Just browsing the news during lunch I see the conservative American radio-tv commentator Glenn Beck, apologizing or something he said. This picture is shown in the article:

I focus in the poster behind this gentleman. Entrepreneurship it says, and then two hands trying to grab or magically making float a light bulb.

I have the impression that this is a promotion of the classical idea of Entrepreneurship. The 1000 times repeated mantra that anyone can have an idea, work hard and become rich. The proof is the thousands of individuals who have done it.

Light bulb is a popularly known icon for an idea. This was “coined” by Alva Edison. I mean, I don’t think that anyone took a picture with a light bulb before him :)

We all have seen this picture below. And perhaps listened to the stories of how patience he was. How he tried his experiments over and over… Persistence is the key ingredient to success…. bla, bla, bla…

They have put in our mind the idea of Edison working in his lab, coming up with something that we all admire. Sure, he was a genius, but he was not alone.

Successful entrepreneurship is about working with people. Even though Edison is alone in the pictures, there should have been a picture of many. He had a strong network of people who provided valuable ideas, not only for the light bulb, but many other inventions. See for example the article in Wikipedia: Edison Pioneers.

Entrepreneurship is not about individualism. I thought that, but I was wrong. Ideas are good, but are worthless until someone get things done. That is an entrepreneur. But entrepreneurship lives within a system. And if we want economic development, and progress we need the right socioeconomic innovation system. An environment, that I would say in most of the times it’s not necessarily accord to the ideas aired by Beck.

I come from a family of entrepreneurs, some firms did ok but the majority failed. I know how the lives of these people are, because it was mine. The vast majority (for example in the US, every year 2 million Americans start their own business) is a bad life. It really breaks my heart to see people buying the story of a successful individual, and just keep trying day after day, without the right network. Let’s not encourage wrong ideas about entrepreneurship.

So, Mr. Beck, I really like this promotion of entrepreneurship. But maybe you could have, instead of two hands reaching the light bulb, maybe a diverse team holding it…

Yesterday there was an article about Vallejo in the Financial Times. It says:

For an image of the future that is guaranteed to chill US civic leaders and bondholders alike, there is no better place to look than among the potholed streets and boarded-up houses that litter the Californian city of Vallejo.

It made me feel good that last year I went to the city to make a case study about it. I stated at Univ. of California, Berkeley during the whole Spring semester 2010. A few days ago I finished writing a paper called “VALLEJO, CALIFORNIA. FROM THE FRINGES OF THE CITY, A CASE FOR THE ‘CITY REGION SYSTEM OF SURVIVAL’. I wrote it to present it at the DIME-DRUID ACADEMY Winter Conference 2011, this week.

This paper is very heterodox, and is a paper on progress. The main purpose of it was to make a summary of theories I learned about Local Economic Development at the Berkeley libraries. I then tried to connect the case of this city (or district) of the San Francisco Bay Area, and its significance to entrepreneurship and innovation policy. Innovation from a broad sense, for the ones that now what I’m talking about.

I got much help from the locals of Vallejo, and one of them, the editor of the popular Vallejo Independent Bulletin, asked me to send him a copy of the article when I would finished it. Keeping my word I sent it to him, and he has published it online.

My article at the Vallejo Independent Bulletin

I am grateful he did it, because I got a few comments from the citizens. This made me realize that my ideas are still quite confusing. So I wrote a comment. It seems it has an anti-spam feature, I told the editor. For now I’ll put it here.

Since I read the comments of Ab and SomeoneElse on my paper about Vallejo and the Bay Area, I have been thinking a lot.

I am grateful for the comments. In particular, because I have realized that I have not made a good job to express my ideas. This is hard, as English is not my native language. But also because of the internal fight I have had. I am a PhD student specializing in local economic development, but it is the case of Vallejo that has made me changed many of my preconceptions. Now I would like to comment on the comments.

Ab says: -“the last line is spont on”- and then quotes me: -“Vallejo … end up like many cities in third world countries, where a few (police and firefighters?) live in affluence while the vast majority of citizens live and die in misery”- [police and firefighters added by Ab].

