Silicon Valley, according to a new Milken Institute report on North America’s high-tech regions. But Seattle, Cambridge, and D.C. are among the nation’s leading high-tech hot spots. The report also charts the tech turnarounds in Rustbelt regions like Kalamazoo, Michigan and Scranton-Wilkes Barre, Pennsylvania, as well as documenting the rise of leading high-tech regions in Canada and Mexico. Here’s the top ten.

Outside the U.S., the report finds that:

• Toronto, ON jumped 10 places from 2003, showing impressive gains in building and attracting high-tech businesses in manufacturing and reproducing of optical media, biopharmaceuticals, and medical and diagnostic laboratories.
• Baja California has become a key manufacturing center for high-tech giants such as Casio, Honeywell, Sanyo, and Sony. The state finished in second place in 2003, just after San Jose, in the ranking for manufacturing of semiconductors and other electronic components. It also leads North America in medical equipment and supplies manufacturing.
• Vancouver, BC showed the greatest rise among the top-10 metros for software publishing, climbing from 14th place in 2003 to ninth place in 2007.

My colleague Charlotta Mellander compared these Milken high-tech rankings with our own regional demographic measures for the top 50 U.S. and Canadian metros and found significant correlations to:

• Economic Output: Measured as gross metropolitan product per person (0.475).
• Talent: The Creative Class (0.46),Super-creatives (0.34), and Human Capital – percent of population with a BA and above (0.3).
• Openness and Tolerance: The Mosaic Index – a measure of openness to foreign-born people (0.45); and also to the Gay Index (0.315) when San Jose – the extreme outlier – is excluded from the analysis.

As an academic, I welcome criticism of my research because it helps me refine and improve my work. Over the years, I’ve benefited tremendously from reasoned debates with people on the left and right sides of the ideological spectrum. From time to time, however, my findings are misrepresented by commentators.

A week or so ago, my Globe and Mail colleague Neil Reynolds wrote a column comparing my work to the findings from a new ranking of “best-performing” U.S. cities by the Milken Institute, a think tank in California. Comparing the Milken measures to my own, Reynolds asserts that the former are “non-ideological” and avoid “creativity scores” and “subjective assessments.” But our measures are data-driven and objective, just like those of the Milken Institute. Indeed, I know Ross DeVol, the principal author of the Milken Institute report, quite well. I respect his work and we have shared data and indicators.

While Reynolds focuses on the differences between the Milken measures and my own, he misses some overlap between the two. Provo, which ranks first on the Milken measures, comes up eighth on my creativity index for medium-size regions. Austin, which ranks fourth on the Milken Index, takes first place on my creativity index for large metros; while Raleigh, which ranks second on the Milken measure, comes in sixth on my creativity index rankings for large metros.

At bottom, the basic difference between the Milken measure of best-performing cities and my own creativity index stems from what we try to measure. The Milken measure attempts to gauge year-over-year economic performance through factors like employment growth. My creativity index focuses on the key factors that shape economic development in the long-run. To reflect that, the creativity index has three components – technology, talent, and tolerance. There is a general consensus among economists that the first two are the key determinants of economic growth. It’s worth pointing out that one of our technology measures – the Tech Pole Index – is based on Milken Institute research and was provided to us by Mr. DeVol. To these two fundamentals our team adds a third – tolerance – which has been shown to shape the economic development nations as well as regions, in as wide range of independent studies from University of Michigan professor Ronald Inglehart’s world value surveys to the Institute for International Economics’ Marcus Noland’s research on global economic performance. There is no ideology at work here at all. Our measures are designed to reflect state-of-the-art theory and research and apply that thinking to objective measures of regional development.

When all is said and done, there are two fundamental gauges of regional development: how much people make – that is, their income – and how much they pay for housing. Provo, Utah – first on the Milken Index – has an average income of around $47,200 (about equal to the national average) and a median housing value of roughly $175,000 (also about the national average). McAllen, Texas, which is seventh on the Milken measure, has an average income of $24,500 (about the half the national average) and a median housing value of $61,200 (37 percent of the national average). Compare that to San Francisco, which ranks first on the creativity index, where the average income is $65,382 (40 percent more than the national average) and the median housing value is $655,300 (three times the national average and 10 times more than McAllen).

To get a better handle on how the two measures stack up in assessing long-run development, my team conducted a simple statistical correlation analysis between them, income levels and housing values as well as human capital, another key measure of regional development. The creativity index has substantial correlations with each (for the statistically minded, they equal .75 with human capital, .55 with income, and .44 with housing values); while the Milken Index shows no correlation at all.

Mr. Reynolds’ column implies that my approach is drawing the greater Toronto region down a misguided path of economic development policy. But an earlier report by U of T’s Merc Gertler, Waterloo’s Tara Vinodrai, UCLA’s Gary Gates, and myself, which took a close look at the economic performance of greater Toronto and all of Canada’s metros alongside U.S. regions, shows that all three Ts play a key role.  It also shows that Canada’s cities and regions benefit greatly from openness and tolerance – something that our ongoing research at the Martin Prosperity Institute confirms. Stay tuned for much more on that front in the next few months.

At the end of the day, my measures – and the entirety of our work at the Prosperity Institute – is empirical and objective and non-ideological. All of it is designed in light of the state-of-the-art theory. Unlike Mr. Reynolds, there is little place in our world for ideological spin.

The 2007 edition of the Milken Institute’s top performing metros is out. Here’s the top ten.

1. Provo-Orem, Utah
2. Raleigh-Cary, North Carolina
3. Salt Lake City, Utah
4. Austin-Round Rock, Texas
5. Huntsville, Alabama
6. Wilmington, North Carolina
7. McAllen-Edinburg-Mission, Texas
8. Tacoma, Washington
9. Olympia, Washington
10. Charleston-North Charleston, South Carolina

What do you think? Does this list jibe with your own thoughts and indicators of America’s top-performing places?

Turner, channeling the likes of Ryan Avent and Richard Florida, said that
consumer prefences are going to move away from the suburban lifestyle
as transportation costs soar. Zell agreed, pointing to enormous growth of housing in what he
called “24/7 cities”, putting a lot of that growth down to the societal
deferral of marriage. But as cities become ever more expensive and the suburbs become ever
cheaper, he was asked, won’t corporations move out to the suburbs? No.
Motorola rented 200,000 square feet of office space in downtown Chicago
last year, he said, even as they have over half a million vacant square
feet not far away in McHenry county. If the employees are moving to the
cities, then the companies are going to have to follow suit.

Yep, they sure are.