In Jackson, MS, the state’s capital city, there are no movie theaters. The lack of a movie theater in the city is perplexing - the city boasts a population of more than 175,000 people (surely, there is enough of a demand for at least a small cinema) and city leaders would love for Jackson to have a theater (leaders are discussing using grants or tax incentives to attract a theater). In Sarah Goodyear’s recent Atlantic Cities article, “Mississippi’s Capital City Doesn’t Have a Movie Theater. Will That Ever Change?,” historian Jerry Dallas puts forth an explanation for this paradox: a continuing fear of crime in Jackson, white flight to the suburbs, and the convenience of suburban theaters in surrounding counties.
Mr. Dallas’ explanations for Jackson’s movie theater situation (or lack thereof) suggest market failure may be to blame. Dallas hints that Jackson is perceived as a crime infested urban locale that is incapable of sustaining a movie theater. Such a perspective would appear to be the result of an information gap; in Harvard Business School Professor Michael Porter’s “New Strategies for Inner-City Economic Development,” he cites information gaps about the purchasing power and crime rates of inner-cities stemming from social biases about inner-cities as a key barrier to attracting investment to such areas. In Jackson, the median income is $34,567, which, when combined with a population of over 175,000, demonstrates the city has a large pool of purchasing power. In addition, although parts of Jackson, like most cities, do have alarmingly high crime rates, the city also has areas that are very safe.
Assuming an information gap is indeed to blame for Jackson not being able to attract a movie theater, the city should step in - the role of government is to intervene in precisely such a situation, when a market failure is occurring. Some would assert that this intervention should take the form of tax incentives but such an approach has been met with large opposition (see Richard Florida and others) as it is seen as subsidizing companies without achieving a lasting impact for a locality. Others would suggest correcting the information gap by taking steps to foster a better business environment in Jackson (see Porter). While this approach sounds great, in a place like Jackson, with deep-rooted biases at play, it may not be feasible to simply build a vision of the city as having an attractive business environment. Rather than tax incentives or pursuing a better business environment, Jackson might be better off doing the unthinkable - running its own movie theater.
If city leaders truly believe that a movie theater can turn a profit in Jackson, why shouldn’t the city realize such profit and provide a service that its population values? Cities across the nation engage in enterprising endeavors - Phoenix, AZ sells methane gas, San Bruno, CA has its own cable television company, and the Milwaukee Sewage District transforms sludge to fertilizer and sells it. But, the simple fact that other cities have developed and operated businesses does not alleviate the concerns about government engaging in such efforts and, specifically, a city operating a movie theater. With the city’s access to taxes, it will have an unfair advantage over other theaters - they will have to respond to market pressures, whereas the city’s theater will be able to offer lower ticket prices since it is “subsidized” by the people. In addition, the pursuit of profit opens up the door to corruption among public officials. Lastly, movie theaters are very risky business endeavors, creating the risk of tax payer dollars being wasted.
These concerns about a city operating a movie theater can be allayed relatively easily. After start-up assistance (say, an amount close to what the city would offer to a potential theater via tax incentives), the theater can be required to be self-sustaining, thus preventing the theater from being continually subsidized and possessing an unfair market advantage. A private third party can be left in charge of theater operations to prevent manipulations by public officials attempting to extract funds or resources from the theater. Lastly, to mitigate the risk of operating a theater, the city could run a small-scale trial period to determine whether investing the full amount a theater would require would be prudent.
In addition to overcoming opponents of such substantial government intervention into the market, Jackson would likely face major legal barriers to establishing its own movie theater. Local government law greatly restricts the ability of cities to engage in efforts to raise money, such as operating a business. But, in our current economic climate in which localities across the country are starving for revenues, the city may be able to convince the state legislature to allow them to pursue this creative revenue stream.
While this post has focused on Jackson’s movie theater woes, the idea of localities operating businesses is something states and cities across the country should begin to consider. As mentioned above, our localities are extremely limited in how they can raise revenues and many are experiencing economic crises as a result of declining tax bases and rising costs. We must pursue innovative, creative ways to sustain our towns and cities - allowing them access to profits that we reserve solely for the private sector is an example of such an approach.
