Entrepreneurship is a core element of economic performance in all market societies. In this paper, we define entrepreneurs as actors who are willing to take risks in producing or providing something new and are the sources of game-changing ideas. They are able to translate concepts into market-feasible products and services and are willing and able to support and finance the new venture creation process.1 This process involves many individuals working in teams through several critical stages of business innovation or firm creation, and social networks are key elements of a dynamic and exemplary entrepreneurial system. Indeed, entrepreneurship operates in a system of information and values, and its success, therefore, depends on the intensity of information flows and the fit between the individuals, local resources, and local values.
Our understanding of how entrepreneurs emerge is influenced by work from various scholarly disciplines, as well as observations from other human endeavors, in fields as diverse as opera, haute cuisine, sports, and symphonic music. While economic models of entrepreneurship suggest a determinist view in which standard market forces produce a variety of predictable outcomes, we appreciate that there is also a bit of magic or even mystery in the entrepreneurial process. Successful entrepreneurial endeavors are, even in the best of circumstances, quite rare. Individuals may risk their time, energy, self-esteem, family, and future prospects for fairly low chances of success. A market economy, however, depends on a significant coterie of people who are willing to take this risky path. In this paper, we outline an approach to achieving greater numbers of successful entrepreneurs, the policy measures that would foster this growth, the contextual constraints that challenge it, and the opportunities we see for local government.
Broad Base Power
We argue that, to increase excellence in any endeavor, including entrepreneurship, it is important to increase the number of people who participate in the undertaking. Clusters of excellence exist throughout the world at particular times and across a variety of fields, because high participation rates in these fields create circumstances that foster standout success. The broad base of participation in an endeavor creates a significant and invested audience that interacts with those who are most motivated and talented, encouraging them to strive for ever-greater levels of achievement. This argument, which we call Broad Base Power, centers on the role of the large number of participants (the Base) in any endeavor who serve as an empathetic audience for those who are most talented. As the Base is composed of those who have attempted the same endeavor, they have experience and familiarity with the effort, skill, and talent involved and are more likely to be highly attuned to and insightful regarding the abilities of a star performer. The high expectations, support, scrutiny, appreciation, criticism, encouragement, and empathy from the Base motivate the star performers and propel them to higher levels of excellence. Achievement in particular ventures, then, results not only from the quality of people entering a field, but also from the complex interaction between the stars and those who are unsuccessful. In short, greater rates of participation in an activity lead to a higher probability that talented and high-achieving individuals will emerge in the field.
This observation holds true across a wide range of fields, from sports, the arts, and science, to business and government. Several examples may illuminate the phenomenon. In music, for example, individuals who have some training in piano come to appreciate the skill of those who perform at the highest level. Those with training are more likely to understand the attributes of a great piano performance and more willing to support and appreciate the performances of great musicians, even if they are not motivated or talented enough to become renowned performers themselves. 2 Similarly, those of us who have considered science careers after being exposed to interesting courses and teachers in biology or chemistry are more likely to support and express appreciation for those who go on to achieve in these fields. Or, in the world of fine cuisine, we see that the very few renowned chefs have a broad range of support from less-successful chefs, those who aspired to be chefs, and those who benefit from the food they prepare, all of whom take a deep interest in the star chefs’ work and ideas.
Applying this concept to entrepreneurship, we argue that it is beneficial to have large numbers of people who appreciate the entrepreneurial endeavor and engage in it, even if they do not ultimately succeed. As in the examples above, the community of individuals who start new businesses or aspire to entrepreneurial activity become the Broad Base for entrepreneurship, appreciating and motivating each other and, especially, their star performers, and thus facilitating the process of innovation and development.3 By increasing the range of people with entrepreneurial experience, we also increase the effectiveness and empathy of employees and others who subsequently interact with entrepreneurs. For example, venture capitalists who have experience starting new businesses and seeking investors themselves may be especially helpful to the entrepreneurs with whom they work, as they have a deeper understanding of incentives that ensure stronger performance and long-term commitment to excellence.
Policy Efforts that Foster Broad Base Power for Entrepreneurship
Promote Broad Base Power across fields to avoid risk in picking winners. Public policies, as a general matter, ought not to encourage a specific arena for greater participation, as it is very risky for the public sector to bet on specific goods and services they anticipate will be “the next big thing.” The range of potential products and services that could benefit from government investment, of course, is enormous, from typewriter repair or vintage film processing to battery development, solar technology research, and microchip design. Government could create incentives to increase the number of people working in any field, including entertainment, sports, and teaching, among many other possibilities. While there are, perhaps, occasions when there is enough consensus and momentum to engage in such bets,4 we recommend that government focus on factors that increase Broad Base Power across fields, rather than making wagers on specific enterprises, businesses, or undertakings. Government should seek to understand how the invisible hand of the market and individuals’ personal desires draw them to activities in which they are interested and for which they are suited. And public policy should enhance the personal traits of individuals—their health, skills, and intellectual capacities.
