Turning the Page


This month the Curmudgeon is wandering into the politics and local economic development topic. But warning is in order; the pompous fool is not going to concern himself with the obvious everyday practitioner concern of how to best cope with the deleterious effects of political meddling into solid and effective local programs and initiatives. Instead, the old codger is delving into various “theories” of local politics and their implications on local economic development. This is on top of last month’s theme of growth and innovation economics in which the Curmudgeon again focused on “theories”, this time economic. What is with this fascination with “theories”?

Explaining the Curmudgeon’s obsession with theory is the purpose of this article. If the reader wants to, unbelievably, immerse herself immediately into political approaches to local economic development, she is urged to quickly click here and move to our second article “Political Approaches and Local Economic Development”. But if the reader is a bit adventurous, if not curious, as to why the Curmudgeon is devoting so much time and effort to theoretical approaches, read on.

One of the few benefits the Curmudgeon enjoyed in having his first career in academia, then followed by a second career in the field of local economic development, was that he was reasonably trained in the theories of politics, public policy, administration and economics while he was actually trying to create jobs and reduce population loss in the chronically distressed New York region. In effect, the Curmudgeon was an “a fly on the wall” watching, mixing and matching the day to day morass and seeing how it jelled with one theory or another. In retrospect this was invaluable, and an almost unique perspective—which probably accounts for the Curmudgeon’s obnoxiousness and cynicism, if not sarcasm. He saw the limits of theories, but he also saw there was much greater predictability and explanation underneath the seemingly pervasive confusion and mishmash of day to day survival in local economic development. There was some underlying order, which if properly understood, gave him an advantage, or at least an explanation of why someone was punching him in the stomach.  Life is full of such small comforts.

Accordingly, this article has a second purpose: to provide some explanation as to why theories can be useful in day to day economic development and also to provide some, probably useless, guidance as to how to evaluate different theories and their utility to practical local economic development.

Why is the Curmudgeon devoting so much attention to “Theories”?

First things first. Why the fascination with Theory in the recent Journal issues? Most articles and writers of economic development commentary seem to focus their attention on specific programs (EB-5, industrial revenue bonds, Main Street, skills upgrade, entrepreneurism, export, SBA504, etc), sectors (manufacturing or green) or at most an “approach” such as “clusters” or “regionalism” or the more traditional business attraction or retention. For the most part, the Curmudgeon hasn’t. Although he plans to in the future (he is currently researching manufacturing and business climate, for instance), these more specific topics, he feels, are less important to the local economic developer than a solid, regrounding of the basics of what local economic development should be about. The reassessment of the goals and central purposes of local economic development are critically important because the Curmudgeon believes we are current living in the transition from one era to a future, largely unknown era. We are in the midst of “turning a page”.

Turning a page is an excellent metaphor. After reading a page for a period of time, one fairly quickly grabs a page’s corner and flips over to a new page. But in the real life of local economic development (and life) flipping a page takes time – lots of it. As time drips by, the reader remembers the characters and issues of the past page, but knows instinctually that the forthcoming page will take these familiar themes and rework them with new information and worse, will actually bring new issues and characters into play which will perhaps morph the old into something new entirely. Usually in reading, this potential for change is why we read; it is actually exciting. In life, turning a page, with paychecks, skills and ego involved, is threatening. The Curmudgeon thinks we are economically and politically, perhaps culturally, turning a page—and the practice of sub-state economic development will be affected dramatically. The best defense in this threatening, but exciting, period starts with “Knowing Yourself” and re-understanding the basics of the profession. This means coming to grips with theories and core goals and desired values.

He might be wrong, of course. The Curmudgeon is prone to error, and in fact seems to search it out. But as usual, he doesn’t yet recognize that he is wrong. So until he finally has to concede the error of his ways, he thinks we are in a transition period from one epoch (call it, the Great Moderation) to a largely unknown and unknowable epoch (call it the future). This transition period is the topic of the Journal’s first issue: The New Normal (or Richard Florida’s Great Reset).  Specific programs and magic bullet initiatives offer hope (and deception) to local economic developers in these desperate and confusing times, but they miss the much larger and most important point, that we had better understand “what” we “should” do and “can” do in the future, before we can really tackle “how” we do it. This is a “back to the future” basics where we rediscover the limits of our past assumptions and question the likelihood and desirability of future goals and policy directions for a future world seen only as shadows in Plato’s cave.

