Density drives innovation and economic growth

Measuring clustered assets

Jon Boyd, Sep 28, 10.

Density drives economic and economic innovation, says Richard Florida in an article published in the Atlantic Monthly (via Planetizen). Florida cites Pittsburgh and Detroit as examples from the industrial era where ” the geographic concentration of firms, industries, technologies, people, and other economic assets plays a powerful role in innovation and economic growth.” This still occurs today, he says, in the Silicon Valley, Nashville, and Los Angeles with the software, recording, and movie industries.

To account for density, some of the metrics for assets should be related to area, instead of measuring them relative to population, Florida writes:

A while back, I posted about this analysis by Rob Pitingolo (h/t: Don Peck) which looked at the density of human capital. Pitingolo developed an intriguing metric that he called “educational attainment density.” Instead of measuring human capital or college degree holders as a function of population, he measures it as a function of land area - that is, as college degree holders per square kilometer. He did this for the primary urban centers of metropolitan areas.

Inspired by this, I worked with my Martin Prosperity Institute colleague Charlotta Mellander to build indicators of density for a wider range of key economic and demographic variables. We conduct our analysis at the metropolitan level. It’s important to point out that there are limits to using the metropolitan area as a unit of analysis. Metropolitan areas combine core cities with their suburbs and come in all different shapes and sizes. Some are more concentrated at the core (like Portland), others more sprawling (like Phoenix). Examining the distribution of key economic, social, and demographic variables at the metro scale is admittedly crude. But it is also a useful and important starting point, since the metro level is by far the most common unit of analysis in studies of regional economic development. In our research on the subject, we’re interested in developing new, more precise metrics and indicators of density within metropolitan areas - comparing central cities or urban centers to suburbs and probing the distribution of density across Census tracts and zip codes, which I will report in future posts.

Update September, 29, 10:
A cluster approach could be a way of rebuilding the nation’s economy, according to one finding of “Regional Innovation Clusters,” a paper by Mark Muro and Bruce Katz of the Brookings Institute.

The intellectual history of “clusters” can be traced back twenty years, according to the background article by Muro and Katz:

Twenty years after Harvard Business School professor Michael Porter introduced the concept to the policy community and 10 years after its wide state adoption, clusters—geographic concentrations of interconnected firms and supporting or coordinating organizations—have reemerged as a key tool and rubric in Washington and in the nation’s economic regions.

After a decade of delay, the executive branch and Congress have joined state and local policymakers in embracing “regional innovation clusters” (RICs) as a framework for structuring the nation’s economic development activities.

At the state level, governors and gubernatorial candidates of both parties are maintaining or stepping up their longstanding interest.

And additionally, a broad range of business leaders, mainstream commentators, and policy analysts have been calling in the wake of the recent recession for a different kind of growth model that depends less on bubbles and consumption and more on the production of lasting value in metropolitan economies and the super-productive clusters within them.

All of which, at a moment of deep economic uncertainty, makes it appropriate to revisit the cluster paradigm and consider its special relevance at a moment of deep economic uncertainty, fiscal crisis, partisan gridlock, and necessary governance reform.