How Creativity Affects Real Estate Prices
by Travis Pantin
Wed, 5 Dec 2007 at 12:38 AM
How closely are fluctuations in housing prices correlated with the
creativity of the people who live in the neighborhood? Quite, it seems.
Richard Florida (creativeclass.typepad.com), who developed a measure called the
"creativity index," gives us reason to believe that artsy cities are more
likely to have rising real estate values.
Mr. Florida's index measures a metropolitan area's "creativity" by weighing
factors such as the rate of innovation — measured as patents per capita —
and the number of openly gay residents, which he claims indicates an area's
openness to different kinds of people.
Many of the cities that rank highest on Mr. Florida's creativity index also
rank highly on the Case-Shiller Housing Price Index, which measures real
home price appreciation since 1987. Thus, highly creative cities such as San
Francisco and Portland, Ore., experienced housing price increases of 136%
and 141%, respectively. In comparison, Cleveland, which ranks 188th on the
creativity index, has experienced a mere 17% increase. New York City ranked
20th on Mr. Florida's creativity index, and experienced a 48% rise in
housing prices.
Economically Modeling Christmas
An economics student at Memorial University of Newfoundland who goes by the
name Andrew uses his Web log (stackelbergfollower.blogspot.com) to explain
why retailers "push" the holiday season so aggressively.
He begins his analysis by dividing all consumers into two groups: the "elf"
group, whose utility is an increasing function of holiday cheer, and the
"humbug" group, whose utility function is a decreasing function of holiday
cheer. He then assumes that elves spend more money on Christmas than do
humbugs.
If one also posits that retailers "push" the holiday season to the degree
that will maximize their profits, an interesting series of questions arises.
For instance: Although elves would presumably spend more in a cheery store,
it is not reasonable to expect that by simply turning up the volume on
"Jingle Bells" a retailer could elicit more spending from his customers.
Doing so might chase off the humbugs, Andrew warns, possibly decreasing
overall customer spending.
A Bigger Economy
For a bout of economic chest-pounding, visit the blog of a Harvard economics
professor, Greg Mankiw, which links to an educational video created by
Shocking Economics (shockingeconomics.com). The video lists a series of
comparisons that demonstrate how enormous America's economy is compared to
other countries'. Among the comparisons: oil-rich Saudi Arabia's entire
annual economic output is less than New Jersey's, and Iran's entire annual
economic output is less than Maryland's.
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