Ilya Somin, who is an assistant professor of law at the George Mason University School of Law, writes his article to argue that the transfer of private property between private owners is not in the best interests of the wider public, even if a new owner claims they will make a greater contribution to the local economy. Somin talks about large business having the power to acquire large amounts of property and provide little obligations to those most affected in the wider neighbourhood.

Somin uses three court decisions from the American judicial system to illustrate his argument. The first case, known as the “Poletown” decision, is used by Somin as an example of injustice to civilians in the face of promised economic prosperity by a large wealthy corporation. The case highlights failures of the Local Government and Supreme Court to look after and care for those who need it most. The Supreme Court decision to allow the City of Detroit to uproot 4200 people, to make way for a General Motors plant, has since had far reaching negative social and economic impacts for the local community.

Such impacts have included the promise of up to 6000 jobs, which never can to fruition, the destruction of approximately 600 businesses and a public cost of approximately $200 million, of which General Motors has since only paid back $8 million. Other non-monetary costs include the destruction of communities and psychological harm as a result. At the crux of the argument is the inherent danger that, if economic development could justify such massive dislocation, it could be used to rationalise almost any condemnation that may benefit a private business in a way that might bolster the economy.

Somin then talks about two other court decisions, that condemn economic growth. In particular Somin uses the Kelo v. City of New London decision, which overruled the “Poletown” decision, because such a standard could justify virtually any condemnation that may benefit a private industry since, “every lawful business” contributes to economic growth.

The article and associated court cases, highlights a major theme of debate within the market rationality critique as described by John Friedman in, Planning in the Public Domain (1987, p20). The “Poletown” case highlights this notion of unrestrained pursuit of self – interest by individuals and corporations, without any planned conscious effort to the social outcomes involved. It also sheds light on the lack of social welfare initiates, not promoted in the transactions of the marketplace. The ‘Poletown” decision, virtually ripped apart the notion that planning involves the whole community and should require public agreement to be effective.

Questions to consider

• How does economic development takings fit in with a social planning perspective?
• Do you think planners are at the mercy of big business when is comes to making planning decisions that affect large communities?
• Do you agree that social welfare is not promoted in the transactions of the marketplace?

Reference
Somin, I. 2005, "Robin Hood in Reverse: The Case against Economic Development Takings", Policy Analysis, Cato Institute, no.535

Friedmann, J. 1987, "Planning in the Public Domain", From Knowledge to Action, Princeton University Press, New Jersey.

4. Economic Growth 31st March, 2008 10:48:36   [#] [1 comment] 

Hall focuses the majority of this article in constructing a background, so to gather some important points which are later used in addressing the questions being asked in the first paragraph. The author quite explicitly states that ‘before we attack these questions, it may be useful to recall some key points from each individual story’. In this particular article the author is quite explicit with listing open questions that the piece is trying to answer.
The questions the piece is trying to answer are:

• Is there some quintessential innovative milieu? (Is there a model for innovative environments?)
• Despite their obvious differences is it possible to distil from these stories some common essence?’ (……common similarities?)
• Are there essential ingredients of an innovative city, shared by places in different eras and in different cultures?
• Is it possible to suggest to planners some guidelines that might be used in developing policies to encourage the development of future innovative milieux?

The article begins by going into the individual historical background of the cities of Manchester, Glasgow, Berlin, Detroit, San Francisco and Tokyo-Kanagawa.

The economic boom or industrialisation of these cities all began with new innovations or the constant improvement of early innovations. These occurred through important networking so that any such improvement immediately was shared and improved upon by others.

A city with a broadly based educational system which stressed the union of theoretical and practical knowledge enabled what was learnt in theory could be practiced outside the universities. This helped the innovation of Watt’s steam engine as Watt’s presence as a technician at the university enabled him to put it in practice. Also there was a demand for steam engines and transportation in Glasgow at the time was predominately by sea to its neighbours. The author also suggests that the market played a role in the innovation of a steam engine. Innovation led one thing to another as one steamship builder made an advance and it was then imitated and improved upon by competitors.

In Berlin the government encouraged the entrepreneur in what Hall, P calls ‘state-supported capitalism’. This could be seen in the example of technical education and military education where a partnership was forged.

