It’s always nice to stop by Creative Class by the Richard Florida squad. Following links I hit the “How the Crash Will Reshape America” published in the Atlantic in the March 2009 issue.

As I have said sometimes, I like Florida. It seems to be kind of funny that all academics related to the discipline of economic geography say “Florida’s ideas are good, BUT…” It seems that they have to say that in order to show their academic credentials.
So, I of course have to say the same. However, for this last document I admit I have very little objection or none.
He clearly explains the change of economic paradigms and how the American cities have to evolve. He quotes Schumpeter, Jacobs, Romer, Glaeser, Lucas, Krugman among some of the key fellows. His final proposals to change the housing market towards a more renting instead of owning are bold. Which is exactly what the U.S., and great part of the world needs now. Not so much Denmark, but this will be especially fit for my home country Spain.

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 School 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.

Once again I have to say, thank you Richard!

I just read the book “Who’s Your City” by Richard Florida (2008). He basically builds upon the theories he explained in his last books (2002 and 2005) and recent articles. For the record, I have to say that since I read “The Rise of the Creative Class”, as a mandatory reading for an Economic Development Class at Georgia Tech, I did not like his “theories”. However, the more that I read from him I think he has some very good points.

I already watched a video of a recent presentation, so many things he said were familiar to me. I put a link to the website of the book. Here I’m writing some of the things that I considered while I was reading the book. I will later share other ideas about the book.

 

This is NOT a book review.

Because the book was published in 2008, it was nice to read updated information. The idea of the mega-region or megacity is very compelling. I’m sure that anyone reading his book has to believe that, if interested in innovation, there is not a chance to avoid living in a big metropolis. Besides, “the share of the world’s population living in urban areas increased from just 3% in 1800 to 14% in 1900. By 1950, it had reached 30%. Today, this number stands at more than 50%. In the advanced countries, three-quarters of people live in urban areas.” (p. 18-19, quoting UN reports)

Although I do not fully agree with his explanation about the economic growth theory (p. 61-67), I found it very useful. He explains how the economy is tied to geography since prehistorical times. He quotes A. Smith, D. Ricardo, A. Marshall, Schumpeter, R. Solow, P. Romer and finalizing with Jane Jacobs. I have read some of each one, but I have never read anything from Jacobs, so I think her book “The economy of cities” is going to be in my list, although for now, the insights of Florida will do.

 

People: Rooted or Mobile?

Another thing of the book I found interesting was his concept of the people who are rooted or mobile (although I think income per capita has a big influence). Something that really shocked me was that 40 million people in the U.S. who move every year; 15 million make significant moves of more than 50 or 100 miles (p. 6) Of the people who move, 52% of them do it to find new housing (up/down grade, etc.). Another 26% say the move for family reasons and a 15% of the Americans move on account of work (p.83-84). Florida says “Still the notion that we move for job persists, despite evidence of the contrary. Ever since I became interested in the question of how people choose where they live and work, I’ve routinely asked my students where they plan to go after graduation”.

After reading this I wonder how big the difference in Europe is. How many million Europeans travel more than 100 kilometers a year? My first thinking is that only a tiny fraction of the American 15 million. I also wonder how many of them don’t do it for job purposes. However, I keep finding more and more younger people who might break this European historical trend. For example, my younger brother and wife just graduated from the university, I asked them where they would like to move, and they had consistent answers with what Florida describes. My brother would like to move in Paris, but not to hypothetical well paid job in Teruel, Spain. In fact not only my brother, many other students here in Denmark that I asked, want to move to cool places, referring to Copenhagen, Berlin, London. For the record my sister in law would like to move back to her native city, which explains the value given to live close to family and friends. This relates to the 2007 study by Powdthavee, which says that you should make 85,000 GBP a year, just to make up for the lack of unhappiness you feel from being far from family and friends (p.87)

 

Do you really want your city to grow?

Florida also addresses one of my doubts, that is, when cool places keep attracting people, there is a moment when certain population of the creative class — the ones that are not well paid, that is musicians, bohemians, etc, against engineers, architects, etc. —  can not afford to live in a more demanded area. Then what happens; can still this city be creative? He answers “escalating real state prices can inhibit innovation” (p. 140).

 

Here lays a conundrum of urban development. Many small cities dream to grow, in fact they are loosing population and they’re afraid they will disappear. All of them dream of glorious past times when the city was in the map. They want their young people to stay, their population to grow and the employment to thrive. However, no matter what they do they keep getting small. Then in the other hand we have other small cities, that for x or y reasons they keep getting bigger and bigger, growing and growing. For example, the project that I’m involved in is Frederikshavn, a provincial city in north Denmark, that has been decreasing in importance during the last decades. I compare this city with my hometown, Alcalá de Henares. A city that has been growing to a tremendous rate. People are happy that there is more money in the city, and unemployment is low. In the case of Frederikshavn, the housing is extremely cheap, while in Alcala is extremely expensive, this gets accentuated comparing by their income averages. That is, I guess that in Frederikshavn people use 25% of their income in housing while in Alcala the expense more than a 50%. But is there a limit? Perhaps we have already reached it. Policy makers in each city have a tremendous role to keep the city alive (Florida explains this in the section “leaders of squelchers” p. 180-181).

It’s a question to analyze if a city really wants to grow or not. I think this should be the first question for a running mayor. Do you want the city to grow? At what cost?

 

In a city like Frederikshavn, they would love to see their houses prices rise. But what happen when people keep moving in, and moving in and housing prices became prohibitively expensive? In certain way that’s what happened to me. I had a nice consulting job in Alcala, close to my family, but my wife and I were not willing to pay  300.000 Euros for a small two bedroom apartment. Many people like me, either leave the city or live there struggling. Therefore a city should be careful with what they ask for. Population pyramids, immigration and industrial trends need to be considered.

 

Something between own and rent

Florida considers that the idea of homeownership might belong to an expired industrial era (p. 142-143). Everyone says that renting is throwing the money out of the window, while buying a home is probably the hardest decision to take in someone’s life –“where”- (although it impact you more, choosing what to study right after high school –“what”-  or falling in love with someone –“who”- , does not seem very analyzed decisions). Buying a house limits yours mobility.

 

He follows “The creative age may well require alternative forms of housing – something between ownership and renting”. It’s quite interesting that this type of housing already exists in Denmark, this is cooperatives or Andelsbolig (Andel means “a part of something” and Bolig means apartment or house). I found this type of housing an excellent option and we have been seriously looking at several andelsbolig. To the best of my knowledge this form of housing does not exist neither in Spain, Germany, USA nor Latin America. I wish they had this type of housing more widespread everywhere. I think Florida got it right on this one.

 

Another main subject of the book that I can mention is the “Geography of Happiness”, an exciting subject, although obviously somewhat shaky. I also enjoyed reading about the different rankings for places where to live.

I will later use some of its argument, quotations and bibliography for my work. I’m grateful for his work.

Richard Florida visits Googles headquarters to discuss his book “Who’s Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life.” This event took place on March 28, 2008

This is an hour presentation. It has been fantastic listening to him. There are many things that I could comment about it. I like the idea of the importance of taking decissions on where to live. I have been also surfing Florida’s site Who’s Your City, and I specially enjoyed the maps sections.

I have to say that the two main critics I had about him have him addressed. The first one, is that the there is no correlation on this issues, as he says in the economic phenomenon things are very complex, “association” better fits the term. The second thing, is that while looking at the new megaregions, he’s using number of patents to measure innovation. Which I consider with too many flaws, specially at the international level, but in the video he said something: “Using number of patents is quite a rude thing to do, it could have been done better…”.

He got me convinced.