VCU and Tobacco: A Long and Profitable History

Back in late May, I posted an opinion piece suggesting that The New York Times was correct in questioning the contractual relationship between Virginia Commonwealth University and Philip Morris USA. VCU seemed to be giving away the shop with research contracts that forbade discussion of their existence and required VCU to inform the tobacco giant right away if regulators or the media asked questions.

In Richmond, of course, the latter wasn't really necessary since the Times-Dispatch, whose top brass has tight ties to VCU, decided there was no story after a very cursory look. I, on the other hand, started getting phone calls and e-mails from current and former members of the VCU community who were greatly concerned about their university and their own careers if VCU was seen as a supplicant for Big Tobacco. VCU's reputation was already being trashed in the national research blogosphere.

Thus began a month-long reporting effort funded by Jim Bacon, the newly appointed editor of R'Biz, the business news component of richmond.com which operates R'Biz. The story, "In Pursuit of the Golden Leaf," is available on today's richmond.com.

• VCU's medical school and predecessor schools had such tight ties with the American Tobacco Company in the 1930s and 1940s that it funded just about the entire pharmacology staffs. So dramatic were the ties that a Stanford University professor is titling an entire chapter on VCU "Sold, American" in his upcoming book on tobacco research. The less-than-flattering title suggest that the Medical College of Virginia had been bought completely by tobacco interests
• VCU started to improve its research situation in 2000 after a debacle in which federal regulators shut down all human research at all of its schools. The academic research ringer hired to help boosted R&D at VCU but she left in 2005 critical of new ties between the school and Philip Morris USA.
• Dr. Eugene Trani, president of VCU, and his staff were greatly involved in "Operation Peat Moss," a secret and ultimately successful plan to convince Philip Morris USA to locate a major research facility at the faltering Virginia Biotechnology Research Park instead of the Research Triangle in North Carolina in 2004 and 2005.
• While Philip Morris claims that much of the research it does in Richmond is limited to smokeless products such as snuff, evidence shows it is involved in a major effort to use respiration devices used in cigarette research as vehicles for dispensing drugs through the lungs to fight such diseases as diabetes.
• Both the University of Virginia and Duke have accepted far more research money from Philip Morris than VCU has. But unlike VCU, they insisted on controlling the research and make their relations public.
• Some VCU faculty say there are fearful of Trani's wrath if they speak out against the Philip Morris contracts. Yet, there appears to be great confusion on campus about what is going on. Trani's absence at Havard this summer isn't helping.
• Trani has appointed a task force to explore his school's corporate contracts. But the very administrator who oversaw negotiations with Philip Morris is heading the task force, which has decided he is not a conflict of interest. It remains to be seen if the task force will force change or sweep the controversy under the rug. The first public meeting is slated for July 16.

There's a lot more in the opus available on line. Check it out.

Peter Galuszka

Personalities and Prosperity

In one of the coolest parts of his new book, "Who's Your City?", creative-class guru Richard Florida argues that regions, like people, can have personalities. He identifies five standard personality types -- openness to experience, conscientiousness, extroversion (sociability), agreeableness and neuroticism -- and, based upon 600,000 survey responses from individuals around the country, plots the responses geographically.

In a nutshell, it's possible to construct a personality profile of a region. The obvious question then arises. What is Virginia's personality profile? And, following the line of reasoning that Florida lays out in his book, what are the implications for building more prosperous, livable and sustainable regions?

The good news is, Virginia is not a hot-spot of "neurotic" personalities -- that distinction is reserved for New York and environs, and parts of the Midwest. The bad news, the "open to experience" personality type also eludes Virginia. Florida associates this category with creativity, innovation and economic growth. You'll find it most prevalently on the West Coast and the Northeast, although there are pockets in Colorado, Texas and Florida.

Virginia is relatively devoid of the "extrovert" personality type -- that's found mostly in the Midwest and large swaths of the South. But that's no big deal because the category is economically neutral.

The two personality types that most define Virginia are "agreeable" and "conscientious." Combine the two together, and you get what Florida refers to as a "conventional" or "dutiful" personality cluster. On the positive side, people tend to be more pleasant and more trustful. They get along. But they don't challenge authority, don't rock the boat, and they're not terribly innovative. And innovation, remember, is one of the keys to prosperity in a globally competitive economy.

If Virginians aren't temperamentally suited to be cutting-edge innovators, what path is there to prosperity? Well, I have always emphasized two paths to prosperity: innovation and productivity. If we aren't especially well suited to be innovators, we are suited to excel at productivity. As Florida himself notes, "agreeable" personalities more easily form bonds of trust, and they tend to work together in teams and collaborative situations -- a prerequisite for high-performance business organizations today. Similarly, Florida notes that conscientious types "work hard and have a great deal of self discipline. They are responsible, detail-oriented, and strive for achievement. They tend to be better-than-average workers on almost any job."

Virginia has two broad alternatives: Try to compete for more "open-to-experience" personality types, a daunting task given the fact that the "opens" tend to migrate to regions where others like themselves reside. Or, we can make the best of what we've got and build productivity-enhancing institutions that play upon our strengths.

Such speculation is so far beyond the level of most thinking about economic development in Virginia today that it will fall on deaf ears initially. But I sense that Florida is on the right track. (Read my column, "Personalities and Prosperity" for a fuller treatment.) If Virginians take to his latest theories as enthusastically as they greeted his earlier discussion of the "creative class," we may be having that conversation sooner than later.

The Power of People Networks

One of the key concepts in Richard Florida's new book, "Who's Your City?" is that of the "clustering force," a knowledge-economy phenomenon that reward people for congregating in places where they can network and collaborate with one another. (See "The Clustering Force Be With You.") The need to cluster is impelling smart, creative people to migrate to a handful of "superstar" cities where they can maximize the economic rewards of their talents and skills by pursuing innovative ideas with others like themselves. (See "Mass Migration and Superstar Cities.")

The clustering force is one of the fundamental economic drivers at work in regional economies today. Because it is so ill appreciated, Florida devotes considerable ink to probing and dissecting it. And, because it is so fundamental to understanding the dynamics of regional economies, I devote yet another blog post to the topic.

As Florida observes, productivity and innovation come from face-to-face communication, information-sharing and teaming. Technology, as marvelous as it is, cannot yet substitute for intensive personal interaction.

Social capital is created, writes Florida, when people institutionalize these personal relationships through "bonding" and "bridging." Bonding, he suggests, represents the close ties between extended families and ethnic communities of the type that Harvard political scientist Robert Putnam described and lamented the demise of in his book, "Bowling Alone." Bonding is important for personal satisfaction and happiness, but not necessarily for innovation. Bridging, suggests Florida, is a pattern of interpersonal ties that extends across, and connects, different groups. For clustering and creativity, bridging is what counts.