Enforce the rules of economic and business competition to ensure legitimacy and confidence. As one advances higher in the competition in any field, the proportion of those who are viewed as winners becomes smaller, and the proportion of those who have failed to reach the higher echelons becomes greater. There are fewer winners than losers. In order for those who lose to accept their status, as well as the shift of great rewards to those who win, the former must see the outcomes of the competition as legitimate. The empathy, awareness, and appreciation of those who have participated in an activity for those who achieve at the highest level rest on the conviction that the achievement is based on merit alone. Without widespread agreement that merit is the paramount criteria for advancing from the Broad Base up the echelons of achievement, the legitimacy of outcomes declines and the audience’s appreciation of the effort, skill, and talent that must be mobilized to reach the top is likely to evaporate. Instead of support and admiration, there will be resentment, suspicion, contestation of outcomes, and even hostility toward those who are judged to be grabbing larger proportions of rewards and benefitting from a rigged, corrupt process. When envy and suspicion replace admiration, the prospect of conflict and fragmentation increases, the entire competitive process is threatened, and the quality of performers at all levels is undermined. This response can occur in any endeavor, from the outcome of a sporting event or admission to a particular academic program to decisions about hiring and promotion or selection of vendors by a public agency.
To maintain confidence and legitimacy, norms and rules regarding participation in the competitive process must be scrupulously and consistently enforced. Those who have the most to gain from winning and succeeding in some field should be most severely disciplined and penalized if they intentionally break rules. Vigilance is essential in order to detect and obviate efforts to tilt and bias a competitive processes of any kind. In the Broad Base Power approach, merit and excellence must be accompanied by commitments to equal opportunity.
This vigilance is especially important in the realm of entrepreneurship, both for factors that affect the participation rates and those that influence entrepreneurial outcomes. A solid Broad Base for entrepreneurship must be founded on equitable and fair opportunities, minimal barriers to entry, and enforcement of the economic and business competition rules. If they view the process as fair and, therefore, legitimate, the Broad Base nourishes the wellspring from which more new entrepreneurs will flow. Just as the great chefs of France, the preeminent operatic stars of Italy, or the chess masters of Eastern Europe arise from the relatively large base of participants in those arenas, so more skilled and successful entrepreneurial performers emerge from the large audience of less-skilled and less-successful entrepreneurs. A larger base results in a greater likelihood that human resources will produce truly excellent, peak-level business entrepreneurs.
Educate to create a Broad Base. Public education may be government’s most significant opportunity to create a Broad Base that will foster improved economic performance. Education exposes large numbers of people to ideas and fields for which they will maintain an appreciation throughout their lives. Indeed, boosting the skills and education of individuals is seen as a primary means of improving economic performance across the board. Greater national success in technology and engineering, for example, can be achieved by upgrading the STEM (science, technology, engineering, and mathematics) education of our population. These STEM educational efforts, which often are emphasized in efforts to improve economic performance, expose the entire population to these important fields, provide incentives for people to participate, make it more likely that talented scientists, engineers, and mathematicians will emerge, and create a large audience of science- and mathematics-proficient individuals who appreciate and support the performance of leaders in these fields. These efforts may also extend beyond public education, with the development of a variety of platforms that enable individuals to participate in new curricula and develop expertise in specific subjects. In math, for example, we might set a national goal to maximize the number of people who are proficient through calculus and create an online, open-source curriculum, with graphics and chat capabilities, that would allow people to interact with instructors. This effort would create a broad base of people with experience and competence in mathematics.5
While there is an important role for more specialized training programs that focus on particular skills, liberal arts education, as it traditionally has been called, must be a core element of developing the Broad Base. A liberal arts education historically has played an important role in elevating the workforce and producing high levels of economic performance in the United States, at least when the United States was the clear, positive outlier in providing public education (Goldin 2001, Goldin and Katz 2007). The newer focus on STEM education should be a priority, but it must be very broadly understood, and the traditional commitment to a general, liberal arts education should be maintained.
