After a three-year hiatus, I returned to teaching Urban and Regional Economic Development at Carnegie Mellon this fall. The process of preparing for the course, and the act of engaging with twenty students who represent a new generation of economic development, has caused me to reconsider the state of the profession and where it is headed as well as what new trends are driving it. I often joke that we are teaching them how to solve the problems of the last generation with tools and policies that will create the problems for their generation to solve. I call it the full employment policy for economic development. Continue reading “Reflections on the Profession”
One of the most influential and widely pursued theories in economic development has been the use of industry clusters, or simply clusters, to focus services in a regional economy. This approach allows communities to consider the needs of interconnected firms and define a focus. What it fails to do though is to contemplate potential impacts on these clusters, both positive and negative, by market dynamics. As a result, the practice of using industry clusters as an economic development strategy is an approach that has run its course.
The Fourth Economy team has long been involved in developing and implementing cluster strategies and we have come to appreciate the advantages and disadvantages of the cluster approach. Along the way, we have developed methods, tools, and best practices that we believe can help regions to more effectively leverage their potential for economic prosperity. In this article, we first review the pros and cons of clusters and then discuss a modern approach that we call Market Opportunity Networks, which retains the advantages of clusters and reduces the disadvantages. Since 2006 members of the Fourth Economy team have been developing this methodology and demonstrated success with a number of clients. Continue reading “Market Opportunity Networks: Advancing Economic Development Strategy”
As Fourth Economy turns three years old it is a good time not only to reflect on the lessons of these past three years but also to think about what is next. One of those lessons is that many surprises in the economy are things people should have known about, but didn’t get enough attention in the media. Stories that lack sound bites or sizzle are ignored until they become a crisis. Even then they may not get attention. So here are three big economic disruptions that are flying under the radar:
Mitt Romney lost the election but some of his fiscal ideas may survive. Mitt Romney’s comments on an Iowa radio station re-ignited the debate about the mortgage interest deduction (MID) that has been simmering since at least 1984. Romney’s plan calls for a $17,000 deduction budget that effectively caps and may even kill the MID:
As an option you could say everybody’s going to get up to a $17,000 deduction. And you could use your charitable deduction, your home mortgage deduction, or others — your health care deduction, and you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number.
The MID inspires deep passions. It is also not likely to be received by the public with any objectivity. The National Association of Home Builders (NAHB) released a poll showing that the MID was supported by 77 percent of Republicans, 71 percent of Independents and 71 percent of Democrats. Real estate lobbyists have been arguing for some time that eliminating the MID while the housing market is weak would further destabilize housing. However home prices and interest rates are so low right now that the benefit that the deduction provides to buyers has been significantly minimized. As a result, there are new calls that now is exactly the right time to restructure the deduction. Continue reading “Debating the Mortgage Interest Deduction”