There are two things. First it should be understood that even though Vallejo has been a city, since the 19th century, I refer in the paper as a “district” of the city-region of the Bay Area. I know this may sound weird for any local (of the Bay Area), but coming from abroad I can clearly see that the Bay Area is a large metropolitan area, highly connected in its economic geography.

The second thing is that I don’t necessarily say that police and firefighters are the few, or the elite of Vallejo, nor of course the elite of the city-region. True, they are an interest group, and as I referenced in the paper they have a well known “symbiotic relationship” with the political power of the city. But going back to my first point, one has to look beyond the city limits of Vallejo. Making $150,000 as a safety employee it’s certainly high, but what about the bankers and real estate leaders who make 10 times or more, in the different districts of the Bay Area?. This is probably a stupid comparison, but what about the profits of a company of the city region, like Apple making 100,000 times more. But still, what is their responsibility towards their neighbors?

“Someone Else” points out we need to think outside the box. I’ll try to do it. There is so much anger against the public safety employees, and probably with a reason. But this is not going to solve the problem of Vallejo. Thinking outside the box… What about a Bay Area police? After all, the criminals operate in all the Bay Area, not only in one particular city. I am NOT an expert in safety, but I see that the New York City Police Department, covers 8 million people, more than the 7 million of the Bay Area. The Bay Area has already the BART police, that would fall inside the Bay Area Police. The 9 counties police departments (sheriffs), a heritage from a bygone era could also be reduced. I repeat, I have no idea about this field. But as an economist I would think that cities (and their tax payers) would avoid the “competition” among them. And that is the idea: work more towards collaboration, than competition.

Of course, safety should not be the only thing. In fact should be the least. The most important things would be towards, education. I had the chance to be in UC Berkeley, one of the most amazing universities in the world. Also visited friends in Stanford. Great places. I know all these ideas have been said many times before, even from the former Governor (I still can’t believe people voted for an European actor). But there should be more mechanisms to get more funding for the rest of more ordinary higher education. However, what I think is of really concern, is the high inequality in the school districts across the Bay Area. In Europe we have many problems, don’t get me wrong! but with the exception of a few countries (like UK), every child has the same amount of money allocated for education, regardless in which neighborhood was born. There is an urgent need for a more cohesive education across the Bay Area.

More cohesiveness should be as well for access to justice, healthcare, transportation, innovation and entrepreneurship policy, etc in the Bay Area. That’s what I am trying to say in the paper. Because the different parts of the city region are so interdependent.

The same goes to having X or Y Mayor. Sure, many question if Davis should be the Mayor. But I think it does not matter if X or Y, or Z would be Mayors. Neither if Vallejo hires the best consultants, or the best City Manager. My hypothesis is that it does not matter who is in the leadership of Vallejo. The city will not survive.

Unless, they realize that: 1) Vallejo is dependent of the city-region. (This does not mean surrender). 2) There is need of active coordination, at local (Vallejo) and city-region level. That is stop fighting at local and inter-local level, and start collaborating.

If not, and now I clarify, the city region of San Francisco, will become more and more as third world country, “where a few live in affluence while the vast majority of citizens live and die in misery.”. Many in the elite, as the mentioned Andy Grove in the paper, have noticed it.

The other day I got this through my friend Jan, who just recently finished his PhD. This is a video animation of a presentation of Steven Johnson, based on his new book Where Good Ideas Come From: The Natural History of Innovation.

He explains the idea of how meeting places where such a great place for innovation, back in the day (and today), and all the time it took to develop ideas. For sure, there were people who talk more, and people who would listen more. But all good benefited. You could go to the table that shares your interests, once in a while. I think that is the same principle in twitter.

I have to admit that my twitter log, (which once in a while I copy in a doc for easier findings), help me a lot to get ideas to include in papers. Therefore I’m very grateful to this tool. It comes a lot of inspiration, and try to keep the people I follow to a minimum, to restrict it for my work. (I don’t know how people can follow more than 150 people, no offense, but there is an optimization point.) Anyways, the thing is that twitter can help to exchange ideas, unfortunately it does not leave too much room for discussion.

