Quality of life is key benefit to economy

Encourages entrepreneurship

Steve Hawley, Mar 17, 10.

When cities invest in quality of life, they increase entrepreneurship and benefit the entire regional economy, according to CEOs for Cities.

The information is based on a policy brief by Harvard professors Edward L. Glaeser and William R. Kerr. The main points, CEOs for Cities notes, are:

(1) Investing too much in attracting large, mature firms may not be good policy.

(2) There is little reason to have much faith in the ability of local governments to play venture capitalist. The best role for government is simply to encourage competition among local banks and financiers.

(3) There is much to be said for the strategy of focusing on the quality of life policies that can attract smart, entrepreneurial people. The best economic development strategy may be to attract smart people and get out of their way.

(4) Good universities have faculty members who are involved in local start-ups and train students who may become entrepreneurs and the employees of entrepreneurs. Imposing costs that restrict the growth of such institutions can be costly.

As noted in the policy brief, it is difficult to measure entrepreneurship. Researchers must examine the number of self-employed people in a give region, as well as the number of independent business establishments and the growth in independent business establishments.

According to the researchers, regional economic success is closely linked to the level of entrepreneurship, and that in turn is linked to the quality of life and the level of higher education in a region. The authors ask, “What community ever screwed up by providing too much quality of life?” They also state that cities should not restrict the growth of academic institutions, because those institutions train students to be entrepreneurs.

Policy brief: What Makes a City Entrepreneurial? (pdf, 123 kb)