Cupcakes and Human Capital

UPDATED: Rich Florida posted his own cupcake commentary. Check it out here.

Richard Florida emailed me yesterday to say that he enjoyed the mini-flap over the Cupcake Class. He also pointed me to this post in his own blog, which I've excerpted below. Read the whole thing for yourself.

First off, it’s important to say that there is now wide consensus among economists and other students of economic development about the primary factors that drive economic development. Long ago, Robert Solow found that technology is critically important. Today, drawing primarily upon the work of Robert Lucas, who in turn drew upon Jane Jacobs, the primary factor is seen to be human capital or what I simply refer to as talent. "As Lucas writes, “much of life is ‘creative’ in much the same way that is ‘art’ and ‘science.’ …To an outsider it even looks the same. A collection of people doing pretty much the same thing, each emphasizing his own originality and uniqueness.”

Drawing on Jacobs’ insights, Lucas, declared the multiplier effects that stem from talent clustering to be the primary determinant of growth and he dubbed this multiplier effect “human capital externalities.” He also said Jane Jacobs deserved a Nobel Prize for identifying it. Places that bring together diverse talent accelerate the local rate of economic development. When large numbers of entrepreneurs, financiers, engineers, designers, and other smart, creative people are constantly bumping into one another inside and outside of work, business ideas are more quickly formed, sharpened, executed, and—if successful—expanded. Lucas summed it up simply: “If we postulate only the usual list of economic forces, cities should fly apart.” This is because land, as Lucas reminds us, “is always far cheaper outside cities than inside.” With a penchant for common sense that seems to distinguish the greatest thinkers he sums it up with the question: “What can people be paying Manhattan or downtown Chicago rents for, if not to be around other people?”


0 Responses to "Cupcakes and Human Capital"

Search Pittsblog

About Pittsblog

Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at] Mike also blogs at, on law and technology. Chris Briem of Null Space drops by from time to time.

All opinions expressed at Pittsblog 2.0 are those of their respective authors and of no one (and no thing) else, least of all the University of Pittsburgh.

Pittsblog 2.0 has a motto: "It's steel good in Pittsburgh." Say it aloud, with a Pittsburgh accent.

Comments are moderated.
Subscribe to Pittsblog comments


Blog Archive

Header Background

Header background images licensed from (left image) lemonad and (right image) plaskota under Creative Commons Attribution - Noncommercial - Share Alike 2.0 Generic licenses.


Copyright 2003-2010 Michael J. Madison - WP Theme by Brian Gardner - Blogger Blog Templates,