I would like to share this video from Tim Harford, first because I liked one of his book on economics (probably it would be good to get the last one “Adapt”), and second, because this video has an interesting teaching that can not be enough remembered by all of us. It’s about an illness [not really an illness] that a smart doctor, with experience in the Spanish Civil War and WWII, found among our species.

Anyways, here below is the way Tim Harford explained about him. Below I typed the part when he specifically introduces this specific illnes.

“Archie Cochrane all his life fought against a terrible affliction, and he realized it was debilitating to individuals and it was corrosive to societies; and he had a name for it, he called it the ‘god complex’. Now I can describe the symptoms of the ‘god complex’ very easily, so, symptoms of the ‘god complex’ are… no matter how complicated the problem, you have an absolutely overwhelming belief that you are infallible right in your solution. Now, Archie was a doctor, so he hangs out around with doctors a lot, and doctors suffer from the ‘god complex’ a lot. Now, I’m an economist I’m not a doctor, but I see the ‘god complex’ around me all the time: in my fellow economists, I see it in our business leaders, I see it in the politicians we vote for. People who in the face of an incredible complicated world, are nevertheless absolutely convinced that they understand the way the world works. (…) The world is simply far too complex to understand in that way.”

I love this quote, and the whole speech.

Unfortunately, I think like all of us, he’s not free from this illness. In the same speech to prove his point he mentions than 10% of the American business disappear every year. That is for him an example of the crucial trial-and-error process.

Trying to explain the entrepreneurial dynamics only through these entrepreneurship rates… it’s as he would say: “simply far too complex to understand in that way“.

Today Saturday, I have found a cool comment on a blog. I decided to copy and paste it.

Anon says:

Look, this is really simple:

Jack and Jill both work at MicroCon, they each make 100K/year. They live in the same neighborhood, drive on the same roads, use the same police/fire services, visit the same national parks. Many of these things are funded by their tax dollars, they utilize them to the same degree.

Jack rents an apartment next door to Jill’s condo.

Every year Jill pays substantially less taxes than Jack, claiming her mortgage interest deduction. We (the democratically elected government) decided to subsidize Jill’s home purchase because we believe home ownership makes a more stable society.

Jill has more money in her pocket than Jack, purely because of a gov’t decision based on social considerations. Every year Jack and Jill can argue to their representatives that the base tax rate is too high, or too low, and that will never change the fact that Jill pays less. Jack might as well have handed the extra money he pays straight to Jill, there is no difference. The inequality between Jack and Jill’s tax bill is a govt social program.

This comes from comment #97 from an article called: –Half of US social program recipients believe they “have not used a government social program”– By the way an amazing, but not surprising article.

Coming back to Anon’scomment, I would also add that besides the widespread believe that home ownership is good per se, (something that also happens outside the US, even though for example in the case of Denmark with strict policies on renting, rental housing usually is in better conditions than owned places [sic]) probably a main driver of this policy is the powerful banking sector. It is great for banks to have people get mortgages so they can work for them (in the case of my native Spain for the rest of their lives).

This intrusion of the banking sector, has deteriorated the possibilities of people of moving to find better places, in particular now with so many places under water (American expression that means your house now cost less than what you paid for). This is something that economic geographers like Richard Florida have been warning for years.

It also clogs innovation, because getting stocked to a house, people tend to prefer a STABLE job in an STABLE company. That is, no one will open his/her mouth to risk things being unSTABLE. In the case of the US this even gets worse, because people are afraid to loose their healthcare insurance (that’s another topic).

Having said that I have to admit I may have a bias. In the last decade we have lived in Spain, Bolivia, USA (Dallas, Atlanta, Berkeley), and Denmark, and always rent places. Of course, I would not been able to move so much if I would have ever tried to own a place (like many of my friends with similar incomes).

Soon we will have our second child, and I don’t think we’re going to own any time soon. Why so many American and European people have to be punished by our governments (in favor of the richer) for not choosing to own?

PhD Pre-Defence

July 4, 2011

There are different types of Pre-Defences. In Aalborg is a voluntary event that some people do after delivering the thesis as a rehearsal of the presentation, others do it 1 or 2 months before delivering the thesis. I have done the latter. It was very good and 15 people from different fields participated. I asked them to read different sections of my first draft. I was very pleased.

The presentation here, it was done with the purpose to spur comment.

One of the interesting things is that many criticized the subtitle that I had. I was not sure about it, and at the end I asked for a vote to drop it or not (even though it is not a democratic process). No one voted in favor to have it. So I dropped it from this version.

Now I have a little more than a month to finish it.

This is a continuation of my last post: Reflections on the IEDC Conference

I attended the roundtable “How effective are today’s incentives in tomorrow worlds?”. There were 9 roundtables simultaneously and this was the largest. It had around 25 people, all from local governments (no State). It was remarkably directed by a gray haired facilitator. I loved the way he facilitated the conversation and asked interesting questions. Now I will transcribe my notes:

Facilitator: Who has free land for potential new comers? 6 out of 28 people.
Who would like to have it? 5 raise their hand.

