The University of Chicago economist and Nobel laureate Robert Lucas declared that the spillovers in knowledge that result from talent-clustering are the main cause of economic growth. Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. There is no evidence that globalization or the Internet has changed that. Indeed, as globalization has increased the financial return on innovation by widening the consumer market, the pull of innovative places, already dense with highly talented workers, has only grown stronger, creating a snowball effect. Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them.
I’ve admired Prof Bello for a long time. I’ve enjoyed stories about him tearing celebrity professors a new one(Celebrity professors/acamedics tend to be more in the communications field and tend to be less in the academic world!).But I sure hope he is wrong about this! Thanks to Angry Bear for the liunk
The Coming Fury
The sudden end of the export era is going to have some ugly consequences. In the last three decades, rapid growth reduced the number living below the poverty line in many countries. In practically all countries, however, income and wealth inequality increased. But the expansion of consumer purchasing power took much of the edge off social conflicts. Now, with the era of growth coming to an end, increasing poverty amid great inequalities will be a combustible combination.
In China, about 20 million workers have lost their jobs in the last few months, many of them heading back to the countryside, where they will find little work. The authorities are rightly worried that what they label “mass group incidents,” which have been increasing in the last decade, might spin out of control. With the safety valve of foreign demand for Indonesian and Filipino workers shut off, hundreds of thousands of workers are returning home to few jobs and dying farms. Suffering is likely to be accompanied by rising protest, as it already has in Vietnam, where strikes are spreading like wildfire. Korea, with its tradition of militant labor and peasant protest, is a ticking time bomb. Indeed, East Asia may be entering a period of radical protest and social revolution that went out of style when export-oriented industrialization became the fashion three decades ago.
Walden Bello is a Foreign Policy In Focus columnist, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and a professor of sociology at the University of the Philippines.
from Paul Krugman. His musings on bad English food.
So what does all this have to do with economics? Well, the whole
point of a market system is supposed to be that it serves consumers,
providing us with what we want and thereby maximizing our collective
basic a matter as eating, a free-market economy can get trapped for
an extended period in a bad equilibrium in which good things are not
demanded because they have never been supplied, and are not supplied
because not enough people demand them.
I was, of course, only saying something that critics of conventional theory had been saying for decades. Yet my point was not part of the mainstream of international economics. Why? Because it had never been expressed in nice models. The new monopolistic competition models gave me a tool to open cleanly what had previously been regarded as a can of worms. More important, however, I suddenly realized the remarkable extent to which the methodology of economics creates blind spots. We just don’t see what we can’t formalize. And the biggest blind spot of all has involved increasing returns. So there, right at hand, was my mission: to look at things from a slightly different angle, and in so doing to reveal the obvious, things that had been right under our noses all the time.