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Edward L. Glaeser
Unleash the Entrepreneurs « Back to Story

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@Andreas:

Glaeser doesn't need to include a racial component to this discussion because its irrelevant. Seattle and Minneapolis have always had a small minority population. But its not part of the reason why they are successful. Atlanta has a majority black population and its thriving. Also many cities in the south have continued to thrive with increased Black populations.

What you seem to ignore is the fact that cities like Cleveland and Detroit struggle with poor black populations because the middle and high income Blacks have left those cities.
Mr. Glaeser you hit all the points that are important for the American economic recovery and renewal. Congratulations. I'm afraid, however, that the excellent points you have made will not be endorsed by the political elite that only knows how to throw money at a problem. Education is a good example.
"The next Steve Jobs is not being held back by too little domestic consumer spending."

There are quite a few (other) economists who would disagree.
Prof. Glaeser might be reminded that a complex problem like unemployment is not solved with simplifications like "unleash the entrepreneurs" - far from it. I have been a successful entrepreneur, and can point to many factors which helped my particular endeavor succeed, but the nature of the technology I developed will not create huge numbers of jobs for the middle class. I think our best authorities must grapple with the engineering involved with creating viable employment for middle class people - education, taxes to establish new and needed infrastructure within which job-creating entrepreneurial activities can flourish, investment structures demonstrably linked collective benefit, reduction in financial gamesmanship. The simplifications by which Professor Glaeser draws conclusions would simply be unacceptable in most technical endeavors. Regrettably, his conclusions, supported mostly by anecdote, are somehow considered worthy opinion. We can do much better in understanding a complex situation and devising measureable set of responses.
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"Federal policies that bail out auto companies ... aren’t merely expensive; they also encourage people to stay in declining industries rather than strike out on their own."

That is a really uninformed statement. The world produced 77 MILLION automobiles annually, (up from 58 Million in 2000). That doesn't look like a declining industry to me. Add to that the 2 Billion potential customers in China and India, and only a fool would claim the auto industry is in decline.

The company that masters a low-cost, high mileage, safe, popular vehicle will have earnings that make any Silicon Valley company envious.
The staple of your article is that workers who lose their job because the economy shifted can reattain their jobs by retraining themselves with the skills to be employed in the new economy. However, higher education is too expensive right now, so workers have to either be unemployed, or go into massive debt. We need cheaper, or free, higher education for your thesis to hold in my opinion.
This is full of vague unsupported generalities and poorly presented statistics that are at best unjustified, yet more likely are simply arbitrary and meaningless.

Example 1:
"Three years have passed since the financial crisis of 2008... As of August 2011, America employed 6.6 million fewer workers than it did four years earlier."

I know it is just the opening paragraph, but even a decent presentation would make some effort to use corresponding time periods. Why should we specifically care about how many more jobs there were four years ago. Why not three years ago for consistency of comparison. Even better would be to establish a date for the beginning of the "financial crisis" (collapse of Lehman might do nicely) and relate employment numbers since then.

Ex. 2
"public spending projects are as likely to crowd out entrepreneurship as to encourage it"

Why? - How? - Which types of public spending? All? Even, for instance an incentive program to invent a new widget or a small business loan program?

Ex. 3
"Or look at the period from 1996 to 2008"

Again, why?

Ex. 4
"Even in 2009, at the bottom of the recession, new firms managed to add more than 2.3 million new jobs—though those job gains were overwhelmed by the 7 million jobs lost by older firms. The lesson here: older firms generally shrink, while new firms erupt, hire new workers, and make up for the older firms’ job losses."

Let me restate the assertion here. "Brand new companies" hire more employees than they lose. They start with zero and manage to never have less than zero. I'm not sure this is profound.

Also, what are the number for 2010. Is there an actual indication that entrepreneurship has been stifled based on the amount of hiring done by "brand new companies?" I have no idea, but it sure seems relevant to the argument.

Isn't the real question something like this:

Have the "Keynesian" policies of the Obama administration caused less jobs to be created by "brand new companies?" Has the number of jobs created by these types of companies decreased in a greater proportion to more aged companies?

We know that at in 2009, at least, this wasn't the case. If it was not the case in 2010 or so far in 2011, then does any of this article mean a thing?

The rest of this thing is is just anecdotal fluff culminating with yet another meaningless assertion that has roughly the intellectual weight of the statement- Puppies are cute! (its wonderfully fun to say and almost everyone agrees)

"And we should work diligently to support free markets" Puppies are cute!

"America... must renew its commitment to economic freedom" Puppies are cute!

This article is simply lazy.





"Unemployment represents a crisis of imagination, a failure to figure out how to make potential workers productive in the modern economy."

Indeed, since 2008 there has been a collapse in imagination. Come back John Lennon, all is forgiven.
Christofer Pierson November 04, 2011 at 3:16 PM
Professor Glaeser, what you're advocating is nothing new but more of the same sorts of business-subsidizing economic measures that have guided policy makers since the early 1980s. It's the default economic position of American politics. What evidence do you have that these policies actually work? Look at where this country has come in the last thirty years for most Americans: down in income for most people, up in working hours for those with jobs, down in employment for others, down in quality of life, down in savings, up in debt.

