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Celebrating Dying Places

How encouraging the best and brightest to stay drags down the economy.
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Want to arrest demographic decline? Stop educating females. Want to stop brain drain? Stop educating the entire population. Israel is dying! That's cause for celebration:

Ironically, the emigration rate is partly due to the success of Israeli academia. "We educate a lot of people to a very high level," and professors are well known at universities abroad, says Jonathan Fine, a Bar-Ilan University linguist. So they are able to help place their protégés in doctoral programs or post-doctoral slots at top institutions overseas.

The more education, the more likely a person is to emigrate. Israel invests heavily in human capital. The return:

After founding two medical technology companies in Israel, Schoenberg and his brother – Roy Schoenberg – launched American Well to connect doctors and patients through mobile and web technology. Though based in Boston, American Well’s partners include Israeli companies like Vidyo, creator of “telehealth” visual communication platforms.

“Not everything can be made in one location or by one company,” said Schoenberg. “A brain drain implies something goes out of one place and into another. I don’t see this as a brain drain, as much as normal change and growth to be embraced, not rejected,” he said.

As evidenced by Schoenberg’s company, Israel’s brain drain is multi-faceted, and far from being a one-way street.

Israel should be proud it has such a problem as a brain drain, because we have a lot of brains there,” said Moshe Pritsker, co-founder and CEO of the Journal of Visualized Experiments (or “JoVE”), based in Cambridge.

“It’s like an unwritten requirement for post-doctoral students in Israel that you have to go abroad for some time,” said Pritsker, who completed a PhD in biology at Princeton University. “Among those who stay abroad, many of them open branches of Israeli companies, or bring their connections back to Israel while they are abroad,” he said.

Emphasis added. The export of world class talent links Israel to a network of global innovation. Say Israel retained all the brains educated in the homeland. The best and brightest don't flee to Boston. There are no connections abroad. Knowledge and venture capital do not flow into Israel. Pack all the scientists you want into an innovation district in Tel Aviv. It won't do much good without talent churn.

The flow of talent from one place to another, from one firm to another, spurs innovation and economic growth. On the other hand, human capital controls stifle innovation and retard growth. Welcome to Michigan:

We construct inventor career histories using the U.S. patent record from 1975 to 2005 and demonstrate a brain drain among patenting inventors from states that enforce employee non-compete agreements to those that do not. Non-compete enforcement appears to drive away inventors with greater human and social capital. We address causality-related concerns with a difference-in-differences study design based on an inadvertent reversal of Michigan‘s non-compete enforcement policy.

Non-compete agreements allow businesses to use the force of law to retain talent. That effort causes a brain drain from Michigan. Encouraging the best and brightest to stay drags down the economy. Similarly, Boston lost out to Silicon Valley because Massachusetts enforces non-competes and California does not. Churn or burn. People develop, not places.