Political Geography Update

From Tyler Cowen, signs of start-up life on the Periphery:

Sometimes significant news doesn’t make much of a splash, and that was the case for a major transaction last week. PetSmart Inc. announced the acquisition of Chewy.com LLC for $3.35 billion, the largest e-commerce deal ever. Also notable is that Chewy.com, which sells pet products online, is based near Fort Lauderdale, Florida, rather than San Francisco or Seattle or New York. Might we be at a point where startups and e-commerce drive economic growth and job creation in many regions of the country, not just a few of the more famous (and expensive) areas?

Ah yes, the bastion of globalist cultural elitism, Ft. Lauderdale, Florida.

But wait, there’s more:

A recent study by Michael Mandel, an economist with the Progressive Policy Institute, found notable signs of startup activity in Detroit, Pittsburgh, Cleveland, Cincinnati, Phoenix, Miami, New Orleans and Charleston, South Carolina, in addition to the locales more closely associated with tech. So this trend does have a chance of spreading, and at a time when the startup scene in Silicon Valley seems to be slowing down.

Mandel also estimates that the e-commerce sector has added 270,000 jobs to the American economy since March 2014, across multiple regions, and, in spite of all the recent problems, retail employment remains above its 2007 peak. Some additional good news is that e-commerce distribution jobs tend to be better paying and less of a dead end than most retail jobs. The warehouse and storage sector is growing dramatically, and those jobs are typically far from the wealthiest parts of the country — they are boosting Kentucky, Ohio and Tennessee.

In the last two years, again according to Mandel, “the regions outside the top 35 metro areas accounted for almost half of net new establishments,” compared with less than one-fifth of net new businesses during the seven preceding years.

Perhaps the urban v. periphery model is oversold? Perhaps it’s just inapplicable to the U.S.? Perhaps these data are misleading or a one-off?

Perhaps globalization . . . isn’t as bad as everyone claims, but like all waterfalls, those at the precipice drink first and then (after they’ve replenished their defensive moats) the gains flow downwards?

The preferred interpretation probably depends on one’s priors.

As an aside, this seems like a good federalism argument against centralized regulation. One way for peripheral regulators to enrich the periphery is to offer a better a better deal to consumers and entrepreneurs than the one offered by the rent-seeking coastal regulators. [Or as Arnold Kling lovingly puts it, the more F.O.O.L.ish coastal regulators.] Regulatory competition has helped Pennsylvania, Arizona, North Carolina and even Michigan get in on the tech boom, particularly with self-driving cars. If New York regulators want to drive all fintech investment from the city, perhaps it’s best they suffer the consequences of their actions . . . assuming anyone actually knows or remembers to blame them.


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