Matthew Yglesias talked about the distinction between increased efficiency in the allocation of resources and fundamental innovation. Either can produce economic growth, but he feels in the long-term fundamental innovation that matters most of all.
Yglesisas says San Francisco is a hotbed of inefficiency it's also a hotbed of real innovation. The corridor that starts in San Francisco and runs down to San Jose is the premiere cluster of technological innovation in the world and has been for some time
Here are problems with Matthew article. He talks about San Francisco's population (about 800,000) but then credits the innovation of Silicon Valley and San Jose and other parts of the Peninsula to San Francisco. He speak like the artistic innovation of San Francisco is the key driver of economic growth that resulted from the computer and internet revolutions. This is a fundamental mistake because he is attributing developments that came from cities with 2 million other people solely to the artistic city that they are near. His analysis then assumes that the arts and artists in San Francisco were critical to the development of PCs and the internet and the various companies that emerged. This is a sweeping and wrong view.
Cities, regions and countries are now rising to challenge silicon valley giants and they often do not have an artistic city component. An alternative view is that science and technology investments with a large military component were critical.
Systematic Analysis of Innovation for national economic growth
The Global Innovation Index is a global index measuring the level of innovation of a country, produced jointly by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI), the NAM's nonpartisan research affiliate. NAM describes it as the "largest and most comprehensive global index of its kind".
The International Innovation Index is part of a large research study that looked at both the business outcomes of innovation and government's ability to encourage and support innovation through public policy. The study comprised a survey of more than 1,000 senior executives from NAM member companies across all industries; in-depth interviews with 30 of the executives; and a comparison of the "innovation friendliness" of 110 countries and all 50 U.S. states. The findings are published in the report, "The Innovation Imperative in Manufacturing: How the United States Can Restore Its Edge."
The report discusses not only country performance but also what companies are doing and should be doing to spur innovation. It looks at new policy indicators for innovation, including tax incentives and policies for immigration, education and intellectual property.