Economic development

Economic development

Overview
Economic development generally refers to the sustained, concerted actions of policymakers and communities
Community
The term community has two distinct meanings:*a group of interacting people, possibly living in close proximity, and often refers to a group that shares some common values, and is attributed with social cohesion within a shared geographical location, generally in social units larger than a household...

 that promote the standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

 and economic health
Economic expansion
An economic expansion is an increase in the level of economic activity, and of the goods and services available in the market place. It is a period of economic growth as measured by a rise in real GDP.The explanation of such fluctuations in aggregate economic activity is one of the primary...

 of a specific area. Such actions can involve multiple areas including development of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

, critical infrastructure
Critical infrastructure
Critical infrastructure is a term used by governments to describe assets that are essential for the functioning of a society and economy. Most commonly associated with the term are facilities for:*electricity generation, transmission and distribution;...

, regional competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...

, environmental sustainability, social inclusion, health
Health
Health is the level of functional or metabolic efficiency of a living being. In humans, it is the general condition of a person's mind, body and spirit, usually meaning to be free from illness, injury or pain...

, safety
Safety
Safety is the state of being "safe" , the condition of being protected against physical, social, spiritual, financial, political, emotional, occupational, psychological, educational or other types or consequences of failure, damage, error, accidents, harm or any other event which could be...

, literacy
Literacy
Literacy has traditionally been described as the ability to read for knowledge, write coherently and think critically about printed material.Literacy represents the lifelong, intellectual process of gaining meaning from print...

, and other initiatives. Economic development differs from economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

. Whereas economic development is a policy intervention
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...

 endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

 productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 and rise in GDP.
Discussion
Ask a question about 'Economic development'
Start a new discussion about 'Economic development'
Answer questions from other users
Full Discussion Forum
 
Unanswered Questions
Encyclopedia
Economic development generally refers to the sustained, concerted actions of policymakers and communities
Community
The term community has two distinct meanings:*a group of interacting people, possibly living in close proximity, and often refers to a group that shares some common values, and is attributed with social cohesion within a shared geographical location, generally in social units larger than a household...

 that promote the standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

 and economic health
Economic expansion
An economic expansion is an increase in the level of economic activity, and of the goods and services available in the market place. It is a period of economic growth as measured by a rise in real GDP.The explanation of such fluctuations in aggregate economic activity is one of the primary...

 of a specific area. Such actions can involve multiple areas including development of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

, critical infrastructure
Critical infrastructure
Critical infrastructure is a term used by governments to describe assets that are essential for the functioning of a society and economy. Most commonly associated with the term are facilities for:*electricity generation, transmission and distribution;...

, regional competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...

, environmental sustainability, social inclusion, health
Health
Health is the level of functional or metabolic efficiency of a living being. In humans, it is the general condition of a person's mind, body and spirit, usually meaning to be free from illness, injury or pain...

, safety
Safety
Safety is the state of being "safe" , the condition of being protected against physical, social, spiritual, financial, political, emotional, occupational, psychological, educational or other types or consequences of failure, damage, error, accidents, harm or any other event which could be...

, literacy
Literacy
Literacy has traditionally been described as the ability to read for knowledge, write coherently and think critically about printed material.Literacy represents the lifelong, intellectual process of gaining meaning from print...

, and other initiatives. Economic development differs from economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

. Whereas economic development is a policy intervention
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...

 endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

 productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 and rise in GDP. Consequently, as economist Amartya Sen
Amartya Sen
Amartya Sen, CH is an Indian economist who was awarded the 1998 Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory, and for his interest in the problems of society's poorest members...

 points out: “economic growth is one aspect of the process of economic development.”

Term


The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people.

The University of Iowa's Center for International Finance and Development states that:


'Economic development' is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization
Modernization
In the social sciences, modernization or modernisation refers to a model of an evolutionary transition from a 'pre-modern' or 'traditional' to a 'modern' society. The teleology of modernization is described in social evolutionism theories, existing as a template that has been generally followed by...

, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism.