Reduce barriers to movement to encourage Broad Base participation. Public policy should reduce friction that prevents people from moving throughout the country and connecting to places they are drawn to by their talent, interests, and economic logic. Broad Base Power assumes that the barriers to entry in a field are minimized and that participation depends on market signals and the preferences and talents of individuals. At the very least, therefore, policies that privilege home purchases, mortgages, and housing investments over renting should be avoided. These policies that privilege owner-occupied housing tend to anchor households to a specific place, preventing easy movement across the landscape on the basis of individuals’ assessments of their business and employment prospects (Indiviglio 2010).6 Furthermore, when capital is directed toward the building and consumption of owner-occupied housing, there is less capital available for business investment, and investment opportunities are scarcer. (Fischer and Huang 2013).
Manage immigration to grow the Broad Base. Growing our own base of people with the skills, imagination, and willingness to engage in entrepreneurship is critical, but immigration plays an increasingly important role in that regard, as well. Immigration often is advocated as a way to supplement the existing workforce and meet employer demands, and immigrant students, the children of immigrants, and immigrant entrepreneurs historically have played a disproportionately large role in our economy (Wadhwa, Saxenian, and Siciliano 2012, Stangler and Wiens 2015, Hart and Acs 2011).
The various immigrant diasporas represented in the United States—Brazilian, Chinese, Korean, Taiwanese, Indian, Vietnamese, and Israeli, for example—also provide networks and opportunities for more effective business interactions with other countries in ways we have not anticipated. In their study of immigration networks’ impact on trade between host countries and countries of origin, for example, Aleksynska and Peri (2012) find that clusters of immigrants produce significant and positive effects on trade. Interestingly, they also find that the key variable for these immigrants is not their education level, but the cultural and legal distance between the home and host countries. When the distances are great, they conclude, entrepreneurial immigrants “play a key role of informational intermediaries” (Aleksynska and Peri 2012: 17).
We should, therefore, adopt and implement public policies that increase the base of talented and entrepreneurial individuals through immigration.7 So far, however, the U.S. Congress has not adequately addressed issues related to the green card backlog and the transition from student visas to work visas and green cards. Nor have they been able to create an evaluation system that assesses immigrants’ potential to contribute to our economy. Our peer countries are more aggressive in competing for the best and brightest, and a U.S. immigration policy that is mired in the pervasive partisan swamp in Congress is a potential hazard to our nation’s entrepreneurial vitality.
Create a reasonable safety net to enhance risk-taking. Risk-taking is a central feature of entrepreneurship. Yet, if the consequences of failure are drastic, they may deter people from initiating entrepreneurial activity. A 2010 study by RAND, for example, finds that becoming eligible for Medicare increases the probability of starting a business (Fairlie, Kapur, and Gates 2010). And, Olds (2014a, 2014b) indicates that the availability of food stamps for one’s family and health insurance for one’s children increases rates of entrepreneurship significantly in families not eligible for Medicaid. Similarly, another study finds that more forgiving bankruptcy protection is associated with higher self-employment rates (Armour and Cumming 2008). While an excessively generous and expensive safety net weighs too heavily on an economy, it is possible that some of the United States’ entrepreneurial dynamism is constrained by the perception of how far one falls upon failure.
Contextual Challenges to Policy Development
There is a significant body of research and a long history of U.S. experience with entrepreneurship policies that can guide government efforts to enhance entrepreneurial activity and business innovation. There are, however, now several signals from our economy that suggest a need for more deliberate and effective reforms and policy responses. Key indicators of our economy are showing worrisome signs of weakness, including declining research and development funding, aging infrastructure on virtually every front, and lagging education performance.8 It is worth looking at some key elements of our contemporary political environment and other features of U.S. life that pose challenges for developing the sorts of policies that can improve business and entrepreneurial performance. Specifically, we are concerned about (1) the policy consequences of public anxiety regarding economic outcomes; and (2) the debilitating effects of ideological confrontation concerning the role of the public sector in the economy.
Public anxiety about the economy. Uneasiness about the economy adversely affects the policymaking arena. Much of the restiveness about the economy today is associated with a growing perception that increased inequality is largely due to government policies and the excessive influence of “people at the top” (Bartels 2008, Hacker and Pierson 2010, Pew 2014, Geidner 2014, Herrnson and Weldon 2014). This suspicion erodes individuals’ confidence and faith in public- and private-sector groups (Pew 2014a), leading them to doubt that these institutions and actors are operating to improve the lives of ordinary Americans. Altogether, these factors weaken the pillars of trust among individuals, making them wary of one another. This policymaking climate is not conducive to building support for some of the necessary responses to our nation’s needs, such as infrastructure and workforce training investments (Jones 2014, Pew 2014b).9 Nevertheless, these policies must be generated, and, as we suggest below, local government offers opportunities in this regard, even when the national government and many states are constrained by partisan gridlock.