I've quoted before the insights of Frans Johansson, whose book "The Medici Effect" describes how innovation takes place at the intersection of cultures, disciplines and worldviews. Extrapolating from Johansson, bridging allows people of varied backgrounds to make connections that enable novel combinations of concepts and thoughts. Florida quotes Andrew Hargadon, of the University of California-Davis, as making a similar point.

[Bridging] changes the way people look at not just those different ideas they find in other worlds, it also changes the way they look at thoughts and actions that dominate their own. Bridging activities provide the conditions for creativity, for the Eureka moment when new possibilities suddenly become apparent.

Stanford University sociologist Mark Granovetter writes about "the strength of weak ties." Numerous weak ties do more to foster innovation than fewer, more intimate ties. "The beauty of weak ties is that they bring us new information," explains Florida. Numerous weak ties, if I might elaborate, exposes you to a wider variety of people and ideas. If you limit yourself to talking to the same people, who simply confirm what you already think, you're far less likely to come up with breakthrough ideas.

Florida, ever the coiner of new terms, calls this creative interaction "making the scene." For investment bankers, the "scene" is power lunches or company retreats in the Hamptons. For tech gurus, it's breakfast meetings, beer bashes or bicycle rides. Hollywood has a scene. Nashville has a scene.

Here's the takeaway for Virginia regions trying to build their human capital: Scenes require social and economic infrastructure. Unfortunately, Florida drops that thought and doesn't tell us what the infrastructure is. Picking up on the theme, I would suggest that the "infrastructure" for "scenes" is the existence of networking groups that allow a wide range of people to plug in and connect with one another. Those networking groups may be chambers of commerce or technology councils. They may be clubs like the Tower Club in Fairfax County, or the Bull & Bear Club in Richmond. They may be venture forums, or women's business associations, or young professional organizations, or metro leadership conferences, or tipster clubs.

I would submit a hypothesis: The capacity of a region for innovation can be measured by the number of formal and informal networking organizations that create "bridging" opportunities across the broadest possible spectrum of society. The richer and denser the skein of bridging networks, the more easily ideas can be communicated through a region, the more spontaneously creative ideas will erupt, and the more speedily people can convert novel notions into business opportunities.

Economy 4.0: If Virginia regions want to build human capital, one place they can start is by encouraging the proliferation of networking groups of all shapes, kinds and colors, through which people -- especially those outside the traditional elites -- can share ideas and help make things happen. Openness and tolerance are virtues highly correlated with economic dynamism, as Florida often preaches. Those traits extend bridging networks and exchange of ideas to the broadest possible number of people.

Mass Migration and Superstar Cities

The United States has seen at least two great migrations in its history: the great trek of settlers to America's seemingly endless frontier through the end of the 19th century, and then the migration of farmers to towns and cities in the 20th century. The late 20th century has experienced a significant movement of "snowbirds" to the "sunbelt," which continues to a degree, but that arguably pales in significance to the migration of the creative class to what regional economist Richard Florida calls "superstar cities."

In his latest book, "Who's Your City," Florida describes a "mass relocation of highly skilled, highly educated and highly paid people to a relatively small number of metropolitan regions, and a corresponding exodus of traditional lower and middle classes from those same places."

The means migration can be seen in the increasing concentration of college graduates. In 1970, human capital was distributed fairly evenly across the country, with half of all regions clustering within a narrow range of 9 percent and 13 percent of over-25 adults possessing college degrees. Over the past three decades, the percentage of Americans with college degrees has doubled, but the gains have gone overwhelmingly to regions like Washington, D.C., and San Francisco while largely bypassing regions like Detroit and Cleveland.

What's driving the migration? Florida argues that the most talented and ambitious people need to live in the anointed regions in order to maximize their full economic potential. And in a virtuous cycle, the influx of talented and ambitious people spurs the productivity and innovation at the heart of wealth creation. The superstar cities surge ahead economically and cities like Motown figuratively spin their wheels.

While people can live anywhere they want to and plug in electronically in the Internet Age, they cannot plug into the networks that really count: the people networks. To participate in the great waves of wealth creation, people still have to live and work where the wealth is being created. Writes Florida:

When large numbers of entrepreneurs, financiers, engineers, designers, and other smart, creative people are constantly bumping into one another inside and outside of work, business ideas are formed, sharpened and executed, and -- if successful -- expanded. The more smart people, and the denser the connections among them, the faster it all goes. It is the multiplier effect of the clustering force at work.

(For a discussion of the "clustering force," see "The Clustering Force Be With You.")

What, then, are the implications for the themes discussed on this blog? One is that the wealth creators are driving up the cost of real estate, a phenomenon clearly at work in the Washington metropolitan region and to a lesser degree in the Richmond region. Florida explains: "Because the returns from colocation among the ablest is so high, and because high-end incomes are rising so fast, it makes sense for these workers to bid up the price of real estate and accept other costs that traditional middle-class families cannot afford." The result: A metropolitan-wide gentrification in which the wealthy displace the less affluent, literally driving them out of the region.

Regions where the greatest wealth creation is taking place tend to be regions marked by the greatest disparities in income and wealth. Florida regards the "means" migration and the growing gap in incomes to as largely inevitable -- and most distressing.

He also warns that escalating real estate prices can inhibit innovation. Many forms of creative activity -- high-tech start-ups, art galleries, musical groups -- require cheap real estate. If every dingy warehouse has been converted into loft condominiums and chi-chi boutiques, there's nowhere for from-the-ground-up innovation to take place. Extreme real estate prices also hinder the ability of regions to attract new talent.

Says Florida: "When creative, productive regions become the province of affluent people who have already made their money (usually elsewhere), the cycle of local wealth building falls apart."

Economy 4.0: Once again we see that economic development merges into community development. The challenge for most Virginia communities is to figure out how to jump onto that wealth-creation bandwagon. How do we spark the chain-reaction in which regions attract talent, which generates wealth, which attracts more talent? (It can be done. Florida points to the example of Nashville as a city that vaulted from a second-tier music city focused on the country-and-western genre into the third largest cluster of musicians in the country, after New York and Los Angeles, and has eclipsed those two cities as "the place for music writing, recording and publishing.")

The Washington region has already catalyzed its human capital/wealth creation chain reaction, and it's far advanced into the unaffordable housing phase. Washington's task is to preserve and create livable and sustainable communities in the face of the Great Means Migration.

I'll have more to say about these themes in later posts.

