The Working System of the Economic Hub

Economic hubs have many components that make them successful. The most important aspect is they work like a system where the proper elements must be drawn into that environment to make it work properly. When one of these components is missing the entire system will lag much like we are seeing in the overall U.S. competitive environment.

Government is one component that is not included in the above diagram because they are the "brains" behind the system that ensures, in conjunction with local stakeholders, proper direction to ensure the elements are present. Such governments help ensure the proper tax structure, fair laws, and infrastructure are available.

We see that as a system we have inputs and outputs. As resources come into the system they are used, evaluated, changed, and improved into finished products. This happens through the interactions between suppliers and the supply chain. There must be adequate interchange of financial, material, network development and information to create innovation.

Of course the system won't work very well without needed capital. The intellectual and physical skills and abilities developed from universities and training are important in ensuring that the right kinds of skills are available for global competition. The system will also need access to investment capital as drawn from loans and outside investors that speed up the transactions between organizations in a way that returns investment.

You may also notice that it will be hard to draw in appropriate skills and abilities without an attractive lifestyle and social interactions that not only improve the quality of life but also the spill over information. A positive lifestyle will also contribute to political stability and retention of top talent.

The overall infrastructure of the area is vitally important to the full functioning of the system. An export oriented infrastructure with ports, railways, roads, high speed Internet, and utilities will encourage the drawing of investment but also the overall success of the business within the hub.

Finally, you will notice that it isn't enough to have a great system in place without advertising it appropriately. The government, organizations and businesses have a stake in ensuring that their product and place are well known to both customers and potential investors. To be successful they will continually need to have feedback loops that improve the functioning of their business through alignment to market needs.

Return on Investment in Higher Education

The debate on higher education and its value continues forward. Graduates make about 70% more than non-graduates but at what level do the returns start to diminish. An argument brought forward in the Economist states that real earning power of higher education is declining.

The Economist Article

There is a point and certain fields that the return of higher education may not be worth the cost. This all depends on what you are trying to accomplish in your life. Up to the MBA level advanced degress seem to have some relevance in the market.

Unless you are going to be a researcher or an academic the obtainment of a PhD is worth much less. You may make descent money but it doesn't seem to significantly improve. The type of work changes but the overall value to the market seems to be less.

There is also a problem with being overqualified and people won't hire you for industry jobs. It would seem that a manager would love a doctor for a discount price. The problem is they don't want to hire someone who has more education then them knowing that eventually they may be replaced.

Likewise, where you get your degree is important. Call it "elitist", unfair, or call it snobby but the ugly truth is that a Harvard or Yale degree is worth more than your local community college. These are brands. Education may be great but actual performance is questionable.

You may also consider what field you get your degree in. Certainly, philosophers are important to society during our massive transition but they are not likely to be paid as much as say someone in the medical field which is supported by large insurance industries or in the technical fields that have strong corporate utility.

Combining Keynesian and Schumpeterian Models

The two models of Keynesian and Schumpeterian models have been at the forefront of modern economic debate often split along party lines. While each of these models have some advantages they are not the whole story in and of themselves. Research by Giovannie, et. al. (2017) helps us understand that these models can work together to encourage proper government policy and economic adaptation and integration. When discussing economic growth models that can help the U.S. it is more intuitive to see innovation as fostered not only by the ability of companies to create and adapt technology but also how government can better ensure that happens.

The K+S model combines Keynesian (demand-driven) mechanisms with Schumpeterian (innovation-driven mechanisms. Using this combined model we find a) search capabilities of firms, b) the pool of technological opportunities available for innovation, c) the degree and breadth of patent protection, d) the strength of market selection and competition.

The Schumpeterian growth model is used to understand innovation and growth within the economy. It rests on growth as a result of innovation and imitation and the diffusion and new products/ideas that lead to more efficient production processes. Innovation is motivated by financial returns and new technologies often replace older ones in a chaotic manner.

Keynesian economics is more based on demand economics which basically says that if people are working then the economy will be good. In this model, government has an important role in ensuring that jobs are growing and government influences the ability of the economy to grow. Sometimes, this is going to require significant investment.

What the researchers found was that an increase in technological opportunities and entrant-carried search have a positive effect on the long-run performance of the economy. Likewise, too much patent protection can damage sharing of information and thus deters growth. There is likely a happy medium of protection and adaptation by other firms but the study doesn't say where this was. There is some positive indication that stronger market competition impacts long-run economic growth. They also found that fiscal policies have an positive impact on unemployment, output stabilization and long run growth.

