Saturday, August 06, 2011

Exit from No Exit

David Wessel's "Prescriptions for Getting Out of the 'Liquidity Trap'" in this morning's WSJ is not cheery and gives one a No Exit kind of feeling.

Time out.  Regional economists had been writing about Growth Poles as a development strategy for developing countries for over fifty years.  This approach emphasized interregional differences in agglomeration opportunities and development potential.  The new-wine-in-old-bottles have been the "Technopoles" and, more interestingly, Paul Romer's Charter Cities idea which has also been seen as having just a developing country focus.  So far.  Read about the Shenzhen example.  Think about one in California -- or any other state.

Regional employment and growth differences within the U.S. are well known.  Here is a recent comment regarding these.  And there are also significant local policy differences.  Here is recent research by Wendell Cox that highlights these.  Less local control and light touches make a difference.

The point of all this is that, bleak as Wessel's report  and other news are, we lose by forgetting about local area policy differences and differences among local opportunities.  Not all labor and capital are equally mobile, but "stickiness" is part of almost all economics.

It's also part of an old story about what we lose when we aggregate and start thinking that it's only about the aggregates and the "big" stories.  Local difference and local policies matter.  Why not Charter Cities somewhere in the U.S.?