In Detroit’s case, it was a city which did not develop their own technologies like Manchester and Glasgow. This American city simply imported the ‘basic technologies’ but instead invented the mass market, mass produced automobile and adapted the automobile to specific market conditions. Here Ford ‘did not actually invent anything, he borrowed and massively adapted techniques that were in widespread use’.

San Francisco like Detroit did not invent anything; it imported the transistor from New Jersey and massively developed and improved on it. This success or chains of cascades of innovation was in no doubt closely related to the Stanford University and Tehman’s Department of Electrical Engineering. This is another example of the importance of a union between theoretical and practical knowledge. To remain innovative and successful Silicon Valley reinterpreted itself over the years to break new ground from semiconductors to personal computers and advanced chips.

By government action to ‘catch-up’ with other world markets, Japan had huge government funding to facilitate action and successful policies. Japan, as commented by Hall, P, is an exception as it follows the oriental market. It differs from the western market models as the government, each company has a strong long term corporate plan, regularly updated and generally looking 15-20 years into the future, which compels it to examine the nature of the business and to reorient into new and expanding fields. American firms have similar concepts but the Japanese actually take them seriously. The Japanese work within a longer framework and do not aim to make short term gains but instead invest into technologies that will become commercially profitable in the long run. Hall, P also states that the culture present and the social structures of society can influence the achievements of that society. It’s argued that a culture that allows the education of any member of society can encourage children of modest backgrounds to achieve their best.

The author answers his questions by explaining that each city reached a point of industrial dereliction, except for San Francisco (Silicon Valley) and Tokyo and that the two innovative models used in America and Japan are both successful in comparison. This was being established in the section title “Two Innovative Models”.

The key model was to keep up with the innovations of new technologies to meet the market demands. As shown in Japan as they developed radios, cassettes, videos, cameras and televisions and in the Silicon Valley: computers to advanced chips. They shared similar models of innovation where a close union of theoretical and practical knowledge is needed. A semi governmental and private partnership is needed in some cases to promote funding, research and competition. These stories of every city shared similar essence in that an innovative city that kept on re-inventing itself would continue in surviving market shifts and remain competitive.

Discussion

I want to ask a question which brings Melbourne into the picture since it wasn’t used in this article as an example.
I think it would be something simple to think about and answer.

What innovative model would best suit Melbourne’s economy and society? The Japanese one or American one? Which one and why?

Reference
Hall, P. 1998, "The Innovative Essence", Cities in Civilisation, Phoenix Giant, London, ch. 16

4. Economic Growth 30th March, 2008 20:34:26   [#] [2 comments] 

As the summary is late, this is a stub for discussion of the Farris (2001) article. I will move the comments across when it is posted.

Note that this article is available online.

4. Economic Growth 29th March, 2008 14:30:17   [#] [1 comment] 

Richard Florida’s article based on his first hand research looks into the economic geography of talent, namely what forces attract talented people to certain areas of a city or region. Previous research has focussed on the impacts talented people have on the growth and economic development of cities, for example, the availability of talent in an area is a big attraction to firms (Ullman and Lucas). There has not been a great deal of research on what attracts talented people to cities, hence the purpose of this report. The research available suggests that other factors including lifestyle choices and the availability of entertainment and amenities is what is attracting talented people into cities. Florida’s research further investigates this theory.

For the purpose of his article, Florida has used both qualitative and quantitative research (see point 1) and refers to talent as individuals who have achieved a bachelor’s degree. He also considers two other factors or indexes, coolness and diversity. Diversity was derived by calculating the number of gay couples in an area (see Point 2).

The Results
Florida’s argument is “that diversity plays a key role in the attraction and retention of the kinds of talent required to support high-technology industry and generate regional growth” (pg 91).

Some of the main findings of his research include:

• Talented people are willing to pay more for higher levels of lifestyle and amenities (and more expensive houses) p 100 – see point 3;
• Talented people are attracted to areas with high levels of diversity;
• Coolness is also associated with the location of talent;
• Talented people strongly favour locations that possess thick labour markets
• Talent has a close relationship with high technology industry;
• The availability of talent is an important factor is the location of firms – not so much land costs, labour costs, tax rates or government incentives;
• Talent is positively correlated with per capita income – see point 4 below;
• “Talent and technology work together in creating regional income effects” and as Florida points out “talent is an important factor in its own right” p107; and
• Ultimately there is a three way relationship between diversity, talent and high technology industries where they are all closely linked to each other and are dependent on one another.

