Resource Allocation Demands Resolution of Economic and Public Policy Needs

Article excerpt

Since President Clinton took office in January 1994, America's cities and towns have witnessed the first real effort to take the idea of enterprise zones (EZ), first popularized in England and delivered to America's shores under the Reagan Administration, and make it a national priority.

As local organizations begin receiving designations as one of nine enterprise communities and one of 95 empowerment zones, it is clear that the federal government has offered distressed areas of our country both a social and an economic boost. Some may argue that the federal commitment to the EZ idea is not enough, and others may say a federal EZ effort should not be done at all. However, for local officials, the important fact is that the movement represents a real federal effort to allocate resources to address urban and rural underdevelopment.

How local officials think about the enterprise zone debate is important in the broader discussion about the public policy process. The following article seeks to provide a framework for thinking about the value of the public policy process, while considering the imperfections in the market system. Clearly, a sharper focus on how and why resources are allocated will help local officials to argue for the public policy approach when the market process proves inadequate. by Herbert L. Green, Jr.

What makes good political sense and what makes good economic sense are not always one in the same.

Resources in American society are allocated along two overlapping but often conflicting tracks: the market economy and the political system. For local officials, when economic priorities and political or public policy needs collide, the situation needs careful handling and a true eye on the public good. That is a tough role, but for local officials it is a reality of day to day operations.

Determinants of market demand are based on income, pricing and consumer tastes and preferences. Market demand is based on a willingness and ability to pay. The market allocates resources efficiently, to the extent that it can capture the wants and needs of a society through the production, pricing, and distribution of goods and services. But does the market reflect all of society's wants and needs, and what about the demand that cannot be neatly put into a market niche?

The demand for a good quality of life reflected in public safety, economic development, health and well being, acceptance, opportunities, does not fit neatly into the market economy. However, these wants and needs are legitimate societal demands and they reflect, to some extent, the Constitutional construct of "life, liberty and the pursuit of happiness." Further, all Western societies today operate in a mixed economy. In a mixed economy, both political and economic choices are important, and the interaction of the two is most important.

Underdevelopment in America's cities, towns and rural communities, often reflect benign and deliberate neglect, and a rationalization by those who contend that the inability of the market system to address non market societal demand, is a natural consequence of a market driven system. However, America is a, mixed economy, and the reality is that all societal demand cannot be adequately addressed by the market, because a construct like quality of life is not purely an economic concept. …