The World Is Spikey?

It would be hard to pass up an opportunity to post something about Thomas Friedmann's "The World Is Flat," which has been assigned twice in my two years at Owen. (Since I bought it when first released, I have twice skimmed the rather large book.)

A post at Kids Prefer Cheese gives us an opportunity to consider whether or not Friedmann was right, and what implications it has on corporations and remote businesses. (The post is about a chapter in Tim Harford's The Logic of Life: The Rational Economies of an Irrational World.) I'll start out with this humorous passage from Matt Taibbi review of "The World is Flat" at the New York Press:

Thomas Friedman in possession of 500 pages of ruminations on the metaphorical theme of flatness would be a very dangerous thing indeed. It would be like letting a chimpanzee loose in the NORAD control room; even the best-case scenario is an image that could keep you awake well into your 50s.

So I tried not to think about it. But when I heard the book was actually coming out, I started to worry. Among other things, I knew I would be asked to write the review. The usual ratio of Friedman criticism is 2:1, i.e., two human words to make sense of each single word of Friedmanese. Friedman is such a genius of literary incompetence that even his most innocent passages invite feature-length essays. I'll give you an example, drawn at random from The World Is Flat. On page 174, Friedman is describing a flight he took on Southwest Airlines from Baltimore to Hartford, Connecticut. (Friedman never forgets to name the company or the brand name; if he had written The Metamorphosis, Gregor Samsa would have awoken from uneasy dreams in a Sealy Posturepedic.) Here's what he says:

I stomped off, went through security, bought a Cinnabon, and glumly sat at the back of the B line, waiting to be herded on board so that I could hunt for space in the overhead bins.

Forget the Cinnabon. Name me a herd animal that hunts. Name me one.

That is one funny book review. Read the entire thing.

Anyway...here is a blurb from the interpretation on chapter seven of Harford's book (titled "The World is Spikey") which may get you thinking that America's entire workforce may not be farmed out to developing countries or the exurbs of Atlanta.

Cities are expensive, and that expense is above and beyond paying the necessary rents to gain access to their unique amenities. Cities are marked by knowledge spillovers, a positive externality ... where human capital grows faster when one is around more humans. And the internet, rather than reducing the positive effects of cities on productivity, actually enhances them. Thus, rather than subsidizing rural areas, perhaps we should consider subsidizing cities.

Luckily for Tim and his prospective book sales, he tells this story in a much more entertaining way than I just did. But I still have some questions, suggestions, and quibbles.

The claim is made that salary differences don’t match up with cost of living differences and the reason for this is knowledge spillovers, but it is not spelled out exactly how that would work. An alternative seems to me that zoning restrictions create these big rents and pre-existing property owners are sucking a lot of the consumer surplus out of people with high valuations on cool experiences. There are a lot of experiences that are simply unavailable outside of a big wealthy city.

Such as the presence of Vermeers, for starters. And then this paragraph:

In discussing the advantages large cities have in producing quality services (another reason why mechanical cost of living comparisons are not very accurate), I would suggest that Tim consider work like Murphy Shleifer & Vishny’s “The Allocation of Talent” which shows how the most able entrepreneurs will run the largest firms (which for services would be located where the largest populations are concentrated).

Comments

[Nathan Ketsdever]

Interesting post. I know that Florida in "Flight of the Creative Class" deals with a similar issue in terms of the growing class divide, but proposes more funding for education, technology, and the development of creative communities. Interesting read, although it begins to sound like a leftist revision of trickle down economics--but perhaps thats a good thing in the sense that its something the democrats & GOP could agree on to ameliorate poverty.
Great posts!