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 :)

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If you have problems wathing the video, just click on his name.

Ed Glaeser was last night at The Daily Show with Jon Stewart. A comedy show based on news that I always find funny. I started watching it when I went to study to the US in 2003, a that time I was surprised how they criticize the Bush administration. Anyways, yesterday Glaeser went to the show, one of the economists I like to follow. So Ed Glaeser and Jon Stewart, a perfect mix. He was promoting his very interesting book “Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier” Penguin. I think it’s a book I’d like to read. See today’s book review at The Economist. I would say his approached looked a little bit like Richard Florida’s love for urban areas, and that’s great we need many more guys supporting the concept of the cities from different points of view

I was surprised how young he is. I always pictured him as a 60 yeard old guy.

Here it is a podcast of Ed Glaeser in Freakonomics: Why Cities Rock. From February 18. I really liked it. I didn’t like some stuff, but I enjoyed the idea of building up in San Francisco Bay Area.

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.

I was going over the intro of Schumpeter’s “Capitalism, Socialism, and Democracy”, and I got into the part where he reviews the Manifesto, when it talks about the accomplishments of the bourgeoisie (it’s in a footnote). Then he points out the part where Marx and Engels say that the rural people live in idiocy, based on the following text:

“The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life.“ (Marx and Engels, 1848 – bold added)

I think I remember, when I read it time ago in Spanish, and the meaning is kind of lost I would say, but I don’t think I paid too much attention at it, however this time got me thinking. Where they saying that people living in small towns are stupid?? I mean it’s a small thing, but almost any sentence from Marx one has to think about it a few times.

So I wrote a friend I met at Berkeley, and asked him about it. He gave such a good answer that I’m just going to dedicate it a post for it. I asked him for permission to upload part of his email.

He answered:

“(…) About the manifesto, it’s not that he thought rural people were stupid (although I think he had an urban bias) but rather that capitalism, through urbanization and industrialization processes developed humanity’s social nature to its greatest expression in history.  He was arguing that the specifically capitalist mode of production and the urban systems it produced brought people together and compelled them to interact in ways not possible in rural regions.  The type of interaction necessary in cities under capitalism allowed for the potential for human nature to develop, with progressive intellectual and cultural production, along with the development of science and technology, reaching heights not possible under feudal relations of agricultural production.  It’s not that rural people were inherently stupid, but rather that the comparatively atomistic lives they led, with arduous and extended labor taking place in relative isolation from a large and developed civil society, and under relations of indirect exploitation of the landlords, prevented them from engaging with a broader social world.  They objectively could not pursue their intellectual and social development to the same extent (with Marx here operating under the assumption that knowledge and the intellect are socially produced and thus require social cooperation and conflict to develop).

It goes without saying that he thought the particular organizational relations under which capitalism initiated this flowering of social development needed revolutionary change.  He thought of capitalism as a progressive force that allowed intellectual and scientific change to occur through direct social contact and thus a force shattering the isolating restrictions of rural life, one that objectively socialized world production and brought everything under a totalizing mode of production.  Unfortunately, this mode of production achieved this socialization through the privatization of ownership of the means of production and as such created the potential for full development only for those who became free from the shackles of direct labor, the capitalists themselves.  Even here, however, this conflict between capital and labor internalized the potential for revolutionary self emancipation of the working class through bringing workers together under the conditions of the factory system, which he saw as capitalism’s unique technological expression.  The concentration of workers allowed for the first time a widespread recognition of the conditions of exploitation of the underclass by the underclass itself and created the potential for revolution.

Whether he was right about the isolating effects of rural life under feudalism or the revolutionary effects of urban concentration under capitalism, it’s not really about ‘stupid’ rural people, but of the objective social conditions within which rural labor has to exist.

Hope this made sense and/or helps. (…)”

 

I’m really grateful for my friends.

I was going over Schumpeter’s “Capitalism, socialism, and democracy”, and I got into the part where he reviews the Manifesto, when it talks about the accomplishments of the bourgeoisie (it’s in a footnote). Then he points out the part where Marx and Engels say that the rural people live in idiocy.

 

“The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life.“

 

I think I remember, when I read it time ago, and I took it as it was in an quasi-ironic way, and did not pay too much attention at it, however this time got my thinking. What were they really trying to say? I mean it’s a small thing, but almost any sentence from Marx one has to think about it a few times.

 

So I wrote a friend I met at Berkeley, and asked him about it. He gave such a good answer that I’m just going to dedicate it a post for it.