Ideological gridlock. Virtually all policy reforms recommended by economists and entrepreneurship advocates require well-designed actions from our public sector. These include revising tax policies, reforming regulation, easing certification burdens, modifying patent policies and ending patent trolling, achieving tort reform, providing startup assistance, boosting education and workforce training support, implementing curriculum improvements, or accomplishing immigration reform, among many others. One of our greatest challenges today, however, is our tendency to hunker down into culturally isolated, partisan cantons. Unfortunately, many policy recommendations for economic growth ignore this institutional and political friction. In the words of The New York Times contributor Thomas B. Edsall (2015), “Many, if not most, of the reforms proposed by economists and other analysts require political action. At the federal level, this would require bipartisan support, an achievement often out of reach in a polarized system.” He goes on to conclude, not implausibly, that, with no relief from our divisive public discourse, “the economy will be held hostage in the battle for supremacy between two ideological poles....” These partisan divides and gridlock now are extending beyond the federal government to the states, as well, as a number of states are now even more polarized than Congress is (Shor 2014).10
Ever since Andrew Hamilton sought to commit our new nation to a policy of promoting manufacturing and enterprise, we have debated the role of government in business matters. The venerable debate largely has been a healthy one, often conducted at sophisticated levels and producing great compromises and policy innovations. The development of voucher systems for delivery of services such as affordable housing or public education, the earned income tax credit, carbon taxes on greenhouse gasses, and a host of other public-private partnerships, emerged from creative compromises between those who advocate for government intervention and those who believe that government should deploy market-like forces in the delivery of public services, if it is to intervene at all. The role of public policy in promoting growth, innovation, and entrepreneurship, however, is a domain that is particularly riven with partisan minefields (Baker, Bloom, Canes-Wrone, Davis, and Rodden 2014).
Local Governments as Arenas for Positive Change
Although there is often gridlock at the national level and even within many states, local governments can be a platform for constructive change. Unlike their warring counterparts in Congress or statehouses across much of the nation, local legislatures often pass budgets and make difficult decisions about service cuts, public employee benefits, tensions among neighborhoods, or conflicts between residents and their public safety personnel. Local officials must manage the highly visible and nearly immediate consequences of many of their decisions, whether these involve natural disasters or fiscal crises. Indeed, constituents experience the consequences of these decisions directly and are able to identify the officials responsible for precipitating, exacerbating, or remedying a particular problem. Nonpartisanship is often the rule at the local level and, even when there is a partisan local ballot, Democrats and Republicans have to collaborate to ensure that hospitals, traffic patterns, roads, recreation facilities, water and power production, and public safety are maintained. Local officials from the two parties often work together to achieve compromises without threatening gridlock and shutdowns.
Given the difficulties we have in making decisions that affect entrepreneurship at the national level and even within many states, local governments, with the appropriate leadership, some impetus, and startup assistance, could be a launching pad for widespread, national political reform, if not structural change. Localized power, in fact, could affect national policy and entrepreneurial activity. Cities, towns, villages, and counties are not simply locations for entrepreneurial activity; they are also underutilized arenas for collective actions that will produce policies more likely to boost entrepreneurship and improve economic outcomes.
Indeed, local governments have long been involved in the economic development field in some form. There is much research identifying key buttons and levers that can be pushed to broaden and intensify both entrepreneurship and economic growth.11 Moreover, recent events suggest that the range and reach of dynamic American places are more expansive than has been suggested by scholars who have observed the increasing divide among cities concerning economic performance (Moretti 2012). Even in parts of the country that may have lagged, we see emerging attractions and a new awareness of pools of talent that might be mobilized to improve entrepreneurship and business innovation.
Steve Case’s recent efforts to seed and stimulate entrepreneurial activity in various regions of our nation highlight the role that awards and prizes can play in stimulating innovation and entrepreneurship. Both public and private sectors historically have been active in this regard (Adler 2011, Williams 2012). Competition and the rising costs of investing in Silicon Valley and in the dominant innovation centers have made it worthwhile for entrepreneurs and investors to seek opportunities in other parts of the country.
Some municipal governments also are leading efforts that enhance opportunities for entrepreneurs to access a growing government-serving startup ecosystem that represents a $140 billion market (Motoyama and Danley 2012).12 The San Francisco Mayor’s Office, for example, announced in 2014 that the city had selected six startup companies to participate in a new Entrepreneurship in Residence program, a voluntary, sixteen-week collaboration to bring together the private sector and San Francisco city departments to explore innovative solutions to civic challenges that can lower costs, increase revenue, and enhance productivity.