I love these animations. Another good one is David Harvey’s (if you don’t know him, is the most quoted geographer), “The Crisis of Capitalism”.

Every time I get into a second hand book I always find something ‘super interesting’. My wife picks on me about it. Earlier this semester I found the book of The Prince [Translated by Daniel Donno. Bantam Classic. 2003], for 1 dollar. I already read some parts but now I want to read the whole thing. I liked most of it, and it is true, that he is not that “Machiavellian”, as the people say. Come on! he was born in 1469! Governments were all about realism.

Because he was leaving in near poverty, he was trying to find a position back in the government. He had to convince the guys in power that, he was a good and useful guy, and even if they tortured him before!

I transcribed the last paragraph of the Chapter 21, ‘What a Prince Must Do to Be Esteemed’. Here it is Machiavelli discussing entrepreneurship policy, local economic development, “cultural economy”, and the importance of having a charismatic/catalystic local government.

For the ones unfamiliar with the term, a prince, was what he was referring to the man in power of the Italian city-states. And the Lorenzo de Medici, which he (or one of his friends) later hired Niccolo.

A prince should also demonstrate that he loves talent by supporting men of ability and by honoring those who excel in each craft. Moreover, he ought to encourage his citizens peaceably to pursue their affairs, whether in trade, in agriculture, or in any other human activity, so that no one will hesitate to improve his possessions for fear that they will be taken from him, an no one will hesitate to open a new avenue of trade for fear of taxes. Instead, the prince ought to be ready to reward those who do these things and those who seek out ways of enriching their city or state. In addition to all this, at the appropriate time of year, he ought to keep the people occupied with festivals and spectacles; and since every city is divided into guilds or other corporate bodies, he ought to take these into account and assemble with them on occasions, thus giving proof of his affability and munificence, yet never failing to beat the dignity of his position in mind, for this must never be lacking.

Niccolò Machiavelli, 1513

In his grave it says: TANTO NOMINI NULLUM PAR ELOGIUM (No eulogy would be adequate to praise so great a name)

“Effective economic development strategies must be customed-designed to meet the unique strengths and opportunities of local and state economies”.

Luke, Ventriss, Reed & Reed argue on page 175, as the editors of the book Managing Economic Development – A guide to State and Local Leadership Strategies (1988). My first impression when I read this, is the striking resemblance of what I must have written a few years ago for a paper conference or project. That is, one should be careful with the ‘one size fits all’ approach than many economists have. I completely agreed with that. That is… agreed. Because now I’m kind of skeptical of this local oriented approach that treats all communities if they were in the same line of the race track.  I keep reasoning in my head:

For example, in the case of Vallejo, they can make the best possible study looking at their financing, regulation, infrastructure, public services, human capital, etc… to tackle their Local Economic Development (as the mentioned book does in chapter 9).  However, no  matter what these cities do, their options will be very limited because theyir economy is quite dependent on the city-region (the San Francisco Bay Area), State of California, etc.

I think to my self that reviewing this book is not going to be very helpful. I keep reading;

“ (…) As a result of the growing economic interdependence, there has been a significant decline in state and local governments’ capacities to unilaterally develop an implement economic development policies and programs. No one government department or individual public manager can effectively act single handedly. This situation forces the invention of new collaborative mechanisms and collective development strategies.
Successful economic development strategies not only precipitate from an intergovernmental contest of cities, counties, COG’s (Council of Governnments), and state and federal agencies, but also emerge from intersectoral collaboration between the public, private, and non profit sectors. Each sector depends on the vitality of the other (…)”

This book is better that I though!, this are so much in line with one of my working papers!. Let’s continue.

“In such an interconnected policy context, a new type of public leadership is required – catalytic leadership. Chapter Eleven examines this trend and shows how, unlike charismatic leadership, which rallies people around the leader’s vision, catalytic leadership facilitates cooperation among a group of leaders and stimulates the pursuit of a goal that is created collectively by the group”.

A pretty nice book, with good complementary articles.

