Creative Class

New research by Oliver Falck, Michael Fritsch, and Stephan Heblich – “Bohemians, Human Capital, and Regional Economic Growth” – nails it down for Germany.

An emerging literature on the geography of bohemians argues that a region’s lifestyle and cultural amenities explain, at least partly, the unequal distribution of highly qualified people across space, which in turn, explains geographic disparities in economic growth. However, to date, there has been little or no empirical attempt to identify a causal relation. To identify the causal impact of bohemians on economic growth, we apply an instrumental variable approach using as an exogenous instrument the geographic distribution of bohemians prior to the Industrial Revolution in Germany. This distribution was primary the result of competition for prestige between courts and not of economic prosperity. Accordingly, the instrument is independent of today’s regional economic development. Focusing on the concentration of highly skilled people today that is explained by the proximity to exogenous concentrations of bohemians, the observed local average treatment effect supports the hypothesis of a positive impact of bohemians on regional economic development.

Blogger and Indiana University professor Michael Rushton elaborates.

Artists attract development, at least in Germany. Hmm. Now the problem for you sophisticated econometricians out there: what is a good “instrument” for artists in the US? In other words, what things generated bohemias in the US prior to industrialization that were not related to economic conditions? I haven’t been able to think of one (and I’ve been thinking on this  a question for a while now).

Any suggestions out there?

“When you bring artists into a town, it changes the character, attracts economic development, makes it more attractive to live in and renews the economics of that town. “There are ways to draw artists into the center of things that will attract other people.”

National Endowment for the Arts, Chair, Rocco Landesman in the New York Times.

The new chairman said he already has a new slogan for his agency: “Art Works.” It’s “something muscular that says, ‘We matter.’ ” The words are meant to highlight both art’s role as an economic driver and the fact that people who work in the arts are themselves a critical part of the economy.

“Someone who works in the arts is every bit as gainfully employed as someone who works in an auto plant or a steel mill,” Mr. Landesman said. “We’re going to make the point till people are tired of hearing it.”

American attitudes toward immigration are hardening, according to a new Gallup poll. Half of all Americans say immigration should be “decreased” – up 11 points from 39 percent last year.

Anti-immigration sentiment is growing across all major political groupings. Some 61 percent of Republicans say they would like to see immigration decreased, up from 46 percent in 2008, compared to 46 percent of Democrats, up from 39 percent; and 44 percent of Independents, up from 37 percent.

Southerners show the greatest anti-immigration sentiment with 54 percent saying they would like to see immigration decreased, followed by easterners (51 percent), midwesterners (48 percent), and westerners (44 percent).

The poll also saw a shift in American attitudes toward whether “immigration is a good or a bad thing for the country” with more than a third (36 percent) saying it is a bad thing.

Gallup notes that this marks “a return to the attitudes that prevailed in the first few years after 9/11.”

Immigration in America has gone in great cycles over the past century or two. While immigration has typically fallen during economic crises, the U.S. has prospered from its relative openness to global talent. America saw an influx of leading scientists, entrepreneurs, artists, and musicians during the Great Depression which helped bolster its position at the frontiers of science, technology, entrepreneurship, and the arts during the long post-war boom.

Economic crises are transformative periods when talent flows can be reset and countries and regions rise and decline. The future belongs to those countries and regions that can attract the best and brightest across the entire world.

Growing anti-immigrant sentiment, should it continue, is bad news for American technology, entrepreneurship, and the economy in general. Let’s hope it turns around.

Deans, probably wonder why the “In Search of Excellence” method of wandering the halls looking for spontaneous chats with faculty doesn’t work so well with us. Answer: the faculty whom they most want to keep, because their work is the best, are working from home – so that they can get something done without a Dean bothering them.

From one of Dan Drezner’s commenters on Paul Graham’s essential essay on makers versus managers.

After writing an article about a local catalyst in a beautiful online publication called Dharma Arts, and especially after this past weekend’s successful House of Paint festival, some thoughts on the function of scenes have coalesced a bit more clearly. Both the occasion of writing the piece and participating in the festival were an opportunity to meditate on the words of Lawrence Rothfield, who spoke at the Martin Prosperity Institute earlier in June at the inaugural Placing Creativity conference. In his presentation about the city of Chicago’s cultural scenes he posited a very interesting hypothesis: that cultural scenes might be more powerful attractors/retainers of talent than creative industries. Seems simple, but this recognition can be a game changer.