 

 

http://books.google.com/books?id=6eM6YrMj46sC&dq=schumpeter+capitalism+socialism+democracy&q=idiocy#v=snippet&q=idiocy&f=false

 

 

He answered:

About the manifesto, it’s not that he thought rural people were stupid (although I think he had an urban bias) but rather that capitalism, through urbanization and industrialization processes developed humanity’s social nature to its greatest expression in history.  He was arguing that the specifically capitalist mode of production and the urban systems it produced brought people together and compelled them to interact in ways not possible in rural regions.  The type of interaction necessary in cities under capitalism allowed for the potential for human nature to develop, with progressive intellectual and cultural production, along with the development of science and technology, reaching heights not possible under feudal relations of agricultural production.  It’s not that rural people were inherently stupid, but rather that the comparatively atomistic lives they led, with arduous and extended labor taking place in relative isolation from a large and developed civil society, and under relations of indirect exploitation of the landlords, prevented them from engaging with a broader social world.  They objectively could not pursue their intellectual and social development to the same extent (with Marx here operating under the assumption that knowledge and the intellect are socially produced and thus require social cooperation and conflict to develop).

 

It goes without saying that he thought the particular organizational relations under which capitalism initiated this flowering of social development needed revolutionary change.  He thought of capitalism as a progressive force that allowed intellectual and scientific change to occur through direct social contact and thus a force shattering the isolating restrictions of rural life, one that objectively socialized world production and brought everything under a totalizing mode of production.  Unfortunately, this mode of production achieved this socialization through the privatization of ownership of the means of production and as such created the potential for full development only for those who became free from the shackles of direct labor, the capitalists themselves.  Even here, however, this conflict between capital and labor internalized the potential for revolutionary self emancipation of the working class through bringing workers together under the conditions of the factory system, which he saw as capitalism’s unique technological expression.  The concentration of workers allowed for the first time a widespread recognition of the conditions of exploitation of the underclass by the underclass itself and created the potential for revolution.

 

Whether he was right about the isolating effects of rural life under feudalism or the revolutionary effects of urban concentration under capitalism, it’s not really about ‘stupid’ rural people, but of the objective social conditions within which rural labor has to exist.

 

Hope this made sense and/or helps.

 

 

 

 

 

http://books.google.com/books?id=VOfrAAAAMAAJ&dq=schumpeter+capitalism+socialism+democracy&q=idiocy#search_anchor

Bicycles and local planning

October 29, 2010

Mobility is an important factor in the cities. In my home country Spain, there is a big debate about the use of bikes, and its promotion and problems. See for example the brad new blog in Spanish. I ♥ Bicis (bikes). Here in Denmark, I love biking to work everyday, ok I admit it, not with intense rain or snow.
What comes before the biker or a biking friendly infrastructure? One would say the biker. However, a correct planning it’s crucial. Here I show a video of the evolution of the cities of the Netherlands.

I think in Spain the most important thing that would change the whole mentality is to incentive housing property owners to have a bike parking. For example, in Denmark every building by law has to have a bike parking. I hope in the future some Spanish cities would change their mentality, some of them are taking good steps, but overall still the bike use is minimal. For now, we should keep asking, what comes first, the car or the car friendly infrastructure?

Thanks to Manuel Fernandez for the link, check his web Ateneo Naider.

Along other projects, I have been working on a paper (so far) titled: “Geography and the Entrepreneurial Profile
– A Study of Rural and Urban Populations in Denmark”. It is coauthored with Kristian Nielsen, a great economist from the Business Department. He’s like me, a PhD candidate, but he has many more skills, including the crucial econometric and statistical analysis. We have done a paper based on a survey conducted to more than 2000 people, of which 3/4 were successful entrepreneurs and the other 1/4 were employees.

Today there is a huge debate about the importance of living in the city vs. living in the country and its influence in entrepreneurship. We wanted to see if they had any difference in their networks, identity and start-up motivation. More or less the question we rise is: Where do you have more differences: between the urban and rural population, or the entrepreneurs and employees (regardless of geography)?. We have asked this in two conferences we have presented the paper the DRUID and the AAG, and answers are split. What do you think?

At the end of the paper, we wrote a fictional story, but based on true research! to summarize our findings. Here I share with you the story, which probably will not be in the paper for space and copyright reasons. The paper? Soon in your best journal :) If you want to give us some feedback (before we send it to the journal!) we could send it to you, I guess.