Cultivating Creativity

The Richmond region was not known in the 20th century as a center of either productivity or innovation. Our region was more prosperous than the national average, but it never stood out as a paragon of anything. Among Southern cities, it was eclipsed by Atlanta, Charlotte, Raleigh, Nasvhille and a half dozen cities in Texas and Florida. But the 21st century may tell a different story.

This evidence is anecdotal. But three new initiatives have emerged on the scene here in Richmond -- the da Vinci Center at Virginia Commonwealth University, the Virginia Biosciences Commercialization Center and the Virginia Business Excellence Consortium -- that are qualitatively different than anything our region has seen before. At long last, the Richmond region is birthing institutions that focus on productivity and innovation, the only enduring sources of competitive advantage in the global economy.

I'll be profiling the second of those groups within a few days, and I hope to dig into the third eventually. Here's a short version of the first, the da Vinci Center, as capsulized in "Cracking the da Vinci Code" which I wrote recently for R'Biz:

A hospital operating table in the United States costs around $40,000. An operating table in Bangladesh can run between $5,000 and $30,000, depending on whether the hospital can spring the cash for a Western model or has to settle for a cheaper Chinese version. Even at the discount price, hospitals in the impoverished South Asian country -- or in many other developing countries, for that matter -- can afford only one.

Hoping to bring operating tables to the masses, a team of Virginia Commonwealth University graduate students wants to design, build and ship a table for $500 -- one tenth the cost of what it takes the Chinese to deliver one. The only way they can possibly succeed is to approach the problem from a radically different perspective.

That's the kind of challenge that VCU's da Vinci Center for Innovation in Product Design and Development thrives upon. A joint initiative of the schools of business, engineering and design sponsored by seven major Richmond-area corporations, the program teams students from different disciplines as a way to stimulate creative, inter-disciplinary thinking.

In a formal presentation [recently], Seule Kabir, Hitesh Patel and Jennifer Farris chronicled their effort over the past semester to crack the code: adapting off-the-shelf components already mass produced at very low prices, and shipping the tables in a "flat pack" mode that requires some assembly on site but saves on distribution costs.

Mike Troy, a consultant for Stryker Communications, Dallas-based designer of operating tables, says the team came up with some very promising ideas. He particularly liked the flat-pack recommendation, although he suggests that outsourcing manufacturing to China may have pitfalls the students haven't considered.

By general agreement, the design solution seemed promising enough to move to Phase Two: detailed mechanical and engineering drawings, material development and more detailed market research. Kabir, a native of Bangladesh, is motivated to see the project through to commercialization, if it can make it that far. Whether the students succeed in designing a marketable product or not, they have engaged in an incredible learning exercise.

As one VCU professor noted after the presentation, "This is not about the table. It's about learning how to solve problems."

To read a more complete treatment of the da Vinci Center (my column this week in Bacon's Rebellion), read "Cultivating Creativity." As I explain there, what makes the Center different from any other program in the country is that it combines the disciplines not only of engineering and business but of design. The Center has seven corporate sponsors willing to pony up $30,000 to advance the art of product development at VCU and, hopefully, recruit the talented young people emerging from the program.

Product development creates more wealth than almost any other economic activity. If Richmond businesses can learn to excel in this arena, they could create unprecedented opportunities for the region.

The Clustering Force Be With You

A debate that periodically erupts in the comments sections of this blog centers on a perceived solution to traffic congestion on Interstate arteries, unaffordable housing and other ailments of large, dysfunctional metropolitan areas. Why don't employers just move the jobs closer to where to where people live? In the words of blogger Ray Hyde, why don't we just create more new places instead of cramming people into the old ones?

Good question. Indeed, it's such a good question that Richard Florida devotes a full chapter to the topic in his new book, "Who's Your City?" Florida posits the existence of a "clustering force" -- a set of economic imperatives that drive businesses and people closer together. Despite the existence of cell phones, laptops, BlackBerries and Internet connectivity, which in theory should liberate people from the need to cluster, Florida contends that the Knowledge Economy puts a premium on physical proximity.

Florida frames the issue this way:

"If we postulate only the usual list of economic forces," the Nobel Prize-winning economist Robert Lucas wrote in 1988, "cities should fly apart." After all, Lucas reminds us, land "is always far cheaper outside the cities than inside." Why, then, didn't businesses and people move en masse out to where costs are substantially lower?

To answer that question, Lucas posed another: "What can people be paying Manhattan or downtown Chicago rents for, if not to be around other people?"

Economy 4.0: Clustering offers social and economic advantages that non-clustering does not. "The benefits in terms of innovation and productivity," Florida writes, "far outweigh the higher costs of living and doing business there." As faithful Bacon's Rebellion readers know, Florida is employing the same vocabulary I use in my Economy 4.0 analysis (See "Peak Performance in a Flat World.") The quest for innovation and productivity drive the Knowledge Economy just as the quest for low labor and raw material costs drove the industrial economy.

While the industrial economy required a limited amount of clustering -- proximity to a sufficient supply of unskilled and semi-skilled labor, which could be found in any small town where excess labor was migrating off the farms -- the Knowledge Economy is arising around industry clusters, in which people with highly knowledge, skill sets and relationships interact in a highly collaborative basis.

Florida concedes that clustering creates drawbacks and obstacles to growth: traffic congestion, rising crime rates and unaffordable housing. "Eventually," he says, "they are likely to pose significant barriers to a city's future development." But somehow, super-congested places like San Jose, Calif., Manhattan and Boston keep forging ahead. They transcend those limitations, Florida suggests, because clustering creates so much wealth through innovation and productivity gain that the advantages outweigh the hassles. "Cities become wealthier and more creative the bigger they get."

This is the force that Florida believes is driving metropolitan areas to fuse into mega-regions (which I discussed here). I'm not persuaded yet that the concept of "mega-regions" reflects any meaningful social or economic reality beyond an unbroken expanse of urban development of varying densities. But I do believe that Florida has identified one of the central economic forces shaping urban economies at work in the world today.

Mega-Regions Redux

Richard Florida, the man who brought us "The Rise of the Creative Class," is back. After his unfortunate second book, "The Flight of the Creative Class" (read why I panned it here), he has more than redeemed himself with "Who's Your City?" This volume is vintage Florida: spitting out original ideas and backing them up with thought-provoking research. Once again, he has elevated the study of regional economic competitiveness to new peaks of understanding.

I will explore several of those ideas in later columns and posts. Today, however, I want to revisit a previous post, "The 'Mega-Region' and the Creative Class," in which I questioned the utility of one of Florida's concepts: the emergence of mega-regions as the driving units of economic develompent. Because I based my comments upon a column he wrote in the Wall Street Journal, I hedged my conclusions, subject to reading his full treatment in the book.

