The Paradox of Economic Development

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.