Again, I remembered that one should never judge something for the first paragraphs one reads. Specially from old fellows…

I believe that the engine of economic life is in the cities. Of course, it is important the national economic policy, but there probably is too much of a bias towards the national level, this is true for academics and policy makers.

I think this bias in the US comes in part after the WWII, the Manhattan Project and Annevar Bush (he basically asked to brutally fund his Ivy League schools to bring national victory through science – he was a very intelligent person), and the traditional nationalistic tendencies of the European countries (I’ll put also a little blame to the Marshall Project for funding them at national level).But anyways, the fact is a professor has more chances to succeed if he focused on the national level, (or even regional level in the case of Wales, Catalonia or Basque Country for their political-economic system – is in it a coincidence that the Regional, instead of National System of Innovation, was created in those places?), instead of cities. Also the national media plays an important role into tell citizens, that they’re not citizens of a city, but of a country. It was not until my research in Latin America for my Master thesis that I started realizing of the importance of the city-region, instead of the national level.

However, sometimes I can not avoid to think about the policies at the national-global level. Today I would like to comment on how screwed up can be the monetary policies of the Central Banks or Federal Reserve during the last decade.

I remember a decade ago, all the pressure that the Euro Zone was receiving to lower the interest rates. I remember all the economic press on how stupid the Euro was going to be with such a high interest rate. For many years Frankfurt, had to defend itself. The idea was fighting inflation and control the economy. After all, Japan had 0% interest rate for almost 15 years, and this did not help them. The American economy was growing well, and everyone though it was because of quasi-god Greenspan, who so smartly had the interest rates low.

What happen when we have low interest rates? Nobody wants to save. If you put the money in the bank they will give you a 0,5% a year, with an inflation of 2% a year, this is loosing your money. You have to spend it, as fast as you can. And yeah, consumption… and the economy grows… Fantastics isn’t? (True, much better than in the 1980s, with double digit rates.)

Wall Street also loves the idea of lower interests, for two reasons. First, because people with savings instead of putting in their savings account in the bank, they will put it in the stock market, you can make up to 10% a year!! without any effort!!. Second, the investment firms they can play, yeah play, easier with cheap money.

There is someone else who likes a low interest rate: The US government. And this is for two reasons. First because they can do all the projects they want printing money, instead of having to tax the people. Something that of course it’s against the “freedom” of the American people. Second, because they borrow so much money to foreigners (especially Asian), if they raise their interest rates, then they have to pay them back more Billions, (or is it Trillions?) in interest.

One of my heros, or one of my former heroes?

Me with the Krugman's name tag, right after his speech at the American Association of Geographers in DC last April

So, is it a good idea to low interest rates in the face of deficits and high unemployment?. This question is highly relevant in 2010. Here it is Nobel Prize in Economics, Dr. Paul Krugman answering:

“it is quite possible to reduce the deficit and increase employment at the same time. All you need to do is cut interest rates, so that private spending takes up the slack” (Krugman, 1998; The Accidental Theorist, p. 37)

This is found in the Chapter “Unmitigated Gauls: Liberte, Egalite, Inanite” in which Krugman bashes the French for maintaining relatively high interest rates. Many Anglos, (German and Spaniards too) think that one can not go wrong criticizing the French, but I have to admit that they were not that wrong, and their influence to have the ECB maintain realistic interest rates. Even though finally after all the pressure, they took it almost as low as the Fed. Which was a bad decision in my opinion.

Looking at the statement of Krugman, sounds pretty ridicule today. Yes, we have to give him that this was after the 1990s US economic growth, but are these articial low interest rates the cause of this? (hint: look at the cities), Did not these low rates contributed to the dot.com bubble? Are not these artificial interest rates the trigger of the today’s housing bubble & bust? Did they not greatly affect  the financial mess in which we are? Did not the low rates helped governments, firms and families got into a huge amounts of debt? With all my regret I have to say, yes, yes, yes, yes and freaking yes.

Yeah, Krugman and others “foresaw” the housing bubble when it was in its last throats, but that was not that hard. Heck, I myself tried to convince all my family and friends to don’t buy an overpriced house!!