Well, I've read the book. And while I will have great things to say about much of it, I stand by my earlier conclusions regarding mega-regions.

Florida opens "Who's Your City" by taking issue with Thomas Friedman, author of the now-classic volume on globalization, "The World Is Flat." A far better metaphor, Florida contends, is to say that the world is spiky. Yes, globalization is spurring the outsourcing of manufacturing and back-office operations to developing nations, but scientific research, innovation and the most value-added economic activity remains concentrated in a relatively small number of large urban clusters, Florida argues. (So far, so good. I totally agree.)

To map those agglomerations, Florida drew upon the work of Timothy Gulden at the University of Maryland's Center for International and Security Studies. Gulden had published maps in Atlantic Monthly in 2005 that showed, in 3-D spikes overlaying a map of the globe, where the world's population was concentrated, and then, based on light emissions detected by space satellites and calibrated with World Bank estimates of Gross Domestic Product, where the world's economic activity was concentrated. This visual analysis showed that the world remains very spiky indeed. (So far, so good.)

Working with Florida's research team, Gulden went on to map innovation, using patents and scientific R&D as proxies. The global map of innovation became even spikier, with towering spires set amidst vast plains of Business As Usual. Two dozen or so of the biggest spikes, according to Florida, account for an overwhelming percentage of the world's innovation. (So far, so good.)

From this, Florida then created an economic model to emulate the real world. Here's what he sees going on: "These city-regions expand outward until they are forced to combine with other city-regions. Through this process of nucleation, these city-regions merge together as a mega-region." Large mega-regions, he says, have more economic staying power; smaller mega-regions rise and fall at a faster clip. "Our model ... forecasts a world increasingly dominated by massive mega-regions." (Hmmm...)

What Florida's model lacks is any support for the idea that mega-regions comprise meaningful units of social or economic interaction other than the fact that they have spilled out of their original urban nucleii and run up against one another. As I argued in my first post, the Boston-Washington "mega-region" is comprised of very distinct metropolitan regions, each with its own urban core at the center of a commuter-shed, or labor pool. The economies of these metro regions have very different industry mixes, and their workforces have very different competencies. Florida presented no evidence whatsoever that there is any more economic or business integration between, say, Philadelphia and Washington, D.C., than there is between Los Angeles and Washington, D.C.

The evidence does exist to test Florida's proposition. Richmond economist Chris Chmura has measured the level of economic integration between Charlottesville, Richmond and Hampton Roads. Many companies conduct business in multiple locations. Presumably, companies that spend money to maintain offices, factories, warehouses or other facilities in a location have a greater economic presence there. As I recall, Chmura mapped the number of technology companies that maintained locations in two or more of the three regions to demonstrate the extensive economic linkages between them.

This would be a useful follow-up phase in Florida's research: Map the business linkages between metropolitan areas within a "mega-region." If metro regions within a mega-region interlink with one another more than they do with other nearby metro regions, there may be some basis for Florida's economic model. If those business regions are strongest among primary industries, as opposed to McDonalds, Wal*Mart, Office Depot and other retail chains, then his case becomes even stronger.

It would be equally interesting to see the linkages between metropolitan regions that are not geographically proximate. To what extent, for example, is Northern Virginia's IT sector inter-linked with Silicon Valley's or Boston's? To what extent is New York's financial sector interlinked with Charlotte's? Such a map, I think, would be far more revealing. Richard Florida, call Chris Chmura.

Fredericksburg Voters Have Spoken: Bring on the Waterpark!

Mayor Thomas Tomzak has won re-election in the City of Fredericksburg, trouncing his rival Debby Girvan by a 64 percent to 36 percent margin. The vote represents an overwhelming endorsement of the Kalahari waterpark project, the negotiation of which was Tomzak's signature achievement. The Free Lance-Star has the story.

In my my recent column about Kalahari, "The Second Battle of Fredericksburg," I gave extensive play to the criticisms leveled by Girvan and others against the Kalahari project, which will rebate nearly half the tax revenue collected by the city back to the Kalahari developer. Although the project will be a big financial winner for the city if the development proceeds as planned, the city could be a loser if the developer fails to line up his project financing. The city could be left holding the bag for $3 million in cash and in-kind expenses.

Critics also expressed concerns that Kalahari's highly visible presence and marketing budget would define the identify of the city on the Rappahannock by the indoor waterpark, not its rich historical and cultural heritage. But voters either did not buy that logic or did not care.

The other big victor in Tomzak's re-election is the Silver Companies, developer of the "Celebrate Virginia" tourism zone where Kalahari will be located. Silver Cos. has invested millions of dollars and considerable ingenuity in trying to promote the tract as a tourism zone with attractions that draw visitors from far outside the region. After a series of expensive setbacks, Kalahari could be the project that finally creates critical mass for Celebrate Virginia, creating momentum that Silver Cos. can build upon.

It will be interesting to see what happens to tourism attractions that rely upon visitors to arrive by automobile in an era of $120-per-barrel oil and $3.50-per-gallon gas prices. An optimistic scenario suggests that that travelers originating in the population centers of the Boston-Washington corridor might curtail their driving to Florida and settle for destinations closer to home, like Fredericksburg. A pessimistic scenario says that they'll cut back on automobile vacations of all types. The voters of Fredericksburg have staked their future on the optimistic outcome. For their sake, I hope they're right.

Second Battle of Fredericksburg

Wisconsin businessman Todd Nelson wants to invest more than $200 million building a resort, conference center and indoor waterpark in Fredericksburg. The Kalahari waterpark would generate roughly $6 million a year in direct local taxes to the city, plus even more indirectly when visitors patronize local stores and restaurants. But there's a hitch: He wants big-time incentives. In addition to waiving some $3.5 million in up-front expenses, City Council has all but approved a deal that would rebate 47.5 percent -- nearly $3 million a year -- back to Nelson over the next 20 years.

The Kalahari controversy is one that raises interesting issues for all Virginians. How much in incentives is too much? To what extent is tourism a "quick fix" for fiscally challenged municipalities? And to what extent should local governments focus instead on spending controls, planning efficient land use patterns, and building an economic base around the knowledge economy?

I've addressed these issues in more detail in "The Second Battle for Fredericksburg," in the current e-zine, than most readers will ever want to know. There are no easy answers. Sometimes you need the "quick fix" to tide you over while your long-term policies take effect. Unfortunately, I don't see much evidence of long-term thinking in Fredericksburg. The deeper issue isn't whether local government officials cut a good deal with Kalahari or not, it's whether citiy leaders are tending to the more profound matter of figuring out what it takes to build a prosperous, livable and sustainable community.

