What is Economic Success?

I've learned in management that you get what you measure, so let's be very careful here.

Let me suggest two indicators that would tell volumes. Hint: neither of them are 'growth' per se. Growth for growth's sake is what cancer cells do (not that growth is bad, it's just not the goal).

Indicator 1: Average Household Income (as a measure of prosperity)

Indicator 2: The standard deviation in Household Income (as a measure of the gap between the richest and the poorest, and the health of the middle class).

If we can make the first one go up and the second one go down, I think we would have a very successful City.

And I wouldn't mind if you reported these indicators for the whole region as well, since the region is really the only meaningful economic unit.

The generally recognized measures of economic success have already been developed. You need only go find a good text from a "Comparative Economic Systems" course to get a feel for the framework for analysis and the parameters to consider. Then isolate out those things that are within or without the power of the local government.

A good overlay would be to think of Portland (and region) in terms that would be familiar to Latin American based Economist that is well schooled in "Economics of Lesser Industrialized Countries."

By all means stay far away from the junk economics of Regional Economics that is nearly infinitely elastic and one-sided to suit a politician's agenda.

Veblen too has good measures. His long sentences, though, would hardly find a home in anyone's effort to draft campaign slogans. It is largely qualitative analysis.

I consider the greatest measure of the reduction of economic well-being as the explosion of public debt. One would have to go research the problem of debt in the Latin America, incurred in the process of aiding development, to see the errors that are being inflicted upon Portlander's and Oregonian's on an ever expanding basis today. If Portland wants to pay me ten grand here and ten grand there to say that certain plans are all wet rather than wise, I'll be more than happy to oblige. Which is why this economist will remain broke by any measure other than that of integrity.

As a management consultant who believes strongly in the power of executive dashboards, I have to applaud the impulse, but I urge Sam (and the public) to be careful. Not everything measureable deserves to be included. And the dashboard's purpose must be extremely clear from the beginning.

I don't yet see such clarity of purpose in Sam's effort. Is the purpose to focus the city on its role in economic development? Or something else?

Good executive dashboards work to support strong, clear strategy by tying strategy to operations. If that's not the purpose of this dashboard, it may not be worth pursuing.

The worst case would be if it became a parking place for data at every scope of action and for every political nostrum, such as Chris Smith's adorable but unsupported belief that income disparity is a useful measure of anything.

If we, as a city, are going to build an ecomonic planning and forecasting model like this I think a very important step is to define a "common economic unit" that we can measure by. We must come to some consensus about the value of things like clean air, healthcare, economic opportunity, and these values must be represented in a way that we can all agree on. Setting the values and terms BEFORE we debate individual projects and ideas might be the only way for us to ever reach consensus. What should this unit be based on? a happiness index? A multiplier of property value and wages- healthcare and social spending cost? What do you think? If we cannot find this common unit we will simply continue to agree to disagree about the values we care most about.

What a great adventure the dashboard discussion has been... from early days in January when Sam first started this and a few economists and policy wonks sat around a table struggling with the challenge of meaningful measures for the City and the region, producing a menu of measurable goals for business, individual and family prosperity which others would pull apart, through dashboard design discussions with labor and business and neighborhoods... to now... as we begin broader community discussions. Watching people see the link between individual and business well-being, watching participants grapple with the impact on all of us of some of us not having health care... seeing the connection between defining our collective economic prosperity and knowing what actions will move us more readily toward it...Sam is keeping the discussion inclusive and big through the Summer, and come Fall, you gotta know he'll work to make sure it's finely focused for us all... JOIN US!

Tom,

I'm not sure what problem you have with Chris Smith's measure. It surely isn't enough to just write Chris Smith's adorable but unsupported belief that income disparity is a useful measure of anything.

In one respect, it measures precisely what he says is measures: standard deviation in incomes. Is it a commonly used measure? My brief websearch says "no;" instead, income is typically broken up into fifths and income disparity is measured by the gap between the top and bottom fifths (percentage of total income earned; average income in each fifth; rate of growth of income).