Yesterday Krugman, he kept saying how wise it was to keep interest rates low. He says

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. (Krugman, The Third Depression, June 27, 2010)

This time I agree with him. That is Economic 101, from the textbooks he writes! That is when the economy is slow keep interest rates low. But WHY, WHY by the end of the 1990s??

Having expressed all these things, I have to say that I really respect and admire Krugman. Specially for stand against many of the Bush policies and supply-side economics (I think now they go by the name of Tea Party :), and the academic field for his proposition in geographical economics, importance of the cities, and his efforts to bring together Economists and Geographers. And of course because his theories convinced the Swedes to give him that golden medal :)

 

I believe that the engine of economic life is in the cities. Of course, it is important the national economic policy, but there probably is too much of a bias towards the national level, this is true for academics and policy makers. I think this bias in the US comes after the WWII, the Manhattan Project and Vannevar Bush (he basically asked to brutally fund his Ivy League schools to bring national victory through science – he was a very intelligent person), and the traditional nationalistic tendencies of the European countries (I’ll put also a little blame to the Marshall Project for funding them at national level). But anyways, the fact is a professor has more chances to succeed if he focused on the national level, (or even regional level in the case of Wales, Catalonia or Basque Country for their political-economic system – is in it a coincidence that the Regional, instead of National System of Innovation, was created in those places?), instead of cities. Also the national media plays an important role into tell citizens, that they’re not citizens of a city, but of a country. It was not until my research in Latin America for my Master thesis that I started realizing of the importance of the city-region, instead of the national level.

However, sometimes I can not avoid to think about the policies at the national-global level. Today I would like to comment on how screwed up can be the monetary policies of the Central Banks or Federal Reserve during the last decade.

I remember a decade ago, all the pressure that the Euro Zone was receiving to lower the interest rates. I remember all the economic press on how stupid the Euro was going to be with such a high interest rate. For many years Frankfurt, had to defend itself. The idea was fighting inflation and control the economy. After all, Japan had 0% interest rate for almost 15 years, and this did not help them. The American economy was growing well, and everyone though it was because of quasi-god Greenspan, who so smartly had the interest rates low.

What happen when we have low interest rates? Nobody wants to save. If you put the money in the bank they will give you a 0,5% a year, with an inflation of 2% a year, this is loosing your money. You have to spend it, as fast as you can. And yeah, consumption… and the economy grows… Fantastics isn’t? (True much better than in the 1980s, with double digit rates.)

Wall Street also loves the idea of lower intererest, for two reasons. First, beacuse people with savings instead of puting in their savings account in the bank, they will put it in the stock market, you can make up to 10% a year!! without any effort!!. Second, the investment firms they can play, yeah play, easier with cheap money.

There is someone else who likes a low interest rate: The US government. And this is for two reasons. First because they can do all the projects they want printing money, instead of having to tax the people. Something that of course it’s against the “freedom” of the American people. Second, because they borrow so much money to foreigners (especially Asian), if they raise their interest rates, then they have to pay them back more Billions, (or is it Trillions?) in interest.

So, is it a good idea to low interest rates in the face of deficits and high unemployment?. This question is highly relevant in 2010. Here it is Nobel Prize in Economics, Dr. Paul Krugman answering:

“it is quite possible to reduce the deficit and increase employment at the same time. All you need to do is cut interest rates, so that private spending takes up the slack” (Krugman, 1998; The Accidental Theorist, p. 37)

This is found in the Chapter “Unmitigated Gauls: Liberte, Egalite, Inanite” in which Krugman bashes the French for maintaining relatively high interest rates. Many Anglos, (German and Spaniards too) will think that one can not go wrong criticizing the French, but I have to admit that they were not that wrong, and their influence to have the ECB maintain realistic interest rates. Even though finally after all the pressure, they took it almost as low as the Fed. Which was a bad decision in my opinion.

Looking at the statement of Krugman, sounds pretty ridicule today. Yes, we have to give him that this was after the 1990s US economic growth, but are these articial low interest rates the cause of this? (hint: look at the cities), Was not this low rates the cause of the dot.com bubble? Are not these artificial interest rates the trigger of the today’s housing bubble? Did they not greatly affect the financial mess in which we are? Did not the low rates helped governments, firms and families into into a huge amounts of debt? With all my regret I have to say, yes, yes, yes, yes and freaking yes.

