June 22, 2021
The Geography of American Innovation, introducing Moretti Podcast
It’s the early 21st century. That means déjà vu all over again: the US economy remains an innovation powerhouse. Silicon Valley, the Puget Sound, Austin, and the Greater Boston Metro area all boast highly productive companies across variegated high-tech industries—and, in the process, they have created coveted jobs for well-educated people. At the same time, cities like Detroit, Akron and Buffalo—the so-called Rustbelt—have largely missed the transition from capital and labor intensive Fordist production to the newer, more intangible knowledge economy: general-purpose technologies such as artificial intelligence and the internet of things powered by big data but ultimately underpinned by high-skilled labor such as computer scientists and silicon chip designers.
Enrico Moretti is one of the foremost experts on the economics of cities. In a new episode of the UW Political Economy Forum Podcast, Nicolas Wittstock and Moretti discuss America’s economic geography. He explains the drivers of the innovation clusters we see today, arguing that today’s cutting-edge sectors benefit from geographic agglomeration and thick labor markets. These industries also pull up wages for local low-skilled workers through a multiplier effect: The high salaries paid to data analysts at a company like Google are partly spent within the local economy, sustaining service sector jobs and pulling up wages in general.
Enrico and Nicolas also discuss the effect of COVID-19 on the US economy. While pandemic policy has forced many to work from home, Enrico does not expect this will remain so for most of the innovation sector. Given the returns to proximity – which have driven the geographical concentration of these industries in the first place – remote work will remain relatively unattractive. Finally, Enrico argues that investing in education – in all areas and across all tiers – is the best innovation strategy the US can pursue.
