Tuesday, December 20, 2011

Urban Economic Development

The metro economy is the national economy. Whenever I see a map with state-level data, I think about the cities driving the numbers. I don't care how Georgia is doing. Tell me more about Atlanta. Thus, I find this story about "urban-development legends" disconcerting:

The [Richard] Florida approach has also led to a renewed emphasis on education, on the assumption that an educated population will probably have much in common with a creative one. But improving local schools, while important in its own right, isn’t a proven economic-development tool, at least for struggling cities. After all, an educated population is an asset that can be lost. A city with poor development prospects is doing the right thing in educating its young effectively, of course, but it is also increasing the chances that they will leave, which is good for the students but makes the city even poorer. Indeed, the fact that education in America is usually financed locally means that richer cities are essentially free riders, importers of labor educated elsewhere.

Mario Pol├Ęse is reminding us that there are no silver bullets, but only economic development fads that usually fail to deliver. Florida or Michael Porter (Mr. Clusters) are flavors of the month peddling the same hubris as Robert Moses did in New York City. Warning heeded.

People develop, not places. Education is seen as a problem because of place-centrism in economic development. We may blunder when trying to improve the development of cities, but we succeed at developing people. We are very good at the latter. We needn't write about people-development legends. Educate girls, improve a nation.

If concern about brain drain is helping to drive policy, then the suggested approach to urban economic development will surely fail. How can cities better align with what is "good for the students"? The problem is that no one is asking such a question. Instead, we have to grapple with our limited capacity to improve the metro economy.

In the short term, labour mobility is an important tool for a prosperous national economy. In the long term, it can lead to permanently weakened regional economies requiring billions of dollars in annual transfer payments from more prosperous regions.

We need to break down barriers to labour mobility across Canada but at the same time we need to foster policies that promote economic growth in all regions of the country.

Atlantic Canada is unable to figure out how to make increased labor mobility (positive for Canada and its citizens) work for the region. Talent is a zero-sum game. Meanwhile, there is a great deal of literature in the arena of international economic development about how the source country can benefit from the outmigration of talent. Like education, the very act of migration economically develops a person. Encouraging someone to stay is analogous to pulling a student out of school.

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