Transcript Adm.Briefing.4.16 dr..

Work-In-Process
Investing in Metropolitan Economies
April 22, 2010
Why Metros?
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
 Goal is economic development - that is inclusive and sustainable.
 Metros are the means, not the ends
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
 The outputs we care about – jobs, income, assets, sustainability – are primarily
a function of the complex interaction of housing, labor, business and other
market systems, enabled and shaped by government and civic sector activity
 Goal is to improve performance of these systems
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
 System performance is function of interactions of people and firms in context
of characteristics of place – “on the ground.” (Vertical and horizontal
integration)
 Key geography of many of these systems and interactions is metropolitan
region. (Metro includes, but is more than sum of, its neighborhoods. Best
neighborhood development deploys people and assets into metro economy,
improving both.)
 Indeed, one of main reasons for very existence of cities is the agglomeration
benefits of concentrating economic activity – an effect of place on market
performance.
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate
Activity
 System and environmental characteristics, opportunities and challenges “on
the ground” vary by place.
 Particularly in the knowledge economy, increasing returns and imperfect
competition are giving rise to specialization and divergence. It is more
important than ever to be deliberate and strategic, as the economy no longer
“takes care of itself.”
Why Metros?
Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate
Activity
Economic growth entails strengthening metro economies, and that requires deliberate,
ground-up, tailored activity.
A Framework for Investing in Metro Economies
• Purpose: shared understanding of how regional economies
work – a “theory of change” -- enables us to:
− Focus on what matters
− Understand how it causes economic growth
− Determine how to improve performance
• There’s no one right answer… but there are a lot of
wrong answers
Micro-Foundations
How Metro Economies Grow
• Metro economy = total value of goods and services
produced in the region
• Growth is inherently business sector growth (number, size
and profitability of firms)
• Business sector grows through firm growth and location
decisions (retention and attraction)
• Firm growth and location depend upon increases in
efficiency and productivity (of firm and system, including
product innovation)
Core Question: What attributes of the region increase efficiency and
productivity, leading to business sector growth?
What is it About Place that Affects Economic Performance?
“Cities exist to eliminate transport costs for people, goods and ideas” (Glaeser)
• Urbanization and Localization Economies: general and industry-specific benefits of
concentration as workers and firms co-locate because of spillovers, synergies, shared labor and job
pools, backward and forward linkages among firms, etc. – generating increased efficiency and
productivity through flow of ideas and technologies, enhancements to human capital, economies of
scale, reduced transaction and transport costs, and so forth. (Marshall, Krugman)
• New Growth Theory:
location is becoming more important, and with different benefits, in the
knowledge economy, as metros become increasingly centers of idea creation and transmission
(through technology, human capital externalities, intellectual spillovers). Increasing returns to
knowledge and imperfect competition lead to metro specialization and divergence. (Romer, Lucas)
• Institutional Economics:
growth, and particularly innovation, take place in the context of an
institutional infrastructure – research, professional and learning networks; universities and
civic/business organizations; quasi- and governmental organizations and regulation – which can
hamper or accelerate all of the other benefits of concentration. (Coase, Atkinson)
Productivity and efficiency depend upon concentrations, interactions and
synergies between economic activities  Key Q:
Where are the leverage points to improve system performance?
Six Key Leverage Points Take Us from Theory to Practice
• Enhance Regional Concentrations (and their performance):
Industries, Occupations and Functions
• Deploy High Human Capital Aligned with Job Pools
• Develop Innovation Enabling Infrastructure
• Increase Spatial Efficiency
• Create Effective Public & Civic Culture & Institutions
• Develop and Deploy Information Resources
These overlap, and themselves interact. This is work-in-process! Anticipate
expanding and refining, especially in practice.
Enhance Regional Concentrations:
Industries, Occupations and Functions
Leverage Point 1
• What is it?