Mansell and Wehn also state that economic development has been understood since the World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 to involve economic growth, namely the increases in per capita income
Per capita income
Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate and dividing it by the total population...

, and (if currently absent) the attainment of a standard of living equivalent to that of industrialized countries. Economic development can also be considered as a static theory that documents the state of an economy at a certain time. According to Schumpeter (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factors coming from the outside.

Social Science Research


The study of economic development by social scientists encompasses theories of industrial/economic modernization
Modernization
In the social sciences, modernization or modernisation refers to a model of an evolutionary transition from a 'pre-modern' or 'traditional' to a 'modern' society. The teleology of modernization is described in social evolutionism theories, existing as a template that has been generally followed by...

 causes, the historical phases or waves of economic development, and the organizational aspects of enterprise development in modern societies
Modernity
Modernity typically refers to a post-traditional, post-medieval historical period, one marked by the move from feudalism toward capitalism, industrialization, secularization, rationalization, the nation-state and its constituent institutions and forms of surveillance...

. Economic development embraces sociological research
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...

 on a variety of topics including: business organization
Industrial organization
Industrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....

, enterprise development, evolution of market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

s and management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...

, and cross-national comparisons of industrial organization
Industrial organization
Industrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....

 patterns. One example inquiry would be: "Why are levels of direct foreign investment and labour productivity significantly higher in some countries than in others?"

In economics, the study of economic development was borne out of an extension to traditional economics that focused entirely on national product, or the aggregate output of goods and services. Economic development was concerned in the expansion of people’s entitlement
Entitlement
An entitlement is a guarantee of access to benefits based on established rights or by legislation. A "right" is itself an entitlement associated with a moral or social principle, such that an "entitlement" is a provision made in accordance with legal framework of a society...

s and their corresponding capabilities, morbidity, nourishment, literacy
Literacy
Literacy has traditionally been described as the ability to read for knowledge, write coherently and think critically about printed material.Literacy represents the lifelong, intellectual process of gaining meaning from print...

, education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...

, and other socio-economic
Socioeconomics
Socioeconomics or socio-economics or social economics is an umbrella term with different usages. 'Social economics' may refer broadly to the "use of economics in the study of society." More narrowly, contemporary practice considers behavioral interactions of individuals and groups through social...

 indicators. Borne out of the backdrop of Keynesian, advocating government intervention, and neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

, stressing reduced intervention, with rise of high-growth countries (Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...

, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...

, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...

) and planned governments (Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...

, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...

, Sudan
Sudan
Sudan , officially the Republic of the Sudan , is a country in North Africa, sometimes considered part of the Middle East politically. It is bordered by Egypt to the north, the Red Sea to the northeast, Eritrea and Ethiopia to the east, South Sudan to the south, the Central African Republic to the...

, Uganda
Uganda
Uganda , officially the Republic of Uganda, is a landlocked country in East Africa. Uganda is also known as the "Pearl of Africa". It is bordered on the east by Kenya, on the north by South Sudan, on the west by the Democratic Republic of the Congo, on the southwest by Rwanda, and on the south by...

), economic development, more generally development economics, emerged amidst these mid-20th century theoretical interpretations of how economies prosper. Also, economist Albert O. Hirschman
Albert O. Hirschman
Albert Otto Hirschman is an influential economist who has authored several books on political economy and political ideology. His first major contribution was in the area of development economics. Here he emphasized the need for unbalanced growth...

, a major contributor to development economics
Development economics
Development Economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example,...

, asserted that economic development grew to concentrate on the poor regions of the world
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...

, primarily in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...

, Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...

 and Latin America
Latin America
Latin America is a region of the Americas where Romance languages  – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...

 yet on the outpouring of fundamental ideas and models.

Growth and Development


Dependency theorists argue that poor countries have sometimes experienced economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 with little or no economic development initiatives; for instance, in cases where they have functioned mainly as resource-providers to wealthy industrialized countries. There is an opposing argument, however, that growth causes development because some of the increase in income gets spent on human development such as education and health.

