Saturday, May 24, 2014

Some Notes on Innovation and Regional Factors

When do limits to innovation affect regional employment options, in knowledge use terms? And, to what extent have knowledge use limitations become more significant? In a recent post about student loans and housing, Ashok Rao notes a growing tendency for new college graduates to prefer coastal regions for employment and lifestyle options. Previously I'd noticed a growing (coastal) preference for what appeared as ideological reasons, but apparently job markets are starting to reflect this reality as well.

Fortunately, these logistical concerns have not always been the determining factor they've become as of late. Not only are coastal areas able to reimburse the commitment and effort of the ambitious college graduate, there are cultural differences between such locations and much of the heartland. One of Ashok's commenters agreed, as he felt forced to live 1800 miles away from his family, just to secure a good job. Indeed, I'd had a conversation with another blogger last week which echoed these same thoughts.

Coastal areas benefit not just from normal city agglomeration effects, but also economies of scale and network effects which are intensified in these regions. And yet, this is an odd story for a country which until recently was viewed somewhat differently. Supposedly, large swathes of the U.S. appear as though an intellectual wasteland, or at the very least a compromise for the aspiring college graduate. In an age of digital possibility and an extensive transportation system across the country, how has this happened?

For much of the twentieth century, most individuals thought of knowledge use as being capable of lifting all boats - after all, knowledge could be readily dispersed. A recent article in Slate, looked at the benefits of innovation and some historical moments when innovation proved capable of generating broad swathes of wealth. However, more open environments for sharing, have often taken place when new ways of doing things are just getting off the ground. After that point, it can be tempting to shut down knowledge dispersal as industries mature.

Cities which continue to be associated with innovation, are home to businesses now burdened by patent gridlock, even as their real estate values pull away from the broader marketplace. And while some argue that agglomeration effects aren't a significant problem for innovation, there could be some wishful thinking in this Vox article. Until the internet becomes widely used for work beyond the walls of specific institutions, polarization of regions in terms of opportunity will likely continue.

There is also a political divide which currently stands in the way of innovation, and even the process of stopping patent trolls has ground to an unexpected temporary halt. One has to wonder, why couldn't a problem with such an obvious solution, get more traction in Washington? Like many, I really didn't think a bill for patent transparency would be so difficult to pass.

To be sure, individuals such as Marc Andreessen (a great Econtalk podcast) are convinced that "software will eat the world" and innovation will indeed transform the coming decades. But before anything remotely close to this vision can happen, innovation needs a broader societal context than either political party has been able to provide for the public. Neither party really knows how to make knowledge use beneficial to the bottom economic line, in ways that all can benefit. And as long as Democrats and Republicans remain divided about the innovation frontier, so too will the regions which have yet to benefit from the innovations of the 21st century.

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