From Tech City to Smart City?

Published by Dr Max Nathan, LSE, SERC and NIESR

A vibrant technology scene has developed in London's East End. Neighbourhoods around Clerkenwell and Shoreditch form a core around Old Street's Silicon Roundabout. Spotting this, in 2010 the UK Government launched the Tech City strategy, hoping to develop the area into 'one of the world's great technology centres'. Last week at an LSE Cities conference, the PM and London Mayor Boris Johnson announced £50m of funding for a new civic space, right on top of the Roundabout.

Ministers are right to get excited. Inner East London is a key node in the capital's digital ecosystem. The Centre for London finds over 3200 digital economy firms there, supporting over 48,000 jobs; those job counts have kept trending up through the recession. (Full disclosure: I led this research.)

Silicon Roundabout is particularly strong on content industries, including global players like MindCandy, Unruly, Songkick and Last.fm. But it's also quietly developed a green layer - an exciting new generation of smart city and cleanweb firms. Could this be the shape of Tech City 2.0?

As the world grows more cities, we need better ways to help them run. The 'smart city' is about using new technology to manage construction, energy, lighting and transport systems - cutting emissions and raising efficiency.

There are two competing smart city visions. The top down version involves brand new, masterplanned demonstration projects - think Masdar or Cisco's 'city in a box'. The bottom up version involves grafting new functionality onto existing urban systems. For an old city like London, it's this on-the-fly approach that's most likely to stick. The capital is already developing smarter transport systems - such as the congestion charge, the Oystercard and Boris Bikes - which point the way ahead.

Green economy products and services also come in two flavours. Cleantech is the physical green economy - driverless cars, smart meters. Cleanweb is online green technology - crowd-sensing apps and maps, environmental data, online marketplaces. London policymakers need this stuff. And London's digital scene, strong on social media and digital content, is well placed to deliver it.

East London's green digital firms are mostly very small and very young. Some offer online apps and tools for cutting carbon - such as Carbon Culture , Gnergy or Homely. Others have developed green transport marketplaces, like Carbon Voyage and Loco2. A third group are more focused on hardware and systems, such as Cosm, Fairphone and Mastodon C.

Amee, an environmental information, auditing and data management firm, is the daddy of the scene. Founded in 2007, it now has 13 staff and offices in London and San Francisco. The first to get major VC investment, it is now helping seed the next generation: founder Gavin Starks now heads the Open Data Institute, and Amee alumni are involved in the London Cleanweb network - 'because we don't want to bluescreen the planet' - organising meetups, talks and hackdays.

Such networks are essential social infrastructure for new young firms. So are accelerators like Bethnal Green Ventures. Aimed at social/environmental start-ups, BGV offers a combination of seed funding (GB£15,000 / US$23,877 per firm), a peer group, structured networking and mentoring, as well as shared workspace at Google Campus.

So how big could the scene get? Cleanweb builds on London firms' skills in programming and digital content. And BGV's Paul Miller notes rising angel and VC interest. The Tech City initiative has shone a bright light on the area; and variable experiences with cleantech investments have pushed many US investors towards cleanweb, where capital requirements are lower and returns potentially higher.

But the next few years won't be easy. Getting finance, finding workspace and skilled workers all present challenges for digital startups. Policymakers hope that tech firms will migrate to brand new spaces in the Olympic Park, Stratford City and the Royal Docks - but so far there are few connections between Shoreditch and shiny new buildings further East. And cleanweb needs committed government support - through legislation, enabling frameworks and funding tools. Ministers' twists and turns on energy policy haven't helped.

So these are early days for green digital firms in London. But in my view there's plenty of promise: watch this space.

 
This piece was also published on the Huffington Post. It's is based on an article written for the LSE Cities 'Electric City' conference, December 6-7 2012. Click here for more. 

Regional versus local pay

Busy week, so only just catching up on the Autumn Statement.

