Bootstraps

Richard Florida writing for the Atlantic this month (in my estimation one of the most creative and important pieces of literature to emerge from the global downturn so far):

The housing bubble was the ultimate expression, and perhaps the last gasp, of an economic system some 80 years in the making, and now well past its “sell-by” date. The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, post-industrial economy. And not least, it created a workforce too often stuck in one place, anchored by houses that cannot be profitably sold, at a time when flexibility and mobility are of great importance.

So how do we move past the bubble, the crash, and an aging, obsolescent model of economic life? What’s the right spatial fix for the economy today, and how do we achieve it?

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy – the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton Shool of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits – a higher level of civic engagement is one – it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work – if they can find it – that is a poor match for thei interests and abilities.

As homewonwership rates have risen, our scoeity s become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

[...]

[D]ifferent eras favor different places, along with the industries and lifestyles those places embody. Band-Aids and bailouts cannot change that. Neither auto-company rescue packages nor policies designed to artificially prop up housing prices will position the country for renewed growth, at least not of the sustainable variety. We need to let demand for the key products and lifestyles of the old order fall, and begin building a new economy, based on a new geography.

What will this geography look like? It will likely be sparser in the Midwest and also, ultimately, in those parts of the Southeast that are dependent on manufacturing. Its suburbs will be thinner and its houses, perhaps, smaller. Some of its southwestern cities will grow less quickly. Its great mega-regions will rise farther upward and extend farther outward. It will feature a lower rate of homeownwership, and a more mobile population of renters. In short, it will be a more concentrated geography, one that allows more people to mix more freely and interact more efficiently in a discrete number of dense, innovative mega-reigions and creative cities Serendipitously, it will be a landscape suited to a world in which petroleum is no longer cheap by any measure. But most of all, it will be a landscape that can accommodate and acclerate invention, innovation, and creation [...].

Here’s video ofBrad DeLong and Michele Boldrin arguing over the effectiveness of Stimulus.

I felt for DeLong, because it’s very difficult to remain dignified in debate with an overbearing – and rather pompous – clown. I am pretty sure Brad expected a grappling with the issues at hand, but Boldrin was simply not interested. He just did a lot of shoulder-shrugging and shushing.

I also felt for the debate’s auditors, who probably expected edification from an open debate between “experts” but were instead treated to a farcical performance by Boldrin that left DeLong with nothing to sharpen a saw against and therefore unable to edify.

DeLong is right; it was “very strange”. Almost as though Boldrin had no grasp of the most basic economic concepts, such as “unemployment” and “spending”. For instance, he seems not to know (or is pretending not to know) what people do with increases in their income (answer: they spend some and save some) or how (or even that) asset deflation bled into the rest of the economy.

Final note: Boldrin dismissed a very good analogy by DeLong. My mother always told me not to trust anyone who didn’t appreciate a good analogy.

Oh, well. Here’s wishing Brad DeLong worthier opponents in the future.

BBC reportsthat India will try to “bridge the digital divide” between South Asia and Africa by offering on-line physician consults and medical training to the struggling continent.

Another illustration that globalization, like almost everything else in this world, is a double-edged sword.

The Koreas

Notice the Koreas (smack in the middle). South Korea is all aglow, while North Korea is benighted.

Without resorting to the simple and dogmatic answer that “South Korea is capitalist and North Korea is communist” (though not incorrect, the answer is incomplete), ask yourself, “Why?”

Now you are a geographer! (And an economist, and a political scientist, and a sociologist, and a historian, and a high-school basketball coach – er, wait…)

Just so no one can ever justly accuse Cosmopolis of not investing – at least a little bit – in human capital, here’s a list of 10 ways to make sure you’re never unemployed (prepared by Career Opportunities News. Ferguson, an imprint of Infobase Publishing, whatever that is):

1. Continue your education. Take at least one course each year to improve your work skills. Your employer may even pick up the tab.

2. Keep Current with New Technology. Make a point to study, and master, the new technology entering your field. Hopefully you’ll end up as the person fellow workers turn to for assistance.

3. Dress for Promotion. Keep up-to-date with changes in fashion, even if it means relegating some of your favorite older items to Saturdays. Being better dressed than the average helps you stand out.

4. Be Sensitive to Diversity Issues. Develop and demonstrate your expertise in working with minorities, people with disabilities, older workers, and both men and women. Rating forms often measure achievements in this area.

5. Pick a Mentor. Develop close working relationships with one or more successful and advancing executives. Support that person and your loyalty may be rewarded.

6. Solicit Feedback. Make sure your work is valued and you are placing the emphasis on what the employer wants. If annual reviews are not held, meet to discuss your progress with your supervisor at least annually.

7. Locate the Right Career Path. Note the kinds of jobs the top people in your organization held on their way up. What career paths did they take and how can you follow them?

8. Become Versatile. Learn as many different jobs in the organization as possible. This will help you avoid being downsized and can be of great assistance when you get promoted.

9. Volunteer. Speak up when opportunities arise to work on special projects. You may learn new skills, make useful contacts, and earn points with your supervisor.

DeLong on economic orthodoxy:

The standard mode of discourse in economics is positive-sum win-win Pareto-optimality. You provide people with the right incentives through property rights to invest and accumulate and they do so—and the benefits of their investment and accumulation spill over and produce higher incomes for everybody else as well. You provide people with secure contract rights and they trade what they personally value less for what they personally value more—redistributing the goods of society across individuals until the Pareto frontier is reached. You incentivize people through property rights to be good stewards of natural resources, and they are.

But a look back at human history suggests that this focus is perhaps misplaced. Much of human economic and political history looks as though it is made up of thugs with spears (or kalishnikovs) taking stuff; or those who can for some reason command the services of thugs with spears taking stuff; or those who can for some reason command the services of thugs with spears threatening others so inducing them to enter into contracts on unfavorable terms. Slavery. Serfdom. Debt peonage. Latifundia. Land barons. Cattle barons. Capital barons. Perhaps economics should focus not on Pareto-optimal exchange equilibria and economic growth but instead on distribution: perhaps economics should be not a hymn to the win-win bounties of the division of labor but instead a discourse on the origins (and maintenance) of inequality.

It has always seemed to me that “the standard mode of discourse” does not merely de-emphasize inequality but serves to justify, rationalize, and otherwise perpetuate it. Mainstream economics is “a hymn to the … bounties of the division of labor” precisely because “a discourse on the origins (and maintenance) of inequality” would have to begin with economic orthodoxy itself, which has for too long been telling students and laypeople how beautiful is the emperor’s new suit.

From Global Issues:

Africa Refugee Numbers

“If this scale of destruction and fighting was in Europe, then people would be calling it World War III with the entire world rushing to report, provide aid, mediate and otherwise try to diffuse the situation.”

Here’s a great set of economic-geographical questions from Daniel Little.

Nancy Birdsall at CGD reports these sentiments from a breakfast on the international food crisis (!):

“Both these crises [financial and climate] were triggered by market failure…our failure to price natural resources into the economy…our overlooking of the ‘negative externalities’ in financial reporting and risk assessment…and in both these we have tried to privatize profits and socialize losses.”

“…the world drifts and our maps don’t work anymore, our paradigms and stories fail, and we have to reinvent our understandings, our reasons for doing things … What we need most urgently, in both the West and all over America, is a fresh dream of who we are, [and stories] which can tell us how we should act… They will be stories in which our home is sacred, stories about making sense of a place without ruining it … Wreck it and we will have lost ourselves, and that is craziness.”

- William Kittredge
Who Owns the West? (1996)