Why Education Matters for Regional Resilience

4.16.13 | More studies reaffirm the links between the quality of education and regional resilience — a point noted last week with the mention of an interesting experiment in Port Townsend, Wash., linking education, local history, and a regional economy.

In Human Capital and Regional Development (pdf), Nicola Gennaioli, Rafael La Porta, Florencio López-de-Silanes, and Andrei Shleifer examine regional development and educational quality across the globe and conclude that education “is a critical determinant of regional development, and the only such determinant that explains a substantial share of regional variation.”

Drawing on data from 1,500-plus “sub-national” regions — everything from states or provinces to counties (shires, oblasts, etc.) to cities — the authors “have also found that regional education influences regional development through education of workers, education of entrepreneurs, and perhaps regional externalities.”

The key to regional resilience, however, appears to lie in an educated entrepreneur class:

economic development occurs in regions that concentrate entrepreneurs, who run productive firms. These entrepreneurs may also contribute to the exchange of ideas, leading to significant regional externalities. The observed large benefits of education through the creation of a supply of entrepreneurs and through externalities offer an optimistic assessment of the possibilities of economic development through raising educational attainment.

The U.S. is working on building an educated, entrepreneurial class, although its ranking among developed nations on that score has fallen. The Common Core standards that 46 states have adopted (under mild duress) can possibly help encourage this kind of nimble, creative, and critical thinker that drives innovation and entrepreneurship—although as Diane Ravitch has noted, there is no evidence of this as of yet. And some colleges are getting in on the game, promoting entrepreneurship or small business majors.

More immediate, given that it takes years to turn a ship around, is the novel experiments in cities like Pittsburgh, an “old” economy of yore, to remake learning and apply cluster development thinking to education. As a city, it has managed to forge amazing cooperation among youth-serving cultural institutions like the renowned Children’s Museum and higher education leaders like Carnegie Mellon, as well as many others to create a pipeline of talent. They hook kids early on robotics, electronics, game design, and other talents that we’ll need in the new century, and then see that talent blossom later down the road in the next generation of innovators. This new talent is in many instances staying put in Pittsburgh and forging new business, like leading learning game makers and others.

This cluster of education innovation might be one example of the kind of human capital that Gennaioli and coauthors are talking about in their second paper, Growth in Regions (pdf). In that paper, the authors conclude that regional growth — like national growth — depends on “geography and human capital.”  But they also note among their conclusions that regional convergence, the narrowing of the gap between rich and poor regions (or countries), is faster in richer countries thanks in part to a healthy regulation regimen: “Among the national factors correlated with the speed of regional convergence is capital market regulation: countries with better regulation exhibit faster convergence.” (Emphasis added.)

I’m not surprised by that, though I am glad to see studies back it up. Perhaps that’s why even Time.com, the online inheritor of Henry Luce’s publication behemoth of yore, entertains the notion that Karl Marx was more correct about unbridled capitalism than previously assumed. Marx got that “dictatorship of the proletariat” thing wrong, but author Michael Schuman notes that he got plenty else right about class (economic) imbalance:

Workers of the world are growing angrier and demanding their fair share of the global economy. From the floor of the U.S. Congress to the streets of Athens to the assembly lines of southern China, political and economic events are being shaped by escalating tensions between capital and labor to a degree unseen since the communist revolutions of the 20th century. How this struggle plays out will influence the direction of global economic policy, the future of the welfare state, political stability in China, and who governs from Washington to Rome. What would Marx say today? “Some variation of: ‘I told you so,’” says Richard Wolff, a Marxist economist at the New School in New York. “The income gap is producing a level of tension that I have not seen in my lifetime.”

BRR researchers might add a focus on equity to that list of conditions. In Just Growth Manuel Pastor and Chris Benner argue that instead of striving for just growth, we need “just growth.” This, they argue, will require a stretch from both business leaders in the region, who have long been more concerned about growth than equity, and those who have long fought for economic justice yet “have not always thought about how best to promote the economic part of that couplet.”

Smart regulation, improved education, and attention to equity—that’s the road to a shared prosperity.

Photo/ Earlham College


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