According to Ranis et al. (2000), economic growth and human development
Human development (humanity)
Human development in the scope of humanity, specifically international development, is an international and economic development paradigm that is about much more than the rise or fall of national incomes. People are the real wealth of nations...

 is a two-way relationship. Moreover, the first chain consists of economic growth benefiting human development with GNP
GNP
Gross National Product is the market value of all products and services produced in one year by labor and property supplied by the residents of a country...

. Specifically, GNP increases human development by expenditure from families, government and organizations such as NGOs. With the rise in economic growth, families and individuals will likely increase expenditures with heightened incomes, which in turn leads to growth in human development. Further, with the increased consumption, health and education grow, also contributing to economic growth.

In addition to increasing private incomes, economic growth also generate additional resource
Resource
A resource is a source or supply from which benefit is produced, typically of limited availability.Resource may also refer to:* Resource , substances or objects required by a biological organism for normal maintenance, growth, and reproduction...

s that can be used to improve social services (such as healthcare, safe drinking water
Drinking water
Drinking water or potable water is water pure enough to be consumed or used with low risk of immediate or long term harm. In most developed countries, the water supplied to households, commerce and industry is all of drinking water standard, even though only a very small proportion is actually...

, etc.). By generating additional resources for social services, unequal income distribution
Income distribution
In economics, income distribution is how a nation’s total economy is distributed amongst its population.Income distribution has always been a central concern of economic theory and economic policy...

 will be mitigated as such social services are distributed equally across each community
Community
The term community has two distinct meanings:*a group of interacting people, possibly living in close proximity, and often refers to a group that shares some common values, and is attributed with social cohesion within a shared geographical location, generally in social units larger than a household...

, thereby benefiting each individual. Thus, increasing living standards for the public.
Concisely, the relationship between human development and economic development can be explained in three ways. First, increase in average income leads to improvement in health
Health
Health is the level of functional or metabolic efficiency of a living being. In humans, it is the general condition of a person's mind, body and spirit, usually meaning to be free from illness, injury or pain...

 and nutrition
Nutrition
Nutrition is the provision, to cells and organisms, of the materials necessary to support life. Many common health problems can be prevented or alleviated with a healthy diet....

 (known as Capability Expansion through Economic Growth). Second, it is believed that social outcomes can only be improved by reducing income poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

 (known as Capability Expansion through Poverty Reduction). Lastly, social outcomes can also be improved with essential services such as education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...

, healthcare, and clean drinking water
Drinking water
Drinking water or potable water is water pure enough to be consumed or used with low risk of immediate or long term harm. In most developed countries, the water supplied to households, commerce and industry is all of drinking water standard, even though only a very small proportion is actually...

 (known as Capability Expansion through Social Services).

John Joseph Puthenkalam's research aims at the process of economic growth theories that lead to economic development. After analyzing the existing capitalistic growth-development theoretical apparatus, he introduces the new model which integrates the variables of freedom, democracy and human rights into the existing models and argue that any future economic growth-development of any nation depends on this emerging model as we witness the third wave of unfolding demand for democracy in the Middle East. He develops the knowledge sector in growth theories with two new concepts of 'mirco knowledge' and 'macro knowledge'. Micro knowledge is what an individual learns from school or from various existing knowledge and macro knowledge is the core philosophical thinking of a nation that all individuals inherently receive. How to combine both these knowledge would determine further growth that leads to economic development of developing nations. For further reading, please refer to "Integrating Freedom, Democracy and Human Rights into Theories of Economic Growth" & other publications(1998,2000&2010).

Goals


In the United States, Project Socrates
Project Socrates
Project Socrates was a US Defense Intelligence Agency program established in 1983 within the Reagan administration. This classified program, founded and directed by physicist Michael Sekora, was designed for the purpose of identifying the root cause of the United States' declining ability to...

  outlined competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...

 as the driving factor for successful economic development in government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...

 and industry
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...

. By addressing technology directly, to meet customer needs, competitiveness was fostered in the surrounding environment and resulted in greater economic performance and sustained growth.

Economic development typically involves improvements in a variety of indicators such as literacy rates, life expectancy
Life expectancy
Life expectancy is the expected number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...

