Wednesday, September 26, 2012

Rentseekers in D.C.

From The Economist:
When did Washington change?
LAST week, the Census Bureau published new county-level income data, which revealed that seven of the nation's ten richest counties are located in the Washington metropolitan area, a share that has only risen of late. This development led to an interesting round of discussion concerning the parasitism of the capital region, some of which you can read here.

I don't wish to dispute this story. It is difficult to miss the presence of large military contractors in the area, the ranks of which soared after the attacks of September 2001. It is disconcerting to see tech stalwarts open offices in the city in order to better conduct their patent wars. There are health and financial industry complexes here, as well, and a substantial portion of their activity is directly geared toward influencing rules and spending that pertain to their businesses. As Matt Yglesias writes, the great success of the Washington metro area can be attributed to the fact that it is very well educated and very well educated places have done well in recent years. But as he notes, one then has to wonder why so many well educated people are here.
But I would advise a little caution in interpreting these figures for one very important reason: clusters of skilled workers are very persistent.

Take as given that some of the recent economic success in the Washington area is down to increased rent-seeking. If one looks at the recent performance of other cities with similar concentrations of tech and science workers, like Boston or San Francisco, one has to conclude that quite a lot of the recent gain is down to economy-wide increases in the returns to clusters of skilled workers. We can then take as given that the gravity of the government is responsible for rooting a skilled-worker cluster in Washington. But when?

From the 1930s to the 1950s, government (primarily military) spending and research in the Bay Area helped seed a cluster of technology firms that became Silicon Valley....MORE
The Bay Area story is true only to a point.
Another high tech bay area cluster were the Kaiser Shipyards in Richmond Ca. They were rather a big deal in the early '40's:
Shift Change at Kaiser Richmond Shipyards

Using the most advanced manufacturing techniques in the world, the Kaiser shipyards were building ships in two weeks and in one demonstration completed the S.S. Robert Peary in five days.
The shipyards were the home of Rosie the Riveter:

Richmond Shipyard Number Three, part of the National Park Service's Rosie the Riveter--World War II Home Front National Historical Park, is located at the tip of Potrero Point in Richmond. The shipyard is currently closed to the public while safe methods of public access are developed. For further information, visit the park's website.

 [graphic] link to Seacoast Defense Essay  [graphic] Link to Shipbuilding essay
[graphic] link to Mobilization essay  [graphic] Linkto Women at War essay
 [graphic] link to Port of Embarkation essay  [graphic] Linkto Preservation essay

Nowadays Richmond routinely places on the Ten Most Dangerous Cities in America lists, scoring a personal best #3 for murders in 2010.
So the persistence of clusters idea only goes so far.