The Theory of Creative Capital and Economic Growth

In relation to the perspective of creative capital, creative capital theory differs in several respects from human capital theory: (1) it identifies a type of human capital, creative people, as the key to economic growth; and (2) it identifies the underlying factors that determine the location decisions of these people, rather than simply saying that regions are blessed with certain endowments of them.

The creative class begins fundamentally with the people Florida calls the creative class. The creative class includes a core group and creative professionals working in a wide range of knowledge-based occupations in high-tech, financial services sectors...

• Some patterns of the creative class: It's moving away from traditional corporate communities.
• Creative centers tend to be the economic winners of our time.
• Creative centers don't prosper for traditional economic reasons.
• Creative people don't move to these places for traditional reasons.

About the new geography of creativity, These changes are giving rise to powerful migratory trends and a new emerging economic geography. In the main creative centers, the creative class represents more than 35 percent of the workforce, an example of which is Washington DC. But despite their advantages, the big regions have not monopolized the market as places of creative class. In fact, a number of smaller regions have some of the highest concentrations of creative class in the nation like Michigan.

At the other extreme are the regions that are being ignored by the creative class. For example, Las Vegas is home to one of the smallest concentrations of the creative class. But it has the highest concentration of class of service among the big cities.

Places that host large concentrations of the creative class tend to be regarded as centers of innovation and high-tech industry.

In terms of technology, talent, and tolerance, the key to understanding the new economic geography is what Florida calls the 3Ts of economic development: technology, talent, and tolerance. Creativity and creative class members are rooted in places that possess all three critical factors. Each is necessary, but by itself an insufficient condition.

Richard defines tolerance as openness, inclusion, and diversity to all ethnicities, races, and lifestyles. Talent is defined as those with a university degree or higher. And technology is a function of both innovation and high-tech concentrations in a region.

The theory of creative capital says that regional growth comes from the 3Ts of economic development, and to stimulate innovation and economic growth a region must have all three.

As for the role of diversity, for Richard Florida, places that are open and have low barriers to entry for people gain creative advantage by their ability to attract people from a wide range of backgrounds. If everything else is the same, more open and diverse places are likely to attract more talented and creative people.