Summary
Florida summarises his findings by stating that “talent is perhaps the driving factor in regional development” and “openness to diversity or low barriers to entry for talent” is the “paramount factor to attracting talent”. The purpose of Florida’s report is to provide direction on policy and programs to attract talent for regional development. Emphasis is drawn to his findings concerning the relationships found with diversity, talent and high technology industry and is summed up in his final statement “that diversity is more than just a social goal – it may have direct economic benefits as well”.

Discussion – points of contention
I found some areas of Florida’s report questionable. Do you agree?

1. The qualitative research was conducted with four structured studies – of which 3 out of the 4 were done with university graduates (young people). I felt that this would skew the results slightly as young people are less likely to have kids or be looking to ‘settle down’ – that is, they would be more interested in the lifestyle choices available in where they live – just like “gay couples”.
2. The short literature review provided on page 91(Zachary, Jacobs) solely discusses diversity in relation to the amount of people from different countries. The diversity factor with encouraging overseas born people to an area (particularly talented ones) is the key – examples from the successes of Silicon Valley in the US and the relative stagnation of Japan and Germany appear to demonstrate a clear advantage to cities that are open to the immigration of talent. However, Florida constantly interchanges diversity with the proportion of gay couples in an area, rather than nationality, race or ethnicity, which I seriously question.
3. The results indicated that talented people were willing to pay more for a better lifestyle, amenities and house prices. Florida suggested that this contrasted with “conventional wisdom” where it is thought that lower costs of living tends to have an advantage in attracting talent (page 100). I found this statement illogical. Without referring to this study, I would assume that talented people would be highly paid, therefore would have higher expectations on their standard of living and also the ability to pay for these higher standards. Lower costs of living, while not so much a deterrent, would not provide the high standard of living talented people would be aspiring towards.
4. One of the many outcomes of Florida’s research is that talent is positively correlated with per capita income (page 107). Florida then goes on to say that “the strong positive correlations suggest that places that are open and supportive of diversity will not only attract talent, but tend to have higher income levels as well” and “based on this one can theorize that low entry barriers to talents translate into higher regional incomes”. I do not exactly agree with this statement. Talented people are by definition ‘well educated’ and therefore have the ability to gain highly paid employment. Florida is basing too much emphasis on diversity (proportion of gay couples) having a causal effect on many of his findings.

If the diversity factor was indicated by nationality or race, I would be more excepting of his claims, but I believe Florida is trying to say that the proportion of gay couples in a city is directly reflecting these positive outcomes for attracting talent, high technology industries, higher incomes and therefore regional development – which simply is not accurate.

Questions:

• Do you trust the findings of Florida?
• Do you think that by making a city more ‘diversified’ by Florida’s definition, more talented people and therefore high technology industries will be attracted there?
• What do you think will attract talent to a city?

Reference
Florida, R. 2005 “The Economic Geography of Talent”, Cities and the Creative Class, Routledge, New York, ch.4 (pp 87 – 109)

4. Economic Growth 29th March, 2008 01:50:46   [#] [4 comments] 

Jane Jacobs’ book The Economy of Cities was published in 1969 towards the end of the long, post war economic boom. America was increasingly urbanised: more than two-thirds of the population were now living in cities and towns (Sandercock 1975) and the arrival of the automobile meant cities were sprawling. Some critics believed large cities were problematic and they advocated smaller settlements. In Chapter 3 Jacobs argues against those who believe “we would be better off without cities, especially without big, unmanageable, disorderly cities (1969 p.85).” Instead, she argues cities are important drivers of economic development.

Jacobs agrees that cities, especially big cities, are impractical and inefficient. However, it is in fact because they are inefficient and impractical that cities are economically valuable: it is the “grave and real deficiencies” (Jacobs p.86) of cities which are necessary for economic development.

