Politicians must know that they are not good at picking winners but the urge to use such power must be irresistible. Los Angeles has a 20 acre "green field" site and it would love to offer incentives to build something like Silicon Valley but focused on green tech. What is the best way to achieve this goal? Similar to having a successful Shopping Mall, one model would be to identify an anchor (in the case of a mall a department store); charge them lower rents to attract them and then pilot fish who gain from the spillover effects (i.e idea flow) will locate nearby. In the case of green tech, who is such an intellectual anchor? Could the Mayor know such an entity ex-ante? In this article the LA Times discusses the early jockeying for receiving special tax breaks here; New Los Angeles "Green" Cluster .
Would Jane Jacobs be impressed? Her diversity theory would suggest that the Mayor should build an ecosystem of various green projects and hope that such proximity yields power lunches and synergistic new ideas and permutations of existing efforts.
It will be interesting to see whether these "green firms" share ideas; so my question is what is the root source of agglomeration here? Why would green firms be attracted to locate near each other? Is it simply the tax breaks? Or is it labor pooling? or intellectual spillovers? Once these firms come up with good ideas, will they outsource the mass production to China and Vietnam? Will Los Angeles workers be productive enough such that their output per wage be high enough to justify production in Los Angeles?