Kicking off the Conversation: Reply to Comments

Wow! What an incredible dialogue to be a part of. I could write all day in response to Frank, Ed, and Robin’s fantastic comments. But then what would I have to say later? I have to save something for the next rounds. And, anyway, the back-and-forth will undoubtedly be a great way to elaborate on ideas and clear up misunderstandings.

But before launching into it let me say thank you to Frank, Ed and Robin for their terrific essays. I’m a firm believer that you learn the most from your critics; they force you to really think through the weaknesses and limits of your concepts and analysis. Good critics always make your own work stronger. Second, props to the editors for pulling this all together. Especially in this day and age of polarized dialogue, we need just these kinds of thoughtful exchanges and Cato Unbound is doing quite a service by making them happen.

I agree with Frank Levy’s assessment of our education system. But I must confess I agree with lots of what Frank has to say and write. I have virtually everything he has written, and my ideas and concepts draw from his work. Without fail, the first question I get everywhere I speak is always something to the effect of: “Isn’t the main problem our education system, which squelches people’s creativity?” I’m no education expert, but I have to agree. Sometimes I think our great research universities will save us, but then I recall what the always-prescient Peter Drucker liked to say. He said, more or less, that the university won’t “survive” the transition to knowledge-based capitalism. Strong words, I know. And I’m not sure I totally agree. But Drucker was far more often right that wrong about these sorts of things.

That short comment keeps ringing in my ears. We have a big problem with education in this country and around the advanced industrial world. America currently has the advantage because our system is less fixed and rigid than most others. People aren’t straight-jacketed here. Our system is relatively open and people can enter at various points. It’s not a “one mistake and you’re out” system. But Frank is absolutely right when he says that an education system that encourages creativity is at least as important as an attractive environment for creative types. I couldn’t agree more.

Recently, I had a conversation with my public policy students about the globalization of talent. Like the members of Tom Friedman’s daughter’s Montgomery Blair class, they’re a veritable United Nations. What my international students said shocked even me: They had come to the United States to pursue graduate education and early career opportunities. But, to a person, they said they would return home when they had children. Why? Because their home countries put more of a premium on education, learning and development early on.

So I take education seriously. Our current system, as Bill Gates likes to say, is badly broken. It’s not teachers’ fault, by the way. Most teachers are highly motivated people. A recent Gallup Study shows that one of the keys to successful schools, successful learning, and successful students is motivated and engaged teachers. Makes sense. The same is true of companies and organizations.

It’s time to stop tweaking the education system. It needs a major overhaul—bigger I think than the birth of public education, the rise of the modern research university, the land grant system, federally-funded research, and the GI Bill combined. The entire framework of education has got to change. We have to stop confusing investments in learning and education with investments in school buildings. Most learning, in fact, goes on outside of schools. Like Frank says, we need an education system—a system for learning, discovery and engagement—that activates and enhances human creativity rather than squelching it. The place that develops this system, whatever place that is, is going to gain a huge advantage in the Creative Economy. The US has some advantages but is far from immune to competition on this front. Sooner or later, some place somewhere is going to figure this out, and then … watch out.

Like Frank Levy, Ed Leamer is someone I have learned a great deal from. Everyone out there who cares about the global economy must read his incredible review of The World is Flat. It’s the best thing out there. Ed draws a distinction between creativity and talent. I agree that virtually everyone has a talent and that some are more talented in some things than others. But the main point I am trying to make is that each and every one of us has tremendous creative potential—and a ton of it is being wasted across the economy and society as a whole. I’ve thought a lot about this and it’s something we can come back to later in the discussion.

I talk a lot about both creativity and talent in my work. My earliest papers in this vein, before I had come up with the notion of the creative class, were about talent. Talent is at the core of my theory and one of my 3 Ts of economic growth—the other two being technology and tolerance. I think all three are crucial components of a prosperous Creative Economy. I come from a technology and innovation background. Most of us from that school of thought liked to think that technology is the main driver of economic growth. We’re all heavily indebted to Robert Solow and Paul Romer. I later came across the work of Robert Lucas, and his incredible essay on the mechanics of economic growth, where he identified human capital externalities as the key factor in growth—a concept which he later credited to the great Jane Jacobs. So, clearly, I believe talent matters. As a short side note, I should add that my own measure of the creative class is a talent measure. But it’s based on jobs or occupations—what people actually do—rather than the more conventional education-based human capital measures.

