In Economic Development Quarterly's second year, Herbert Rubin questioned whether economic development practitioners were strategic actors or reactive opportunists. [Rubin used the terms professionalism and credit claiming.] This article answers Rubin's question by grounding economic development in microeconomic foundations and a conceptual model of market interactions, forging 10 rules that define economic development professionals as market-making intermediaries who reduce information asymmetries, lower transaction costs, and mitigate investment risks by connecting the supply sides of regional factor markets to businesses demanding those assets. The Five Developments framework is a complementary and mutually reinforcing set of development practices, these are: Community, Site, Workforce, Housing, and Economic Development. Four operate on the supply sides of regional asset markets, while Economic Development is the intermediary that connects those assets to business demand. The Ten Rules were refined over 24 years with cycles of presentation, listening, feedback, and revision.
This paper investigates the effect of rental housing affordability on homelessness across commuting zones within the United States. The authors’ estimates suggest the elasticity of the homelessness rate to median rents is positive and ranges between 0.55 and 4.5. To address concerns about endogeneity in the relationship between homelessness and rental housing affordability, the authors instrument for various measures of housing affordability using the Wharton Residential Land-Use Regulatory Index. The magnitude of the instrumental variables estimates are significantly increased relative to the ordinary least squares estimates, supporting the conclusion that declining housing affordability is a major driver of homelessness.
Economic development today is trapped in a costly, wasteful, and largely ineffective incentive game, even as the bidding wars between cities and states continue to escalate. States and localities now spend between $45 and $90 billion a year on economic development incentives, depending on the estimate, with individual deals routinely costing hundreds of thousands of dollars per job created. The absurdity of the Amazon HQ2 contest and other megadeals makes the paradox plain: even when local leaders know incentives don’t work, they feel they cannot walk away. There is a way out of this trap, but it requires more than better research. It requires a compact between states, cities, professional economic developers, and researchers built around two goals: ending the incentive competition that has defined the field for 40 years and redirecting those resources into place-based investments in people, innovation, and communities that actually work.