Although local governments are making new and innovative efforts in economic development, including business innovation and entrepreneurship, there is also a venerable and growing field of research and literature that focuses on describing and evaluating the efficacy of local, state, and federal policies directed at supporting, attracting, clustering, or funding startups and entrepreneurs. There is, for example, a significant body of research on and evaluation of federal regional innovation clusters, state economic development efforts, tax policies, regulatory reforms, and empowerment zones, among others. Even the newer perspectives on economic development, innovation, and entrepreneurship are a continuation of a history of work focused on what communities or regions can do as they seek to nurture, attract, or retain economic activity (Lewis and Neiman, 2009; Neiman and Krimm, 2009; Kolko, 2009; Busso, Gregory, and Kline, 2010; Duranton, 2011; Glaeser, 2013).
The research literature strongly implies that economic development efforts in general have not produced a commensurate return on the investments and incentives that have been provided by government at all levels. When adding up state and local costs to engage in economic development policies, the burden runs into the tens of billions of dollars each year. In an extensive analysis of local governments alone, it was estimated that local governments expend $80 billion every year to retain and attract businesses, with federal and state incentives to business amounting to another $170 billion per year (Story, 2012). Even conceding the possibility of double-counting some of the federal and state money that devolves to localities, it is clear that a very substantial amount of resources go into individual state and individual local efforts to retain and attract economic activity. Most analysts argue that these efforts, at best, generally rearrange the furniture across local and state boundaries, but do not necessarily create new economic activity. They primarily benefit local economic development officials, relocation consultants, and others involved in the field of business location decisions.
It is likely, nevertheless, that localities and states will continue to compete with one another, even as they experiment with new efforts, including trying to create or incentivize innovation ecospheres, create small venture capital pools, provide free rent for startups, nurture and support clusters, or seek to develop the government itself as a possible innovation sector. The political logic and compulsion for localities to try in various ways to cultivate economic activity is too great. However, states and the federal government should encourage localities to expend less of their scarce resources on inter-jurisdictional competition and far more on education, workforce training, and innovation and entrepreneurial ecosystems.
Although local governments are creatures of their respective states and have no sovereignty in our federal political system, they do have a common interest in vastly improving policymaking at the federal level. Mobilizing the urban interest in this nation around a genuinely nonpartisan policy agenda that provides long-term responses to infrastructure funding, workforce development, education, immigration, and a host of other issues should be a top, sustained, and loudly expressed priority for the organized elements of our nation’s cities.
This paper began with the application of the Broad Base Power framework to entrepreneurship. We argued for an approach that focuses on maximizing the entry-level participation of individuals to create broad audiences and constituencies to nurture business innovation and entrepreneurship. The large numbers of individuals who do not succeed in breaking into ever-higher levels of performance in entrepreneurship, we argued, will support, encourage, and inspire others to achieve. We also spoke to the policy efforts that could enhance the success of this approach and maximize the power of the Broad Base. These included efforts to ensure fairness and legitimacy, improve education, buttress the safety net, and capitalize on the opportunities posed by immigration, among others.
We suggest, however, that the Broad Base Power approach also may illuminate policy challenges. It is often observed that the vast proportion of businesses fail. Sometimes the failure rate is put at 80 percent, sometimes a bit more or less. Something of the sort happens in public policy as well, although it seems we are much less understanding or tolerant of public-sector failures. Of course, we owe it to taxpayers to figure out which policies are worth their costs or obviously fail. Good intentions are not a substitute for positive results. Still, there likely will be a hefty failure rate in public-sector efforts to improve economic performance.
There are, of course, many reasons why the standards we apply for judging private economic conduct are different than those we apply in judging government performance. But, even so, even allowing for that, we should understand that we do have information about the general characteristics that have a chance of improving our economic punch and entrepreneurial dynamism. These are not small items, as we have seen. They will require significant capacity to overcome many of our short-term, narrow interests. This challenge, perhaps, is the knottiest, most mysterious of all the policy puzzles we face.
About the Authors
Jeremy Goldberg serves as Civic Innovation Advisor, at Civic Consulting USA, charged with fostering pro bono partnerships. Jeremy led the effort to create the Silicon Valley Talent Partnership (SVTP). He is a graduate of the Masters in Public Affairs from the University of San Francisco and received his BA in Government from the University of Texas-Austin. He is a proud alumnus of Aspen’s Socrates Program.