Now Chris further claims that this provides us information about a) the gap between rich and poor and b) the health of the middle class. I don't think it provides any information on (b) but it may help us understand (a), right?

So final question is do we care if we have high or low income disparities? I'm not sure how you feel about that, since you don't make your position clear, but another brief websearch finds that large income disparities are generally viewed as a bad thing.

And I agree with Chris on this one. I'd ask Cmmr. Sam to make sure that any measure of economic success comprehend the whole city of Portland, and not just the Pearl/Ladds/West Hills triangle that seems to drive so much of City policy and politics. Measuring income disparity is one way to get at this.

Paul, my use of standard deviation is a clear givaway to my original education as an engineer :-)

My thought process on that particular measure is two-fold:

1) Like the quintile metric you mentioned, it will help measure the gap between the highest and lowest income households, because the more data points at the ends of the spectrum (and the further apart they are) the greater the standard deviation.

2) It also gives some measure of the degree of polarization, because a large population near the middle will help reduce the standard deviation, leading to my comment about the middle class. The highest/lowest quintile gap doesn't tell you anything about what's going on in the middle three quintiles.

As Director of Business and Strategic Planning for Sports and Fitness at Nike, a job I had reporting to the President, I had a chance to think about Portland and Oregon in a global context. More recently, I have been the founder of two start-ups here in Portland, and that has given me more food for thought.

First, I believe Portland and Oregon are at a critical juncture that will determine our ability to compete economically with Washington and California, and with other important Pacific Rim countries -- Japan, China, Korea, Taiwan, Singapore and the countries emerging into the second world -- The Phillipines,Thailand and Vietnam, Chile, Argentina, Mexico and Brazil, for example.

We must choose which path we want to go down. We must recognize that we cannot compete for manufacturing jobs with Asia and Central & South America in terms of what we must pay our workers. We are NOT going to be an industrial economy. Nor are our natural resources inexhaustible -- mining, forestry and farming are not the path to prosperity for Oregon in the 21st century.

So we must choose -- either we are going to be largely a service economy with jobs in retail, warehousing, construction, landscaping, and so forth, in which case we will fall even further behind our competitors in the U.S. and the Pacific Rim in all of the factors on your economic dashboard; Or, we are going to develop our base in the knowledge economy of the future. But this choice of going after the Knowledge Economy Jobs requires leadership at the State and Local levels that Oregon has not had over the last 20 years. We must, first and foremost, build centers of excellence in our K-12 schools and in our community colleges and public universities. Particularly, Portland State here in the State's largest City, and the Portland Public Schools. We need a center for academic research right here in the City. OHSU cannot carry us outside of Biotech. We need a program like the University of Washington that supports the transition of knowledge into entrepreneurial enterprises. We are so far behind in the educational arena, I despair of catching up. But it is essential to our future. Where is the leadership -- by the Governor, by the State Legislature, by the Mayor and Council?

Secondly, the City must learn to compete with the Suburbs. At this point in time the Central City has about 20% of the region's jobs. But it has been losing ground steadily to the suburbs in that percentage. Surely, the Central City is most attractive to the college-educated 21-35 year olds who Joe Cortright says are moving here in droves. But we have to find ways to get the Creative, Knowledge-based jobs headquartered in Portland's Central City. Washington County has been growing these jobs at twice the rate of the Central City for some time now.

That's why I am so excited that Sam Adams is taking over Portland Transportation, because Transportation is one key to making the Central City work for the Knowledge Economy.

1) People like to work near where they live, especially knowledge-economy workers, and particularly workers in the Creative Sector. If we can get the Eastbank Freeway off the Willamette River, preferably in a tunnel under the Central Eastside, we can build housing in at least 18 blocks there in the Central City. If we build "workforce housing" on what is now federal and state owned land under the Freeway -- that's housing for workers who earn within 60% to 140% of the average wage (not the kind we built in the Pearl and elsewhere in NW, which is largely aimed at wealthier empty-nesters). We can build this new housing right next to the booming creative knowledge economy in the what used to be called the Central Eastside Industrial Sanctuary. That way we can leave the land for jobs in the rest of the Central eastside out to 12th, over to OMSI and over to the Banfield.
This project would kick in just about the time that the South Waterfront is built out (Thank God for Homer Williams in NW and the South Waterfront -- we are so lucky to have what he has done for the Central City).

