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Calgary Herald.

A Flawed Analysis
March 28, 2004

By Steven Malanga

Richard Florida, who started his career as an academic economist writing dry treatises on industrial production, began contemplating the "creative class" when Carnegie Mellon University enlisted him to help Pittsburgh attract and retain more educated workers and high-tech firms.

He observed in the mid-1990s that cities reputed to be cool, "in" places seemed to be incubating many of the hottest new technology companies, and he began to wonder if, in the jargon of academia, some new paradigm was emerging, based on the "lifestyle choices" of a new generation of workers. In 1998, he met a Carnegie Mellon graduate student, Gary Gates, who was tracking U.S. gay communities using Census Bureau statistics on unmarried same-sex households.

In what he describes as a major revelation, Florida noticed that Gates' list of America's most gay-friendly cities closely matched his list of hip technology centres. Looking for other ways to measure the distinguishing characteristics of the new-economy cities, Florida developed a so-called Bohemian Index, which counted the number of artists, writers and performers in a city. He added a Creative Class Index to measure a city's concentration of knowledge workers -- scientists, engineers, professors, think-tank employees. Each index, Florida was stunned to find, correlated highly with the other indexes. Cities with many gays were also places with lots of performers, creative workers and tech companies.

Florida made two big -- and dubious -- leaps in logic. First, he assumed there was some causal connection linking all of these indexes to economic growth. Then, he decided he could infer just what it was about these cities that helped power this growth. He concluded that, in the new economic order, the engine of growth wasn't individual companies but, rather, creative workers who came to live in cities they admired and then started their own firms or attracted businesses seeking educated workers. What enticed these workers, the professor concluded with very little evidence, was that the cities were "tolerant, diverse and open to creativity."

To a generation of liberal urban policymakers and politicians who favour big government, Florida's ideas offer a way to talk economic-development talk while walking the familiar big-spending walk.

Cities rushing to embrace Florida's ideas have based their strategies more on wishful thinking than clear-eyed analysis. Neither the professor nor his most ardent adherents seem worried the Internet generation formed its eccentric capitalist culture during a speculative bubble, when billions of dollars of free-flowing investment capital gave workers and their bosses the freedom to ignore basic economic concerns and that, now, with that money vanished and many companies defunct, a focus on such old-economy ideas as profits and tax rates has reemerged.

But a far more serious -- indeed, fatal -- objection to Florida's theories is the economics behind them don't work. Although Florida's book bristles with charts and statistics showing how he constructed his various indexes and where cities rank on them, the professor, incredibly, doesn't provide any data demonstrating that his creative cities actually have vibrant economies that perform well over time. A look at even the most simple economic indicators, in fact, shows that, far from being economic powerhouses, many of Florida's favoured cities are chronic underperformers.

Steven Malanga is a contributing editor of the Manhattan Institute's City Journal (www.city-journal.org), from whose Winter 2004 issue this article is excerpted.

©2004 www.calgaryherald.com

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