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Community and Economic Development
Principles Definitions
Community Development - ANSWERS-something to do with improving the community Economic Development - ANSWERS-something to do with improving the local economy Housing Development - ANSWERS-ensuring that people have somewhere to live Real Estate Development - ANSWERS-ensuring that commercial and industrial establishmentshave somewhere to operate Workforce Development - ANSWERS-ensuring that firms have access to competent labor Community - ANSWERS-group of people in a physical setting with geographic,political, social, and economic boundaries Development - ANSWERS-sustained progressive change to attain individual andgroup interests through expanded, intensified, and adjusted use ofresources
So what is community development? - ANSWERS-the ongoing improvement of a geographically, politically, socially, and economically defined group ,pursuing collective and individual goals through optimized resource utilization So what is economic Development? - ANSWERS-those activities that lead to greater resourceproductivity and a wider range of real choices for consumers andproducers Core activities - ANSWERS-business recruitment (attraction), retention,expansion, and entrepreneurship Community Economic Development - ANSWERS-- the blending of economic development and community development...a holistic approach to community problem solving."
- is built on "the premise that economic and noneconomic development forces are equally important"
- is about creating opportunities for the residents of the community
- is about enhancing human well-being, welfare, and quality of life
- Holistic perspectives are good for analysis and theory, but in practice,community economic development is hard! Most places are lucky to doan excellent job with one type of development. Building local capacity - ANSWERS-leadership training, youth engagement, civicorganizations
sells beyond its local market, contributing to externaldemand and economic base growth. Expansion of the productive capabilities - ANSWERS-This means enhancing the capacity,skills, technology, or resources of existing businesses in the region to increase theiroutput, efficiency, or value-added production. Existing members of a region's economic base - ANSWERS-These are the established firmsand industries that form the core economic foundation of a region through theirproduction and export of goods and services. What does economic development look like? - ANSWERS-- Business retention & expansion (helping existing firms grow)• - - Recruitment/attraction (site selection, incentive negotiations)• - Entrepreneurship support (startups, incubators, "rabbits")• - Product/industry rejuvenation (help firms adopt new tech, avoiddecline)•
- Building traded sectors: exports, advanced services, manufacturingniches Growth - ANSWERS-doing more of what we are currently doing— more jobs, morebuildings, more dollars, more people—in a manner that isfundamentally the same as what is currently being done
Development in terms of growth - ANSWERS-can include growth, but has more to do withimprovements in well-being, equity, opportunity, education, health, andsustainability.•
- goes beyond quantitative, market-determined indicators of value•
- is longer term, purposeful, and permanent•
- "tends to imply more understanding, more insight, more learning, morenuances, and some semblance of structural change" (Shaffer et al., 2004)• -"Top-line growth doesn't ensure bottom-line prosperity." (Liu,
Neoclassical/Solow Model - ANSWERS-Growth comes from capital, labor,and especially technological progress—sustained growth needsinnovation Endogenous (Romer) - ANSWERS-Innovation, education, and ideas drivelong-run growth—these are outcomes of purposeful investment,not just luck Endogenous (Romer)/Neoclassical/Solow Model - ANSWERS-These models show that economies can grow through investmentand productivity, but don't guarantee social or environmentalimprovements Traditional Society - ANSWERS-Subsistence, agriculture, limited change
- Reallocation of resources to serve more vulnerable groups, regardless of output level
3 Ps - ANSWERS-people, planet, and prosperity/profit Sustainable Development - ANSWERS-development should meet current needswhile supporting future generations' opportunities Triple Bottom Line: People - ANSWERS-Focus on social outcomes —health,education, equity, and communitywell-being• Reduce poverty and inequality;include marginalized groups indecision-making and benefits• Ensure that economic improvementslead to real gains for everyone, notjust a few• Bottom Line: Lasting developmentcannot be counted as successfulunless it genuinely improves quality oflife for people in the community Triple Bottom Line: Planet - ANSWERS-Consider environmental impacts ofgrowth: pollution, biodiversity,resource depletion•
Protect ecosystem health andencourage sustainable use of resources• Balance economic activity withpreservation for future generations• Bottom Line: True developmentaccounts for and minimizesenvironmental harm, ensuring naturalresources and ecosystems remainhealthy over the long term Triple Bottom Line: Prosperity - ANSWERS-Economic value and profitabilitymatter, but should support social andenvironmental goals• Long-term prosperity often requiresbalancing short-term profits withwider responsibilities• Aim for development that alignseconomic opportunity withsustainability and equity• Bottom Line: At the end of the day, lasting and sustainable economic development still relies on ongoing private sector investment and entrepreneurship The first 3 Waves - ANSWERS-Wave One: "smokestack chasing" (i.e., using tax incentives and'business climate' to recruit firms into the region•