But taking down the Marquam and putting the Eastbank Freeway underground to the Rose Garden so that we can build workforce housing for young knowledge workers is not the only answer for building a healthy Central City.

It's important that people of the region can travel through the Central City by automobile as they do today. But we must want the Central City to be more than an interchange. If we want a great City, we must follow the lead of great cities around the globe -- we must de-emphasize the automobile and increase housing density and serve the Central City with transit, pedestrian amenities and the bicycle.

Instead, the City is going backward -- it is putting light rail on the bus mall, creating conflict with light rail, buses and automobiles in the Central City. It already takes 23 minutes to go across the Central City from East to West on light rail, and with these changes, that is going to get even longer. As traffic grows on the West Side Light Rail line (averaging 8% growth a year since start-up) our requirement for growing no larger than two-car trains on light rail because of the lack of grade separation and our short blocks in PDX, means that we are going to be at capacity going through the tunnel into the City within 10 years. We need to build a subway so we can increase speed to make light rail competitive with the auto, so that we can increase capacity coming into the City, and so that we don't turn our Central City into an interchange for the automobile. Where's the planning for this? It's essential to making the Central City work. Where's the Vision? Where's the willingness to compete with the suburbs for Jobs by making transit work and building workforce housing in the Central City?

Please post my name -- Ronald A. Buel

Now, Sam, you know the city has had goals in this area since 1994 when the benchmarks were established! Whatever happened to that program anyway?

Sam,

Glad to see your blog. Hope it helps you hear the citizens.

About transportation: I despair what the city will do when the price of gas for transportation becomes unaffordable. I say this because I have been impressed by the "Peak Oil" argument. I'd like to see a plan that would deal with short term and long term disappearence of the oil supply.

Or do you think that would not be a problem?

Not that I think bikes could replace cars, but a better bike system would be a good place to start.

Steve-

With respect to bikes, I would encourage you to check out the start of Sam's efforts to achieve a "Platinum" ranking from the League of American Bicyclists.

Here's the link: http://www.commissionersam.com/sam_adams/2005/06/sam_shoots_for_.html

I wholeheartedly agree with Ron Buel's post. I own a consulting business and have spent many years as a management consultant; I've watched Portland's economy closely over the past 10 years. We are not doing enough in the Higher Ed sector to generate Knowledge Economy jobs. But I also think the city needs to seriously attempt to lure some large corporations here, instead of chasing them away. Sam and I have had this conversation before: consider the example offered by Cincinnati, which is actually smaller than metro Portland. Yet their economic stability (not to mention their significant tax base) is greater than Portland's, because they have a diversified economy. Consider that metro Cincinnati is the home of Kroger, Proctor and Gamble, Chiquita Brands, Toyota of North America, etc. The jobs they provide are in different economic sectors, a key factor; and food, consumer products, and automotive manufacturing are sectors that will remain healthy for quite some time. Why isn't anyone alarmed that, in 20 years, Portland's economic development model went from one that was over-dependent on forest products (bad idea) to one that ws over-dependent on semiconductors (equally bad idea)? Diversification and a serious effort to build a world-class Higher Educational model to support the new Portland economy are critical factors.

