Who’s Your City? The critical role of place in the world economy

Richard Florida, Random House, 2008

Reviewed by Graham Mulligan

In an increasingly urbanized world there are clusters where economic and other advantages occur. Florida has noticed this phenomenon and seeks to analyze how and why it occurs. The book has three big themes: Place and Happiness (location and well-being); the Three Stages of Life (that affect where we live); and the Tools we need (to determine where to live).

Using mapping technology and economic activity tables Florida is able to identify Mega-Regions around the globe. On a map designed to show more activity by ‘spikes’ it is possible to see that the world is made up of ‘spiky’ locations where innovation and creation concentrate, and ‘valleys’ where inequalities stand out. There are 40 Mega-Regions worldwide comprising 18% of world population, 66% of economic activity and 83% of patented innovations (technology).

(See: Edward Learner, ‘A Flat World, A Level Playing Field, A Small World After All, or None of the Above’; Journal of Economic Literature No.45, 2007)

Dense population is not enough to spur the development of ‘spikes’. Florida depicts this by retelling the history of Economic Theory to show what drives growth:

1776 Adam Smith – division of labour

1823 David Ricardo – comparative advantage

1940’s Joseph Schumpeter – innovation and entrepreneurship

1957 Robert Solow – effect of technology

1990’s Paul Romer – new technical knowledge from ‘within’

In addition to Economic Theory, he shows how Place Matters:

Jane Jacobs – The Economy of Cities

1988 Robert Lucas – the multiplier effect – labour, capital and energy in the same location

Migration into some cities, usually with big universities, by talented and skilled people leads to concentration of higher-income driving out middle-income people. Two classes of workers are emerging in post-industrial society. A service sector group (retail, health aides, food service, personal care) and a new group Florida calls the Creative Class (technology, art and design, entertainment and media, law, finance, management, health-care and education). I call this TED+

Although heavily American-centric, mainly because that is where the research data exists, because that is where the resources such as grants to universities exists, Florida does tell some stories about Toronto, where he lives now. One story is about kids going out on Hallowe’en and the Trick or Treater Index, high in Toronto, very low in D.C., his old neighbourhood.

Choosing where to live is a function of stage-of-life according to Florida. ‘Young and Restless’, ‘Married With Children’, and ‘When the Kids are Gone’ describe the three big stages. Again, the forces of clustering appear to influence where we live. The principle of ‘like with like’ clustering however, brings with it the further widening gulf between people whether its income, ethnicity, age or just about any other marker. “Sometimes, if I ask just the right way, my students and younger members of my research team will tell me how they resent what boomers have done, not just by foisting ‘their music’ on them, but by taking over whole parts of cities and pricing them out”. Ouch!

Clusters of specialized economies emerge where there are pools of local talent close to sophisticated users and customers. These attractive locations, or Superstar Cities, as Florida calls them, are identified by high real-estate values. The housing bubble had not burst by the time the book was published in 2008 and Florida ironically refers to Robert Schiller’s predictions with skepticism. The idea of real-estate hot spots nevertheless, remains valid. Desirable locations always have buyers as long as they are mobile. Vancouver is a case in point, experiencing rising house prices even during the extended financial crisis. What makes some locations more desirable than others is the question. Florida points to studies that show the presence of bohemian and gay lifestyles as indicators of such locations.

Tools to help you decide where to live:

First, prioritize what is important; second, use a ‘location calculator’ at www.whosyourcity.com; third, do your homework and check out the opportunities, basic services, leadership values and aesthetics of the place. Use the ‘Place Finder’ tool on the website.

A note on methodology: Florida uses survey data from a number of sources but usually only US-related, for example, the ‘happiness’ survey done with Gallup in 2005. He also uses mapping tools that reveal population densities and economic activity centers to develop his ‘spiky’ theory. His ideas about cities also owe much to the pioneering work of Jane Jacobs.

See also:

Schumpeter Theory of Economic Development, Harvard, 1911

Joseph Schumpeter ‘Capitalism, Socialism and Democracy’, Harper, 1942

www.creativeclass.com

http://cowles.econ.yale.edu

www.cato.org

www.outofservice.com/bigfive/

www.vpostrel.com

 

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