Revving up "Pentagon South"

It looks like Hampton Roads is moving towards an "Economy 4.0" paradigm: mobilizing resources to build its defense-industry cluster rather than opportunistically chasing any old business-relocation opportunity that comes down the pike. The Hampton Roads Technology Council and the Defense & Homeland Security Consortium have launched an initiative to promote the region as "Pentagon South."

Outside of Northern Virginia (and possibly Southern California), Hampton Roads is home to the largest defense-industry cluster in the United States. Hampton Roads is the largest center for military shipbuilding and repair in the country (which makes it the largest in the world). Outside the shipbuilding sector, however, most private-sector defense businesses once consisted mainly of field offices serving local military clients. But the size and scope of defense-related business have grown steadily over the years to encompass "systems integration, analysis, innovation, solutions and services across multiple disciplines."

Illustrative of the "new" defense sector in Hampton Roads is the up-and-coming modeling & simulation cluster in Suffolk, the ultimate in sophisticated information technology.

The Pentagon South initiative combines a number of components: (a) provide necessary training and workforce development, (b) create networking opportunities for businesses in the sector, and (c) to brand the region nationally and internationally. (Read the list of goals here.)

This initiative makes sense. Not only does Hampton Roads have a strong military presence and defense-industry cluster to build upon, it enjoys a significantly lower cost of doing business and lower cost of living than competing defense-heavy regions. Equally important, Pentagon South organizers are attentive to the "soft infrastructure" needed to support a growing industry. The preliminary indications are very positive.

The "Mega-Region" and the Creative Class

The driving force in the world economy today is not the nation-state, argues "Creative Class" guru Richard Florida, but a new economic unit -- something he calls the "mega-region." The idea that nation-states are receding in relative importance is not a new one. When I was working at Virginia Business magazine some 12 to 15 years ago, we published a cover story on the "Rise of the City State," based on the thinking of regional leadership consultant Jim Crupi. And no one can read the Bacon's Rebellion blog for long without encountering Ed Risse's concept of the "New Urban Region."

But Florida is suggesting that something else is going on. In a April 12, 2008, piece in the Wall Street Journal, Florida notes that a mere 40 mega-regions around the world account for one-fifth of the world's population, two-thirds of global economic output and more than 85 percent of all global innovation. By his reckoning, the world's greatest mega-region is Greater Tokyo, with 55 million people and $2.5 trillion in economic activity, while No. 2 is the 500-mile Boston-Washington corridor, with some 54 million people and $2.2 trillion in output.

Based on the insight that mega-regions are the economic engines of the global economy, Florida suggests that the thrust of public policy should be to make them stronger and more competitive. Stay committed to global trade. Promote more urban densities, not sprawl. Modernize infrastructure. And stop transferring wealth from productive regions to lagging, unproductive ones.

These are all ideas that I'm comfortable with. But I do wonder whether the concept of a "mega-region" is really a meaningful one. Florida did not have the space to elaborate upon his thinking in a short op-ed piece. Hopefully, he has done so in his new book, "Who's Your City?", which I have not yet read. So, I remain open to being persuaded, but at this point I have to say that the usefulness of the concept in guiding thinking about economic development is less than self-evident.

The problem of defining the units of economic development is no mere academic issue. If we regard our community as part of a "city state" synonymous with a metropolitan region or a New Urban Region -- the Washington region, the Hampton Roads region, the Richmond region, etc. -- we will bend our efforts to creating institutions and linkages that match. If we regard our community as part of a "mega-region" stretching 500 miles across multiple states, we will organize our efforts quite differently.

I find it difficult to see how the defining the urban agglomeration stretching from Boston to Northern Virginia as a "mega-region" reflects any political, economic or sociological reality. The Boston-Washington agglomeration has no self identity as a region. It spans some 10 to 12 states (depending on how you define the region) and too many municipalities to count. The mega-region encompasses numerous distinct labor markets. Florida may present evidence to the contrary in his book, but I don't see the area as being tied together by any special business or economic linkages. To the contrary, to pick one example, the IT-centric economy of Northern Virginia has more corporate and business linkages with Silicon Valley in California than it does to, say, Philadelphia, New York City or even a technology center like Boston.

Using Florida's own theory of the "creative class" as a basis for thinking about the issue, I would suggest that the fundamental unit of regional economic development is the "labor pool" -- a geographic entity within which the vast majority of people who live there also work there. The outer edges of such a region coincide with the "commuter shed" -- beyond which people tend to commute to work in a different region. (This is a larger unit than the Metropolitan Statistical Areas catalogued by the U.S. Census. I believe it is how Ed Risse defines a New Urban Region, but I would welcome any clarification from him on that point.)

Looking at a region as a "labor pool" rather than a collection of municipalities puts the emphasis where it rightly belongs in a knowledge-based economy: on the workforce. The most powerful driver of economic prosperity today is the depth and breadth of human capital, and the great economic-development challenge of the age is creating the kinds of communities where the most economically, artistically and scientifically productive members of the workforce (the "creative class") are drawn to live and work by the regional quality of life.

No one personally identifies with the "Boston-Washington" mega-region. No one moves to, say, the Northern Virginia portion of the mega-region on the logic, "Oh, yeah, I moved here for the great quality of life. We've got these really great educational institutions -- like Harvard and Yale. And, man, the nightlife -- you can't beat those shows on Broadway!" No... people in Northern Virginia identify with George Mason University and Wolf Trap performing arts center, or maybe Georgetown University and the Kennedy Center.

Florida is right to say that wealth creation around the world is highly concentrated in a few very large, super-productive regions. But what appears to be a "mega-region" may really be a cluster of "city states" or "New Urban Regions" in such close proximity that they overlap with one another. The driving unit, with which people identify and mobilize their efforts, occur at the level of the city state, not the mega-region.

(Hat tip: Larry Gross.)

Learning to Love Lawyers: Economic Development in the Knowledge Economy

Some people regard the proliferation of lawyers in the United States as a blight, a symptom of a society addicted to litigation. But here in Richmond, we love our lawyers.

In this town, where the economy is based largely upon professional services, the law is big business. At the end of 2007, according to Emily Dooley with the Times-Dispatch, the legal sector employed 5,838 people, about 2,000 of whom are attorneys. The industry sector's average annual salary, which includes non-lawyers, was $77,000.

The legal profession is remarkably large for a city Richmond's size. Several characteristics of the region account for the proliferation of practitioners. Richmond is home to the state capital, which provides lots of lobbying and regulatory work; a U.S. Court of Appeals, one of 12 in the country; and a Federal Reserve Bank. The city also has a large business clientele, including the corporate headquarters of 10 Fortune 1000 companies.

