13 January 2009

Washington's Wealth Boom

Here's Radley Blako's latest column: Washington's Wealth Boom
The new top three [richest per-household counties] are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland. All three are suburbs or exurbs of Washington, D.C. In 2000, 14 of the 100 richest counties were in the Washington, D.C., area. In 2007, it was nine of the richest 20.

The problem is that, save for the tech corridor in D.C.'s Virginia exurbs, the Washington Metro area doesn't actually produce anything. Washington doesn't create wealth, it just moves it around — redistributes it. As government grows and takes control of more and more of the private economy — either through spending, regulation, or taxes — more and more wealth that's created elsewhere comes to Washington to be devoured.
This is a good piece, and I agree with his thesis on the whole. I'm not one to defend the growth of leviathan, but Balko did leave something out here, specifically that the Washington region also produces a huge amount of scientific and medical knowledge. NIH and Naval Medical are both in suburban Montgomery County, and both attract herds of highly skilled, highly educated and highly compensated people. There's also a legion of biomedical companies along the 270 corridor which have spun off from NIH, doing good, wholesome private sector work.

Note specifically that highly educated bit. My hometown, Bethesda — in Montgomery County, and the home of NIH and Naval Medical — is, or was in 2002 at least, the most highly educated city in the country. Half of residents over 25 had a post-grad degree. I think we would all be a little bit shocked if they had managed to earn those degrees and couldn't rake in some money afterwards.

Taking the DC metro region at large we find that:
Of the 231 counties with populations of 250,000 or more surveyed by the ACS, three of the four with the highest percentages of college graduates were in the Washington-Arlington-Alexandria, D.C.-Va.-Md.-W. Va., metro area: Howard County (58.2 percent) and Montgomery County (56.3 percent) in Maryland and Fairfax County (55.9 percent) in Virginia.
Generally speaking we should probably be happy that the there is a large financial return on education. Granted, a lot of these very educated people are using their law degrees to weasel their employers into favorable regulatory environments, but a lot of them are also using their pharmaceutical chemistry degrees to design new medicines.

(Sidenote: my neighbor was one of the project leaders designing Adderall and she's now embroiled in some patent dispute, for which all of her lab notebooks as well as pretty much all scribblings and notes from the relevant period have been subpoenaed. Her response has been to cease taking written notes completely. She says its a pain, but it's worth it so she won't have to deal with this again. Thanks justice system, for making scientists less productive.)

Oh, and we should also note that the Dulles tech corridor in Virginia which Balko exempts from his criticism grew out of the Operations Research companies like RAND Corp that sprang up in Tyson's Corner following WWII to advise the Pentagon.* So while that area eventually turned into a hub of internet activity (UUNet and AOL were prime examples) and now has a lot of biomed, telecom and aerospace activity, it originated as a group of government hangers-on.

* Paul Ceruzzi wrote a book called Internet Alley: High Technology in Tysons Corner, 1945-2005, which seemed pretty interesting based on this interview with Chris Gondek on the MIT Press Podcast. I haven't read it, but it looks interesting as an examination of both one facet of the tech industry as well as the Washington suburbs in general.

I realize that my counter-example to Balko's thesis is still tax-payer funded, and as such isn't the strongest argument. I have as a slew of problems with the way science research is funded in America, both philosophically and as someone on the receiving end of it. But I think there's a clear distinction between NIH and NSF on one hand, and the other government agencies like Labor or Agriculture on the other. There's a huge positive externality associated with increased world knowledge so there's some justification for subsidizing research. Not to mention my neo-Platonic belief that adding to the stock of knowledge is a Good in itself. Furthermore, at least most of the DC area residents getting rich off of Uncle Sam's science policy are actually doing science, and not through lobbying to change that policy.

Finally, I have one more small quibble with this statement of Balko's:
The Cato Institute's Chris Edwards estimates that in 2005, the average federal employee made $106,579 per year including benefits, about twice as much as the average person makes in the private sector. Federal wage are also rising at about twice the rate they are in the private sector.
One thing you have to keep in mind is that during the Clinton administration a lot of federal jobs were offloaded onto contractors so that he could claim he had "shrunk the size of government." (Of course he meant head count only, not cost, but who's going to going to argue with the Boy from Hope?) My semi-informed understanding is that a lot of these easy-to-contract-out jobs were lower paying clerical and unskilled office positions, which would really throw off the average wages when compared to the private sector since you're disproportionately cutting out people from the bottom tiers. Most agencies don't hire their own broom-pushers either, so they don't tend to have menial jobs on the books to drive the average wage down either. Again, this is just a guess, but I'll run it by someone who would know and make a note if I'm wildly off-base.

1 comment:

  1. Dude, Interesting post. I was talking with this guy I know in school that has a masters in public policy from GW and worked for the OMB before law school. He was saying that basically everyone in DC that works for gov agencies and the like have either masters or phd. It's commonplace. Why the heck do we need all that brainpower (using that term causiously) in government? And I suppose that's also why people in government are overpaid - to kiss their overeducated and overvalued arsses.