Using a Local Public Good to Attract Representative Creative Class Members: The Inefficient Equilibrium Case

Amitrajeet A Batabyal,Seung Jick Yoo

doi:10.4236/tel.2020.101003

Abstract

Batabyal and Beladi [1] have recently analyzed a model of competition between two cities that use a local public good (LPG) to attract members of the creative class. The creative class consists of artists and engineers and they study the behavior of a representative artist and an engineer. In this note, we explore three implications of the use of this “representative artist and engineer” modeling strategy. First, we show that the use of such a strategy can lead one to study an inefficient equilibrium in the aggregate economy. Second, we point out that in this inefficient equilibrium, the beliefs of the representative artist and the engineer are inconsistent. Finally, we contend that if we depart from the “representative artist and engineer” construct and focus instead on the entire creative class population which we model as a continuum, then the inefficient equilibrium mentioned above can be turned into an efficient equilibrium.

Highlights

Richard Florida—see Florida [2] [3] [4] [5] [6], Florida, Adler, and Mellander [7]—has argued on several occasions that cities and regions that want to prosper in this era of globalization need to do all they can to attract and retain the creative capital1 possessing members of the creative class
We contend that if we depart from the “representative artist and engineer” construct and focus instead on the entire creative class population which we model as a continuum, the inefficient equilibrium mentioned above can be turned into an efficient equilibrium
We argue that if we depart from the “representative artist and engineer” construct and focus instead on the entire creative class population which we model as a continuum, the inefficient equilibrium mentioned above can be turned into an efficient equilibrium

Summary

Introduction

Richard Florida—see Florida [2] [3] [4] [5] [6], Florida, Adler, and Mellander [7]—has argued on several occasions that cities and regions that want to prosper in this era of globalization need to do all they can to attract and retain the creative capital possessing members of the creative class. We use this model to analyze competition between two cities when each city uses a LPG to attract and retain members of the creative class.

Preliminaries

An Inefficient Equilibrium

Inconsistent Beliefs

An Efficient Equilibrium

Conclusions