In my observation, however, the local client base is almost incidental to many Richmond attorneys, who are road warriors serving clients who rarely, if ever, set foot in the city. One friend of mine, who handles litigation for automobile manufacturers, zooms off every week to trials in courtrooms around the country. Another friend, an expert in land use law, travels nationally to work on cutting-edge real estate projects. Yet another represents a roster of Israeli firms doing business in the U.S.

More examples: After stepping down as governor, Gerald L. Baliles built a national practice as an aviation attorney. After stepping down as Secretary of Commerce and Trade, Michael Schewel has started working on alternate energy deals around the country.

In the Knowledge Economy, lawyers are more than ambulance chasers and pettifoggers -- they are deal makers. The best of them do business anywhere, and they can live anywhere, they want. A remarkable number of top attorneys choose to live in Richmond.

Economic development of the Knowledge Economy is all about recruiting and retaining human capital. That's made easier in Richmond by the number of large and growing firms: most prominently Hunton & Williams and McGuire Woods, but also fast-risers such as LeClair Ryan. Richmond has another big advantage in talent recruitment: access to excellent law schools such as the University of Virginia, William & Mary and the University of Richmond, all located within the region or a few miles down the Interstate. All three law schools recruit nationally, and a disproportionate number of their graduates are recruited by local law firms.

So, what can the Richmond region do to build its legal sector? Top lawyers travel a lot, so the most important piece of physical infrastructure is Richmond International Airport. Only a few years ago, Richmond had arguably the worst air service of any city its size. We now have a handsome new facility and much more competitive air fares and flight schedules. Otherwise, "economic development" consists of building the kind of communities that lawyers like to live in. In that regard, last weekend's French Film Festival at Virginia Commonwealth University, an internationally known cultural event, may do more to make Richmond desirable to legal professionals than anything that traditional economic developers can do.

Schmucks Pay Taxes, Too

I'm a pro-business kind of guy. I believe in free markets. I celebrate the contribution of entrepreneurs. I believe that capitalism is the greatest wealth-creating system ever created. But I've got a big problem -- a very big problem -- when businesses lobby for tax breaks from government that ordinary citizens could never hope to receive. Here in Virginia, government practitioners appear willing to hand out tax breaks to any special pleader with a story to tell, even as they jack up taxes on everyone else.

Two more straws in the wind...

Volkswagen. Over and above the $6 million in subsidies and incentives that the Commonwealth is paying Volkswagen to relocate its US headquarters to Fairfax County (see "Another Data Point on the VW Deal"), it appears that we will be giving VW employees exemptions on car-related taxes as well. Reports Emily Dooley with the Times-Dispatch:

Known around the General Assembly as the "Volkswagen bill," the legislation exempts employees at automaker headquarters and their families from paying motor vehicle sales and use taxes if they lease a car built by the automobile manufacturer.

Volkswagen Group of America Inc. announced last fall its plans to move 120 employees and its headquarters from Michigan to Fairfax County in April.

A nonemployee pays $750 in taxes when buying a $25,000 Volkswagen. After July 1, a VW headquarters employee would not. Each employee is allowed to lease up to four cars per year for 12 months. Then the cars are sold.

The tax waiver was a benefit in Michigan.

Qimonda. Will Jones with the Times-Dispatch reports today that semiconductor manufacturer Qimonda in eastern Henrico County would get an estimated $1.3 million tax cut this year as part of the county's proposed budget for fiscal 2008-09. The semiconductor company plans to invest $1.5 billion in the plant over the next several years, and the 27 percent reduction in the machine & tool tax, writes Jones, "would help the memory-chip manufacturer weather a depressed market for its products and make Henrico more attractive for investment by the semiconductor industry."

Of course, those two tax breaks are chicken feed compared to the ginormous incentives that the City of Fredericksburg is offering to the Kalahari Waterpark to locate an indoor waterpark in the Celebrate Virginia project. (See "Kalahari's $61 Million Waterpark Subsidy.") Fredericksburg officials hand out goodies to favored businesses like Halloween candy.

What we're experiencing in Virginia is the slow-motion transformation of the tax code into a two-tier system: one set of rules for special pleaders who wheedle concessions from lawmakers, and a set of rules of the rest of us schmucks. As the special pleaders whittle away at the tax base, government raise taxes on the schmucks to make up the difference.

State and local officials contend that the tax breaks represent a net gain -- without them, VW, Qimonda and Kalahari wouldn't make the investments, create the jobs and generate the taxes that are projected. What the business-welfare apologists don't acknowledge is that the schmucks create jobs and pay taxes, too. The difference is, our economic activity is invisible to public policy makers: We don't hire lobbyists and public relations professionals to make our case. When schmucks pay more in taxes, we have less capital to grow our businesses. Thus, we pay less in taxes in the long run.

Maybe I should just stop complaining about unfair tax treatment and join the crowd. Maybe I can make a case that blogs are a critical component of Virginia's emerging information economy and that they need to be encouraged and subsidized. Think anyone would buy it?

Privatize the Ports, Fund the Roads

The General Assembly will form a subcommittee to study the pros and cons of privatizing Virginia's state-owned ports. As the Virginian-Pilot observes, the private sector has demonstrated its willingness to invest in expanding and upgrading port facilities. There is good reason to believe that Virginia's superb ports could operate just as efficiently and raise capital just as easily as a private entity.

The subcommittee also will examine whether the state's road and rail network is adequate to serve the ports' long-term needs.

The two questions are interrelated. Clearly, the highway network is not adequate to serve the ports' long-term needs. Regional transportation planners desperately want to to build a Third Crossing across the James River and to upgrade U.S. 460. Trouble is, the ports have demonstrated no interest in paying for the multibillion-dollar upgrades themselves. All proposals on the table would shift most of the burden to motorists.

I have no idea what the ports of Virginia would sell for, but let's hazard a guess. The ports generate roughly $4.5 billion a year in revenue. Assuming a valuation in the ballpark of $1 of value per $1 in revenue, the ports could sell for as much as $5 billion. How about investing a portion of that sum in upgrading the highways and track needed to keep the ports more competitive? Not only would that solve the political problem of taxing unwilling citizens, a promise to invest the proceeds in transportation infrastructure actually would increase the value of the ports to any bidder.

I don't know if the authors of the General Assembly study intend to explore that specific idea, but I wouldn't be surprised if they do. Such elegant solutions to otherwise intractable problems don't come along very often.

The Inscrutable Meaning of the Shrinking Trade Deficit

Buried on page 2 of today's Wall Street Journal is a single-columned story headlined "Slow Spending Helps Narrow Trade Deficit." After decades of a stagnating exports and steadily rising exports, the United States trade gap narrowed 6.9 percent in December to $58.8 billion. Despite higher oil prices, the trade gap for the full year narrowed 6.2 percent -- the biggest decline in percentage terms in 16 years. At last, the positive impact of a weaker dollar is kicking in.

