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If you tramp through the woods of New England and upstate New York, you will see stone walls marking the borders of farms that have been abandoned for a century or two. You may see the foundation of a small house, the entrance to a mine or the crumbling walls of a mill. The people left when the opportunity to make a living ran out, leaving behind nothing but stones, bricks and ghosts.
Among policymakers, there are two schools of thought about this. One is that the death of places that have lost their economic reason for being is natural and inevitable. The other is that society should attempt to revitalize the economies of down-and-out places, generating wealth while allowing people to stay where they’ve built families and friendships.
The Biden administration has come down on the side of helping places, not just people. That’s kind, and potentially efficient as well. But there are obvious drawbacks to pumping taxpayer money into places that the private sector has withdrawn from. I worry that place-based economic policy, as it’s called, could go too far in the name of doing good.
When President Franklin Roosevelt signed the Tennessee Valley Authority Act in 1933, the government was helping a place — a region, really — by building dams, roads, canals and hydroelectric power plants. The T.V.A. was a boon to Tennessee and surrounding states. However, the region remains poorer than average, and one study found that the local gains came at the expense of losses in other parts of the country.
After World War II, political support for place-based initiatives dwindled. In 1953, President Dwight Eisenhower called the T.V.A. an example of “creeping socialism.” The federal government could have spent less money and achieved more, some thought, by mailing poor people in Appalachia one-way bus tickets to somewhere else.
Much of the economics profession also took the view that helping individuals was more efficient than fixing where they lived. The failure of urban renewal projects to reverse the decay of many cities seemed, fairly or not, to confirm that view. In 2007, Edward Glaeser, a Harvard economist, asked in the headline of an article he wrote, “Can Buffalo Ever Come Back?” The subheadline answered: “Probably Not — and Government Should Stop Bribing People to Stay There.”
But then the tide shifted again. Just 11 years after Glaeser wrote the Buffalo article, he argued for a reconsideration. He and two Harvard colleagues (one of whom was Lawrence Summers), wrote in a paper that the hoped-for convergence between rich and poor places was failing to happen on its own. They also said that “subsidizing job creation may be easier at the place level than at the person level” and that “one-size-fits-all interventions are woefully inappropriate.” That is, if you’re going to subsidize employment, it makes sense to focus on places where lack of employment is a problem — not waste it on people who live in places with very low unemployment rates.
“The U-Haul School of Urban Policy” is what Jason Segedy, an economic development specialist in Ohio, disparagingly termed in 2019 the theory that moving to opportunity is always the answer. (Segedy hastened to write, seven times in italics, “I’m not arguing that people should never move away from where they live.”)
Also in 2019, Simon Johnson of the Massachusetts Institute of Technology, who this week shared a Nobel prize in economics, wrote a book with his colleague Jonathan Gruber, “Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream.” The book listed 102 metro areas that were ripe for growth. And not just any kind of growth: high-tech employment.
That brings us up to the Biden administration, which embedded place-based thinking in several of its signature pieces of legislation, including the American Rescue Plan, the Infrastructure Investment and Jobs Act and the CHIPS and Science Act. According to the White House, “over 99 percent of high-poverty counties in the United States” are benefiting from its “Investing in America” agenda.
Lael Brainard, the director of the National Economic Council, singled out Milwaukee and Allentown, Pa., as beneficiaries of President Biden’s policies in a speech in January. (Biden had recently visited both cities.) She contrasted Biden’s approach with the “trickle down” policies of the past, including the Trump administration’s.
President Donald Trump included opportunity zones, which are a form of place-based aid, in the Tax Cuts and Jobs Act of 2017, but critics say they have mainly benefited wealthy investors, who got tax breaks. Project 2025, which Trump says he hasn’t read but is intended as a blueprint for his administration if he wins in November, proposes to abolish the Economic Development Administration, a major conduit for place-based aid. Or if that’s impossible, to reassign it “to better align funding with conservative political purposes.”
So, how is Biden’s place-based economics working out so far? It’s important to keep things in perspective. While place-based aid in the form of government transfers has grown to around $300 billion a year, according to a 2022 study, it’s still much smaller than the more than $3 trillion spent on person-based transfers.
