Place-Based Economic Policy: Innovation or Fad?

By Johnson, Thomas G. | Agricultural and Resource Economics Review, April 2007 | Go to article overview

Place-Based Economic Policy: Innovation or Fad?


Johnson, Thomas G., Agricultural and Resource Economics Review


This paper explores the emerging concept of place-based economic policy. It reviews recent literature on place-based economics policy, especially regional competitiveness policy, and explores the adoption and diffusion of this concept by economic development practitioners and social science researchers. It attempts to answer the question: Are place-based economic policy and the underlying conceptual foundations lasting innovations, or are they fads which economic development practitioners and social scientists will adopt until another fad emerges? The conclusion is that economic development practitioners and social scientists do tend to respond to fads. To ensure that regional economic development policy is not dominated by fads, social scientists must get out in front of economic development practitioners far enough to thoroughly develop and test regional competitiveness and other place-based economic theories.

Key Words: regional, competitiveness, place-based, clusters, policy

The goal of this paper is to explore what appears to be an emerging concept in the social sciences referred to as, among other things, place-based economics. There are several related streams of thought that are moving in similar directions towards the view that economic processes are best understood in the context of space. In a 2002 paper (Johnson 2002), I explored the relationship between space, as treated in regional science, economics, and economic geography, as well as sociology, anthropology, and other disciplines. My conclusion was that there was a great deal of room for elaboration of place in economic theories and that for the purposes of this elaboration, important insights could be drawn from other disciplines. In particular, it is important that we incorporate concepts similar to the notions of location, locale, and sense of place in geography (Agnew 1987, Massey 1994), as well as the related notions of cosmic, social, and personal space in ethnography (Kort 2001). This paper continues the effort to elaborate upon the role of place in economics by reviewing some of the recent literature on place-based economics policy. In order to better understand the potential for place-based economics in policy, I first explore the process by which this emerging concept is diffused and adopted by researchers and practitioners. Using this process, I focus on one thread of place-based policy-regional competitiveness theory-to shed light on the question: Are placebased economic policy and the underlying conceptual foundations lasting innovations, or are they fads which economic development practitioners and social scientists will adopt until another strategy emerges?

What Is Placed-Based Economics?

Not surprisingly, there is no accepted definition of place-based economics. For the purposes of this paper I define place-based economic theories as those in which economic behavior is explained as a process which is influenced by the characteristics of places, and by interpersonal relationships which are influenced by the characteristics of places.

Thus, place-based economic theories go beyond explaining behavior as a function of distance, proximity, transportation and communications infrastructure, irregularities in spatial form, etc. In such theories, place is different than space, region, and distance. Place-based theories are defined as those which generalize the role of place in shaping behavior.

There are a number of ideas that potentially meet this rather broad definition. Industrial targeting, regional competitiveness theory (including economic cluster theory), regional innovation systems, and entrepreneurial development theories (especially economic gardening) are all theories or perspectives that have features that make them candidates under this definition of placebased economics.

The focus of much of this paper is on one of these theories, Porter's regional competitiveness theory, primarily because the literature on this concept is becoming quite large and it is arguably the most readily recognized theory of this type.

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