Why does the shrinking trade gap matter to a blog that focuses exclusively on Virginia? Because Virginia's economy is inextricably tied to global trading patterns. Not only that, but lawmakers are being urged to make massive infrastructure investments based on those global trading patterns.

Hampton Roads is undergoing a massive expansion of port capacity predicated on the view that the volume of imported containers, mostly from China, will continue basically forever. Anticipating a surge in the volume of cargo shipments, port and maritime interests are urging lawmakers to spend billions of dollars to build a Third Crossing and upgrade U.S. 460 in order to accommodate those trucks. To pay for those multi-billion investments, Hampton Roads politicians have yoked the citizens and businesses of the region with significant transportation taxes.

But no trend continues in a straight line forever. Even the world's largest economy cannot sustain balance-of-payment deficits approaching $1 trillion -- that's trillion with a "tr" -- a year forever. Inevitably, the value of the dollar has plummeted, and there is little prospect, given the easy-money regime of the Federal Reserve Board, that it will get stronger any time soon. Americans have seen the downside of the weak dollar in the form of higher prices for oil and other imported goods. Now we're finally seeing the upside. Exports rose to a record $144.3 billion in December. More to the point of this blog post, as the WSJ reports:

Exports rose while imports fell. That underscores a shift in the economy as domestic consumer spending slows and foreign demand for U.S. goods remains strong. ... The drop in nonpetroleum imports -- a major gauge of consumer demand -- was widespread. ... "Disturbingly, the drop in imports was led by autos and consumer goods," wrote Lehman Brothers economist Drew Matus."

As far as the Ports of Virginia are concerned, it shouldn't much matter whether exports and imports are rising and falling as long as the same volume of goods gets funneled through the ports. But the ratio of imports to exports very much matters to transportation planners. Right now, thousands of trucks pick up containers in Norfolk, haul them to inland destinations, and then dead-head back to the port to pick up more containers. Rising imports implies the need for more trucks -- and highway capacity. But a leveling off of imports suggests that the anticipated surge in truck traffic may not materialize. The surge in exports poses no comparable problem because rising volumes can be accommodated by filling up trucks now driving back empty to the ports.

What worries me is that the business-political establishment of Hampton Roads will plunge ahead blindly with its monumental road improvement projects, saddling the region with a massive extra tax burden in order to handle an increase in imports that never materializes. Hold gun firmly in hand. Cock trigger. Point gun to head. Pull trigger.

Declining imports and rising exports have other implications that Bacon's Rebellion shall explore as occasion permits. One trend worth watching: A surge in exports could underpin the U.S. economy, strengthening the manufacturing sector to offset weakness in the homebuilding and financial sectors. The economic downturn may not be as severe as anticipated. That may be good news for lawmakers in Richmond fashioning the next two-year budget.

A second trend worth watching: A newly competitive U.S. manufacturing sector is very, very good news for Virginia's mill towns, which have seen their manufacturing-based economies hollowed out for some three decades now. With U.S.-based manufacturing suddenly looking more competitive, Virginia should consider investing more heavily in the Virginia Economic Development Partnership, the organization that promotes both Virginia exports and inbound manufacturing investment. We could well see a pick-up in the number of announcements like the one made yesterday in which Com.40 Ltd, a Polish manufacturer of mattresses and upholstered furniture, will invest $36.3 million and create 813 jobs in the City of Danville.

More Nuke News

The state Senate has signed off on a bill to study whether uranium can be safely mined in Pittsylvania County. (You can find coverage by the Lynchburg News & Advance here.) This is a good thing: The Pittsylvania uranium deposits are among the richest in North America. Uranium mining could stimulate a major new industry for Southside Virginia, but uranium mining has the potential to do devastating environmental harm. Rather than stick our heads in the sand, we need to update ourselves on both the latest uranium mining techniques and the evidence for the harm that could result.

Meanwhile, the Senate has sidetracked a companion bill calling for a broader study of the nuclear industry in Virginia. SJ100, submitted by Sen. Ken Cuccinelli, R-Fairfax, would establish a joint subcommittee that would (1) address all aspects of the production of nuclear power, including the mining of uranium; (2) examine the economic development potential of nuclear power; (3) consider whether the General Assembly should take action to support the development of additional nuclear power facilities in the Commonwealth.

What the resolution does not explicitly say, but I would urge upon the Commonwealth: Virginia needs to study the prospect for building upon the presence of Dominion and its nuclear power plants, the Pittsylvania uranium deposits and nuclear services companies in Lynchburg and Newport News. We need to know: Does the potential exist to build a world-class nuclear power cluster -- uranium mining, uranium processing, nuclear power plant design, nuclear power plant operation, nuclear power services -- here in the Commonwealth?

I don't pretend to understand the legislative workings of the General Assembly, but it appears that Cuccinelli's bill has been incorporated into SJR133, sponored by Sen. Donald McEachin, D-Richmond, which would study the disposal of low-level nuclear waste. True, the two bills do contain the words "nuclear," but otherwise they have virtually no overlap whatsoever. It appears that McEachin bill is getting kicked around from committee to committee, going nowhere fast.

I'm surprised that legislators from Southside and Central Virginia haven't jumped on the chance to build a major new industry -- a very high-paying one, I might add -- in their region. Why are they letting Cuccinelli, from Northern Virginia, do the heavy lifting on this?

RIGHT ON CUE

Jim Bacon did a find job of pointing out some of the problems with innovation in shared-vehicle systems in his lead column this week. "The Innovation Gap."

Right on cue, METRO demonstrated how right he is.

In today’s WaPo it is reported that METRO is considering running some Blue Line trains through the underutilized Yellow Line Potomac tunnel. We will not bother with the details, except to say it is a good idea.

It is such a good idea that over 25 years ago, while working to increase the capacity of the Orange line we suggested this very same move.

Most of the ideas that became the Backgrounder "It is Time to Fundamentally Rethink METRO and Mobility in the National Capital Subregion" http://www.baconsrebellion.com/ surfaced in white papers by EMR and reports by the Fairfax County Chamber of Commerce Transportation Committee. (FCC of C Trans Comm was one of the seven large Enterprise-backed Organizations EMR chaired / served on from the mid 70s to the late 80s.)

The initial feedback from staff at METRO was positive on the ideas including the Turquoise Line. Later we learned that they were vetoed by senior staff. "We are going to complete the 101 mile system before we make any changes," and "it would cost too much to reprint all the maps" were the only specifics that we ever heard.

