no
longer so paradoxical. The pool of appealing men shrinks as many are
married off and taken out of the game, leaving a disproportionate
number of men who are notably imperfect (perhaps they are short,
socially awkward, underemployed). And at the same time, you get a pool
of women weighted toward the attractive, desirable “strong bidders.” Where have all the most appealing men gone? Married young, most of
them—and sometimes to women whose most salient characteristic was not
their beauty, or passion, or intellect, but their decisiveness.

Tyler Cowen doesn’t quite buy it.

So the “strong bidding
women” can always cave and settle for a “lesser man” after an optimal
amount of waiting, yet many don’t.  The distinction between
period-by-period happiness and overall lifetime happiness also shapes
the market.  As smart single women mature, their lives get better and
better.  “Settling”
becomes psychologically harder, even if it would make some of the
“settlers” happy in the longer run.  So settling doesn’t happen;
decisiveness become harder to conjure up at the same time that its
long-run value is increasing, or in other words behavioral economics is
very much at work here.

Your thoughts?

An important new study by Statscan finds that:

Culture workers and their knowledge, skills and creativity are
relevant for producing goods and services outside the culture sector, according
to a new study on the role of culture occupations in the economy.  … [It] used employment data from the 1991, 1996 and 2001
censuses, examined the extent to which employers in non-culture industries, such
as manufacturing, relied on culture workers and their skills as inputs into
productive processes during the 1990s. It found that almost half of all culture workers were employed in non-culture
industries, particularly in four sectors: manufacturing, business services,
educational services and retail trade … This suggests that forms of creativity other than purely
scientific and technical expertise were also relevant for producing goods and
services.

Moreover, core culture employment in manufacturing increased by 55%, a rate
far higher than overall employment growth in manufacturing during the 1990s. For
business services, core culture employment almost doubled over the decade, an
increase that was also larger than overall employment growth in business
services. This suggests that producing manufactured goods and business services relied
to a greater degree on creative design work at the end of the decade than at the
beginning.

The study also examined where core culture workers tend to be employed. Firms
located in large cities hired culture workers to a much greater extent than
those located in small cities and rural areas.

Click here for the full report; here is a related study charting trends in Canada and the US.

Eye Weekly’s ever witty Marc Weisblott really made me smile tonight. We’re in NYC to do a segment on the CBS Early Show tomorrow AM, and I came across his new piece (with requisite, though mainly recycled, “zingers”) titled “Sunshine Statesman.”

When my brother Rob and I formed our first band in the mid-1960s, trying our hand at Jimi Hendrix, Cream and other power rock staples, we practiced hard for our first gig – the annual Cub Scout shindig. We thought we’d found a great name – Flagg – with those so strategically place double gs.

But our Dad, who headed our local troupe, told the organizers to call us “The Sunshines.”

I hadn’t thought about that for nearly 40 years, but Weisblott and Eye brought it all back – the image of our youthfully mortified red faces on the stage of Queen of Peace Elementary School’s cafeteria cum Cub Scout meeting hall/ performance venue. And for that I am ever so grateful.

WaPo’s Marc Fisher responds to my response:

That’s all quite reasonable, but it doesn’t entirely respond to my
point about Florida’s ranking of the District as a relatively lousy
place for families with children, or his comments about how Washington
flunks his “Trick or Treater Index,” a shorthand measure of a city’s
suitability for families with kids based on how many or few kids come
around on Halloween.

He and I certainly agree that each family has to make its own
choices based on its own values and ideals–and what it can
realistically manage. But I don’t think Florida has really answered the
point about what he found lacking in the District. Rather, he simply
states how much he loves the District, which I know is true, but which
doesn’t seem to cover all of his feelings and thoughts about the city.

He also goes on to say some nice things about me and my work’s influence on his own. Like I said, I very much admire Marc’s writing.

But I have to wonder if he stopped reading Who’s Your City? after the “trick-or-treater index” passage that got him so worked up. On p. 262 I rank greater Washington DC as the No. 1 place for families with children in the USA. I also rank it is No.2 for young singles (only San Fran does better).  And in the new edition of the Advocate I say in my estimation it’s also the best place for gays and lesbian (especially single gay men in the country.). The trick or treater index was not meant to say that DC is a bad place for children – Rana and I were planning to have kids and raise them there that’s why we bought the house in the neighborhood we did – but simply to show that parents in cities outside the US do not fear as much for their kids safety. That section of the book quotes several parents saying as much.  It is very clear to me parents worry more about their kids safety in DC and virtually any US city and most suburbs than they do in Toronto.  But as the book says, greater DC remains the best place for familes with children in the US according to our rankings.

I’ll say it again: Rana and I love Washington DC. Like I said, we moved for the one reason that Marc identifies – the opportunity to run a well-funded think tank. Furthermore, I believe Greater DC has just about the biggest upside of any US region. Not only because of federal spending but because it is attracting talent and business as the most livable and relatively affordable node in the great Bos-Wash mega-region.  The region does face some issues and threats – among them traffic congestion, sprawl, income inequality, and housing affordability. But it has the resources and trajectory to cope with all of them, and our Gallup survey shows that people are very positively attached to the region and find it to be incredibly open-minded, tolerant, diverse, and to offer a high quality of life – and that includes all races, ethnicities, income and education levels across the board.  I actually have an oped sitting with the WaPo which expresses my
thoughts on greater Washington’s very positive future in a little bit
deeper fashion. Hope they decide to run  in, and I’d very much appreciate Marc’s comments on it.

Two new studies document considerable variance in health outcomes by location (h/t: Jason Rentfrow).

The first study investigated over 7,000 individuals aged 52 and older who
lived in urban areas across England. The study found that even when individual
differences in education and income were taken into account, people who lived in
the most deprived areas were significantly more likely to have poorer cognitive
function than those living in the least deprived areas. These findings represent
a cause for concern because poor cognitive function in older people is closely
linked to the risk of developing dementia.

Meanwhile, the second study, which involved 4,148 individuals aged 60 and
over, assessed whether mobility disability and neighbourhood deprivation are
linked. Over a two-year period, 13.6% of those in the most deprived areas
developed problems with mobility compared to 4.0% of those in the least deprived
areas. As with the first studies, these figures took into account individual
differences in income, education, and health.

The full press release with a link to more information is here.