How exogeneous shocks reshape regions and economic competitiveness

is the focus on the cover story by Richard Florida, "How the Crash Will Reshape America," in the current issue of The Atlantic Monthly magazine. The article is abstracted thusly:

The crash of 2008 continues to reverberate loudly nationwide—destroying jobs, bankrupting businesses, and displacing homeowners. But already, it has damaged some places much more severely than others. On the other side of the crisis, America’s economic landscape will look very different than it does today. What fate will the coming years hold for New York, Charlotte, Detroit, Las Vegas? Will the suburbs be ineffably changed? Which cities and regions can come back strong? And which will never come back at all?

The root argument of the article is based on the idea of agglomeration economies and the clustering of talent. That despite technology enabling remote working and communication, ideas are generated working with other like-talented people. That economic crises accelerate change and transformation.

You ought to read it.

I had two reactions while reading the article:

1. When I do revitalization planning in other communities, or even in DC where I am wont to say "neighborhoods need to create their own neighborhood livability plans and not wait around for the city to do it for them", I say that it is important to do your own economic development planning, especially as it relates to culture, tourism, and retail and commercial district revitalization.

For example, there is a community in Georgia where I worked. The county is a major tourist destination in the Southeast, although the core city of the region has been surpassed by the other destinations. The County has an amazing "CVB" -- convention and visitors bureau. They do great work and I would gladly tap the head of that organization to run Destination DC...

Even though the CVB works to serve all areas of the county relatively equally, at the end of the day they have to be responsive to the areas/properties that generate the most tourism tax revenue, which isn't the core city. That doesn't mean that the CVB underserves the core city, but it is incumbent on the core city to represent its interests foremost, to develop its own vision and work to implement it.

It's the same idea behind the previous entry, where I say DC needs to develop and advocate its own transportation plan. Or that DC needs to develop its own tourism development and management plan independent of all the other interests. Etc.

This is the point that undergirds my bastardization of the Louis Pasteur quote:

Chance favors the prepared city.

In other words, when you work to develop and plan and implement your own vision, you are far better prepared to take advantage of exogeneous and endogenous shocks to your economy.

2. The second concern I have is the nature of the knowledge economy in the DC region. In my period attempting to become a cable television billionaire (we were undercapitalized and ahead of our time), someone I was working with pointed out that the Washington region's chief asset is its role as an information collector, aggregator, and disseminator. He didn't call it knowledge management.

But my real concern is that what truly defines the "creative class" in the DC region is the manipulation of law and politics for advantage of the better and/or well-connected.

That the capacity for knowledge and innovation creation isn't expanded by government, but reduced. (What would be called "rent seeking behavior" by economists.)

Now I have to admit that the region has strong clusters in biotech (in part a spinoff of the National Institutes of Health) and telecommunications and technology (primarily a spinoff of the Dept. of Defense, particularly DARPA, to some extent the National Institute of Standards and Technology, but also because MCI located here because they needed to keep suing AT&T before the Federal Communications Commission, and it made more sense to relocate to DC than to stay in St. Louis).

But again this is about a kind of innovation spawned by bigness (see Walter Adams' The Bigness Complex: Industry, Labor, and Government in the American Economy as well as the thinking behind the Foundation science fiction series by Issac Asimov and the fall of the Empire due to stultification) and institutions, as opposed to the kind of small startups fostered in places like the Silicon Valley. (Another counter-example would be Rte. 128 in Massachusetts, another area where the innovation economy was focused on big institutions, due to the spinoffs from the DOD-oriented MIT Draper Laboratories.

Will the Washington region continue to have an "innovation ecology" dominated by rent seekers, or will it be able to transcend manipulation and focus on change and transformation and innovation?

Another way to put it is "creative destruction" (Schumpeter) vs. "destructive creation" where rent seeking behavior causes the destruction of value through subsidies or maintenance of behaviors or industries that aren't sustainable.