Who has cash incentives? The majority. In the last 10 years, they have given 500,000$, 2million and one guy said 10 million.

Facilitator: They looked at how much money they have given in the last years, and how much they have collected. They have only gave 600,000$, but that they have got 16 million dollars in tax revenues. “A pretty good return of investment”. (later he changed to over 10 million dollars, so I’m not sure about the figure).

Most of the incentives (which can be tax abatement or other types of support – it is not always cash), is usually done over 3 years. Some said in 7 years or 10.

Usually money is for potential incomers, but sometimes they would give money if a company is planning to leave, and or they have an offer on the table from another place.

They all offer workforce training programs.

They all have guidelines, that is no strict policies (check list)

Tax benefits were usually based on investment, but in today’s economy the main thing is jobs.

They know big companies receive training to get governments money. They know the lingo, etc.

But they know that companies will hardly leave only because of the money. They also know that sometimes they just want attention, not money. “If they call you to complain about traffic, for example, it was advised not to excuse yourself by saying that this is not your department! You have to be the facilitator and help the firms!” (I loved that answer).

One Mayor of a small city in Milwaukee: “I was impressed yesterday, about what the keynote speaker said, that people first choose a city, then a job. I never though in that way!” (Richard Florida influences :)

Lady: How can we promote quality of place?

Facilitator: that’s very interesting, but it’s another subject, let’s stay focused.
Lady, a little in doubt: But, quality of place is also an incentive to bring companies! We have a great living standard, but we don’t know how to market it.
People agreed, this was also important, and the facilitator let them talk a little about it. (they use images with sailboats and kids with tricycles in their pamphlets).

Young fellow: We’re trying to focus on certain industries.
Facilitator: Yeah, we all are trying to do that.
Young fellow: We in Anytown, Colorado, we’re trying green energy, etc.
Facilitator: Yeah, we all try to target industries, the cluster idea, but boy if there is a bakery that will hire 25 people, we all run like…

Facilitator: In a very hypothetical case, that the federal government will ban cash incentives. Would you agree? Yes = 8. No=3. Undecided= A few.

Facilitator: It would be good, because at the end of the road, we’re fighting against each other (Some nodded) But why would it be bad? Let me ask among the ones who said -no-.

Man who raised his hand fastest when answering no: We will lose firms… In this globalized and competitive world, they will leave us.
Facilitator: So you’re saying that other countries will out-compete us with financial incentives.
Man: Yes.
Facilitator: Could not they do it now?
Man: Errr… yes. But… it would be worse…

Facilitator: Many here have not participated. Any of you have any comment?

I raise my hand.
“I’m a phd student, researching on LED, so I’m really happy to be here, because you’re the guys running the real show. My perspective from the academic research is somewhat different. Most research is very skeptical of incentives. Mainly for two reasons, first because as you said, you’re fighting against each other, and second, it’s really difficult to measure the impact of them. I mean sometimes it can be done (pointing with my hand to the facilitator’s example) but it can be very biased”.

(small silence)

3 old guys, including the facilitators, were hard on me.

Experienced man: “You got your research wrong!! In terms of recruiting, we have got many jobs because of the incentives we have given…. ”

Me: “Just to clarify, I’m talking about cash incentives”.

Experienced man: “Cash incentives, we rarely do it, but they are important…”

Facilitator (looking at me): “I tell you, we gave so little money, and we have got so much! It really works!!

Another guy also was hard on me, I could see his lips moving, but at that point I could not really hear much more nor take notes.

It would have been completely futile for me to quote authors and years, to prove a point, like in an academic conference. These people, they knew, they have been there, they have seen it with their eyes…

Two worlds. I hope you get my point, regardless of what field you come from.

One of the most interesting questions was when the facilitator asked who will increase/the same/decrease their cash incentives the short term future.
Decrease = 8 (our current economic situation won’t let us do it)
Increase = 8 (we have to do it, we have no option)
The same = 4

What a great topic for research, uh!! It would be great to see in 5 years, how these cities have performed in several aspects. It would be such an interesting and publishable paper :) I thought about asking for their business cards, but first I ran out of biz cards (I forgot to bring extras!), and after my controversial question, I don’t know how happy they would be to give me info. I’m sure, like always, some researchers have already done that. I have to find these papers… For my post-doc :)

The International Economic Development Council’s 2011 spring conference, held June 5-7, in Indianapolis, IN.

Understanding Tomorrow’s Industries Today: The Landscape of the Future.

