A recent weekend had me heading to a conference of economic research centers. As always, the big topic is new research, though given the current economic slowdown, there were many a forecast. In a time when so much research is available on the internet, I’m surprised how useful it is to meet other researchers in person.
I presented a study that examines the effect across state borders of laws that require prescribing physicians to check the Prescription Drug Monitoring Program database to determine whether patients are already prescribed opioids. This study tests the effects those laws have on overall economic conditions, finding a modest, but important, boost. This very careful work was completed with Srikant Devaraj here at Ball State. Fellow researcher Pankaj Patel at Villanova also finds that these laws increase the labor force participation rate and reduce opioid prescription rates. This means that tighter restrictions on opioid prescriptions generally improve short-term labor supply conditions through affecting the supply of labor.
A bigger question is how state and municipal governments consume the huge volume of research about local economic development. I can think of few more pressing matters for much of the country.
There are 3,114 counties in the United States. About 550 of these places are exploding with growth. They are the richest places the world has ever seen and face a very happy suite of challenges. There are perhaps 400 other counties that are doing well. They may have a few challenges but are largely poised to grow more prosperous and attract more residents. While even prosperous places have challenges, they are far easier to deal with than those which beset places in economic decline.
At the other end of the spectrum, there are roughly 1,300 counties who lost people last year. Another 900 grew, but at a rate much lower than the national average. Nearly 70 million Americans live in counties that are losing population. That’s about one in five of us, including my family and me. A bit more than half of Americans live in counties that are shrinking in absolute or relative terms.
These places in decline are most in need of careful thinking about economic development. How and in what ways these communities digest the type of research my colleagues and I perform is important. In particular, how can small communities with few resources understand what does and does not work in economic development?
I would like to say that economists and sociologists have all the answers about economic development. We do not. However, we do have some very important insights drawn from a half century of data-driven analysis. Maybe the most important thing empirical research into economic development can offer is to outline simply those things that do not work.
The best work on economic development research is ruthlessly empirical. It is the time-honored process of scientific discovery, which combines a hypothesis with actual data. This work is being performed in almost every research university in the country and at smaller schools. The goal never is to try and prove something works, but rather to disprove the hypothesis. Every month, new studies are published on a wide variety of topics pertaining to local economic development. Topics range from the right mix of tax policies, the effects of business incubators, the role of walkable communities and the right types of policing strategies to deter crime.
Over time, these studies build an understanding of what does not work. This process of elimination leaves a remarkably small number of strategies that actually boost local economic development. But, my observation has long been that the communities that are most in need of understanding what does and does not work tend to be the least informed by research.
Large, often successful communities actually access this research, appealing to the actual researchers or consultants who have read much in this area. Ironically, these are the places that need the least guidance in these areas, perhaps because they have been successful, but maybe just because they are lucky. Either way, they can afford to make a mistake or plow some tax dollars into a low-value project.
It is the communities in distress that need to be most thoughtful about their approach. Yet, in my experience, communities in distress are far more likely to jump headlong into any economic development scheme without asking any questions. These are the places most at risk from developers that fabricate data, builders with dubious plans, or businesses with fanciful ambitions in need of only a stiff tax subsidy to get rich quickly.
If I had but one wish for Hoosier communities, it would simply be that the poorest and most at-risk places be the first to appeal to the wide world of economic development research available to them through the internet, local library or nearby university. This isn’t a panacea for such places, but, it is a lot better alternative than most current practices.
Michael Hicks is the George and Frances Ball Distinguished Professor of Economics and the director of the Center for Business and Economic Research at Ball State University. His column appears in Indiana newspapers. Send comments to [email protected].