Dr. Max Neiman is Senior Research Fellow at the Institute of Governmental Studies of the University of California, Berkeley. He is also Professor of Political Science, Emeritus, University of California, Riverside, and Senior Fellow at the Public Policy Institute of California.
Acemoglu, Daron, and David Autor. 2012. “What Does Human Capital Do? A Review of Goldin and Katz’s The Race Between Education and Technology.” Journal of Economic Literature, 50 (No. 2): 426–463.
Acharya, Amitav. 2014. The End of American World Order. Cambridge, United Kingdom: Polity Publishers.
Armour, John, and Douglas Cumming. 2007. “Bankruptcy Law and Entrepreneurship.” American Law and Economics Review.
Arnold, Gordon B. 2013. Projecting the End of the American Dream: Hollywood’s Visions of U.S. Decline. New York: Praeger.
Audretsch, David B., Diana Heger, and Tobias Veith. 2015. “Infrastructure and Entrepreneurship.” Small Business Economics, 44 (February): 219–230
Baker, Geoffrey. 2014. El Sistema: Orchestrating Venezuela’s Youth. New York: Oxford University Press.
Baker, Scott R., Nicholas Bloom, Brandice Canes-Wrone, Steven J. Davis, and Jonathan A. Rodden. 2014. “Why Has U.S. Policy Uncertainty Risen Since 1960.” National Bureau of Economic Research Working Paper No. 19826, January. http://www.nber.org/papers/w19826.
Breau, Sebastian, Dieter F. Kogler, and Kenyon C. Bolton. 2013. “On the Relationship between Innovation and Inequality: New Evidence from Canadian Cities.” Unpublished paper, June 30.
Chatterji, Aaron, Edward Glaeser, and William Kerr. 2013. “Clusters of Entrepreneurship and Innovation.” Unpublished paper. .
Duranton, Gilles. 2011. “California Dreamin’: The Feeble Case for Cluster Policies.” Review of Economic Analysis, 3 (No. 1): 3–45.
Fairlie, Robert W., Kanika Kapur, and Susan M. Gates. 2010. “Is Employer-Based Health Insurance a Barrier to Entrepreneurship?" Working Paper, WR-637-1-EMKF. Kauffman-RAND Institute for Entrepreneurship Public Policy, Rand Institute for Civil Justice, September.
Fairlie, Robert W., and Magnus Lofstrom. 2013. “Immigration and Entrepreneurship.” Institute for the Study of Labor (IZA), Discussion Paper No. 7669, October.
Fischer, Will, and Chye-Ching Huang. 2013. “Mortgage Interest Deduction is Ripe for Reform.” Center on Budget and Policy Priorities, June 25.
Florida, Richard. 2002. The Rise of the Creative Class. New York: Basic Books.
Geidner, Chris. 2014. “New Poll: Americans Think the Supreme Court is Political, Closed Off, and Got Citizens United Wrong.”
Glaeser, Edward. 2013. “A Review of Enrico Moretti’s The New Geography of Jobs.” Journal of Economic Literature, 51 (No. 3): 825–837.
Glaeser, Edward. 2011. Triumph of the City. New York: The Penguin Press.
Goldin, Claudia. 2001. “The Human-Capital Century and American Leadership: Virtues of the Past.” The Journal of Economic History, 61 (June): 263–292.
Goldin, Claudia, and Lawrence F. Katz. 2007. “The Race Between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005. National Bureau of Economic Research, Working Paper No. 12984, March.
Greer, John Michael. 2014. Decline and Fall: The End of Empire and the Future of Democracy in 21st Century America. Gabriola Island, British Columbia: New Society Publishers.
Gromb, Denis, and David Scharfstein. 2002. “Entrepreneurship in Equilibrium.” National Bureau of Economic Research (NBER) Working Paper No. 9001, June.
Hart, David M., and Zoltan J. Acs. 2011. “Immigration and High Impact, High Tech Entrepreneurship.” Center for Technology Innovation, Issues in Technology Innovation, February.
Hawkins, Christopher Vincent. 2007. Local Government Joint Ventures: Cooperation and Competition for Economic Development. Doctoral dissertation submitted to the Department of Urban and Regional Planning, Florida State University, Fall Semester.
Hegde, Deepak, and Justin Tumlinson. 2015. “Unobserved Ability and Entrepreneurship.” http://ssrn.com/abstract=2596846.
Herrnson, Paul, and Kathleen Weldon. 2014. “Money, Politics and the American Public.”
Indiviglio, Daniel. 2010. “The Conflict of Labor Mobility and Promoting Home Ownership.” The Atlantic, August 30.
