Austin, Are You Professional?

Entrepreneur Magazine recently ranked Austin one of America’s Top Ten cities for start-ups, a claim echoed in the local press.

If you delve into the methodology Entrepreneur used to develop the rankings…well, there just isn’t one.  For a policy maker, these rankings shed no light on what exactly makes a community entrepreneur-friendly.  You might ask: “What’s the big deal? Entrepreneur is just trying to sell some ads and Austin gets good press in the process.”

Well, the problem is that this kind of hype creates the impression that Austin is somehow an economic “winner” relative to other communities. And what we really need in a post-bubble world is to ask tougher questions.  We need to ask: Is entrepreneurship really the outcome we want? Is our “winning” a vindication of local public policy or a lucky accident?    Are we efficient in the use of our local human capital?

Answering that question with certainty is hard.  But I want to show that it is possible.  Or at least that we can do better.  In the scatterplot below, I’ve compared all of the Texas cities in the American Community Survey to see if some are better than others at using high-skilled workers to produce higher median income.   My assumption is that if we are going evaluate public policy, we want to focus on the “lifting of all boats” and median household income is a good way to compare across time and communities.    The data is in 2007 dollars.  Austin is the red dot.


As you can see, Austin is below the trendline of the modest fit linear regression.  So, while it is statistically hard to say that Austin is below average, it is also fairly difficult to state that it is substantially better than other Texas communities at the task of transforming high-skilled people into economic gains for everybody.

Some will argue that our public policy is geared at attracting high-skilled people by creating a certain lifestyle, and that is of itself a triumph because we are better off since the chart indicates that the presence of high-skilled people almost explains a majority of variance in median income.  I am sympathetic to that argument up to a point.  I’m not saying Austin is an accident or that our officials are incompetent.  I am simply pointing out that examining data chips away at our exceptionalism.

Entrepreneur magazine isn’t focused on advancing policies for the optimal promotion of median income gains or undermining exceptionalism myths. It’s job is not holding public officials accountable to do so. But as a voter and taxpayer, I value and want those things to happen.  Unfortunately, these types of headlines do fill a vacuum for information upon which to hold policymakers accountable.  And that is where they become dangerous.

Instead of believing the hype, we need to push back. To start with, we need to point out that once we adjust for the number of high-skilled people we have, we seem to be pretty normal at leveraging them to create economic gains for everybody.  More broadly, we need better indicators that provide insight on the public value being created by decision-makers.  And of course, we need organizations in civil society constructively raising a fuss about the limits of boosterism.

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1 Response to Austin, Are You Professional?

  1. M1EK says:

    Most likely is that as AC points out implicitly, cities with huge colleges are going to be outliers. Think about all the liberal arts majors who stick around because they like Austin and end up waiting tables…

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