Smart People Matter
January 6, 2009
As a follow-up to last week's post over at Brewed Fresh Daily, take a look at what Edward Glaeser has to say about cities that do a good job of attracting a lot of smart and talented people:
First, smart people matter. Just about every major metropolitan region has at least one, if not more, well-respected universities. Theoretically, cities could have a proportion of college graduates equal to the number of students who attend those universities; and thus cities could boost educational attainment by sending more locals to college - but it rarely works out exactly that way. Some cities do an incredible job attracting college graduates; others bring smart people in for only a temporary four year period; a few see locals born and raised in their city pack up and leave after graduation. Cities that have a higher proportion of students to graduates should be seriously concerned about why those individuals are not sticking around.
Second, density matters. College campuses themselves are among the most densely populated places in America. Cities that engage in policies that encourage sprawling development over dense urban development may be doing themselves a disservice by encouraging the best and the brightest to disconnect from each other geographically. In places that are already attracting a lot of talent, the market might be able to take care of this; in cities that aren't, an impetus from local leadership may be in order.
Wall Street is just about to finish the worst year since 1931. American housing markets are finishing their worst year in recorded history. New York’s economy is highly dependent on Wall Street; about 40 percent of Manhattan’s total payroll was in finance and insurance in 2006. These three facts should have created the mother of all price crashes in New York City real estate. Yet New York’s housing prices are doing remarkably well relative to elsewhere in America... the New York area’s unemployment rate, 5.6 percent in the latest figures, is lower than that in many other major cities... New York still has an amazing concentration of talent. That talent is more effective because all those smart people are connected because of the city’s extreme population density levels. Historically, human capital — the education and skills of a work force — predicts which cities are able to reinvent themselves and which ones are not. Those people who are continuing to pay high prices for Manhattan real estate are implicitly betting that New York’s human capital will continue to come up with new ways of reinventing the city.I think the takeaway is twofold.
First, smart people matter. Just about every major metropolitan region has at least one, if not more, well-respected universities. Theoretically, cities could have a proportion of college graduates equal to the number of students who attend those universities; and thus cities could boost educational attainment by sending more locals to college - but it rarely works out exactly that way. Some cities do an incredible job attracting college graduates; others bring smart people in for only a temporary four year period; a few see locals born and raised in their city pack up and leave after graduation. Cities that have a higher proportion of students to graduates should be seriously concerned about why those individuals are not sticking around.
Second, density matters. College campuses themselves are among the most densely populated places in America. Cities that engage in policies that encourage sprawling development over dense urban development may be doing themselves a disservice by encouraging the best and the brightest to disconnect from each other geographically. In places that are already attracting a lot of talent, the market might be able to take care of this; in cities that aren't, an impetus from local leadership may be in order.
While I agree that New York City will be cushioned during the recession by their educated workforce, I question the statistics Mr. Glaeser uses to support how much NYC will be cushioned. Although the unemployment rate is lower than other cities, I would be interested to see if there's any change in any payroll or income taxes of NYC between 2006-08.
The lessons you draw are good to note.
Respected universities bring in a lot for a region including research dollars and the eventual graduates. Although Cleveland has CWRU (ok, and a couple others, including JCU, not to slight you, though that's not in CLE proper), an increase of graduates staying here to pursue their careers is needed.
By the way, nice to see a classmate in the NEO blogosphere (though I don't think we even had any classes together at Ignatius).
- Will.
I think that you make some good points about how essential smart people are to metropolitan areas.
Have you ever thought about how smart people are geographical distributed across metropolitan areas? Take Cleveland for example, as a good juxtapostion to NY in your post, the inner core of the metro area is not where I would go to find a smart person. I would follow the money to the suburbs that surround the city. Cleveland has a human capital doughnut that greatly inhibits its ability to attract smart people to fill in the doughnut hole. Just something to think about.
Will, I think the question of what impact universities have on a local economy is an interesting one. On the one hand, universities operate under a different tax structure than traditional businesses, but they do provide many good jobs and potentially draw talented individuals to the region. One criticism of cities that center their economies around universities and hospitals (sounds a lot like Cleveland to me) is that most of the revenue they bring in is local, so the ability to experience true growth is hindered.
Kyle, I fully agree with you. I think the doughnut cities (I like that term, by the way) are in uniquely challenging situations because 1) it makes them less likely to lure smart people in the first place and 2) the smart people will be geographically disconnected from each other thus limiting the benefits of being around other such people. It isn't the trend in every American city to push human capital to the fringes. The cities that can't fill in their doughnut holes are apt to wonder what they are doing wrong.