Jones, Jeffrey M. 2014. “Americans’ Trust in Executive, Legislative Branches Down.” Gallup.
Kennedy, Paul. 1989. The Rise and Fall of the Great Powers. New York: Random House.
Kolko, Jed. 2009. Do California’s Enterprise Zones Create Jobs? San Francisco, California: Public Policy Institute of California, June.
Kolko, Jed. 2010. Does Broadband Boost Local Economic Development? San Francisco, California: Public Policy Institute of California, January.
Lewis, Paul, and Max Neiman. 2009. Custodians of Place: Governing the Growth and Development of Cities. Washington, D.C.: Georgetown University Press.
Liu, Shimeng. 2014. “Spillovers from Universities: Evidence from the Land-Grant Program.” Unpublished paper. .
McAnaney, Patrick. 2015. Innovation that Matters: How City Networks Drive Civic Entrepreneurship. Washington, D.C.: U.S. Chamber of Commerce, May 15.
Monaco, Kristen, and Steven Yamarik. 2012. “Are There Human Capital Externalities in U.S. States? Evidence from the Current Population Survey.” BLS Working Papers, Working Paper 480. U.S. Department of Labor, U.S. Bureau of Labor Statistics, Office of Compensation and Living Conditions.
Moretti, Enrico. 2012. The New Geography of Jobs. New York: Houghton, Mifflin, Harcourt.
Motoyama, Yasuyuki, and Karren K. Watkins. 2014. “Examining the Connections within the Startup Ecosystem: A Case Study of St. Louis.” Kauffman Foundation Research Series on City, Metro, and Regional Entrepreneurship. Kansas City, Missouri: Ewing Marion Kauffman Foundation, September.
Motoyama, Yasuyuki, and Brian Danley. 2012. The Ascent of America’s High-Growth Companies: An Analysis of the Geography of Entrepreneurship. Kansas City, Missouri: Ewing Marion Kauffman Foundation, September.
Neiman, Max. 2000. Defending Government: Why Big Government Works. New Jersey: Prentice-Hall.
Neiman, Max, and Daniel Krimm. 2009. Economic Development: The Local Perspective. San Francisco: Public Policy Institute of California.
Neiman, Max, and Martin Johnson. 2004. “Perception is Everything: Efforts to Attract and Retain Economic Development Among Local Jurisdictions.” Metropolitan Governance: Conflict, Competition, and Cooperation. Richard Feiock, ed., Chapter 5. Washington, D.C.: Georgetown University Press.
O’Connor, Alice, Chris Tilly, and Lawrence D. Bobo, eds. 2003. Urban Inequality: Evidence from Four Cities: New York: Russell Sage Foundation.
Okun, Arthur M. 1975. Equality and Efficiency: The Big Tradeoff. Washington, D.C.: The Brookings Institution.
Olds, Gareth. 2014a. “Entrepreneurship and Public Health Insurance.” Unpublished paper, May. .
Olds, Gareth. 2014b. “Food Stamp Entrepreneurs.” Unpublished paper, May.
Passel, Jeffrey S., Gretchen Livingston, and D’Vera Cohn. 2012. “Explaining Why Minority Births Now Outnumber White Births.” Pew Research Center, Social and Demographic Trends.
Pew Research Center. 2014a. “Section 3: Fairness of the Economic System, Views of the Poor and the Social Safety Net.” June.
Pew Research Center. 2014b. “Public Trust in Government: 1958–2014.”
Ruppert, Michael C., and Colin Campbell. 2009. Confronting Collapse: The Crisis of Energy and Money in a Post Peak Oil World. Burlington, Vermont: Chelsea Green Publishing.
Shah, Neil. 2014. “Smallville, USA, Fades Further: Migration Trend Underlines Economic Shift as Young People Chase Jobs in cities.” The Wall Street Journal, March 27.
Shor, Boris. 2014. “How U.S. State Legislatures are Polarized and Getting More Polarized (in 2 Graphs).” The Washington Post, January 14.
Stangler, Dane, and Jason Wiens. 2015. “The Economic Case for Welcoming Immigrant Entrepreneurs.” Ewing Marion Kauffman Foundation, March 27.
Story, Louise. 2012. “As Companies Seek Tax Deals, Governments Pay High Price.” The New York Times, December 1.
Surowiecki, James. 2015. “Raise the Gas Tax Already.” New Yorker, July 24. .
Volz, Dustin. “The Senate is Finally Getting Serious about Slaying Patent Trolls.”