It’s also important to distinguish place-based aid from government spending that’s mainly done for other purposes. For example, the CHIPS and Science Act and the Inflation Reduction Act have ignited a boom in construction in Texas, Arizona, Ohio and Georgia, but neither law was primarily about aiding places. Conversely, aid intended for people can aid places — by funneling money into communities where jobs are scarce.
Timothy Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research who is an expert on the topic, says it’s important to differentiate two types of place-based aid. One type is for creating tech hubs, which is what Gruber and Johnson had in mind. That requires a skilled work force plus probably a good local university or two. The goal is to jump-start what turns into a self-sustaining local tech economy. The other type of aid is for more distressed areas that will never resemble Silicon Valley. There the goal is to fit the new jobs to the skills that are available, helping the populace while increasing economic output.
It’s easy to get funding for the tech stuff, Bartik said. In contrast, “It’s always hard to target distressed places,” he said. “They have less political clout, less wealth, fewer prominent leaders. You’re trying to set up programs to change the path of development. It’s harder than you might think.”
This month the Economic Innovation Group wrote that while manufacturing employment has grown rapidly in the Sun Belt and Mountain West, “the Rust Belt continues to rust.” Not exactly evidence of the administration’s success on the place-based front.
“The vision and appetite for intervention is large but Congress’s actual material support has fallen short,” Mark Muro, a senior fellow at the Brookings Institution who also specializes in place-based policies, told me.
“We’ve learned that excessive laissez-faire in the trajectory of cities can lead to a lock-in and then excessive concentration” of jobs in a handful of superstar cities, Muro said. He worries that history is repeating itself in the emerging field of generative artificial intelligence, which has produced most of its jobs in a few established tech hubs.
Fighting market forces doesn’t come cheap, though. Last year the nonpartisan Congressional Research Service wrote that “one persistent criticism” of place-based programs is that rather than adding to economic activity, it will simply move it from one place to another. That was the criticism levied against the T.V.A.
Another risk is that place-based aid could “potentially concentrate poverty by inducing the poor to stay in poor places,” a Federal Reserve Bank of Richmond brief warned this year. It added that “instead of locals benefiting, landowners or workers from neighboring areas may receive the bulk of the benefits.”
Smart people are aware of these potential drawbacks and have ideas for how to remedy them. If investment in places truly can reignite their growth, everyone benefits. The National Bureau of Economic Research is staging a two-day international conference next month to explore the economics of place-based policies. One session is titled, “Lessons Learned and Ignored in U.S. Place-Based Policymaking.”
Still, as the Richmond Fed brief observes, place-based aid is “far from being the silver bullet to solve all sources of economic disparities across regions.” At best it’s a complement to helping people directly. Something to think about the next time you encounter an old stone wall deep in the woods.
The Readers Write
Long story short, the State Legislature has not done nearly enough to fix Florida’s insurance problems. The insurance companies who lobby and donate to them may be pleased, but the citizens the Legislature supposedly serves are far from happy.
Brian StokesJacksonville, Fla.
I have long been addicted to reading old newspapers. My go-to sources are The Times and The New York Tribune, which is available for free on the website of the Library of Congress (here and here). I like to go past the big news to society notes, the crime blotter, advertisements including the classifieds, financial news, essays from travelers, entertainment and books, and religious essays/sermons.
Most of us would not have the skills to survive in the mid-19th century were we magically transported back. Generally, people owned only a few sets of clothes, which were made and mended at home. The poor often owned only the clothes on their backs. Respectable people took a bath once a week, usually on the night before church. Someone whose name escapes me once noted that the past was dark, stinky and dangerous. And the farther back you go, the darker it was.
John CheeversNorth Fort Myers, Fla.
Quote of the Day
“I have always wanted to be a detective and have finally succeeded.”
— Claudia Goldin, 2023 Nobel laureate economist, quoted by Michael Szenberg, editor, in “Passion and Craft: Economists at Work” (1998)
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