Monday, April 14, 2008

Rethinking an Economic Unit

Much of the economic data we collect is collected on the national level. But an opinion piece in the Weekend Edition of The Wall street Journal has me wondering about alternative sources of data.

In his piece, The Rise of the Mega-Region, Richard Florida talks about how certain regions (combinations of cities, suburbs and surrounding areas) host business and economic activities "on a massive scale". He checks off some impressive statistics. Compared to 191 countries in the world, there are 40 mega-regions. These regions are "home to more than one-fifth of the world's population," and they "account for two-thirds of global economic output and more than 85% of all global innovation" according to Florida.

The idea that the city is the important unit for economic growth and development is not new. I first ran across the idea in two books by Jane Jacobs. Her 1969 book, The Economy of Cities, and her 1984 book, Cities and the Wealth of Nations, both spoke to the point. And while I have not read Mr. Florida's book, Who's Your City? and really can't say much about it; based on the reviews I've read, I suspect it contains similar ideas.

Anyway, Mr. Florida's article was interesting in that it addressed how we make policy - often basing it on nations instead of, as he suggests, being concerned about regions. Where it started me thinking was the connection between policy and data.

I would think effective policy-making would depend, at least in part, on accurate data. And I suspect collecting data on some of these regions would be a daunting task. Many of them cross political boundaries. But the more basic questions is this, "How far" does the region extend?" If one were to begin targetting these mega-regions for any special treatment, wouldn't one be creating incentives for those areas on the margin? Wouldn't they be seeking to be included/excluded depending on the policy?

While I don't disagree with what either Ms. Jacobs or Mr. Florida have said about the importance of cities/regions to economic growth and activity, I do believe it is an interesting question. What do you think? Have you read Ms. Jacobs and/or Mr. Florida? Am I on track or off? I look forward to your comments.

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