Richard Florida’s recent article, Homeownership Means Little to No Economic Growth, illustrates that home ownership is not correlated to any indicators of economic growth. The message: putting resources towards home ownership may be inefficient if economic growth is the goal. What explains this finding?
Historically, we have felt that homeownership is an important tool for economic growth. Homeownership is associated with stability and in a community, this is good. Stability helps build community and ensures residents are knowledgeable about their city. Furthermore, homeowners often have a strong financial foundation, which allows them to invest more into their city. However, in terms of economic growth, it seems like instability trumps stability.
The alternative to homeownership is renting, which is associated with an unstable population. An unstable population is one that is constantly moving. In our knowledge-based economy, this is an ideal population in many ways. New community members means new ideas and perspectives. New ideas and perspectives enhance the creativity of a community and spur a city to constantly reevaluate itself rather than getting stuck in a certain approach. Furthermore, a mobile population is one that is maximizing its potential. People often move for jobs and when they do, they move to the job that is a best fit for them - the job that maximizes their productivity. It is true that homeowners may have moved to a city for a job that maximizes their productivity, but they are less likely to move when their job is no longer a best fit because of the way homeownership ties them to an area. Others who could maximize their productivity in the city may not locate there because of shortages in housing stock. As a result, a city of renters may have more residents that are maximizing their productivity. Thus, a city of renters may be a more productive city.
An unstable, mobile community appears to have several advantages in terms of economic growth. However, this does not mean that we want our communities to be completely comprised of no-strings attached, economic mercenaries. As with all things in life, balance is key. Community and having roots somewhere is important to us. Florida’s piece says that homeownership rates between the mid-50 percentage range and the low 60’s may be ideal. We should keep this and the benefits of a mobile population in mind to check our tendency to become homeownership obsessed.
Urbanist Richard Florida is well-known partly for his studies pertaining to the benefits of density. As a place becomes more dense, it often becomes a “hotbed” for creativity and innovation. A dense, diverse city has people discussing ideas, learning from each other, and thinking about issues in different ways. Arguably, this dynamic leads to increased productivity.
Can this line of thinking be applied to labor for firms? Such application of this thinking seems logical - just as more density leads to a more innovative and productive city, a firm with a greater number of employees interacting should be a more innovative and productive firm. But, this reasoning directly contradicts key assumptions of the neo-classical model of economics.
Diminishing returns causes firms’ demand for labor to be downward sloping - as the number of employees a firm has increases, the productivity of each additional employee decreases. The Florida model suggests this might not be true because each additional worker adds to the firm’s density and opportunity for innovative exchanges. Therefore, each additional worker may be associated with increasing (as opposed to “decreasing”) returns.
Of course the “Florida model” of firms wouldn’t be applicable to every firm. For example, adding a 100 employees to a Subway shop wouldn’t likely lead to exponential increases in the productivity of the store. But, it seems reasonable to assume that there is something to this argument for a variety of types of firms - especially in our cutting-edge, knowledge-based economy.
Renowned urbanist Richard Florida often speaks about the importance of diversity for cities; diversity makes cities havens for creativity and, therefore, ideal places for businesses to locate. Many articles and blogs were recently written about the ill effects North Carolina’s recent constitutional amendment banning same sax marriage will have on the state’s economy because of the resulting effects on diversity in North Carolina.
Across the United States, the diversity of our cities is significantly limited by policies that tend to exclude persons with disabilities. In a recent article, Ensuring Fair Transit Options for the Elderly and Disabled, Ben Adler discusses a recent report that highlights the large degree to which persons with disabilities are prevented from accessing city life because of inadequate transportation. By limiting the ability of persons with disabilities to interact in cities, cities are hindering their own creative potential. Persons with disabilities have vastly different experiences in our world than persons without disabilities and such experiences lend themselves to a different perspective that can fuel innovative thinking. In addition, similar to a ban on same sex marriage, a inaccessible city sends a signal to the “creative class” that an area is not open to diversity. Such a signal may deter talented people from locating in such an area.
Cities should stop looking at “universal design” and accessibility for persons with disabilities as a simply cost vs. fairness analysis (i.e. making public transportation accessible is so costly that it is okay for persons with disabilities to suffer an unfair result). Our cities should see the embracing of persons with disabilities as an opportunity to send a positive message and utilize a brilliant, creative group.