My wife wanted to come to Indiana to visit her family, anytime in spring/summer 2011. We made it coincide so I could attend the IEDC conference, that by coincidence was taking place in Indianapolis. Unfortunately, I found that my PhD student fund for the 3 years had ran out, so I weighed if I REALLY wanted to attend to that conference, and I decided most of it was not really relevant for me, specially in the very last stage (hopefully) of my PhD. But I wanted to attend to a couple of sessions. So, after a lot of though, I decided to attend, and I openly confess my fault, I decided to crash a couple of sessions. (I’m a poor phd student ok!?). It was a little bit uncomfortable to be the only one around the conference of around 200 attendees without a name tag. I though, in case they catch me, with my Spanish accent I could always pretend I was serving water or something.

I was really happy I attended, and if you’re interested in local/regional economic development (LED), I highly encouraged to learn more about this outstanding organization. (A little advertisement to cover for my conference fee :) I would not mind to join myself.

I think there were only a couple of academics, the vast majority were practitioners of local governments, and a few were from consultancy companies.

The LED literature says that there is a big disconnect between academia and practitioners. I confirmed this when I conducted some interviews with public officials in USA and Denmark. Attending to this conference was just a big confirmation stamp of the stereotype.

University LED researchers and LED officials are two worlds apart. Almost like the astronomical bodies and the astronomers. I know it sounds ridicule, but what I’m trying to say, it’s that there is not much communication among them. Well, at least astronomers seems to admire the sky, something that LED researchers not always do.

At the conference, I performed two informal interviews to LED experts. I asked them several things, but concerning the topic I’m blogging today I asked them if they found in their sphere a disconnect from the academia. They both have certain links with the universities, but they said that they’re “in their world”, “ivory tower”, “disconnected from reality”. One explained how in her hometown “the professors in the field (usually in planning), have their network, they all come from the same prestigious university, they recruit themselves, and live by and for them. There are some younger PhD students who have more involved projects, but not the professors.”

The dislike of the people in the field for the academic research is matched if nor surpassed by the professors for the field. In Berkeley, I interviewed one prominent professor on economic geography and regional development. When I asked him about his feelings about LED, he said “Much prostitution!! Much prostitution!! (not literally) These guys will do whatever to please companies!”

Both positions are wrong and right. I belief the way forward is to combine both views. It’s true that the academic world can really suck to come up with useful things for the economic development of cities and regions. Academics much focus on concepts and discussion, but the governments cant make little use of that. In the case of more public funded universities (European), many professors have not in their agendas help cities. For the ones more based on private and quasi-public grants (US), they’re neither motivated to do the applied research on the field.

The lack of rigorous research and fluffy concepts are the the main courses in the practitioners’ menu, while professors and their phd students have endless discussions about the ingredients of the onion soup. Then we have the consultants, another amazing world, that I can not reflect upon in this post.

In one of the sessions I attended I heard this quotes from the speaker:

a) Today the world -of business creation and growth- does not depend on geography.

b) How do we train for jobs that don’t exist yet? (question posed for the organizers)
You don’t! you focus on lifelong learning, curiosity, trust, etc.

–I think it would be pretty cool to be able to write academic papers like this :) —

note: I talk about two worlds, as dichotomy, but there are actually a big scale of grays.

We have been passing through one of those great economic storms which periodically bring hardship and suffering upon our people. While the crash only took place six months ago, I am convinced that we have now passed the worst and with continuity of effort we shall rapidly recover. There is one certainty in the future of a people of the resources, intelligence, and character of the people of the United States—that is, prosperity. 

(President Herbert Hoover, 1 May 1930 – read rest of speech here)

 

I read this from the illustrated book “Brother, can you spare a dime?” by Susan Winslow (1976).

After quoting Hoover, then she writes:

By 1932, some 18 months after Hoover’s pronouncement, ‘the great economic storm’ had, if anything, worsened, leaving more than 15 million out of 123 million Americans unemployed in its wake. FDR’s (President Franklin D. Roosevelt) New Deal did much to mitigate the effects of the Depression and restore a sense of confidence in the American people, but recovery was not really complete until the nation began to spend heavily for defense in the early 1940s.

[I just wanted to share this with you guys during my holidays]

Last year I visited UC Berkeley as a researcher and studied the city of Vallejo. The city is known by the youth of the San Francisco Bay Area for its hip hop music. There are some famous rappers from there. I rarely put videos in this blog, but a friend sent it to me, and it was nice to see the city again. What is interesting about this video is that even if Vallejo is known for being officially in bankruptcy (because of mismanagement) or other things that make the citizens struggle, the people there are so proud of their city. With good reason, is a very interesting place, with a fascinating economic evolution.

Here it is a post talking a little about my findings of this city. Vallejo has recently got coverage from New York Times, Financial Times, Wall Street Journal and other media. Watching the video I wish I would have got some souvenirs from there. By the way 707 is the telephone code of the area.

Here it is another video with images from the town.

Just a little note for the demographers, the city is equally divided in white, black, brown and yellow. See chart below. Also the neighborhoods are quite unsegregated. The interesting thing… they all can rap.