, and poverty rates. GDP does not take into account other aspects such as leisure
Leisure
Leisure, or free time, is time spent away from business, work, and domestic chores. It is also the periods of time before or after necessary activities such as eating, sleeping and, where it is compulsory, education....

 time, environment
Natural environment
The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....

al quality, freedom, or social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

; alternative measures of economic well-being have been proposed (more). Essentially, a country's economic development is related to its human development, which encompasses, among other things, health and education. These factors are, however, closely related to economic growth so that development and growth often go together.

Regional policy


]
In its broadest sense, policies of economic development encompass three major areas:
  • Governments undertaking to meet broad economic objectives such as price
    Price
    -Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...

     stability, high employment
    Employment
    Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

    , and sustainable growth
    Sustainable development
    Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...

    . Such efforts include monetary
    Monetary policy
    Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

     and fiscal policies, regulation of financial institutions, trade
    Trade
    Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...

    , and tax
    Tax
    To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

     policies.
  • Programs that provide infrastructure and services such as highway
    Highway
    A highway is any public road. In American English, the term is common and almost always designates major roads. In British English, the term designates any road open to the public. Any interconnected set of highways can be variously referred to as a "highway system", a "highway network", or a...

    s, park
    Park
    A park is a protected area, in its natural or semi-natural state, or planted, and set aside for human recreation and enjoyment, or for the protection of wildlife or natural habitats. It may consist of rocks, soil, water, flora and fauna and grass areas. Many parks are legally protected by...

    s, affordable housing
    Affordable housing
    Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...

    , crime prevention
    Crime prevention
    Crime prevention is the attempt to reduce victimization and to deter crime and criminals. It is applied specifically to efforts made by governments to reduce crime, enforce the law, and maintain criminal justice.-Studies:...

    , and K–12 education
    Primary education
    A primary school is an institution in which children receive the first stage of compulsory education known as primary or elementary education. Primary school is the preferred term in the United Kingdom and many Commonwealth Nations, and in most publications of the United Nations Educational,...

    .
  • Job creation and retention through specific efforts in business finance
    Finance
    "Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

    , marketing
    Marketing
    Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...

    , neighborhood development
    Community development
    Community development is a broad term applied to the practices and academic disciplines of civic leaders, activists, involved citizens and professionals to improve various aspects of local communities....

    , workforce development
    Workforce development
    Workforce development is an American economic development approach that attempts to enhance a region's economic stability and prosperity by focusing on people rather than businesses. It is essentially a human resources strategy...

    , small business
    Small business
    A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships...

     development, business
    Business
    A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

     retention and expansion, technology transfer
    Technology transfer
    Technology Transfer, also called Transfer of Technology and Technology Commercialisation, is the process of skill transferring, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities among governments or universities and other institutions to ensure that...

    , and real estate
    Real estate
    In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...

     development. This third category is a primary focus of economic development professionals.


One growing understanding in economic development is the promotion of regional clusters
Business cluster
A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used...

 and a thriving metropolitan economy
Metropolitan economy
A metropolitan economy refers to the cohesive, naturally evolving concentration of industries, commerce, markets, firms, housing, human capital, infrastructure and other economic elements that are comprised in a particular metropolitan area...

. In today’s global landscape, location is vitally important and becomes a key in competitive advantage. The cluster of similar industries, specialties, skilled laborforce, and technologies help lower transaction costs and foster a growing environment of commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...

, entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

, exports, and other market productive activities. Additionally, local services such as restaurants, stores, and trades experience growth as well, helping to develop a vibrant region for the wider community. Even the U.S.’s Economic Development Administration
Economic Development Administration
The Economic Development Administration is an agency in the United States Department of Commerce that provides grants to economically distressed communities to generate new employment, help retain existing jobs and stimulate industrial and commercial growth.-History:The EDA was established under...

 recognizes the importance of clusters with their continued Regional Innovation Clusters initiative which aims to “create jobs and grow the economy” through the geographic concentrations of industries and firms in their need for talent, technology, and infrastructure.

