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THE PENNSYLVANIA STATE UNIVERSITY SCHREYER HONORS COLLEGE DEPARTMENT OF FINANCE PSYCHIC VALUE AND URBAN REGENERATION: HOW AND WHY SIGNATURE ARCHITECTURE AFFECTS REGIONAL ECONOMIES ALEXANDER GROSEK SUMMER 2020 A thesis submitted in partial fulfillment of the requirements for a baccalaureate degree in Finance with honors in Finance Reviewed and approved* by the following: Christoph Hinkelmann Clinical Associate Professor of Finance Thesis Supervisor Brian Davis Clinical Associate Professor of Finance Honors Adviser * Electronic approvals are on file. i ABSTRACT Focusing on buildings designed by winners of the Pritzker Prize for Architecture, I create a sample of 509 buildings-designed-by-signature-architects (BDSA) in the United States. This yields 170 metropolitan statistical areas (MSAs) that contain 509 BDSA. Drawing on U.S. Census data from 2010 – 2019, 13 economic data points are collected for each MSA in the sample, yielding 2,210 initial data points. The same 13 data points are collected for each of the 37 states where at least one BDSA currently resides, yielding an additional 481 unique data points Finally, the same 13 data points are collected for the U.S. economy as a whole. This data is sorted using basic weighted-average calculations to measure the relationship between the number of BDSA and the regional economic performance of the group of MSAs containing those BDSA, weighted by the number of BDSA in each city. The BDSA-weighted average of these economic statistics is then compared to the state and national averages for the same economic indicators. The results of this study show that the 170 regions under analysis have BDSA-weighted economic indicators that, when viewed together, demonstrate significantly more robust regional economic environments than the population-weighted average statistics for the 37 state economies in which they reside and the national average for the U.S. The results of this study show that BDSAs overwhelmingly appear in economically vibrant cities that are wealthier, more racially diverse, more educated and more employed than the respective average for the 37 states that contain at least one BDSA, and the United States overall. ii Architecture goes past function. It intelligently solves problems it isn’t explicitly asked to solve and inspires awe by demonstrating the creative potential of humans. - Anonymous Architecture is aesthetically distinctive because it is an art of design…. Architecture’s individuality comes from the fact that it is a useful art, and that the aesthetics of architecture should be based on recognizing its usefulness. - Richard Hill, “Purpose, Function, Use” A fit object is one the contemplation of which ought to give rise to a state of mind which is good. - John Maynard Keynes Figure 1 - Bank in Kingston, PA Designed by Peter Bohlin (AIA Gold 2010) Figure 2 - A Run-Of-The-Mill Bank Branch, Anywhere-Ville, USA Image Source | Author Image Source | https://tinyurl.com/ycbewt59 Examine the two bank branches above… Is there one that you would prefer to have in your neighborhood? iii TABLE OF CONTENTS LIST OF FIGURES ............................................................................................. iv LIST OF TABLES ............................................................................................... v ACKNOWLEDGEMENTS ................................................................................. vi PREFACE ............................................................................................................ vii Chapter 1 Introduction .......................................................................................... 1 Chapter 2 Literature Review ................................................................................ 8 Chapter 3 Methodology ........................................................................................ 17 Chapter 4 Data ...................................................................................................... 20 Chapter 5 Results .................................................................................................. 33 Chapter 6 Conclusion ........................................................................................... 41 Appendix A Cities w/ BDSA By State ................................................................ 45 Appendix B Economic Indicators Used in This Study ........................................ 64 Appendix C BDSA Dispersal by Zip code .......................................................... 72 BIBLIOGRAPHY ................................................................................................ 79 iv LIST OF FIGURES Figure 1 - Bank in Kingston, PA Designed by Peter Bohlin (AIA Gold 2010) ... ii Figure 2 - A Run-Of-The-Mill Bank Branch, Anywhere-Ville, USA ................. ii Figure 3 - Bhimbetka and Daraki-Chattan Cupules (290–700,000 BC) .............. 1 Figure 4 - Salvator Mundi by Leonardo da Vinci ................................................ 4 v LIST OF TABLES Table 1 - Pritzker Prize Winners (1979 - 2020) ................................................... 20 Table 2 - List of Built Works by Pritzker Laureates in the U.S. .......................... 21 Table 3 - U.S. Cities w/ BDSA (Sorted by # BDSA) ........................................... 33 Table 4 - U.S. States w/ BDSA (Sorted by # BDSA) .......................................... 38 Table 5 - 170 Cities w/ BDSA v. United States ................................................... 39 Table 6 - 170 Cities w/ BDSA v. 37 States w/ BDSA ......................................... 39 Table 7 - 509 BDSA By Building Type ............................................................... 40 Table 8 - 170 Cities by Type (Urban / Rural) ...................................................... 40 vi ACKNOWLEDGEMENTS I would like to thank my parents for encouraging me to be curious. Without their commitment to fostering an imaginative spirit at home, I would not look at the world the same way. I would like to thank Dr. Christoph Hinkelmann for exposing me to the world of research. Without his invisible hand overseeing my thesis, I would have failed to deliver a research project at all. I would like to thank Dr. Randall J. Woolridge for his unwavering support for me throughout college. Dr. Woolridge showed me how to approach work, life and relationships with confidence, humor and respect. I would like to thank Dr. Brian Davis for reinforcing my academic curiosity; for harboring a community of intellectually curious students at Penn State; and for always treating my ideas with dignity and respect. Thank you to my friends, there are many of you, who challenge my point of view and expose me to interesting and wonderful things. Finally, I would like to thank my sisters. Julia, thank you for showing me how to face the world with compassion. You push me to seek out an understanding of the bigger picture and to never accept other people’s dogma. Katrina, thank you for showing me how to have fun and live for the moment. Because of you both, I wake up every day grateful and happy to be alive. vii PREFACE This paper begins by introducing art as a measurable and economically relevant component of global financial markets. Chapter 2 discusses architecture as a hybrid form of art that serves a clear functional purpose, as well as a secondary purpose as a medium for creative expression, by summarizing a few prominent studies that guide much of the current debate over the economic value of architecture. Chapter 3 describes the methodology for my empirical analysis that addresses two key questions: 1) Where in the United States is signature architecture concentrated? and 2) How do these regional economies stack up against the state and national economies in which they operate? Chapter 4 presents the data gathered for this study without additional commentary. Chapter 5 provides data tables summarizing the key information gleaned from the data in Chapter 4. Chapter 6 discusses the findings and draws conclusions based on the data. In addition, Chapter 6 recommends further research and offers a few concluding thoughts. The key finding of this paper is that buildings designed by signature architects (BDSA) are concentrated in many of the wealthiest and most-educated cities in the United States, implying that an appreciation for “high design” may be a common element of economically productive societies. Further, the available data strengthens the point made in past studies that the very presence of good architecture helps inspire positive mindsets in people, which can indirectly trickle down into higher achievement and increased local economic productivity. 1 Chapter 1 Introduction Art has existed in human civilization long before value was a concept entrenched in economic thinking. In fact, the oldest remnants of art, the Bhimbetka and Daraki-Chattan Cupules, have been dated to around 290 - 700,000 BCE. This period aligns with the earliest fossil evidence of Homo sapiens, which appeared in Africa some 300,000 years ago (Bhimbetka, 2020). These early stone carvings were created and preserved by humans despite their clear lack of functional value. As time progressed, human societies continued to create and preserve art for no reason other than a shared understanding and appreciation for beautiful things. Today, our world is rich in new, contemporary art as well as vast collections of works preserved over the course of human history, dating all the way back to the Daraki-Chattan Cupules so many years ago. Figure