#5: Get out of the economic-development game and invest in basic research
The "economic development" game, as it is played today, is expensive and unproductive
What happens when Maytag leaves Newton or Blue Bird leaves Mount Pleasant? We have too many one-company towns, and the development-incentives game actually makes that problem worse. While there's always lots of talk about "spin-off" companies and secondary effects of any new plant or project, the people trumpeting those figures are master salespeople. It's their job to sell a blue-sky promise.
Iowa has an aging population, which means that we'll face rising costs in the long term for things like health care. Why not use public money for truly public goods -- like cancer research?
If we perpetually hope that someone else will pursue and fund the answers, then how do we answer the question, "If not now, when? If not us, who?"
Investing in scientific research is different from subsidizing manufacturing plants. If a manufacturer closes down, the jobs evaporate, and the plant and equipment inside are liquidated. But scientific gains are different -- they're kept no matter what, and don't just disappear because an experiment fails. All failures lead to knowing what isn't the answer, which helps isolate what the answer is. Think of the hundreds of failures it took for Edison to develop a reliable light bulb.
By aggressively pursuing medical research, we may be able to gain benefits from some spin-offs (just like in the Research Triangle in North Carolina), but we shouldn't count on them. Texas invests much more in trying to gain "spin-off" benefits from its universities, and it hasn't gotten a great return. We should invest in basic research because it's a useful public good. If other economic development results, so much the better. But just like you shouldn't buy $20 worth of things you don't need just to take advantage of a 10% off coupon, we shouldn't kid ourselves about the benefits of economic-development incentives.
At least if those dollars went into cancer research, everyone would stand a nearly equal chance of collecting on the rewards.
A state gambling its economic future on picking a handful of businesses or even industries is like the speculator who enters the stock market and invests in a bunch of "hot picks" without regard to the fundamental value of those businesses. Sure, once in a while that speculator is rewarded -- but more often than not, speculation is punished by lower-than-average returns.
Note, for instance, the investment industry's ability to select and hire the best talent in stock-picking. Yet almost all mutual funds perform worse than their market averages. There are two culprits:
Iowa is not now, nor will it ever be, an entertainment Mecca.
The phrase goes, "It's a nice place to visit, but I wouldn't want to live there." Iowa is a place for living, not a place for visiting.
To waste precious tax dollars on efforts to make Iowa a place to visit is to be stunningly ignorant of some basic rules of competition: You fare best when you do something that others can't do as well or as cheaply as you. In that regard, Iowa will never have a competitive advantage in entertainment or tourism -- we simply don't have beaches like Florida or Hawaii, sun like Arizona, or mountains like Colorado.
What happens when Maytag leaves Newton or Blue Bird leaves Mount Pleasant? We have too many one-company towns, and the development-incentives game actually makes that problem worse. While there's always lots of talk about "spin-off" companies and secondary effects of any new plant or project, the people trumpeting those figures are master salespeople. It's their job to sell a blue-sky promise.
Iowa has an aging population, which means that we'll face rising costs in the long term for things like health care. Why not use public money for truly public goods -- like cancer research?
If we perpetually hope that someone else will pursue and fund the answers, then how do we answer the question, "If not now, when? If not us, who?"
Investing in scientific research is different from subsidizing manufacturing plants. If a manufacturer closes down, the jobs evaporate, and the plant and equipment inside are liquidated. But scientific gains are different -- they're kept no matter what, and don't just disappear because an experiment fails. All failures lead to knowing what isn't the answer, which helps isolate what the answer is. Think of the hundreds of failures it took for Edison to develop a reliable light bulb.
By aggressively pursuing medical research, we may be able to gain benefits from some spin-offs (just like in the Research Triangle in North Carolina), but we shouldn't count on them. Texas invests much more in trying to gain "spin-off" benefits from its universities, and it hasn't gotten a great return. We should invest in basic research because it's a useful public good. If other economic development results, so much the better. But just like you shouldn't buy $20 worth of things you don't need just to take advantage of a 10% off coupon, we shouldn't kid ourselves about the benefits of economic-development incentives.
At least if those dollars went into cancer research, everyone would stand a nearly equal chance of collecting on the rewards.
A state gambling its economic future on picking a handful of businesses or even industries is like the speculator who enters the stock market and invests in a bunch of "hot picks" without regard to the fundamental value of those businesses. Sure, once in a while that speculator is rewarded -- but more often than not, speculation is punished by lower-than-average returns.
Note, for instance, the investment industry's ability to select and hire the best talent in stock-picking. Yet almost all mutual funds perform worse than their market averages. There are two culprits:
- Excessive expenses involved in trying to find the best
- Quixotic nature of speculative gambling
Iowa is not now, nor will it ever be, an entertainment Mecca.
The phrase goes, "It's a nice place to visit, but I wouldn't want to live there." Iowa is a place for living, not a place for visiting.
To waste precious tax dollars on efforts to make Iowa a place to visit is to be stunningly ignorant of some basic rules of competition: You fare best when you do something that others can't do as well or as cheaply as you. In that regard, Iowa will never have a competitive advantage in entertainment or tourism -- we simply don't have beaches like Florida or Hawaii, sun like Arizona, or mountains like Colorado.
- What government should do:
- What individuals should do:
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