Robin, Thanks again for your thoughtful comments. The elaborations and clarifications in this dialogue are mighty useful. In that vein, one last clarification: My theory does not say regions “cause” hackers or anyone else to be innovative. It says instead that regions that have these “low barriers to entry” attract more potentially innovative people. As more of such people are attracted to these places, they form new combinations, and some of their work then turns into commercially useful and successful innovation, though much does not. Simply put, if innovative and entrepreneurial people (Ed, I’m trying to avoid another round) are mobile and have many locational choices (in other words, if talent is a flow rather than a stock), what matters is where higher proportions of talented people choose to locate. It is not enough, I think, to say they simply choose to be near one another, though Jacobs-Lucas’ human capital externalities certainly power the process. The flip side of it to understand why places that were once innovative and productive decline. I posit that it is because, at some point, they start to squelch these people and drive them away. I read a post recently commenting on our dialogue here with an apt header in this regard—“centers of repulsion.” Understanding the uneven flow and distribution of talent, I think, and the role of place or location in this, is perhaps the key element in generating more robust theories of innovation and economic growth.
Why Openness Matters
Also from this issue
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 Science and technology, art and design, and culture and entertainment have superceded natural resources and industrial infrastructure as the key to economic success.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.
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.