

For once the World Bank says something smart about the real causes of prosperity (and poverty) - chaostheory
http://reason.com/news/show/122854.html

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jsjenkins168
This is a great article. When I read it in WSJ last week I realized that it
helps explain why startup hubs such as Silicon Valley are so important for
startups. These locations simply offer more intangible wealth to founders.
Just by being in a place like Silicon Valley you have more immediate access to
investors, a society which understands and encourages startups, and like-
minded peers. These are intangible items that may not immediately seem obvious
but are contributors to success none the less.

When this reasoning is applied it makes sense why founding a company in a
place like SV is so important. When you are not in a startup hub, you are
instantly at a disadvantage because you do not posses as much intangible
wealth as a competitor who is.

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trevelyan
The World Bank runs a regression analysis trying to identify factors
responsible for growth, and ends up with a remainder that is larger than any
of their "measured" variables, including capital.

This says nothing at all about "hubs" or "culture" or "language" or anything
else. A better headline would be: Economists have no clue what causes growth

~~~
tuukkah
Good point that we easily read too much into the study. On a positive note,
it's already something to know that "80% of the wealth of rich countries and
60% of the wealth of poor countries is of this intangible type", that is, we
know what the wealth is _not_.

Further based on the (non-academic) article: "According to their regression
analyses, for example, the rule of law explains 57 percent of countries'
intangible capital. Education accounts for 36 percent." Wouldn't you say
that's a clue at least?

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pg
It's in the right direction, but they're missing something: social attitudes.
A country where it's frowned on to take risks or do things out of the ordinary
will do worse too.

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zhyder
That's just another component of intangible capital though. The reason risk-
taking isn't mentioned separately is because it's of far less significance
(either because it doesn't make much difference, or because the delta between
developed and less-developed countries is small) than education, property
rights, etc.

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mynameishere
"Here's the deal" (winks the capitalist to the Mexican/Indian/Filipino), "You
come here and take a job for less than the prevailing wages. In exchange, you
get to live in a place that has traditions, institutions, infrastructure,
social programs, laws, etc, that supplement your salary...all at no cost to
me."

<http://en.wikipedia.org/wiki/Tragedy_of_the_commons>

Keep in mind, that _everything_ is paid for. By someone. Just because it isn't
person X who is paying, doesn't mean it is good policy when person X writes a
column in Reason magazine.

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andreyf
I think it's clear that on average, people in America generate more wealth
than they pay toward the commons. Hence, more people will generate even more
wealth, giving even more toward the commons.

~~~
anamax
If I have 10 programmers and they're finishing 10 projects a month, will I
necessarily get 11 projects done if I add another programmer? Or, does the
result depend on the new programmer and other factors?

