Paul Diversa suggests that the entrepreneurial playing field between New York city and the Bay Area is leveling :

Silicon Valley will maintain its undisputed grip on engineering talent, overall thought leadership and sheer volume of innovation. There is no arguing that point. The depth of the talent pool in the Bay, especially in product and engineering seems almost unfathomable.
But here’s is what has changed: more than any time in recent history I am seeing a migration of talented engineering and operating executives leaving the Bay area and other parts of the country to lead NY companies. As a matter of fact, it seemed commonplace to hear “NFW” when talking to Valley execs as recently as 18 months ago when called about a NY opportunity.
Now we expect the receptivity! There is no doubt that the burst of NY’s momentum is being fueled by signs of life from Madison Avenue and large brands that dominate the East Coast. There is also a newfound energy that is serving as the shot in the arm of vitamin B to Silicon Alley investors and start-up…a signal that Silicon Valley’s birthright and mecca of professions is being threatened (or least facing some viable competition).

The question for me is whether this is a case of leveling up or leveling down. Part of this might reflect the deteriorating infrastructure and business climate in northern California. New York city has raised its local marginal tax rate, and I get the impression — an unscientific impression, as we won’t know for sure for some time — that this is leading at least some affluent New Yorkers to leave town. But in a zero-sum competition between California and New York, that is less relevant. Californians also face a punishing tax burden.

Indeed, as Casey Mulligan has argued, the problem could be that both California and New York are big, unwieldy states. A quick look at Freedom in the 50 States [PDF] from the Mercatus Center suggests that smaller states have far less burdensome regulation than larger states.

What I’d like to know is whether both Silicon Valley and Silicon Alley are losing steam relative to technology clusters in relatively low-cost metropolitan areas. For now, I’m guessing the answer is no. The advantages of the Valley and the Alley are considerable, in terms of the concentration of engineering, managerial, and design talent. But there eventually comes a point at which those advantages are outweighed by the disadvantages of a high spending and tax burden.

As a New Yorker, I tend to think that our local government is quite competent. The state of our municipal infrastructure, for example, is very good, thanks to considerable investment spearheaded by Mayor Bloomberg. Competent isn’t the same as cost-effective. But it is certainly better than municipal governments that are neither. That is a decent characterization of San Francisco and Oakland. The affluent enclaves in the Valley do a decent job, yet they’ve been dealt a darn good hand. Eventually, Austin and Boulder and Provo and Boise and Fargo will come close enough to make a dent. And that will be good news for everyone.