The employment paradigm has shifted such that jobs follow talent just as much as talent follows jobs. In both cases, place has become more important because in both cases choosing it has become so fluid – there really has to be something particular about a given place for talent or jobs to settle and stay. An over investment in job creation without a balanced cultural investment can create a bubble/vacuum effect wherein creative class types are drawn in by the prospect of being professionally engaged, but aren’t incentivized to put down roots. Ottawa is an interesting place in that it has “creative class stabilizers” – three levels of government employment and 4 post secondary institutions. Still, even if there is a consistent flow of talent, it might not affect the economy that much in a quantitative way but it will inevitably affect the quality of place. In the pre-digital era connectivity and affinity through institutions like sports clubs, churches, or job related groups seemed to be sufficient, but increasingly these days people are more interested in being engaged as individuals. The flexible accumulation that the media environment has afforded us often means that the diversity of individual interests in a given area outpaces the scope of local institutions.

Local scenes are comprised of individuals who are willing to fill that gap by aggregating interest – usually at a place (read: venue) or series of places. I don’t think that the value or role of these people and these places can be understated within the creative economy ecosystem. Without them, the best that any given place can be is what Steven Johnson would term a “swarm without logic” – a group that could be greater than the sum of its parts but lacks the connectivity to realize it. Without active scenes though, talent can only be narrowly engaged along lines of official employment, and the net benefit of that talent can only be narrowly experienced by the region. Considering the fluidity of talent and jobs, creative industries may be the visible tip of the iceberg that signal security to talented people, whereas creative scenes might represent the larger underside that help catalyze that talent, cross-pollinating the emerging creative economy.

Has any particular scene in your city/town affected your quality of life? How is it related to that place? What type of scene activity would support an ideal employment situation for you? Considering that the aggregation of individual interests outpaces institutional reaction time as it does, how can institutions be more supportive of scenes and help to facilitate the emergent culture that is critical to retaining talent?

La musique.

Check out this great new collection of essays by a variety of thought leaders on a wide range of global trends. McKinsey organized it, and it’s titled What Matters. They were nice enough to include two pieces from moi – one on talentopolis, the second on a new kind of economic indicator (can you guess?).

In Canada, the number of self-employed people has been rising month after month during this recession. Recently, the thousands going into business for themselves have mitigated many of the employment losses and made the Canadian job numbers look reasonably rosy in comparison to the declines happening in the U.S.

The Globe and Mail referred to this as “The Do-It-Yourself” recovery.

On the one hand, this seems logical in a recession – losing a job can be the spark that pushes people into business for themselves. Yet, on the other hand, the same phenomenon does not appear to be happening in the United States. So, what’s happening and what’s significant?

The divergent self-employment trends may be an indicator of different employment, economic, and workplace trends in the two countries.

It should be noted that some economists argue that self-employment is inferior to full-time, salaried employment and thus should be considered an indicator of economic weakness rather than strength in Canada. However, because the numbers of self-employed are growing so early – when collecting EI benefits would still be an option – it suggests this shift to self-employment is more of a deliberate choice than a move made in desperation.

Also, the 55+ age group has been the dominant demographic group shifting into this category in Canada – it may be that well-educated baby boomers are seeking more flexibility and the option to “cash in” on their years of experience and extensive contacts made over the years. Because basic health care coverage is universal in Canada, the aging baby boomers may feel more free to leave their large employer (or not seek another if their employer laid them off).

Implications:

Could this give the Canadian economy the productivity boost (to catch up to American levels) that has been lacking? That is, in pure economic productivity terms, would it be more efficient for many corporations to hire the talent they need when and as they need it via contracting the self-employed?

From the talent’s perspective, could this be the style that allows much better control over work and life balance?

Can salaried staff and free agents work together on teams (when the free-agents might be working on several projects simultaneously for different companies)?

Flipping the coin, does it matter that the U.S. self-employment rate is not growing?

Your thoughts?

Jane Jacobs and Robert Lucas long ago argued that the clustering and density of talented people is a key driver of innovation and economic growth. A new study, “Productivity and the Density of Human Capital,” by Jaison Abel of the NY Fed, Ishita Dey of the University at Buffalo, and Todd M. Gabe of the University of Maine, provides clear evidence of density’s effects on regional economic output (pointer from Kevin Stolarick).

We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area’s stock of human capital. Using new measures of output per worker for U.S. metropolitan areas along with two measures of density that account for different aspects of the spatial distribution of population, we find that a doubling of density increases productivity by 10 to 20 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock that is one standard deviation below the mean level realize around half of the average productivity gain, while doubling density in metropolitan areas with a human capital stock that is one standard deviation above the mean level yields productivity benefits that are about 1.5 times larger than average.