What is needed is an entirely new form of community-based entrepreneurship rooted in what people actually need, not on what they might be persuaded to buy. There is work to be done in our communities, work toward sustaining them economically, ecologically, socially. We need to find ways to get that work done and reward people for using their unique skills to do it. Following the tired old path Milton Friedman urged us onto 30 years ago, the pursuit of which anyone with intelligence can see has resulted in the disastrous state we're in now, will not work in the future, either.
Start talking to people you know who are dissatisfied at work. All of them probably have an idea or vision for something else they would rather be doing, and its probably a reasonable dream. Then ask them why they don't do it. I'll be the answer is they are trapped in their jobs because of health care. When people in this comments forum talk about the fears that prevent people from starting businesses, I don't hear them saying that people can't see themselves taking the risk of not having health insurance. The government could free up entrepreneurship by providing all its citizens with a good education and health care.....
So the next Steve Jobs is trapped working on a GM assembly line in Detroit because of those evil government policies (??)
Entrepreneurs don't "Occupy" or protest.....we just quit.
I've quit.
My taxes for 2006-08 were over $500k per year. For 2009-11? ZERO.
We have an entire generation (or maybe two) of people who have been trained in zero-sum thinking--that all business is evil, profits are solely a measure of exploitation, and those who pursue business are selfish oppressors who must be "controlled" or destroyed.
I had 52 employees in 2007 and an SEC report stated that my company saved investors $1-2 Billion per year. Fortunately I saw this nightmare coming and sold the company. WHEW! The company is still doing well, but there's no way I would start a business in the U.S., and I don't see a 'way out' for the U.S. So....good luck !
Make your life time more easy take the personal loans and all you want.
I enjoyed the article.
I've lived in Detroit and then later in Minneapolis, these two cities are such a stark contrast indeed.

Also resources and resourcefulness are inversely related. One is embodied by the government, the other by people with ideas and a drive to make that happen.

Great article.
Clearly written by someone who's never operated any type of business, nor worked in any capacity in the real world.

"The federal government could lead the way by creating more federal government somehow attached to the Congressional Budget Office," e.g., the well-oiled bridery-induced Congressional Budget Office that is openly "FOR SALE" to the highest bidder (just as Congress clearly is) to analyze (determine who pays the largest bribe) state and local regulations (that are consistent with the financial betterment of the well paid-off government "regulators"). Localities that instituted entrepreneurship-killing regulations (Like parking a roach-coach in the parking lot of my restaurant during operating hours or, more likely, entities without sufficent money to pay the "regulators" off) would lose their power to issue federal-tax-exempt bonds.

Just another missappropriation the well-connected would immediately reign control of and use for the benefit of their financial benefactors.

Do you honestly believe the federal government should be picking and choosing (their favorite parties / winners and loosers) relative to who has the ability to issue tax-free debt (bonds)? Inexpensive debt which potentially may give some local/Municipal government the ability to climb out of a financial hole.

So, if we do not allow Juan from selling tacos in the Taco Ball parking lot (the parking lot Taco Bell had to pay for and place there because the local govt made him do so) we are no longer going to have access to tax-exempt financing? Crazy! What the hell are we supposed to do after Juan puts tax paying Taco Bell out of business? Then Juan directly makes another dozen or so people unemployed. Juan doen't employ anyone besides himself and cousin Lupita. Neither of which pay any taxes ever! nor do they reinvest any of the money they just stole from Taco Bell that they send back to whatever rat-infested country that they illegally crawled out of in the first place.

I certainly hope you are not "teaching" fictional baloney like this to students who eventually hope to compete in the real world.

We are certainly doomed to become a third-world country if you believe any of this.
Clearly written by someone who's never operated any type of business, nor worked in any capacity in the real world.

"The federal government could lead the way by creating more federal government somehow attached to the Congressional Budget Office," e.g., the well-oiled bridery-induced Congressional Budget Office that is openly "FOR SALE" to the highest bidder (just as Congress clearly is) to analyze (determine who pays the largest bribe) state and local regulations (that are consistent with the financial betterment of the well paid-off government "regulators"). Localities that instituted entrepreneurship-killing regulations (Like parking a roach-coach in the parking lot of my restaurant during operating hours or, more likely, entities without sufficent money to pay the "regulators" off) would lose their power to issue federal-tax-exempt bonds.

Just another missappropriation the well-connected would immediately reign control of and use for the benefit of their financial benefactors.

Do you honestly believe the federal government should be picking and choosing (their favorite parties / winners and loosers) relative to who has the ability to issue tax-free debt (bonds)? Inexpensive debt which potentially may give some local/Municipal government the ability to climb out of a financial hole.