Interesting to see that centrally set regional pay ruled out. I don't think this ever made much sense. Much better to have more local variation that helps address recruitment and retention issues where they occur. More flexibility is still likely to prove controversial, but the case for is pretty convincing (as I argue here in some detail).

Two cheers for Mr Boles

A bold step from the new housing minister to insist that building on open land is needed to solve the housing crisis. No disagreement from me on that front. But what a pity that the political debate on development is so poisonous that Mr Boles feels the need to rule out building on greenbelt land.

Any sensible debate on new development would recognise that some greenbelt land is of such low environmental value that we should consider building on it. Ruling this out means developing land that is of higher environmental value and further away from existing development (with all the implications that has for longer commutes etc). But it would take a very brave (some might argue foolish) minister to try to win that particular debate against the anti-development lobby. At least Mr Boles is trying to move the debate in the right direction and for that he deserves to be congratulated.

Happiness maps

When the latest 'happiness maps' show that the happiest people live in the least populated places (Outer Hebrides, Orkney and Shetland) I am once again convinced that we can learn little, if anything, from spatial differences in self-reported happiness. Quite simply, if people care about their wellbeing and if this drives decisions about where to live then the most heavily populated places must offer something that low populated places don't. So either the people in the Outer Hebrides aren't very representative of the overall population or self-reported happiness misses something important (or both).

I provide a more detailed discussion in my March post on 'Miserable Londoners' but this is the basic idea and the reason why I take these things with a pinch of salt.

The Grey Side of Localism

The Guardian has coverage of the Intergenerational Foundation's report arguing that the localism act hands power to older generations.

The report argues that local tiers of government are completely unrepresentative of their voters. This is certainly true, although (as the Guardian piece argues) this is certainly true of other tiers of government and would also hold for other groups (e.g. ethnic minorities).

Whether the lack of representation is a problem depends on whether the decision they make consistently advantage one group over another. The Intergenerational Foundation think this is a particular problem in the area of planning. As the Guardian reports it: "[...] the report cites strong statistical evidence that older people are more likely to be opposed to change, such as new development in a rural area than their younger counterparts: 45% of people aged 55 and above had formally objected to a local planning application to build houses, compared to just 8% of those under 25."

I am sympathetic with the general argument being made here, but I do wonder whether this particular fact provides strong statistical evidence of a bias. Imagine that the arrival rate of planning applications is random and that the probability to object is independent of age. In the 7 years (from when they are aged 18 to 25) 8% of individuals end up objecting to a planning application. That gives a rate of about 1.14% of the age group complaining in any given year. If this cohort lives to be 55, how many of them will have complained at some point in that time period: roughly 43%.

So, whether this is strong statistical evidence on a bias depends on whether the question asked of people specified a time limit or instead just asked if they had ever objected. Unfortunately, the NHPAU report that was the original source doesn't provide details and the archive section of yougov (who did the poll) is a broken link. The situation is also complicated by the fact that the arrival rate of applications may be biased towards home owners.

In short, while the argument fits with my NIMBY prejudice, I am not sure it confirms it.

[Update: Via Jonathan Jones: Looking at the actual report, it seems the Guardian added together "25% of 55–64s & 20% of 65–74s"! p16]

[Update 2: Via Geography Jim: British Social Attitudes better on this (p.68); Although I think you would want to net out location and income before attributing to age (see tables 5.7 and  5.8)]

Aerotropolis

A couple of long flights seemed the perfect moment to have a look at Kasarda and Lindsay's Aerotropolis: The Way We'll Live Next.

The books main argument runs as follows: "Not so long ago, airports were built near cities, and roads connected the one to the other. This pattern—the city in the center, the airport on the periphery— shaped life in the twentieth century, from the central city to exurban sprawl. Today, the ubiquity of jet travel, round-the-clock workdays, overnight shipping, and global business networks has turned the pattern inside out. Soon the airport will be at the center and the city will be built around it, the better to keep workers, suppliers, executives, and goods in touch with the global market."