To download the study click here.

Here’s the abstract from a new paper by Ed Glaeser and Matthew G. Resseger (thanks to David Ptak for the pointer).

There is a strong connection between per worker productivity and metropolitan area population, which is commonly interpreted as evidence for the existence of agglomeration economies. This correlation is particularly strong in cities with higher levels of skill and virtually non-existent in less skilled metropolitan areas. This fact is particularly compatible with the view that urban density is important because proximity spreads knowledge, which either makes workers more skilled or entrepreneurs more productive. Bigger cities certainly attract more skilled workers, and there is some evidence suggesting that human capital accumulates more quickly in urban areas.

Full text is here.

The location decisions of graduating college students has interested me for years. The reason is simple: College grads are making a joint decision about what job to take, what labor market to enter, and what city to live in, so they provide an interesting lens into how these choices get made. And, because they are both highly skilled and highly mobile – three to five times lore likely to move than, say, a 45-year-old – the locations they pick are likely to leave a lasting imprint on our economic geography.

For the past several years, the Harvard Crimson has surveyed the graduating class. I’m the first to admit it’s a highly biased sample, but it’s also a very interesting one – tracking graduates from arguably the world’s leading university. As such, it provides useful signals about the kinds of jobs and the kinds of places highly motivated, highly mobile young talent is picking.

The results of earlier surveys were predictable. Harvard grads traditionally headed to consulting and investment banking jobs in NYC. But this year’s findings – coming as they are in the midst of the economic and financial crisis – evidence some different and interesting trends.

Still Getting Jobs: While stories about the worsening job prospects for college grads are legion, the economic and financial crises have not significantly altered prospects for Harvard grads. The survey found that 59 percent of students had jobs lined up prior to graduation down slightly from 66 percent last year. This is understandable since Harvard grads are headed into professional, knowledge, and creative occupations which have the lowest rates of unemployment and since they signal top talent.

That said, career choices are certainly shifting along some predictable and some not-so-predictable lines.

Finance and Consulting Fade: Far fewer grads are headed to finance and consulting. The figure has been consistently down over the past three years, actually – falling from 47 percent in 2007 to 39 percent in 2008 to 20 percent this year. The numbers of grads headed into finance fell from  23 percent last year to 11.5 percent this year, while consulting dropped from 16 percent to 8.5 percent.

Education and Health Care Gain: More grads are headed to education and health care. Education is up from 10 to 15 percent of grads. Health care increased from six to 12 percent.

Government Down, Slightly: Despite the conventional view that government work might become more attractive, the share of grads taking jobs in government fell slightly this year 4.5 to three percent. The Crimson suggests this is “a paradoxical trend given the Democratic victories in the 2008 elections and the fact that 74 percent of Harvard seniors describe themselves as more liberal or considerably more liberal than the average American.”

I think it’s more predictable. Having taught public policy students for the better part of three decades, I’ve seen a long-running trend away from traditional government work which is perceived as overly hierarchical and bureaucratic. Public service and cause-oriented students I’ve come across prefer work in smaller scale, more flexible non-profits where they believe they can have more immediate impact. The Crimson reports that “programs like Teach for America… received applications from a record-setting 14 percent of Harvard seniors, according to data released by the organization.”

What They Really Want to Do: I found this question to be the most interesting in the survey. When grads were asked “what career they would choose if finances were not a concern,” the number one field was the arts, with 16 percent choosing it as their “dream field,” followed by public service (12.5 percent) and education (12 percent). Finance and consulting dropped to five percent each.

Top Cities: Check out the great map below. The greater Boston area is the top destination – reinforcing the point that having an elite university (or more) in your local backyard can be a considerable talent advantage. And since after-college moves are the pinnacle of mobility it can be a lasting one. Cities might do better by focusing a little bit less on luring “ex-pats” back home, and a little more on retaining the college grads that have already chosen them.  New York has fallen from its previous top spot. D.C. is down just a tad – even with the new heavily Harvard Obama administration and the southern shift in the nation’s financial and economic nerve center. Small percentages are headed to the South or the Midwest, with Chicago drawing just 1.3 percent of grads. Seventeen percent of grads are going abroad – which may be taken as a signal of a shrinking U.S. and improving foreign opportunities but which I view as a very positive sign for the future.