This leverage point has to do with “clustering,” recognizing that what is clustering may be shifting - toward occupations and functions -- and the whole notion may need to be broadened, brought
to ground, and complemented with other production-side strategies. It focuses on the optimal
interaction between production components of an economy – the optimal mix and scale of
industries, occupations, functions; multiple specializations; etc. Cultivating benefits of
concentration requires understanding nuances of what and how specific types of concentrations
create efficiencies and enhance productivity in your region.
• Aspects to consider include:
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Current concentrations
High-growth potential areas
Geography of concentrations
Optimal mix and scale of industries, occupations, functions
What factors (locational, institutional, others) contribute to efficiency/productivity benefits
gained from concentration
• Strategies might include:
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Provide co-location opportunities (e.g., Research Triangle)
Offer co-location incentives
Enhance access to capital for targeted concentrations
Strengthen institutional and network infrastructure
Strengthen “inputs” to concentration – from training/education to venture capital
Careful about limits of government in picking or causing genuine “clustering”!
Deploy High Human Capital Aligned
with Job Pools
Leverage Point 2
• What is it?
This leverage point addresses human capital in the context of economic performance:
the goal is not just human capital, but linked, mutually reinforcing, human capital and job
pools. Pools of workers and jobs/firms attract each other. Not just quality, but
deployment, are key to productivity and efficiency gains. Entails a two-fold, iterative
process:
− Growing supply of skilled workers to meet employer demands
− Growing demand for skilled workers by cultivating appropriate jobs
• Aspects to consider include:
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Concentrations and growth prospects (both skills and occupations)
Existing skills/education levels – obstacles and opportunities
Quality of education/training system
Attraction/retention factors
• Strategies might include:
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Increase demand-side focus of workforce development
Increase access, reduce transaction costs to increase labor market efficiency and inclusiveness
Links to occupational concentration strategies (Leverage Point 1)
Production, attraction, retention strategies
Leverage Point 3
Develop Innovation Enabling Infrastructure
• What is it?*
Innovation inherently drives increasing productivity and efficiency, and is the source of
all long-term growth. Used here broadly to encompass movement along various stages
from idea to product to commercialization to entrepreneurship to “gazelles” (high
growth firms). Institutional infrastructure and inputs – from R&D funding to open, risktolerant business culture – critically enables innovation.
• Aspects to consider include:
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Cluster formation and dynamics
Public sector enablers/constraints
Nature of supporting institutions and networks
Flow of R&D and early-stage business funding
Rate/pattern of commercialization
Firm starts, growth, trajectories
• Strategies might include:
− Build regional R&D capacity (education, facilities, funding)
− Foster entrepreneurship & commercialization of knowledge
− Institutional development: facilitate opportunities for interdisciplinary crossfertilization
− Cluster formation, especially high human capital occupational concentrations
(Leverage Points 1 and 2)
*“…new products, new services, new technologies, new ways of organizing work,
and new business models….” (Brookings Metro Policy)
Leverage Point 4
Increase Spatial Efficiency
• What is it?
The location of firms and workers, producers, suppliers and consumers within
the region determines transportation costs for people and businesses, and
influences agglomeration benefits (such as shared inputs and knowledge
spillovers). Generally, to increase efficiency and productivity of the metro
economy, we want to:
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Minimize transportation costs
Reduce congestion
Maximize agglomeration benefits
Avoid segregation and concentration of poverty
• Aspects to consider include:
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Public policies re: land use/zoning, infrastructure, etc.
Degree of housing-jobs mismatch
Access to transit
Spatial concentrations of firms, occupations, functions, etc.
• Strategies might include:
− Transit-oriented and mixed-use/mixed-income development
− Affordable housing programs (inclusionary zoning, etc.)
− Fostering business co-location
Create Effective Public & Civic
Culture & Institutions
Leverage Point 5
• What is it?
Government and civic sector activities hinder or enhance the productivity and efficiency
of the economic systems – attracting entrepreneurs, enabling markets, lowering
transaction costs, increasing deployment of assets, etc. A culture of trust and
collaboration, as well as institutional flexibility and adaptability, are increasingly
important (including particularly to leverage points 1 and 3).