The Story

To illustrate some of our main findings regarding entrepreneurs we will present a simple example. – Imagine you have two friends, Ruben and Urban. Ruben is from a rural area, and Urban is from a big city. You talk with each one of them once in a while. You are an equally important friend for each one of them, since they have around the same number of friends. Ruben, earned a three-year technical degree and Urban got a university degree. When you hang out with Urban and his friends you talk about ideas for businesses. He is a very creative guy. – Some time passes – Urban is about to get married, and Ruben, although slightly younger, already has. Interestingly, they both started a business in the service sector. Urban proposed that you and another friend join him in his business adventure. You did not join. Urban borrowed some money from family and friends. – A few more years pass, and both of your friends have become successful entrepreneurs – By reading the results of this paper, you know that you are equally as likely to receive a call from either of them to have a drink. But you are more likely to have Urban ask you for help, with for instance, a computer problem. If you do not help him, you should not worry a lot; he’s the type of person who will soon call an IT professional or another friend. It’s not that Ruben won’t have a problem with the computer, but he would not bother you about it. Ruben would probably ended up spending a few days fixing it himself.

This was a didactic example based on some of our results, overemphasizing the main differences. The differences between age, marriage, and education of these characters can probably be explained by socio-economic and cultural values for each region. Whether this is true for the difference in personal traits and work values could be important to further investigate. Also, the reason for the different use of networks is unclear, however, this behavior is probably related to geographical proximity and/or agglomeration issues. It seems that, while much has changed over the last centuries, in today’s economy the rural entrepreneurs still share a certain resemblance to the rural tradition of surviving without division of labour. This behavior was pointed out in the introduction, with the examples by Adam Smith and the ancient Greeks.

Another main finding of our research is that entrepreneurs are similar, regardless of geography, when compared to wage earners. Going back to the fictional case of the story of our two friends; – The most interesting thing happens the day you introduce Ruben and Urban. They start talking about their businesses, and get along very well. They talked about their employees, and complain about the routine problems of their providers, customers and government bureaucrats. However, they both agree on how much they like having the freedom of being their own boss. They exchange cards and comment on how many things they have in common. – And they are right; these guys have always been one of a kind.

L.C. Freire-Gibb and K. Nielsen, forthcoming

Books recently read

July 20, 2010

Books I’m about to return to the library (actually 4 different ones) on the Berkeley campus:

  • Goodman, Robert, (1979) The last entrepreneurs : America’s regional wars for jobs and dollars [In the book he refers to the local and state government workers, and how they act as bad entrepreneurs. I quoted him here once talking about energy]
  • Richard D. Bingham, Robert Mier (1993) Theories of Local Economic Development: Perspectives from Across the Disciplines. [I started reading their books in 2006, and I love their different perspectives. When I grow up I want to be like them]
  • B. Joseph Pine and James H. Gilmore (1999) The Experience Economy: Work Is Theater & Every Business a Stage [If you want to know more about this, see my slides about it]
  • Daniel Hjorth and Monika Kostera (2007) Entrepreneurship and the Experience Economy [Their point of view on “The Rise of the Experience Economy”]
  • Norman Walzer (2009) Entrepreneurship and Local Economic Development. [Very good book, with out of the box ideas. Recommended reading for LED specialists]
  • Henri L. F. De Groot, Peter Nijkamp, Roger R. Strough, and Roger Stough (2004) Entrepreneurship and Regional Economic Development: A Spatial Perspective [It includes 25 contributors, including my affiliated supervisor Phil Cooke. It has a focus on quant research]
  • Jane Jacobs (1983) Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics. [She should have got the Nobel Prize in Economics, even if she was not an economist. Here I comment on one of her books.]
  • Jeffrey Scott Luke, Curtis Ventriss, Betty Jane Reed, and Christine Reed (1988) Managing Economic Development: A Guide to State and Local Leadership Strategies (Jossey Bass Public Administration Series) [This book is made by these four authors. I recently commented on this book]

  • Richard Walker (2007) The Country in the City: The Greening of the San Francisco Bay Area [This is from my advisor here at the Dept. of Geography in Berkeley. He recommended to me, in order to learn more about the efforts that the Bay Area have had on trying to promote a more cohesive regional government. Too bad they failed. See more on chapter 6. The book explains why San Francisco has so many parks (relatively) and nature around. I theorize this makes it different and attracts people. Excuse, DW, to mention Richard Florida, but he would say that these outdoor amenities attract the creative class. And I think it’s right in this one. It’s a good reminder for cities to keep green places.]

Ok, I admit it, I have not read the whole books. But I tried to find the useful things for my project and papers I’m working on now.