Enrico Moretti explains why policymakers should concentrate on mobility inequality, why there is no Great Stagnation, and why economist Paul Romer has a tough road ahead.
Editor’s note: Enrico Moretti is professor of economics at the University of California, Berkeley, and the author of an important new book ‘.’ He recently answered questions from THE AMERICAN Editor-in-Chief Nick Schulz about why mobility inequality matters more than income inequality, and why there is no Great Stagnation.
Nick Schulz: Your book highlights how high concentrations of skilled workers can generate wealth and economic growth in metropolitan areas and how this redounds to the benefit of the unskilled in those areas. Obviously policymakers are interested in developing these kinds of clusters, but you point out that most explicit efforts to do so fail or are not worth the cost and that plain-old luck plays a big part in cluster success. Is there anything policymakers can or should do to improve their metros and push them toward innovation?
Enrico Moretti: People often have unrealistic expectations of their governments. The role that local governments can play in revitalizing struggling communities is less extensive than most voters realize and most mayors would like to admit. The reality is that a city’s economic fate is in no small part determined by historical factors. In the book, I argue that path dependency and strong forces of agglomeration present serious challenges for communities without a well-educated labor force and an established innovation sector. Local governments can certainly lay a foundation for economic development and create all the necessary conditions for a city’s rebirth, including a business climate friendly to job creation, but there is no magic formula for redevelopment. Like politics, all innovation is local: Each community has its own comparative advantage. Local governments must build on their existing capabilities by leveraging local strengths and expertise. The use of public funds to create jobs must be reserved for cases where there are important market failures and a community has a credible chance of building a self-sustaining cluster. Ultimately, though, local policymakers should realize that when it comes to local development, there is no free lunch.
Read the full article at The American website.