International trade and exchange rates are a key issue in economic development. Currencies are often either under-valued or over-valued
Kemal Kurdas
Kemal Kurdas was Turkish Minister of Finance, the IMF’s adviser to Latin American governments and deputy head of the Turkish Treasury. But those jobs were just a small part of a long career. He went on to develop Middle East Technical University, build a distinctive campus for it and create a...

, resulting in trade surpluses or deficits.

Organization


Economic development has evolved into a professional industry of highly specialized practitioners. The practitioners have two key roles: one is to provide leadership in policy-making
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...

, and the other is to administer policy, programs, and projects. Economic development practitioners generally work in public offices on the state, regional, or municipal level, or in public-private partnerships organizations that may be partially funded by local, regional, state, or federal tax money. These economic development organizations (EDO's) function as individual entities and in some cases as departments of local governments. Their role is to seek out new economic opportunities and retain their existing business wealth.

There are numerous other organizations whose primary function is not economic development work in partnership with economic developers. They include the news media, foundations, utilities, schools, health care providers, faith-based organizations, and colleges, universities, and other education or research institutions.

International Economic Development Council


With more than 20,000 professional economic developers employed world wide in this highly specialized industry, the International Economic Development Council
International Economic Development Council
The International Economic Development Council, also known as the IEDC, is an organization for Economic developers. It has more than 4,000 members in North America and around the world, and is the largest organization of its kind in existence...

 (IEDC) headquartered in Washington, D.C. is a non-profit organization dedicated to helping economic developers do their job more effectively and raising the profile of the profession. With over 4,500 members across the US and internationally, serving exclusively the economic development community, IEDC membership represents the entire range of the profession ranging from regional, state, local, rural, urban, and international economic development organizations, as well as chambers of commerce, technology development agencies, utility companies, educational institutions, consultants and redevelopment authorities. Many individual states also have associations comprising economic development professionals, who work closely with IEDC.

Community Competition


One unintended consequence of economic development is the intense competition between communities, states, and nations for new economic development projects in today's globalized world
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

. With the struggle to attract and retain business, competition is further intensified by the use of many variations of economic incentives to the potential business such as: tax incentives, investment capital, donated land, utility rate discounts, and many others. IEDC places significant attention on the various activities undertaken by economic development organizations to help them compete and sustain vibrant communities.

Additionally, the use of community profiling tools and database
Database
A database is an organized collection of data for one or more purposes, usually in digital form. The data are typically organized to model relevant aspects of reality , in a way that supports processes requiring this information...

 templates to measure community assets versus other communities is also an important aspect of economic development. Job creation, economic output, and increase in taxable basis are the most common measurement tools. When considering measurement, too much emphasis has been placed on economic developers for "not creating jobs." However, the reality is that economic developers do not typically create jobs, but facilitate the process for existing businesses and start-ups
Startup company
A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets...

 to do so. Therefore, the economic developer must make sure that there are sufficient economic development programs in place to assist the businesses achieve their goals. Those types of programs are usually policy-created and can be local, regional, statewide and national in nature.

See also


  • Business cluster
    Business cluster
    A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used...

  • Constitutional economics
    Constitutional economics
    Constitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of 'the economic analysis of constitutional law' in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the...

  • Development economics
    Development economics
    Development Economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example,...

  • Economic growth
    Economic growth
    In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

  • FORGE Program
    FORGE Program
    FORGE is a United States based nonprofit organization that works with displaced communities in Africa. FORGE was founded by Stanford University graduate Kjerstin Erickson at the age of 20 in 2003. Since its founding, FORGE has implemented over sixty community development projects that have served...

  • Infrastructure
    Infrastructure
    Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

  • Metropolitan economy
    Metropolitan economy
    A metropolitan economy refers to the cohesive, naturally evolving concentration of industries, commerce, markets, firms, housing, human capital, infrastructure and other economic elements that are comprised in a particular metropolitan area...

  • Private Sector Development
    Private sector development
    Private Sector Development is a strategy for promoting economic growth and reducing poverty in developing countries by building private enterprises, membership organizations representing them, and competitive markets that are stronger and more inclusive....

  • Public capital