• Aspects to consider include:
− Degree of horizontal and vertical fragmentation
− Areas and mechanisms for inter-jurisdictional coordination
− Transparency, openness, responsiveness, engagement of citizens, private and civic
sectors
− Private and Civic sector formal and informal institutional infrastructure
• Strategies might include:
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Consolidation
Revenue sharing
Civic engagement (program specific)
E-government
Fast-tracking
Special purpose entities
Industry or occupation specific informal networks (e.g. “First Tuesday” )
Incenting consolidation and cross-sector collaboration in civic sector
Leverage Point 6
Develop and Deploy Information Resources
• What is it?
Rich information resources and networks increase market efficiencies by
reducing finding, measurement and other transaction costs; facilitate
knowledge spillovers and innovation; and enable continued business
planning, monitoring and refinement.
• Aspects to consider include:
− Collection, accessibility, dissemination of relevant info
− Development and provision of analytic tools (not just data: answers)
− Specific market inefficiencies, barriers, opportunities
• Strategies might include:
− Data warehouse
− Specific market driving information resources and tools
− Cluster or strategy specific on-going shared info/analytics
Why “Metropolitan Business Planning”?
ECONOMIC DEVELOPMENT PLANNING
TRADITIONAL BUSINESS PLANNING
Vision for the Regional Economy
Business Mission & Vision
Status of Economy: Assets,
Opportunities, Challenges
Market Analysis
Goal-Setting & Strategy Identification
Analysis of Strategic Alternatives & Risks
Identification of Policies, Programs, Products
& Interventions
Development of Products & Services
Operational Planning for Implementation
Operational & Management Planning
Identification of Funding Needs
and Sources
Forecasting & Financial Planning
Definition of Outcome Measures & Targets
Target-Setting & Performance Tracking
The steps to analyzing and improving a regional economy lend
themselves to the proven discipline of business planning.
Elements of the Business Plan
MISSION/VISION
Competitiveness
(Wages, GRP, Innovation)
Sustainability
(VMT, Energy Efficiency)
Inclusion
(Participation in Employment, Business
and Market Growth)
MEASURABLE
OUTPUTS/IMPACTS
MARKET SCAN
Status, Systems, Dynamics
(Spatial efficiency,
Human capital trends matched to
business growth,
Business clusters/performance….)
Wage Growth,
Reduction in Unemployment,
Reduction in CO2 Emissions,
Neighborhood Revitalization
INSTITUTIONAL AND
FINANCIAL IMPLICATIONS
GOALS/STRATEGIES
• Regional Information Infrastructure
• Regional Coordination
• Specific Institutions/Implementation
Capacity
• Financials  Investment “Prospectus”
Tied to Outcome Measures
Transit-Oriented Development
Coordinated Workforce and
Occupational Clusters
Inner-City Retail Development
PRODUCTS AND
INTERVENTIONS
WIRED Program,
Regional Inclusionary Zoning,
Green Impact Zones,
Pilot MBPs Will Lay the Groundwork
Metro Development Baseline/Overview (MDBO)
Mission/Vision
↓
Market Scan/Environmental Analysis
↓
Goals
↓
Strategies
↓
Future
DDI
Future
DDI
Detailed Development
Initiative (DDI)
Products, Policies,
Programs, Interventions
↓
Organizational &
Operational Implications
↓
Financial Implications
↓
Performance Metrics
Metropolitan
Investment
Prospectus
What Might a Pilot MBP Look Like?
Metro Development Baseline/Overview (MDBO)
Mission/Vision: Sustainable communities…dense nodes…efficiently linked people & businesses
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Market Scan Results: Emerging specialization in alternative energy businesses and occupations
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Goals: Increase number of establishments, employment and total payroll in the alternative energy field
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Strategies: (a) Co-location incentives; (b) Targeted, demand-driven workforce devel.; (c) Links to students
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Detailed Development Initiative (DDI)
Intervention: Cluster-Focused Industrial Park that:
•Facilitates business co-location
•Houses on-site “training academy” that
− Provides skill devel. for key occs./functions
− Utilizes demand-driven curriculum
− Offers internship, co-op & mentorship opportunities to local students
↓
Operational Plan
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Financial Sources & Uses
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Metrics: new jobs, new cos., $payroll, $GMP, etc.
