Tuesday, August 7, 2007

The Diversity Paradox?

An Article in the Boston Globe highlights Robert Putnam’s research on diversity. The take home message is that diversity seems to lower social capital, yet increase creativity and possibly economic growth. This is labeled a diversity paradox.

However, it seems to me that there is no paradox at all, at least with respect to creativity. Diversity increases creativity because it lowers social capital.


A sketch of a model:

There are two levels of social goods: global and local.

Finding a cure for cancer is a global social good; building a children's center is a local social good.

People are compensated for the production of social goods through status.

Each ethnicity has a different preference ordering over local social goods.

In a mulit-ethnic community there are fewer people who prefer any one social good. Therefore, the status return is lower to producing local socials goods. The status return to global social goods is constant everywhere.

When communities become more diverse people substitute the production of local social goods for global social goods.

That is, it is more difficult to become famous and loved by all for being a civic leader so I tend to invest more time in becoming famous and loved by all through some national level accomplishment.

This might suggest that diversity itself is a public good but I am not sure. That is, it could be that homogenous communities are piggy-backing off of the global social goods produced by diverse communities.

Hat-tip Mankiw

15 comments:

promoteyourblogforfree said...

nice blog

ryan said...

How much evidence is there for a lack of convergence in the ordering of local social goods? Where discordance exists, I see that it exists more as Group A wants exactly what Group B wants but doesn't want to let Group B have any. The extreme current example is sectarianism in Iraq and elsewhere, perhaps Lebanon. While this is extremely violent it is Civic Engagement in a manner of speaking. I'm not well versed in industrial organization, but isn't that a "winner take all" scenario such as in elections? I'd love to see breakdowns of diversity and engagement over time -- I wonder if established places where diversity reigns (NY city, for example) have gotten over the "winner take all" attitude, while places newly experiencing diversity (or experiencing new forms of diversity) are having the most trouble. Just a thought -- your model is very intriguing.

I haven't read the paper yet to look for any of the causes offered.

TGGP said...

I've got a post here on my blog riffing on your theory as well as some related ideas.

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