Yeah, Krugman and others “foresaw” the housing bubble when it was in its last throats, but that was not that hard. Heck, I tried to convince all my family and friends to don’t buy an overpriced house!. It was not until yesterday (literally) that I read Krugman saying that the G-20 should consider rise interest rates. (I guess the only one in favor would be the Chinesse economists who always take the wrong decisions against the mainstream – please note irony)

Having expressed all these things, I have to say that I really respect and admire Krugman. Specially for stand against many of the Bush policies and supply-side economics (I think now they go by the name of Tea Party :), and the academic field for his proposition in geographical economics, importance of the cities, and his efforts to bring together Economists and Geographers. And of course because his theories convinced the Swedes to give him that golden medal :)

 

Obama believes States and Cities need urgent help

I’m currently studying the city of Vallejo, California, because it is so far the biggest city of California (and I think in the USA) to have filed for bankrutcy so far. For my PhD I learn about the “do’s”, but I also have to learn about the “don’ts”, so the case of Vallejo it seems it’s a good one to look at some “don’ts”. But, it’s not only California, all across the USA, Europe and Japan, cities now are seriously struggling. Many has been said about the countries, but as Jane Jacobs and Robert Lucas clearly pointed out, the economic development and innovation does not come from the coutries, but more precisely, from the cities. So, in my opinion, we should pay more attention to the cities, even if the neo-classical economists and the different national media across the countries only look at the national level.
Unfortunately, we have had not to wait too long to start paying attention to the economy of the cities. They have been getting into trouble, and this last Friday, President Obama talking about the American cities expressed the urgency to focus on them: 

I am concerned … that the lingering economic damage left by the financial crisis we inherited has left a mounting employment crisis at the state and local level that could set back the pace of our economic recovery. Because this recession has been deeper and more painful than any in 70 years, our state and local governments face a vicious cycle. The lost jobs and foreclosed homes caused by this financial crisis have led to a dramatic decline in revenues that has provoked major cutbacks in critical services at the very time our Nation’s families need them most. Already this year, we have lost 84,000 jobs in state and local governments, a loss that was cushioned by the substantial assistance provided in the Recovery Act. And while state and local governments have already taken difficult steps to balance their budgets, if additional action is not taken hundreds of thousands of additional jobs could be lost. (….) Because the urgency is high—many school districts, cities and states are already being forced to make these layoffs,”

(Barack Obama, 12 June 2010)

Then according to the media he’s asking for $50 Billion in this emergency fund. Something that of course many policy makers can hardly support, not so much because of the 13 trillion debt the USA already has, but because it’s an election year and this looks a risky move. Obama in order to get the monies he continues, a) “I have called for a three year freeze in non-security discretionary spending”, b) put a “a fee on the largest Wall Street firms”, and c) put “agency incentives to identify ways to save money”.

For the first, I think that’s fantastic, although the main chunk of the discretionary budget is the military, so if this is not even discussed to be frozen then it does not go too far. In fact I think the US should not have a freeze but to reduce the whole thing. The question is, Does the American people prefer to keep having a huge military force or teachers in their towns and cities? The fact is that the majority of the people believe that education should be the priority, but the choice it’s not that easy, even if the US military budget sums more than the next 16 countries altogether. For the second measure, it seems that the majority of the people won’t have any problem on taxing the big ones in Wall Street. I mean, it’s like one of the wildest dreams of the middle and poor class. The third sounds like empty words, that I can not even say it is a good try.

Anyways, I don’t want to get into US politics. The main point here it’s not if they’re going to be able to do this, but to say that it seems that the US Government is realizing about the importance of the state and local level. From my view, this is very positive, even if it might be too late. They should have let bankrupt some companies, but cities can not and should not go bankrupt.

p.s. Having said that, I of course have to acknowledge that leading-Republican American guys really think Obama wants sincerely to destroy the nation, as well as the leading-Democrats though Bush wanted the same.