This brings me to the third T: tolerance. This is the one people like to argue about, but the one I think we still need to better understand. Where most economists take technology and talent as stocks or endowments that are fixed in various places, I argue that they are flows. So what we also need to understand is what feature(s) of some places enable them to attract a disproportionate share of these flows. That means more than simply an environment that is attractive to “creative types.” It means an eco-system which harnesses and mobilizes this creativity and talent across the board. I always like to say that creativity does not know any of the social categories we have imposed on ourselves—it cuts completely across gender, race, ethnicity, sexual orientation, and so on. So being an open place, an open system so to speak, matters a lot here. It matters basically because it enables you to harness more talent, more creativity across the board—a point I’ll come back to later.

Like I said, I do think creativity is something that every human being has, in one form or another. Sure, peoples’ talents differ. But every one of us has potential or latent talents. The key—and the most difficult thing for us to do as a society—is to harness and mobilize that talent or creativity across the board. The places that do will benefit immensely from it. In fact, in Flight of the Creative Class I say the biggest gains in terms of growth will not flow to places that only tap high-end creativity—whether that’s Silicon Valley in tech, LA in entertainment, or New York or London in finance—but that the key for the future will be to tap creativity from across much broader segments of society. I call that a shift from the Creative Economy, where we are today, to a Creative Society, where we need to be in the future. That’s also something we can come back to later.

Costs, as Ed says, are a critical part of the competitiveness equation. I could not agree more. He’s one of the world’s best trade economists and I agree with him about the arbitrage going on in production. My guess is I wasn’t clear enough in my original essay. I meant to emphasize that talent is incredibly concentrated in China and India—not that their advantage in manufacturing was talent-driven.

With one of my Chinese students I have looked in detail at Chinese data at the regional level, and the concentration of talent in China is even more uneven than in the United States. The large mass of highly educated people in China is clustered in a corridor from Beijing to Shanghai. My point here is that the world is far from flat, and that talent, creativity, and innovative resources are incredibly concentrated. And not just in the advanced countries, but often even more so in the developing world. The free market, left to its own devices (I want to reiterate), is generating greater concentration, greater unevenness, than most people care to talk about. As Ed and I agree, the myth of a flat world does not help at all here. His review of Friedman’s book says it better than I ever could.

Robin Hanson, my George Mason colleague, picks up on several threads in this debate. The first is the importance of process. I could not agree more. My broad body of work has always stressed the importance of process innovations. I wrote a book with Martin Kenney in 1990 about the limits of the US breakthrough system of product innovation and another in 1993, also with Kenney, on the success of Japanese transplant companies in America based on their process innovations.

I think a large part of my theory of creativity is about the cumulative impact of small process innovations—the unleashing of human creativity from the ground up. My father was a factory worker. He worked in an eyeglass factory—Victory Optical in Newark, New Jersey—from the day he turned 13 until he was 65, save for a tour of duty as an infantry soldier in World War II. He worked his way up from a factory worker, to a foreman, to one of the plant’s supervisors. When I was young, I always wanted to see the place my dad worked on Saturdays (when the factory was running over time). He’d take me as a special treat some times.

I remember standing there on the shop floor, wide-eyed, transfixed, fascinated by the machines and technology all around me—by the machine tools, plastic injection molding equipment, electro-plating vats. My father would see my eyes, focused like lasers on these big beautiful pieces of “high-tech” (at the time) equipment. He would tap me on the shoulder and say: “Richard, It’s not the machinery that makes this factory great. Not the technology or the equipment. Anyone can buy that. This is old stuff. The key is the knowledge and intelligence and creativity of the men who work these machines.”

Later, I heard CEOs from Jack Welch and Carley Fiorina to Best Buy’s Brad Anderson say much the same thing. It’s human ability, human creativity, that matters. As a young professor, I studied firsthand Toyota and Honda and all of the Japanese manufacturing plants that had moved to America. What those companies always understood is that the key source of their competitive advantage lies in tapping the knowledge and intelligence of their factory floor workers. They did this through continuous improvement, or kaizen, and other mechanisms and techniques.

Call me an eternal optimist, but these experiences and many, many others have led me to believe that there’s a whole lot more creativity and talent out there that our organizations, regions, and societies are currently harnessing. Not just at the top end, but across society as a whole.

Robin also picks up on the relationship between culture and economic growth. This, I think, is the most important question in front of us today, both intellectually and politically. We have a very one-sided view of culture. Most theories of culture and economic growth—from Max Weber’s Protestant ethic to Dan Bell’s cultural contradictions of capitalism—argue that culture plays an important role in constraining, focusing, and motivating human behavior. We need culture to control us, to channel our efforts, to make us work harder, save more.

