Sunday, February 15, 2015

Ben Chinitz Redux

Just to keep the digital squatters from laying claim to this corner of the Intertubes, here is a quick thought. (Yes, this is what I do when cocooning from the cold.)

It is hard to read any local news, or any national news about Pittsburgh these days, without someone touting just how big a transformation has been going on here.  There is the inevitable story about this new business, or that new business, and it is easy to believe that those stories can be aggregated and extrapolated, and that we are really a hotbed of new entrepreneurship.  The thing is.. this is a big region, and for sure there are stories of smart innovative folks doing neat things.  The question is whether the region as a whole is really doing well. Remember, the plural of anecdote is not data, so you have to move well beyond any one story.

Over 50 years ago, so literally more than half a century, the economist Ben Chinitz wrote on the hard to quantify, but generally accepted, observation that being an entrepreneur in Pittsburgh was hard, or at least rare. We basically were not generating new small businesses. See: Benjamin Chinitz: Contrasts in Agglomeration, American Economic Review, Papers and Proceedings, Vol. 51, 1961, pp. 279-289

His theory was that the nature of the steel industry here actually inhibited the level of entrepreneurship that might normally take place. One sentence from his paper oversimilifies his thesis but gets to the rub of it: ".. you do not breed as many entrepreneurs per capita in families allied with steel..." (p. 284)

But now.. today, what is the state of entrepreneurship in Pittsburgh?  It is actually not much easier today to measure 'entrepreneurship' than it was a half century ago. But there is some data that is pretty current. So I took some data that the economic census has data on establishment births. This counts as at least a generic measure of new business creation. The data is from the Statistics on U.S. businesses, and specifically the Metropolitan Statistical Area totals for 2010-2011:

I basically filtered the data for, the 30 largest metropolitan areas (ranked by employment) and then quickly computed the ratio of new establishment births between 2011 and 2012 to the number of establishments in 2011. That gives a somewhat depressing benchmarking that looks like this.

So Pittsburgh is decidedly last, even now 50 years after Chinitz was one of the first to talk about this foreboding Pittsburghism so openly. Can we still look to the impact of industry structure and the nature of big steel writ large? Seems a stretch even if that legacy extends long past the contraction of the local steel industry.  Should we be looking for new explanations?  And what does it say about all the recent Pittsburgh buzz?

To be clear, this is just an elaborate factoid, one that clearly is not the whole picture.  But it certainly is worth keeping in mind when yet another 'What lessons does Pittsburgh have for us' type of headline.


Anonymous BrianTH said...

Two things I would be investigating--correlations with population growth and immigration rates.

Monday, February 16, 2015 9:54:00 AM  
Anonymous BrianTH said...

And given the denominator in this measure--maybe also business failure rates. Even just commercial rents.

Monday, February 16, 2015 10:01:00 AM  
Anonymous Michael Lamb said...

I agree with Brian on immigration. Our depressed rate of international immigration is having a major effect on both population and entrepreneurship.

Tuesday, February 24, 2015 3:01:00 PM  
Blogger JRoth said...

I agree on immigration, of course, but it's also worth noting that, because Pittsburgh largely avoided Great Recession effects, we have much less bouncing back to do. Look at the cities on top of that list: the top 4 were all CRUSHED by the housing bust. I bet if you reversed the chart and went back to a period from 2007 to 2010, you'd see a far, far higher failure rate in those exact cities (some of that is a natural effect of entrepreneurship, too - attempts breed failures - but you'd see a correlation).

Thursday, March 12, 2015 5:55:00 PM  

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