Practitioners face challenges in measuring their impact:• "I think part of the frustration is, at times, companies areterribly reluctant to tell you why you won or why you lost."• "When a place is in the dumps, it's in the dumps. And, to someextent, economic development can help it, but it can't solve it" Market - ANSWERS-a group of buyers and sellers of a particular good orservice. Buyers as a group determine the demand for the product,and the sellers as a group determine the supply of the product. Competitive Market - ANSWERS-a market in which there are many buyersand many sellers so that each has a negligible impact on themarket price Examples of Markets - ANSWERS-stock market, housing market, labormarket, agricultural commodities (wheat, corn), gasoline stations,online marketplaces (Amazon, eBay), foreign exchange market Law of Demand - ANSWERS-the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises Demand Curve - ANSWERS-downward sloping, showing inverse relationship
Ceteris Paribus - ANSWERS-all else equal," means other factors held constant What shifts demand? - ANSWERS-Income: influences normal vs. inferiorgoods• Prices of Related Goods: substitutes(goods that can replace each other, likeCoke vs. Pepsi) vs. complements (goodsused together, like cars and gasoline)• Tastes and Preferences: cultural trendsand fads• Expectations: anticipated future pricesor income• Demographics: number and type ofconsumers Movement along the demand curve - ANSWERS-The curve itself doesn't move - only your position on it changes• Occurs when only price changes while everything else stays constant• Example: Pizza price drops from $20 to $15 → people buy more pizza (slidedown the curve)•
What shifts Supply? - ANSWERS-Input Costs: wages, raw materials, energy• Technology: improvements that lower production costs• Number of Sellers: more producers increase supply• Government Policy: taxes, regulations, subsidies• Natural Events: weather patterns, disasters Equilibrium - ANSWERS-price and quantity where demandequals supply Equilibrium Price - ANSWERS-market "clearing" price Price adjustment - ANSWERS-as price falls, quantitydemanded rises and quantity supplied falls; asprice rises, quantity demanded falls and quantitysupplied rises Simultaneous Adjustment - ANSWERS-prices and quantitiesadjust together; buyers and sellers respond at thesame time, moving markets toward equilibrium
Elasticity - ANSWERS-a unit-free measure of how demand or supply responds toprice changes Elastic Demand - ANSWERS-quantity demanded is highly responsive to pricechanges (large sensitivity) Inelastic Demand - ANSWERS-quantity demanded responds only slightly to pricechanges (low sensitivity) Determinants - ANSWERS-availability of substitutes is the most important factor Mathematical Definition - ANSWERS-elasticity is the ratio of percentage changes Other elasticities - ANSWERS-Price Elasticity of Demand: responsiveness of buyersto price changes• Price Elasticity of Supply: responsiveness of sellersto price changes• Cross-Price Elasticity: demand changes in one gooddue to price of another (substitutes/complements)• Income Elasticity: demand changes in response toconsumer income
Equity: A third consideration. Whileequality is giving everyone the samething, equity is providing what's neededto achieve the same outcome• Tradeoffs: Policies for greater equality(e.g., taxes) may reduce efficiency, andvice versa What and Why: Market Failure - ANSWERS-Market failure occurs when free markets fail toallocate resources efficiently, resulting in lost totalsurplus• Can happen when prices don't reflect all costs/benefits,or when some resources are over/under-consumed• Not every "bad" outcome is a market failure. Wespecifically care about inefficiency and missed potentialwelfare. Market Power - ANSWERS-means a firm or group canstrongly influence prices—monopoly (oneseller), oligopoly (few), or monopsony(one/few buyers) Leads to reduced output and higher pricescompared to competitive equilibrium• Profits increase for the powerful firm;consumers pay more and buy less•
Perpetuated by barriers to entry (patents,resource control, scale) Externalities - ANSWERS-Externalities: exist when costs or benefits ofa market action spill over to others whoaren't involved• Negative: pollution, secondhand smoke,noise → society bears extra costs• Positive: education, vaccinations → societygains uncounted benefits Asymmetric Information - ANSWERS-a situation in atransaction where one party (buyer or seller)possesses more or better information than theother party Public Goods - ANSWERS-on-rival (non-depletable)and non- excludable (can't easily keep peopleout)• Examples: national defense, street lighting,public parks Common Pool Resources - ANSWERS-Common-pool resources: rival (getdepleted) but non-excludable (hard to stopuse)•
They act as community actors, reinforcing social networks, culture, andcivic engagement• They bring investment, innovation, and growth opportunities thatshape long-run development prospects• They can also create risks of inequality, instability, or concentratedpower if unchecked Production in a Market Economy - ANSWERS-Market signals: prices convey information about consumer demandand resource scarcity• Profit motive: firms seek to minimize costs and maximize revenue toremain competitive• Competition: multiple producers compete for customers, drivinginnovation and efficiency• Resource allocation: markets direct resources toward their mostvalued uses through price mechanisms• Entry and exit: new firms can enter profitable markets whileunsuccessful firms exit
Production, Productivity, & the Product - ANSWERS-Production is the process by which firms use labor, capital, and resources tocreate goods or services that have value in the market• Productivity: how efficiently inputs are converted into outputs, reflecting theratio of output produced to the quantity of inputs used• The product: a good or service tailored to meet customer needs and createvalue in the marketplace Market Competition in Economics - ANSWERS-Perfect competition: many firms with identical products, where nofirm has market power• Monopoly: a single firm dominates the entire market, often settingprices and output• Oligopoly: a few large firms control most of the market and mayengage in strategic behavior• Monopolistic competition: many firms sell differentiated products,balancing variety and rivalry Von Th Lunen — Implications - ANSWERS-Land use intensity decreases with distance from themarket•