To illustrate this point, Jacobs compares the economic development of an ‘efficient’ city and an ‘inefficient’ city – Manchester and Birmingham in the mid 1800s. Manchester was heralded as a city of the future. Its textile industry and mills dominated the city. Paradoxically, however, it was the efficient operation of this one dominant industry which led to Manchester’s eventual stagnation. When the textile industry lost market share due to increased competition there were no new industries to compensate. Manchester was ‘efficient’ but no energy was put into developing new forms of economic activity.

Birmingham, on the other hand, was seen as the type of inefficient city that Manchester was to replace. Most manufacturing was done by small organisations with relatively few employees; there was much duplication and overlapping. The approach to production was neither rational nor efficient. Yet, the economy did not stagnate. Birmingham, with all its inefficiencies, and, in fact, because of its inefficiencies, had a high rate of development. The economy did not rely on one efficient industry, instead new industries and goods and services were constantly being added to the existing.

The development of new goods and services is not an efficient process; rather it is one of trial and error requiring huge amounts of time and resources. Sometimes the process is successful, other times resulting in failure. Despite its inefficiencies, the development of new activity is vital to a city’s continued economic development. The development rate of a city is the rate at which new goods and services are added to a city’s existing output. It is the ratio of new work to old. “A city’s ability to maintain high development rates is what staves off stagnation, and allows the city to continue to prosper...efficiency fails to make a city prosper (Jacobs p.96).”

Jacobs goes on to argue that a city cannot be highly efficient and also have high development rates. The conditions required for each “are diametrically opposed (Jacobs p.97).” For example:

• The breakaway of workers from existing organisations promotes development of new enterprises and new organisations. However, this undermines the efficiency of original organisations as they have lost skilled and experienced workers and need to retrain.
• Having many suppliers, whose work may duplicate and overlap, is necessary to achieve a high rate of development. Yet this is inefficient for the suppliers and those who buy from them. Having larger manufacturers who can mass produce many components is much more efficient.
• It is most efficient to invest capital through few, relatively large loans and to invest in enterprises that produce already developed goods and services. However, for a high development rate, new enterprises need access to inefficiently dispensed capital. Many, many small loans are required.
• It is more efficient for construction firms to build multiples of the same building, for architects to design multiples of identical buildings. It is more efficient to have large city blocks: there are fewer crossings, traffic flows more efficiently, maintenance costs less and utilities are more efficiently distributed. However, small enterprises, developing new ventures, do not fit well into this mono- landscape.

Jacobs concludes by arguing that cities which grow to be large and impractical magnify the problems associated with them. A modern day example is chronic traffic congestion and pollution in the biggest cities. Yet, it is in these very same cities that solutions are found. It is here that technological advances are made and the practical problems are solved. Problems are solved by the development of new goods and services, and from this comes economic growth. When the problems of a city remain unsolved, Jacobs argues it is not because progress and the side effects of new technology are to blame but that the opposite is true; there is in fact a lack of progress. A city has not been able to add the new goods and services necessary to address the problem – instead there is stagnation.

Jacobs is arguing against a monoculture. She is in favour of dynamic cities where new ideas are allowed to flourish. It is when this happens that cities prosper economically.

Questions for discussion

• Do you agree that the problems of cities are best able to be solved through the addition of new goods and services and the development of new technology? Consider the problems facing Australian cities (eg. water scarcity, high carbon emissions, congested traffic).
• Can efficiency and the development of new work be reconciled? Is it possible for both to occur or are they mutually exclusive concepts?
• Can smaller towns also be categorised as either efficient or inefficient? Can they too develop new goods and services and technology or is it cities which are responsible for the majority of economic development?

References
Jacobs, J. 1969 ‘The Valuable Inefficiencies and Impracticalities of Cities’, The Economy of Cities, Vintage, New York, Ch 3.

Sandercock, L. 1975 Cities for Sale, Melbourne University Press, Parkville, Victoria.

4. Economic Growth 28th March, 2008 16:56:28   [#] [6 comments] 

No-one is reviewing this reading, but I hope some of you will read and comment on it. To that end, this is a stub for discussion of the De Soto article.

Note that a condensed version of this reading is available online.