Metropolitan
Investment
Prospectus
Implications for Federal Policy
• The federal government should strategically invest in regional
prosperity as a priority for national economic growth.
• The federal government should incent and support
comprehensive, integrated regional business planning, as it
will enable more effective and efficient federal investment.
• Since regional performance depends upon local, specialized
system interactions, the federal response needs to be crossprogram, flexible and performance-driven.
Federal policy should be driven ground-up by regional development plans
(reversing the current dynamic).
CLEVELAND
Initial Content
(illustrative, from pre-existing work)
Mission/Vision
• “Northeast Ohio is a diverse, united region made up of individuals fully engaged in creating a vibrant regional
economy home to growing, innovative employers, connected core communities and valued natural spaces.
All residents participate fully in educational and economic opportunities and engaged citizens promote
collaborative local governments that support sustainable growth.”
• 6 core cultural principles
• 4 future characteristics
Market Scan
Dashboard of Economic Indicators:
• 4 top-line economic growth measures – % change in employment, income, productivity and output
• 9 indicators: (1) Skilled Workforce and R&D , (2) Legacy of Place, (3) Urban Assimilation, (4) Racial Inclusion
and Income Equality, (5) Locational Amenities, (6) Technology Commercialization, (7) Urban/Metro Structure,
(8) Individual Entrepreneurship, (9) Business Dynamics
• 36 supporting variables arrayed under the 9 indicators
Goals
• Top-level goals:
Per capita income > national average
Job growth > national average
Core city poverty < 20%
• Area-specific goals and quantitative targets re: Business Growth, Talent Development, Racial and Economic
Inclusion, Government Collaboration and Efficiency
Strategies
• Entrepreneurship: maximize available capital and provide needed consulting/services
• Innovation/Research: attract more state $ in key industries, align efforts re: federal R&D/commercialization $,
attract high-growth cos., assist transition of existing cos.
• Inclusion: network to support sales growth in minority businesses
• Talent Development: align stakeholders to increase attainment and create life-long learning culture
• Government: educate, engage and empower citizens to advance key initiatives
Detailed
Development
Initiative
Integrate and increase flexibility of a variety of existing manufacturing extension, Small Business
Administration, workforce and other programs to assist a growing portfolio of high-potential but challenged
manufacturing companies and their employees transition into high-technology/advanced manufacturing
clusters that show strong growth potential
CLEVELAND DDI!!
Work-In-Process
Investing in Metropolitan Economies
April 22, 2010
Current Economy’s Meta-Drivers Also
Shape Strategic Interventions
• Innovation-led
• Export-oriented
• Low-carbon
• Opportunity-rich
What?!!
Eureka!
Huh???
Prosperity
Export-oriented
Low-carbon
Innovation-driven
Metro-led
Opportunity rich
Fundamental Drivers of Prosperity
Innovation
Infrastructure
Human Capital
Governance
Levers / Interventions
Increase
Spatial
Efficiency
Develop
and Deploy
Information
Resources
Develop
InnovationEnabling
Infrastructure
Enhance
Regional
Concentrations
Deploy
Human Capital
Aligned with
Job Pools
Create Effective
Public & Civic
Culture &
Institutions
Strategies & Implementation
Quality Places
What Drives Inclusive and Sustainable
Economic Growth?
Local (Regional) Enabling Environment
(Government regulation, tax and public goods, including
particularly infrastructure and education; civic institutions;
qualities of place, including the natural environment; etc.)
Inputs to
Production
(Human capital; real estate;
capital; natural and
knowledge resources; etc.)
Key Systems
(Market processes – housing,
labor, etc.; production
dynamics – clusters, value
chains, etc.; innovation
dynamics - knowledge
creation, networks,
commercialization, etc.)
Macro/Global Context & Trends
Economic Outputs
(Businesses – gross regional
product, profits; households
– wages, other income, etc.)