TITLE:
Using a Local Public Good to Attract Representative Creative Class Members: The Inefficient Equilibrium Case
AUTHORS:
Amitrajeet A. Batabyal, Seung Jick Yoo
KEYWORDS:
Artist, Creative Class, Efficient Equilibrium, Engineer, Inefficient Equilibrium
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.1,
January
17,
2020
ABSTRACT: Batabyal and Beladi [1] have recently analyzed a
model of competition between two cities that use a local public good (LPG) to
attract members of the creative class. The creative class consists of artists and engineers and they study the behavior of a representative artist and an engineer. In this note, we explore
three implications of the use of this “representative artist and engineer”
modeling strategy. First, we show that the use of such a strategy can lead one
to study an inefficient equilibrium in the aggregate economy. Second, we point
out that in this inefficient equilibrium, the beliefs of the representative
artist and the engineer are inconsistent. Finally, we contend that if we depart
from the “representative artist and engineer” construct and focus instead on
the entire creative class population which we model as a continuum, then the inefficient equilibrium mentioned above can be
turned into an efficient equilibrium.