I have to say that I am somewhat skeptical on a couple of fronts. The first concerns the extent to which activity will cluster incredibly close to airports. I buy that there are a small(ish) group of people who travel an incredible amount for whom living near a good airport is important. This group appears to be growing, but I can't imagine it will ever comprise large percentages of the population. I also buy that there are firms - involved in global supply chains, distribution etc - that benefit a lot from being near airports. Again, the book makes the case that this group is growing, but the non-traded part of the economy will remain substantial. Of course, in the old days the fact that merchants and firms wanted to cluster near ports (and then rail stations) was enough to drive overall concentration of non-traded activity around those infrastructure hubs. But that was because intra-metropolitan travel costs were high. When you no longer need to walk or take the omnibus to work, you can live a lot further away from your office or factory. This drop in within city transport costs decimated city centres. To the extent they are coming back, this is more about the amenities of city centre living than the need to be close to work. I don't see how airports as a key transport infrastructure changes that particular dynamic.

The second piece of skepticism concerned what was cause and what was effect. Airports are clearly going to be important in the future, but many of the build it and they will come examples in the book didn't appear that successful.

Still, a thought provoking read, and interesting for the wealth of detail on some fascinating case studies.
  

The Heseltine Report

The FT has my reaction to the Heseltine report (£). There's good and bad in there, but on the central recommendations around decentralisation I admit to being puzzled. As I explain in the piece: 'there is a tension, which is never resolved, about whether Mr Heseltine calls for the devolution or the decentralisation of decision making. Should cities be free to tax and spend how they like or are they instead to act as localised delivery merchants for some grand central government strategy conceived and developed in Whitehall?'

 

I'm also unconvinced by the 'back to the future' flavour of some of it: 'On other occasions, however, it appears that Mr Heseltine (like many politicians) finds it hard to take a critical look at policies that they had a hand in developing. Many would suggest that the emphasis on “challenge funds” provides a particularly unfortunate example. The Heseltine report isn’t all bad. But it is hard to shake the feeling that Mr Heseltine is arguing for a return to policies, many of them not particularly successful, that were developed in different times, to tackle different challenges.'

The FT has more on this, so let me instead discuss a couple of themes that I didn't develop fully there. The first of these concerns whether industrial policy should have a strong sectoral component. Mr Heseltine appears to be calling for this with the emphasis on sectoral councils and national government plans. Most economists would suggest that the evidence goes against this recommendation and would prefer horizontal policies (that treat all sectors equally). I wouldn't deny that this evidence is heavily 'contested' but I would argue that the systematic evidence in favour of sectoral policy is hard to come by. By systematic evidence, I mean something that goes out and looks at all sectors that are the target of sector specific industrial policy and demonstrates that these do better than sectors that don't receive such help. Instead, most of the so-called evidence adopts the opposite approach - find a successful sector, point to the existence of a sector specific industrial policy, trade group etc and argue that the policy drove the success. This is correlation, not causation. For those of you who are interested a previous post on clusters develops these arguments further.

The other concern is around the localisation of skills policy and the need for local business to play a much bigger role in shaping demand. I hear this claim all the time from local government so this recommendation will certainly be popular outside of Whitehall. The key point, however, is whether it will be effective. Here, in contrast to industrial policy, there is simply no convincing evidence either way. It's unclear whether local areas should put the emphasis on improving general skills (reading, writing, ability to interact with others) or on vocational skills aimed at particular sectors. Similarly, local areas will often point to 'local skills gaps' as a justification for the need to skew local provision towards particular sectors. But this assumes that, e.g. the lack of engineers, is down to the fact that FE colleges provide too many hairdressing courses and not enough engineering courses. If engineering courses were systematically over subscribed that might be compelling evidence to support this proposition - but my feeling is that this is not the case. If the problem instead is what people want to study (rather than what they can) then changing the supply of places may just lead to lots of empty lecture halls. As I said, there's no convincing evidence either way but I don't think things are as clear cut as the Heseltine report makes out.

There's much more to debate (and for this alone the Heseltine review is welcome), but that will need to wait for another day.