I only disagree with part of what Ron said. I think that his point about building PSU's program into a first class university is spot on as well as his points about the need to concentrate on k-12 and his bemoaning the lack of leadership in the state.
What he says that I disagree with and believe to be counterproductive and out dated thinking is the idea that Portland is in competition with the suburbs for the Knowledge based jobs. That paradigm gets less useful everyday. The Portland metropolitan area (including Vancouver) is in competition with Austin, Boston, Santa Clara and the research triangle. In fact we are increasingly in competition with Shanghai, Singapore, and Pranab/ In order to do that we have to apply all of the resources of the region. We need to take advantage of the green field locations in Washington County as well as the brown fields in NW Pdx. To continue to think of ourselves as in competition with each other is to waste time and energy in inter-regional policy disputes that sap our collective strength.
Working towards a regional stategy is the only hope for our future success. I know that that is the conclusion we have come to in Washington County and Hillsboro and I think generally in the region. I would be sad if Portland to develop a different direction.

Dear Sam/City Council and Mayor:

In order to land the higher paying new jobs for Portland...we need to engage those business CEO's who are looking to expand, relocate or start up.

On what kind of 'platform' can Portland, and Oregon for that matter, open and maintain a dialogue with CEO's who have the power to bring jobs, fill available office space etc?

Let me site a real example...these are real numbers, verifiable by Hillsboro Chamber.

An Oregon CEO, of a fortune 200 company, invited the CEO of a Japaneese electronics giant...to come to Oregon as his guest to attend and international tennis match.

The Japaneese CEO accepted the invitation.

The Oregon CEO hosted him for a three day weekend.

At the end of the weekend, the Japaneese CEO revealed that he had narrowed to two locations in America to build a plant. After experiencing Oregon and its people and the beauty of our envirnoment...the Japaneese CEO instructed his people to add Oregon to the short list.

Oregon won the contest...and the Japaneese electronics company decided to build the plant in Hillsboro, Oregon.

Phase One construction was $25 million.

Phase Two construction was another $25 million.

Number of new jobs: 500 high tech jobs.

...that is not all.

Four small Japaneese companies were waiting for the decision. When Oregon was selected for the plant location, Fujitsu, Kyocera, Epson and SEH American then followed to supply the giant electronics firm.

Epson alone got up to 1400 new jobs.

...and the door opener was a tennis match. The USA vs Australia Davis Cup semifinals, televised around the world and in the USA on ESPN.

What is my point to Sam and the city council and the Mayor.

Realize that the internationally televised and staged Champ Car World Series...is the Davis Cup opportunity...TIMES TEN.

Why? Because it occures annually...(Davis Cup comes once in a blue moon)...and Champ Car is bigger than Davis Cup in several ways.

Let's consider getting the Oregon CEO's together...with the PDC...and the OECDD 'target lists' of companies...to use the event as the economic 'driver' it can be.

And I think we (Portlanders) should strategically look at two/three other such opportunities.

1. Create an international event for Mt. Hood.

2. Create/develop or secure and international tennis event on an annual basis.

3. Work with, support the efforts of companies like Jeld Wen, who are bringing national and international recognition to Oregon/Portland.

Respectully...but with first hand knowledge of how this can be done...submitted.

Brian Parrott
...an advocate for Oregon/economic development

I would first like to applaud Commissioner Adams for developing this method to get input from constituents. True democracy requires much more of us than voting in elections. We have forgotten that the original intent of our democracy was to facilitate citizen participation in their own governance. This website is a very effective way to accomplish that.

This approach can apply equally well to economics. The best measure of economic success is the degree to which every citizen is able to participate in economic life.

As an economist, I am very familiar with the shortcomings of the typical measures of economic well-being, like growth in aggregate output or income. Those measures simply don't work in the current context of the widening gulf between income and assets of the rich and the poor.

I would encourage everyone to think outside of the old paradigm of growth and devise measures that a majority of Portlanders really care about- then track their rate of change over time- such as:

1. housing affordability/ accessibility
2. proportion of workers earning a living wage
3. proportion of workers covered by health insurance
4. proportion of workers who own assets that exceed their annual income
5. proportion of population living below the poverty line
6. proportion of children living below the poverty line
7. proportion of population gaining access to higher education

This would require a refocusing of energy toward efforts that improve the economic status of individuals and families, which is what truly defines economic success.