Great post, Robin. You and I agree on two things, both backed by solid empirical findings.
Immigration: The most powerful driver of economic development in small and mid-sized regions, as Rise of the Creative Class points out, is immigration. The other factors Robin and I have debated, the gay index and bohemian index, are important to very large regions. Schenectady actually went after immigrants, specifically Guyanese immigrants in Queens, and the strategy seems to have worked fairly well.
Density: it also really matters. Jane Jacobs said so, long ago. And my Carnegie Mellon doctoral student Brian Knudsen found very strong density effects across U.S. regions.
I mention tolerance training as an aside, only because older regions tend to chase away some segment of their talent, especially gay people, and in many case young people because they are not open to them. Our recent Gallup survey of 22 urban centers found something interesting, here. When we asked these 3000 residents if their cities were “good places” for a whole slew of groups, guess what group came in last place? Not gays, not racial minorities, not immigrants, but “young recent college graduates looking for work.” I’m not saying becoming more open and tolerant would save the day, but it would create a social climate more open to immigrants and young people, as well as other groups.