But there’s another side to the culture and economic growth equation, one which I think deserves a hearing. Culture works to liberate human productive capabilities as well. It’s not that gays equal growth, or that more bohemians make a place more innovative. Rather, an open culture, one that encourages and fosters self-expression, is a key ingredient in innovation, creativity, entrepreneurship, and ultimately growth. Open places encourage and foster new ideas. They attract new and different kinds of people. Most of all, they allow people to develop according to their own interests and purposes and to express themselves. I have no interest in making a culture wars argument. Far from it. I’m a political independent, with no stake in culture wars or political party issues whatsoever. The members of my research team, as I’ve said before, cross virtually the entire political spectrum. What we share is a penchant for empirical analyses of the causes of economic growth.

When I speak to cultural audiences, the first thing I do is apologize for my lack of background in cultural issues. I’m a student of economic growth, I say. And I came to cultural issues late in academic mid-life, not because I had a unique interest in them, but because I found them to explain more about economic growth than standard economic variables alone can explain. I’m not the only one. Ronald Inglehart of the University of Michigan and Marcus Noland of the Institute for International Economics, in independent research efforts, have each found that countries with more open attitudes (particularly toward gays) have better rates of economic performance.

I think it’s simple really. Openness matters. It’s culture’s ability to promote self-expression, critical thinking, new ideas and new ways of doing things that really matters to innovation and economic growth. I’ve used measures of revealed locational preferences to get at this—the Bohemian Index, the Gay Index, and so on. They’re just a first step. We need much better measures and much better empirical analysis. But my own work along with that of Noland, Inglehart, and others convinces me that something’s there.

My own work says it is our attitudes toward self-expression, openness, and tolerance that have been America’s secret weapon in economic competition. For decades, even centuries, we have been the world’s most open and tolerant country, enabling us to attract innovative, creative and entrepreneurial talent from across the artistic, technological, and economic spect6rum—and to motivate our own people to achieve more.

Rather than flogging the culture wars issue, it’s critical that we develop and understand the facts about how culture—in this case openness, tolerance, and self-expression—affect innovation and economic growth. In my humble estimation, it’s the single biggest issue that warrants new ideas, new analysis, and new explanation in the fields of innovation and economic growth.

Thanks again for the opportunity. You’ve heard enough from me. In the interest of generating a little innovative thought, let’s open it up.

Also from this issue

Lead Essay

  • In this month’s lead essay, Richard Florida, bestselling author of Rise of the Creative Class, argues that the old industrial era has given way to a new creative era. Science and technology, art and design, and culture and entertainment have superceded natural resources and industrial infrastructure as the key to economic success. Talent is now the key factor of production and winners in global economic competition will be those who can best deploy and attract it. However, the creative economy is a source of increasing inequality both within and between nations. Florida argues that the key to bridging the gap between the creative and service sectors is to harness the creativity of service sector workers to make their jobs both higher-paying and more satisfying.

Response Essays

  • In his reply to Florida’s lead essay, George Mason economist Robin Hanson argues that creativity matters less for economic growth and the future of work than Florida thinks. According to Hanson, Florida’s emphasis on creativity distracts us from the prospect of a truly revolutionary change to work and economy just over the horizon: rapidly exponential growth driven by smart machines. “An economy with intelligent machines could grow very rapidly indeed,” Hanson argues, “and induce rapidly falling human wages.” Will we be prepared if we’re busy making the Creative Class comfortable?

  • MIT economist Frank Levy agrees that creativity is more important than ever in a world where computers and foreign workers can do routine work less expensively than domestic workers. This shift, Levy says, requires better education in problem-solving. But education can only do so much. The gains from rising labor productivity are going largely to the wealthy, Levy argues. Unless policies and norms are reinstated that spread those gains more widely “all of the nation’s institutions will be at risk.”

  • While agreeing with much in Florida’s essay, UCLA economist Edward Leamer suggests that the key to understanding the future of work isn’t creativity, but talent. “Is a personal computer like a forklift or a microphone?” Leamer asks. Forklifts are forces for equality, washing out individual differences in ability. Microphones, on the other hand, amplify difference in ability and talent. If training cannot create talent, but can only enhance it, the gains to training will be highest for the talented, and it will not be possible to close the talent and wage gaps by offering more training to the less talented.