Monday, January 17, 2005

Economic Development in THE CITY

Once upon a time many moons ago before Sigourney Weaver, my specialty was in Economic Development, which is a nebulous area not readily understood by the general public. My personal belief is that there are areas in which Government intervention in the Market is necessary; the Market is only 100% efficient in theory and, when left on its own, it will tend toward inefficiency in the short run. [Whether that inefficiency balances out in the long run is subject for debate... but as Keynes said, "In the long run, we're dead."]

So, I believe that there is a legitimate role for Government in Economic Development.

The problem with Government, however, is that so many people conflate it with Politics, and everyone has an opinion as to what to do in Politics. Unfortunately, most people don't quite understand the situation and are quick to jump in with their own ridiculous ideas as to what "should be done". Which is why talk radio is so successful: idiots spouting off their damned "easy" theories of how to fix things.

And yes, the irony of this blog has not been lost on me. Although, I'm going to try to talk about this whole subject in a more technocratic and academic way.

Anyway... one of the basic goals of Economic Development is the creation and generation of Wealth. Creating wealth, for a Metropolitan Statistical Area (MSA), results in (1) the creation of more wealth, (2) the creation of more tax revenue for the MSA, and (3) political stability for the politicians. [Politicians like to be able to say that they created X jobs... which leads to Y votes.] Creating wealth, at its most basic level, creates a higher standard of living, and is sort of the overarching goal of Wealth.

And if you want to talk about the Aristotelian concept of Happiness and how it relates to the telos of mankind, we can do that too.

Back to Economic Development:

Wealth comes about through marginal productivity in an MSA: we do things better and more efficient than you. One thinks about Silicon Valley for IT or Austin TX for Hardware or, a classic example, Pittsburgh PA for steel. In each case, these regions were better and more efficiently than everyone else in what they did and were able to convert that "surplus" into Wealth.

Therefore, what could be said is that the ability of an MSA to create better products and services more efficiently will give it a competitive advantage over other Regions and lead to Wealth creation. What could also be said is that inefficiency is bad and drains away resources from the production of wealth.

The logical conclusion is that Government's role in Economic Development is to promote policies that (1) allow the market to create better products and services, (2) allow the market to act more efficiently, and (3) remove barriers that create inefficiencies.

Well, that's enough theory for now. More later.

This post brought to you by: $1.40 small, regular coffee.

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