So, if we do not allow Juan from selling tacos in the Taco Ball parking lot (the parking lot Taco Bell had to pay for and place there because the local govt made him do so) we are no longer going to have access to tax-exempt financing? Crazy! What the hell are we supposed to do we do after Juan puts tax paying Taco Bell out of business? Essentially Juan directly makes another dozen or so people unemployed. Juan doen't employ anyone besides himself and cousin Lupita. Neither of which pay any taxes ever! nor do they reinvest any of the money that they send back to whatever rat-infested toilet of a country that they illegally crawled out of in the first place.

I certainly hope you are not "teaching" fictional crap like this to students who eventually hope to compete in the real world.

We are doomed to become a third-world country if you are.
I just know those entreprenuers are all banked up and bundled ready to be RELEASED. In fact They are waiting for the magical call that says here is a million dollars release yourself. The unfortunate STATE REGULATION that destroyed a vending business is not at all typical and the Feds should not be blamed for it.I want to see what regs prevent these entrprenuers from pursuing their business plan.If its money they need. Remember, you got watch out for BIG GOVRNMENT.
Well done! I would suggest that in the case of Detroit, large manufacturers, and the auto industry in particular, one should look at the the effects of the union movement. Initially protecting the workers from the corporations and in the end bringing those companies to distruction. A great deal of the loss of entrepreneurial spirit is in my opinion due to union rules which stiffled anything that could help the employer.
Wow. This is a very well written and well articulated article. Propping up The old industries that rely on low skilled labor prevents short term pain but leads to less long term growth. I think this is the problem with the United States right now. No one has the political will to tell people they need to sacrifice now in order to be better off in the future. This article takes that concept and skillfully relates it to entrepreneurship.
Glaeser ignores the racial component to all of this. The thriving cities he cites--Seattle and Minneapolis--have low minority population percentages. The Detroits, etc, are heavily minority-populated.

We've not only got a regulatory environment that punishes entrepreneurship and productivity (e.g., EEO rules, EPA, etc), but a society and legal framework that encourages needless but costly litigation.

Finally, I realize this is a New York publication, but Glaeser is just a little too NYC-Centric in his thinking, as if all good ideas and trends originate there. Typical NYC parochialism.
I have to agree with the consensous. This will not happen while Obama and his minions are still running the Government.

Get Obama and Michelle out, and watch America prosper!
Wow, an Ivy League professor who isn't a left-wing nut case and who actually believes in the free-market. Who'd a thunk it?

In all seriousness though this was a good read, particularly in the 3rd to last paragraph where he mentions a not often spoken but needed policy correction: that the Federal government has to come up with a way not only to eliminate its own counter-productive regulatory schemes, but also that of States and localities. Another idea is to institute the "Infrastructure Bank", provided that it only funds REPAIRING infrastructure and not building new infrastructure. If a State or city does not eliminate its regulatory burden by x amount of dollars per GDP or something then they get no funds from the infrastructure bank.

Unfortunately Governors like Jerry Brown probably won't care, as evidenced by his plan to raise electricity costs significantly by mandating renewable energy percentages on utilities which will of course will predominantly affect the poor. Just like these environmental regulatory burdens, the "wealthy corporations" are not effected nearly as much as small business and the unemployed looking for work.

Why certain States and cities want to make it harder to create jobs is beyond me, although I suppose it has to do with government control and certain politicians realizing that if someone is dependent on the government rather than themselves then that person is easier to control and manipulate with governmenst sponsored welfare programs.
Dear Mr. Glaeser:

Until you get the socialists and communists and left wing big government advocates out of the White House, true entrepeneurs are not going to invest their own capital. With the extraordinary amount of risk already involved in start ups, no one in the right mind is going to take on those risks when the government is run by people who believe it is their right as government to come in and take the profits of the entrepeneur as they see fit, or make him dance to their ever changing tunes. Barack Obama and his minions have torn apart the basic principles that made this country great. If you do not know that by now, you are either living in a dream world or woefully ignorant. Judging from your position with Harvard, likely both.
Why should anybody invest their treasure, labor, and imagination in a society that just punishes achievement?
There are plenty of creative entrepreneurs employed inside our Auto Companies in Detroit. But large, mature industries have bottled these people up. If the Auto Companies "unleash these entrepreneurs" with capitist incentive systems, we can compete with anyone in the world.
"Yet many of our policies, like subsidized highways in low-density areas, pull Americans away from the urban centers that are the country’s true economic heartland."

Thanks for that bit of humor. It isn't highways that "pull people away" from urban centers. They are RUNNING away because most large cities are mismanaged dumps with high crime rates and crummy schools. The few that are safe are unaffordable.

The highway system is merely a reflection of the citizenry freely choosing to live outside of cities.
The author, and others, might wish to consider the implications of this observation about the curse of natural resources.

My research with William Kerr has found that places blessed—or cursed—...

The Dictator's Handbook (B.B. de Mesquita)describes the mechanism for that.
yes even roosevelt received a letter in the 1930sgovtstimulus will not work with us economy
Glaeser gets all of this right. Debt guarantees, underspending on education, and uninformed public outlays for public transportation are not the whole problem: but they are demonstrative. The Seattle-Detroit comparison needs careful reading. That said, Seattle made some intelligent investments in public transport that make it attractive to its non-MSFT workforce.