So Jim is right. To understand why he is right read Supercapitalism by Robert Reich.

The problem is now that the settlement pattern in most of the urbanized area within R=23 to R= 25 is not suitable for METRO-like shared-vehicle systems (aka, Heavy Rail). That means citzens must morph the settlement patterns and come up with new technology.

We focus on these critical issues in column after column on Rail to Dulles. See "Who Killed Rail-to-Dulles?" and "Why METRO-to-Tysons Is a Mess."

In a comment yesterday, Larry Gross noted interest in Personal Rapid Transit. For years the advocates of PRT including our friends who started the Advanced Transit Organization have said that PRT can better serve dispersed origins and destinations.

We have reservations. Those interested in PRT search "PRT" in the back columns at http://www.baconsrebellion.com/

Vocabulary is also an issue here as it is everywhere in the real world. As long as shared-vehicle systems are called "mass transit" few will be interested in the topic.

EMR

The Free-Market Conservative's Case for Journey Through Hallowed Ground

At the risk of inciting my blogging friend Groveton, I recommend to readers an op-ed piece that I penned for the Fredericksburg Free Lance-Star, "History, lifestyles, and vistas are threatened," in which I extol the virtues of the Journey Through Hallowed Ground.

JTHG is one of the most promising experiments in free-enterprise conservation taking place in the country today. The broad-based initiative, which encompasses the region along the U.S. 15 corridor between Charlottesville and Gettysburg, is based upon respect for property rights. Contrary to the delusional claims of adversaries who see it as a Trojan horse for introducing land use controls, JTHG is conspicuous by its refusal to get embroiled in land use disputes. The group's purpose is to create an alternate economic model for towns, hamlets and farms on the fringe of the Washington metropolitan area -- a model built upon heritage tourism, Main Street revitalization, and sustainable agriculture -- that enables landowners to make a decent living without selling off their property for scattered subdivisions and shopping centers.

I'm not saying the model is perfect. Perfection is for heaven, not earth. JTHG wants a federal designation as a National Heritage Area, which would come with funds for educational programs, and it seeks National Scenic Byway status for Rt. 15, which also would entail the expenditure of federal funds. So, if you're a deficit hawk worried about runaway federal funding, like Groveton, you might object to these priorities. Ed Risse offers a different criticism: If heritage tourism becomes really successful, how much automobile traffic will it generate, and what are the implications for highway congestion in the corridor and for environmental sustainability?

Both legitimate points. But to my mind, those objections are far outweighed by the positive, uplifting example set by the Journey Through Hallowed Ground. JTHG aims to preserve our cultural and historic heritage, and it aims to do so not by filing lawsuits and lobbying for government restrictions on growth, but by creating economic value and preserving natural and manmade landscapes. How self-styled conservatives can object to that is a mystery to me.

(Photo cutline: Oakhill plantation. Photo credit: Journey Through Hallowed Ground.)

What Does Jimmie Massey Have Against Business Assistance?

Del. Jimmie Massey, R-Richmond, has introduced a bill that would abolish the Department of Business Assistance and transfer its functions to the Virginia Economic Development Partnership. There are good reasons to keep the two economic development entities separate, which makes me wonder if there's some kind of hidden agenda behind the move.

Business Assistance runs a grab-bag of programs, mostly related to small business finance and small business assistance, that rightfully belongs in the portfolio of agencies under the Secretary of Commerce and Trade. The VEDP, by contrast, is set up as a quasi-independent authority with the sole focus of promoting Virginia outside the Commonwealth. Massie's proposed transfer would effectively remove Business Assistance from the operational control of the Governor and create a mixed mission for VEDP.

What's the point? I can't imagine that VEDP asked for this expansion of its authority. It does a good job of industrial recruitment and, I would guess, would prefer to keep its focus unmuddled. There's no obvious scandal or crisis driving this proposal. But the bill has several co-sponsors. Something must be going on. Anybody know?

Brain Gain: Building Human Capital

In the ongoing saga of the "Economy 4.0" series, I have arrived at the topic of building human capital -- an issue that barely registers on the public-policy radar screen here in Virginia. Oh, sure, there's lots of debate about education and training, which are components of the larger task of upgrading the level of skills and education in Virginia's population, but discussions are narrow and institution focused. And there is next-to-no discussion about recruitment and retention -- recruiting economically productive people to Virginia, and then ensuring that they want to stay here.

What Virginia and its regions need, I argue, are comprehensive plans for (1) developing human capital (educating and training the people already here), (2) recruiting human capital, and (3) retaining human capital. No one leg of this trifecta can do the job alone.

As an example of what can happen when only the first aspect is addressed, I cite the example of Massachusetts. Public education in the Bay State is consistently ranked as the best, or among the best, systems in the country. And no state can compare to the concentration of higher education -- from Harvard and MIT on down. Massachusetts does, in fact, have among the best educated populations in the country. But between 2000 and 2004, an net average of 42,000 native-born migrants left the state. Folks, that's called a brain drain.

Currently, Virginia is a net beneficiary of migration patterns. We're experiencing a modest Brain Gain. That's an economic positive because the newcomers are more highly educated and make more money than the natives. Insofar as the newcomers are members of the creative class, they contribute disproportionately to artistic, scientific and entrepreneurial innovation as well.

The United States is reaching a new era of chronic labor shortages as Baby Boomers retire and the ranks of younger generations are too frew in number to replace all of them. The battle for economically productive talent will intensify. Inevitably, states and regions will begin competing for top talent, just as they now compete for capital investment. Those regions that start thinking about how to win the migration wars will enjoy a significant competitive advantage over their rivals. Although some Virginia regions have been talking about the "creative class," the discussion hasn't gotten very profound or led to anything concrete. We need to get started.

As awareness increases that human capital is the critical driver of economic prosperity, political, business and civic leaders will start paying more attention to creating more livable and sustainable communities as a way to attract and keep economically productive employees. Thus, economic development will morph into community development. As this set of issues comes to the fore, Virginia regions will be compelled to address the dysfunctional human settlement patterns that detract so much from sustainability and quality of life.

I develop this line of argument in more detail in "Brain Gain," supplemented with some cool internal-migration statistics. For your wonkish pleasure, I have made that data accessible for both the United States and Virginia. I think I've drawn some interesting and counter-intuitive conclusions. Perhaps readers can mine this data for more refined insights.

Gray Matter Migration. A chart ranking the 50 states by net in-migration.

Virginia Migration Winners and Losers. A spreadsheet ranking Virginia localities by net in-migration.

(Cut-line: Homer Simpson lives in Springfield. Could he be a Virginian? Image credit: Asymptopia.)