National data are wrong everywhere. This is why a regional approach is essential to understand the economy. More of this later.
First to say is that I’m delighted to have joined City-REDI in April 2023 as a Professor of Regional Economic Development.
My mission is to support and contribute to City-REDI’s rigorous and relevant research and data analytics capability to inform our partners and shape local and regional economic development policies. I am passionate about the value of rigorous – but clearly communicated – research to identify the drivers of social and economic change, and to understand what might work in different circumstances to improve matters.
I am drawn to city and regional economic development because of the shocking disparities in economic and social well-being between places. The UK has one of the most geographically uneven economies in the developed world, and I am convinced that we can and must do better to foster economic prosperity that is both inclusive and environmentally responsible. Unthinking pursuit of growth has increased social inequality producing personal and social hardship and opening up dangerous political fissures. Unthinking growth has also harmed the natural environment on which we – and indeed all species – ultimately depend.
One of my favourite quotes is from the Nobel Prize-winning economist, Paul Krugman, “Productivity isn’t everything, but in the long run it’s almost everything”.
In other words, increasing efficiency (output per input) is what has driven up living standards and life expectancy for centuries, rather than growth in the overall size of the economy per se (although the two are linked). Using inputs to production more efficiently might be the way forward rather than forever chasing more output, but doing so in a way in which work and wealth are more equitably shared. Presently, some people have too much work for their well-being while others have too little (or, perhaps more accurately, too little income).
One of the most profound questions I have ever been asked was – almost prosaically – in a job interview. The job was a lectureship in Human Geography. The University was Dundee, a post-industrial city on the east coast of Scotland, surrounded by relative rural affluence. The question was, “Does the place have causal properties, or is geographical inequality merely the result of essentially non-spatial processes playing out in geographically uneven ways?”. Gulp.
Coming back to national data being wrong everywhere, the answer depends on the spatial scale and the issue under investigation. Unemployment, for example, depends (in part) on how plentiful job openings are within a commutable distance. So, differing unemployment rates between adjacent city neighbourhoods are principally the result of the composition of their populations in terms of skills rather than due to differing proximity to jobs. At a larger spatial scale, say comparing whole cities some distance apart, differences in the level of demand for labour are more likely to play a role. So we can come to different conclusions about the causes of unemployment depending on the spatial scale at which we choose to investigate it – skills at the neighbourhood level, or labour demand at the city level. Each has different policy implications – training versus stimulating the economy.
Geographical scale is fundamental. Economists tend not to think about geography, as if markets operate in an abstract or on the head of a pin. Most macroeconomics and labour economics are done at the national level, often focussing on temporal change. When studying for my doctorate, I read a report from the central government stating that there were more job vacancies than unemployed workers, therefore the unemployment problem was one of lacking skills, not lacking jobs.
The idea that a national one-size-fits-all policy will work everywhere is often fundamentally flawed. National data are, after all, wrong everywhere – and this is why we need city and regional economic analysis.
This blog was written by Donald Houston, Professor of Regional Economic Development, City-REDI / WMREDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WMREDI or the University of Birmingham.