Richard Florida and the Cato Unbound Series

Back in June the Cato Unbound web site ran a short debate between Richard Florida, of Rise of the Creative Class fame, and three other economists called “The Future of Work.” Strangely enough the exchange didn’t force me to start pulling my hair out because of unwarranted claims about the utter brilliance of the free market, something I expect whenever I come into contact with the Cato Institute.

Florida basically summarized his major thinking in four points.

  1. In the new economy talent has become the fundamental factor in production.
  2. Regions become the fundamental geographic unit of the new economy because talent concentrates into regions, not necessarily nations.
  3. The forces of concentration for talent lead to greater political divides between areas of haves and have-nots.
  4. The divisions in the global economy are becoming more extreme.

The criticisms of Florida’s thesis are pretty mild. Robin Hansen thinks Florida is hand-waving when he uses the term creativity, and linking said creativity to closely to those ‘bohemian fringes.’ Frank Levy says that the creative class is just another name for skill biased technical change. And Edward Leamer wants to use the word talent instead of creativity, and worries that a talent economy may increase inequality.

None of the respondents mention the impact of all these economic changes on democracy, but I think it’s worth considering. Modern democracies are intimately connected to the rise of middle class societies. The expansion of suffrage to all adults is a relatively recent development, even in the United States. The Nineteenth Amendment to the Constitution is less than 100 years old.

Nowadays the rising importance of talent is leading to a winner-take-all society, with growing income inequality. I don’t think it’s likely that we will overturn the 19th amendment anytime soon, but the social and economic fabric that supports democracy seems to be dissolving.

Levy does raise some very interesting questions about education in all of this mess.

If I am right in this judgment, an educational system that stresses creativity is at least as important as an attractive environment for the high IQ types. Consider, for example, one part of education that everyone stands up for—how to teach problem-solving skills.

In the workplace, solving a problem usually involves two steps. First, parse a messy set of facts to determine what technique applies. Second, execute the technique. In the classroom, “problem solving” is often defined as the second (rules-based) step and the first step is ignored. I firmly believe that an algebra student needs to know how to solve a system of two equations and two unknowns. But once the student is in a real job, she won’t be paid to solve the equations by hand—a computer will solve the equations. Rather, she will be paid to recognize when a two equation system is a good way to answer some complex question. Teaching this kind of recognition looks more like project work or a business school case than it looks like assigning the first five problems at the end of the chapter on simultaneous equations where choosing a solution technique isn’t much of an issue.

So we need to introduce more real problem-solving into education. But as I suggested in the beginning of this essay, even the best education will not solve the basic distributional problem now facing the country. Any economist will tell you that rising labor productivity is the key to rising living standards. As we now can see, however, that statement only holds in the aggregate: the distribution of the rising living standards is always up for grabs.
It all fits into things I’ve said before.

Last winter I read a book called Splintering Urbanism for a class with Paul Edwards about the history of information infrastructure. The thesis of Splintering Urbanism is that the late-nineteenth and early-twentieth century acceptance of public support for urban infrastructure began to come apart in the 1970s and 1980s, coincidentally with calls for deregulation and privatization. One of the results of this is glocalization, a neologism coined by the authors to describe localities that are hooked up to the world economy but disconnected from their physical neighbors. Gated communities, special business districts, transportation hubs, are a few of the examples they give.

Graham and Marvin are professors of urban studies so their approach to the problem is different than Florida’s economic sociology, but both of them indicate something fundamental. Florida shows that the current economy is pushing us toward enclaves of wealth and Graham and Marvin show that the accepted role of public institutions, such as the government, for building infrastructure has been assailed for the past thirty years. Together these two events don’t bode well for economic fairness or equality.