Wadhwa, Vivek, AnnaLee Saxenian, and F. Daniel Siciliano. 2012. Then and Now: America’s New Immigrant Entrepreneurs, Part VII. Kansas City, Missouri: The Ewing Marion Kauffman Foundation, October.
Williams, Carol J. 2013. “Political Gridlock over U.S. Debt Not Just America’s Problem.” Los Angeles Times, October 16.
Wooley, Jennifer L. 2014. “The Creation and Configuration of Infrastructure for Entrepreneurship in Emerging Domains of Activity.” Entrepreneurship: Theory and Practice, 38 (July): 721–747.
- Venezuela’s El Sistema serves as a particularly dramatic example of Broad Base Power in the field of music. Adopted in 1975, this program provides classical music training for Venezuelan children on a massive scale, exposing hundreds of thousands of children each year to classical music. As a result, Venezuelan musicians have achieved worldwide visibility at the highest levels. There has, however, been some criticism of these musicians in recent years, suggesting that they have overlooked possible shortcomings in the implementation of El Sistema (Baker 2014).
- While we know that society would not benefit if every adult were poised to start a new business, the optimal level of entrepreneurship is debated among scholars, and we do not suggest an optimal level in this paper. Scholars (Gromb and Scharfstein 2002) distinguish between the financing of new ventures in startups (entrepreneurship) and within established firms (intrapreneurship). They have found complex interrelations between the two processes and recognize how their interconnections might complicate our understanding of the process of economic dynamism and growth.
- Examples of government efforts to increase participation in certain fields include “land rushes” that attracted farmers and settlers, the establishment of the land grant college and university system, the use of government prizes to increase research and development, and private efforts in telegraphy, transportation, and engine development, government support of rural electrification, and the use of government contracts with trucking companies and airlines to support a base of airlines and pilots.
- The notion of investing in clusters or agglomerations is closely related to the idea of Broad Base Power. A Broad Base in any particular endeavor, in fact, produces clusters and agglomerations. A biotech cluster, for example, is identified by the presence of a significant body of educated individuals in a particular place with specific biotech skills. Of course, a narrower (smaller) base will result in fewer clusters for a particular endeavor.
- Policymakers historically have been most concerned with labor mobility, but, in our view, all households should be incentivized to move where economic opportunities within the nation are best for them. Privileging home ownership not only as a lifestyle, but also as an investment, savings vehicle, or loan source tends to create friction in labor markets. Of course, much of the critique of pro-ownership housing policy is focused on the inequity of current policies.
- There is, however, valid concern that immigration policy could be exploited to undercut the bargaining power of a special interest. It should be emphasized that these policies must be conducted in ways that genuinely maintain or improve the workforce.
- Indications of distress also are surfacing in the American media and popular literature. Depictions of American decline in books and in commentary and opinion pieces were evident prior to the Great Recession, but the genre of books focused on American decline or impending collapse is now vast and growing (See, for example, Acharya 2014, Greer 2014, Rupert and Campbell 2009, and Arnold 2013 for an interesting discussion of filmic depictions of American decline; Kennedy 1989). We saw a similar growth in this literature in Japan at the peak of Japanese economic success, just before the collapse of its asset price bubble in the early 1990s and the onset of its Lost Decade.
- Apprehension regarding the economy and the quagmire of policymaking at the national and state levels also has wounded our economic fortunes by contributing to downgrades in fiscal capacities by rating agencies. Political gridlock in some states has led to ratings downgrades, independent of the states’ economic conditions. Gridlock was certainly a factor in the series of downgrades that hit California before the state made it easier to enact a state budget. Furthermore, the congressional circus over raising the debt ceiling and the general rancor over virtually every significant policy choice facing the nation has produced ratings downgrades for the national government and even agitated more interest in moving away from the U.S. dollar as the world’s reserve currency (Williams 2013).
- Of course, polarization does not necessarily result in gridlock if one of the parties has sufficient control and is dominant enough to push its agenda through the policymaking process. Whether this result is positive or negative is subject to debate and dependent on how one sees the consequences of one party being able to achieve its policy goals. However, as in Congress, polarization in many states has produced much sound and fury, resulting in considerable paralysis and uncertainty in the states’ respective policy environments.
- This research, however, is insufficient. Through no fault of Moretti or others who celebrate the knowledge or innovation economy, an increasingly crabbed perception of efforts to broaden innovation activity to other economic sectors has developed, including manufacturing, agriculture, or the government sector itself as sources of innovation and growth (McAnaney 2015).
- This FY 2014 total is estimated by combining the spending of the federal government (https://cio.gov) and state and local government (http://breakinggov.com).