Reference:
De Soto H. 2001, “The Hidden Conversion Process of the West”, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, Black Swan, London, ch. 3

4. Economic Growth 27th March, 2008 22:40:48   [#] [0 comments] 

This paper could be said to be written in a political / practical context. The Victorian State Government, by commissioning such papers, are aiming to keep Melbourne’s transport infrastructure, (roads, ports, distribution nodes etc), and business practices competitive in the national and global economy. ‘Economic Drivers’ that focus on the regions business risk, structure and competitiveness are discussed. Melbourne’s Economic Drivers are then rated for their respective strengths and weaknesses. As a practical tool this paper was released to precede a ground truthing forum for Melbourne’s industry leaders. These leaders upon reviewing the paper would have then been in a position to debate Melbourne’s economic strength’s and weaknesses in the early 21st century global economy. This debate would help to formulate industry recommendations for planning practice that would help to maximise Melbourne’s position in the national and global economy.

The paper begins by discussing Melbourne’s position in the economic landscape of the last 30-40 years. This era has seen the economy change dramatically in the western world. Western government’s have increasingly adopted ‘Freidmanite’ economic policies that have promoted global free trade, and subsequently promoted the abolition of tariffs on imports within local or national economic zones. Labour costs in Western countries have become increasingly uncompetitive with those of the worlds developing economies. These conditions have seen cities such as Melbourne evolve from industrial/ production economies, to those of knowledge/ information/consumer/service based economies. These developing and changing conditions were and still are where Melbourne finds itself placed in the national and global economy.

The paper locates Melbourne in a strong economic position in the early 21st century global economy. These strengths are as follows:
· A centre of technologically advanced manufacturing.
· Strong cultural, tourism and leisure growth.
· Infrastructure advantages at the Port of Melbourne and the curfew free Tullamarine airport.
· De-centralised distribution hubs (Dandenong, Somerton, Laverton), which has allowed urban renewal in the inner suburbs.
· Strong research and development centre.

To keep Melbourne in this strong economic position, the paper goes on to discuss the economic drivers that must be developed and safeguarded, to keep Melbourne economically competitive and an economic leader. As a city of a developed and stable nation, Melbourne’s drivers of economic competitiveness are I believe, its major advantage over the worlds developing economies (China, India etc). As a society though we should not take for granted these benefits. Societal input and government leadership are required to keep our structures relevant and progressive to the needs of the global economy. The paper lists some of these structures as infrastructure development, stable financial markets and tax system, education, educated and flexible workforce, research and development and Melbourne’s livability amongst others.

Historically Melbourne could be said to have been economically wealthy, socially cohesive, with good transport infrastructure. To keep this economic advantage, the paper lists some of the cities weaknesses that will have to be addressed. Some weaknesses that I believe are worth improving are the nations attitude to migrants and new cultures/ideas. If we don’t embrace our new Australian’s economically let alone culturally we run the risk of creating isolated groups of people that feel within the economy that they have no chance of social mobility. Such circumstances will lead to a lack of social cohesion and become a threat to economic development. Investment in rail freight infrastructure is also of vital importance. There will always be trucks on our roads but measures need to be taken to provide more transport rail freight options. Investment in rail freight will ease road congestion, reduce co2 emissions, limit already overfunded road investment (when compared to other transport funding) and improve Melbourne’s livability. With the debate on climate change and global warming not at the stage that it is in 2008 back in 2000, it is interesting that the paper was sort-of looking at the issue.

In conclusion I found the paper a good read and quite understandable for the lay person (I’m not an industry leader). It reads to be still relevant some seven and a half years later. I would be interested to know what the outcomes of the truthing forum were and if the industry leaders formed their own model for drivers of economic competitiveness.

Questions for Consideration

• Should government planning start to invest more in non-road transport initiatives?
• How much say should the private business sector have in advising government of future planning directions?
• Do such papers as that discussed have enough powers to implement the economic decisions to keep Melbourne globally competitive?

Reference
DOI 2000, ‘Executive Briefing Paper Globalisation, Competitiveness and Melbourne’s Metropolitan Strategy’, Technical Report 3: Global Competitiveness and Metropolitan Strategy, Department of Infrastructure, Victoria, p95-117

4. Economic Growth 27th March, 2008 20:02:22   [#] [3 comments]