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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: 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.