Neither of these models is true or not true but only useful based on gradation. Combining the models does mean that we can foster creative destruction and innovation by the proper use of government administration. The study helps us understand that government does have a role in encourage stronger policies that raise internal competition and foster greater economic growth. Patents and innovation are important but have their widest use when other firms within a cluster can eventually immitate those advantages raising the economy in the long run. Thus, by creating stronger government policies, pin pointing investment in key areas that improve the business environment, and helping companies to invent and imitate can raise the overall advantages of local economies.

Giovanni, D., et. al. (2017). Micro and macro policies in the Keynes+Schumpeter Evolutionary Models. Journal of Evolutionary Economics, 27 (1).

Risks to the US from Russia's New "Invincible Missile"

Putin recently announced a new nuclear missile that can reach anywhere and can't be detected. He furthermore, mentioned that such a missile would would never be detected by future detection systems. Some of what he is saying might be true but since no one can know the future of defense capabilities some of this is hype. We should still be concerned as while Putin likes to make things bigger and stronger than they are he is not known to be a person who bluffs his way through issues.

Russia has national ambitions to rebuild their economy and military strength to previous Soviet levels. This has something to do with the national culture and the desire to make "come backs" but also Putins own personality which is focused on expansion, domination, and in some ways glorification.

He is definitely a nationalist for his own country and with his background of intelligence he doesn't have a problem doing what it takes to achieve his objectives. Backed and supported by most of the military and the intelligence community he wields enormous power within his country.

But there is a bigger problem here. That includes the U.S.'s ability to stay competitive from a manufacturing standpoint and our technological advantage. We are seeing bigger challenges not only from Russia but also China. Our position is starting to slip.

Some of the military developments in China can also match our own and this should be somewhat a wake-up call for U.S. leaders. Our economy and people need to be more innovative and think about how our decisions, government, and business choices impact the end result. We are a nation of people who rely on strong commerce, education, and innovation. In some ways, we must realign to meet these challenges on a global scale.

Expanding Channels with Shared Marketing Messages

The international business environment is competitive and Americans are not doing as well as we once thought. Cities push to encourage companies invest in their regions through tax and other incentives but sometimes don't maximize the benefits of raising exposure to their area through marketing strategy. Governments that focus on the infrastructure, lifestyles, and benefits of investing in their economies can help businesses understand that they have a significant stake in ensuring their economy is growing and the right type of investment and skills are available. By working in a collaborative manner businesses can further expand the reach and depth of their marketing messages in ways that help them and their environment be more competitive.

Economic Marketing by Governments and Organizations

Governments and organizations like Downtown Development Authorities, and other business organizations, often engage in general marketing campaigns to raise tourism, lifestyle, and business development. Local businesses find these methods beneficial for pooling the advantages of marketing for all businesses in the area. Focusing on infrastructure, lifestyle, and other benefits of living and working within the region can draw future business and needed skilled labor that help existing businesses thrive.

Economic Marketing by Companies

Companies engage in marketing to raise the demand for their products and encourage sales. Their advertising campaigns contain, not only messages about the product, but also its value. In a cluster, some of these messages have shared meaning among the many different suppliers and companies that them. Companies often focus on the utility, feelings and benefits of their particular products and the overall value of the company itself.

Shared Marketing Messages

The brand and its place are often integrally tied together in a value proposition. Market messages from of participating entities (government and business) can share similarities in location and values. For example, an advertisement highlighting steel gates can also include images of the location in which these gates are made and their overall value to consumer. It is the shared information of where the product is produced and the environment in which it is made that strengthens the overall message.

Expanded Reach and Benefits of Coordinated Marketing

Coordinated branding  relies on having similar messages repeated in multiple ways and channels until a lasting image is formed in the customer's minds. Each company promoting its products should contain some information about the location in which the product is built. The government, or business entity (i.e. business organizations) should furthermore drive home the messages about the value of the business environment, types of infrastructure, lifestyle and the type of skills the area seeks to attract. Together, these shared and separate messages create greater reach of marketing for both the companies as well as the economic hub as a whole.

Expanding international reach of marketing occurs when we expand the channels through shared marketing messages. While companies focus on specific brand values they can include elements that raise awareness of the entire cluster and area. The advantages of greater exposure impact their suppliers and other businesses within the cluster together. There is incentive for governments, businesses, and local stakeholders to engaged in shared marketing messages that impact the development and access to skilled labor in the area.