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It was Ben Bernanke who pointed out that economics isn't really all that much good at predicting the next recession (and the long-standing joke is that economists have predicted 11 out of the past three), but it is pretty good at working out why the world is the way it is.
Which brings us to the cutting edge of modern economic research and an explanation of why the tech bit of the tech industry is so hugely concentrated in Silicon Valley, and also why the nerds get paid so damn much.
Our starting point is, as always when looking at the structure of firms and industries, Ronald Coase and his paper Theory of the Firm ( http://lib.cufe.edu.cn/upload_files/other/4_20140516101548_13%20Coase.pdf ). Essentially, he asked why do we have firms? The answer being that sometimes it is more efficient to do so than to have a network of contractors dealing with each other.
Critical mass there is obviously akin to clustering. But they are taking it a stage further, in that they're not arguing that it's just more convenient or efficient, as in clustering, but that there's got to be some minimum amount for it all to work at all.
No economist is going to go around shouting that his model solves everything: economists have a name for people that do that and it's “non-economists”.
A model explains only those aspects of reality that the model was set up to explore. So the mapping of any one model over reality is never going to be one to one.
We do think that this model, where knowledge is a combination of good and also where the asset is really the knowledge holders themselves, explains some aspects of why the top end of the tech business is so concentrated in Silicon Valley and also why people get paid so blindingly much.
But nobody is arrogant enough to suggest that it explains all behaviour in the industry, nor that it even explains all about the clustering and the incomes. Only that it shines a light on some of it.
http://www.theregister.co.uk/2015/04/19/so_why_is_tech_all_in_silicon_valley/
[Related]: http://antidismal.blogspot.cz/2015/04/modelling-science-as-contribution-good-2.html
(Score: 5, Insightful) by Grishnakh on Monday April 20 2015, @03:06PM
"Almost all" tech is NOT in Silicon Valley. Yes, there's a huge amount there, but by no means is it "almost all". Hell, Microsoft isn't even Silicon Valley, it's in the Seattle area! And they're one of the biggest and well-known tech companies (even if hated by many, including myself).
The truth is that there's quite a few tech hubs all over the US, in particular metro areas. Some that come to mind, in no particular order: NYC, Boston, RTP, Austin, SLC, Phoenix, Portland, Seattle, LA, San Diego.
(Score: 5, Insightful) by WillR on Monday April 20 2015, @03:21PM
So, you know, Google, Apple, Facebook, and ten thousand startups building platforms for young wealthy urbanites to have their household chores done by anonymous contractors without any inconvenient pangs of white upper-class liberal guilt about having "servants".
(Score: 0) by Anonymous Coward on Monday April 20 2015, @03:45PM
Yeah, as a non-Californian, I have to admit there's something about SV that makes it a mecca for tech startups staffed by twentysomethings, with "adult supervision" provided by real techies (not managers who gave up on being engineers when they found they couldn't keep up), usually in their thirties.
Now let's take a typical big tech company, let's say Oracle (which of course is still HQ'd in SV) - engineers wear casual clothes, there are probably foosball and pingpong tables set up, but it isn't the same mindset.
(Score: 0) by Anonymous Coward on Monday April 20 2015, @08:25PM
But that doesn't fit the narrative!
(Score: 3, Insightful) by Appalbarry on Monday April 20 2015, @10:45PM
The US? Try all over the world from Canada, to Europe, to China and India and beyond.
Only an American writer could ignore 95% of the global population to make such a claim.
If the author can substantiate a claim that even 50% +1 of all tech is located in Silicon Valley I'll take him seriously.
(Score: 2) by Grishnakh on Monday April 20 2015, @11:18PM
Try some context. This is an American site, with mostly American readers, and we're talking about an American place, Silicon Valley.
(Score: 1) by khallow on Tuesday April 21 2015, @06:23PM
Only an American writer could ignore 95% of the global population to make such a claim.
Given that the percent of non-high tech people is probably a bit over 99% with an inordinate number of the high tech people in Silicon Vally, the ignoring has good reason.
If the author can substantiate a claim that even 50% +1 of all tech is located in Silicon Valley I'll take him seriously.
I'd say it's an easy plurality with Silicon Valley being about a factor of ten greater concentration than the next largest metropolitan-scale concentrations elsewhere in the world.
(Score: 3, Insightful) by TheRaven on Tuesday April 21 2015, @07:24AM
sudo mod me up
(Score: 2) by VLM on Tuesday April 21 2015, @11:44AM
By "tech" they mean the "hacker news" style tech, "Daddy got me into Stanford and I graduated then Daddy's VC firm gave me $100M to wrap someone else's project in twitter bootstrap and now I'm entitled to my billion dollar buy out, thank you". Surrounded by a whole slew of "we're going to disrupt the dog poop cleanup marketplace by becoming the facebook of dog poop cleanup services" and the like.
They don't mean "real technology" like you'd learn in a textbook, "stuff thats hard", but more web frontend, marketing experiments that coincidentally happen to be online, startup scene in general. That is solely focused in SV.
(Score: 2) by Grishnakh on Tuesday April 21 2015, @03:24PM
They don't mean "real technology" like you'd learn in a textbook, "stuff thats hard", but more web frontend, marketing experiments that coincidentally happen to be online, startup scene in general. That is solely focused in SV.
Again, no, it's not. That's my whole point. Go to NYC; there's tons of that exact same shit there.
(Score: 2) by TK on Tuesday April 21 2015, @07:32PM
Come to Chicago, same deal.
The fleas have smaller fleas, upon their backs to bite them, and those fleas have lesser fleas, and so ad infinitum