What Makes Cities Grow: Carl Schramm

Excerpts:

What makes cities grow? This question is the subject of countless magazine articles peddling lists of “best cities” and is fodder for consulting firms looking to sell advice. But in reality, the most reliable measure of a city’s future health is whether employment is expanding or contracting. Declining cities are not home to growing businesses that need people. Only true believers in the come-back story would move to Detroit, Cleveland, or Buffalo right now — the three big cities with the highest unemployment rates in the nation.

So what features of a city correlate with expanding employment? The index-making experts offer all kinds of explanations. Some say it’s smart people, as measured by the percentage of persons holding various university degrees. But using degrees as a proxy for the quality of a city’s human capital can be very misleading, as anyone who has hired real people will attest. Richard Florida advances the “smart people expand employment” theme through a surrogate measure — the housing and entertainment infrastructure and culture (of tolerance) that attract creative people. My observations suggest that these ideas are headed in the right direction, but it is doubtful they are insights that suggest actions able to improve a city’s growth path.

Sometimes such expert advice proves ruinous. Kansas City provides an example. About eight years ago the city bought into the notion that a downtown entertainment district that included open-container laws would bring needed life to the inner core. So called “creatives” would flock to the Emerald City from all over the Midwest to start businesses and give needed vibrancy to America’s least dynamic town — it won’t grow and it won’t shrink. After operating for several years this multi-block restaurant, bar, and night-club zone is underperforming — it is producing only about a third of projected revenue to service its city-issued debt…What municipality doesn’t think their future would be improved by having a downtown mall, an aquarium, or new sports stadiums?

The flaw with the Kansas City strategy is common to many municipal growth strategies. They are founded on the implicit belief that outsiders are smarter than native people and the city must attract talent. This is similar to the even greater development fallacy of “smokestack chasing” — recruiting existing businesses to relocate to a city in response to tax relief and public subsidies for new plant and equipment spending. History tells us that the essence of growth in any place is the exertions of people who already live there. Any city’s history of economic success is a story of its resident entrepreneurs (even if they were born someplace else) who decided to take the risk of starting a business.

What’s important isn’t so much the university itself, but rather the entrepreneurial culture that accompanies many of them. Indeed, the cities with faster growing work forces are home to universities with particularly entrepreneurial cultures. The cultures in Seattle, San Diego, Columbus, Raleigh, and San Jose (proximate as it is to Palo Alto) reflect the particularly entrepreneurial capacities of their universities. One might even offer that, in the future, the universities that will be regarded as the best will be the ones with an explicit focus on inventing and innovating in their research and teaching such that they become schools for creative entrepreneurs.

Mayors, local elites, business leaders, and citizens interested in improving the future of their local economies should encourage their universities to strengthen their faculty and research to produce more ideas that can be commercialized.

Link to Article:
http://www.fourpercentgrowth.org/2012/09/the-town-gown-connection/