There is a second reason for acquainting local economic developers with underlying theories and approaches: there is a serious disconnect between what economic developers are doing in programs and what most economic developers “think” they are doing and there is almost a complete ignorance as to the values, goals and timeframes inherent in many current programs, policies and initiatives. Often economic developers seem to be on automatic pilot, simply carrying on programs and value priorities simply because this is what they (and their EDOs) have always done. In other instances, developers embrace initiatives and programs with a rather poor understanding of not only the suitability of these efforts for their jurisdiction, but what these programs and initiatives really seek to achieve.

All of this disconnect is permitted, even encouraged, by the profession’s inability to seriously evaluate the consequences and effectiveness of the tools, programs, and initiatives we pursue. Instead, we frequently see in the literature, either those who critique local economic development as fruitless and error-filled, and those who within hours of launching a new initiative observe the revitalization of their community.  It has become easy to deceive ourselves as to what really works. However, even if something does work, proving it is quite another matter.

In an economy (and an epoch) dominated by macro and global distortions, local program successes can either be crushed, or obscured by the larger events and forces. Worse, perhaps, is the common linking of local economic development to three goals (jobs, population and taxes) and the inability to measure consistently and efficiently whether, and to what extent, local economic development programs have contributed to their trend. Assertion and marketing have often filled the gap between program and performance.

So What Is A Theory?

Now’s the time to throw out some convoluted verbiage derived from academia as to what a theory is or is not. Except the Curmudgeon won’t, and with apologies to Kuhn (Structure of Scientific Revolutions, 1962), he will blaze on with his own rambling description of a theory.

A theory is really an attempt at organizing the observable reality that concerns the theory’s author. Theories are not, therefore, right or wrong. They are rather tools to be used as appropriate to the task at hand. Usually each theory poses several questions, its author deems important or critical to be answered (and in so doing ignores or downplays other questions). In this sense, theories are limited (there really is no “theory of everything”).

Also, to grapple with all elements included in questions it seeks to answer would overwhelm any theory-maker.  So theories simplify complex life realities into basic assumptions and key variables/concepts (for instance, perfect rationality and information which supposedly guides the Adam Smith’s invisible hand). Because they simplify reality, theories become approximations of the reality they seek to explain. As long as theories stay in academia, the risks inherent in any assumption may be manageable, but in real life, assumptions are real weaknesses for any theory. Though the assumptions do not square with real life behavior, or deviations from assumptions occur (this is the so-called Black Swan issue), a theory may be able to predict, but not explain behavior (or vice versa).

Theories really have two purposes: explain the reality and prediction as to how reality will respond to changes in either the assumptions or the key variables around which the theory is based (for instance, Karl Marx used “economic class” and “class conflict” as key variables in his theory of socialism). Explanation and prediction are the benchmarks for evaluating the utility of any theory, and the theory which best explains and predicts the reality associated with the questions originally posed by the theory may often be labeled as a “paradigm” or a theory in which most members in a profession adhere or accept in a formal and informal consensus (for example, evolution).

Since the questions which inspire a theory/paradigm change over time, it is no surprise that theories beget counter-theories and off we go to the typical academic professional races in which rival sub-theories contend within a general consensus or paradigm. Each profession has its own paradigms, theories, and sub-theories. Research and policy prescriptions emanate from each of these categories and it is at this point that the layman, (us—the practitioner) get involved.

By the time the practitioner gets a hold of a theory, we are usually in the theory’s second derivative, i.e. the assumptions, key concepts, inherent values preferences, and even the original questions which prompted the theory and critiques of the theory, are often ignored or downplayed and instead actions or programs and policies stressed. This is not a conspiracy. Practitioners often don’t want to wade through the theory, and the theory’s adherents exhibit little enthusiasm for explaining things to the Great Unwashed.  Hence clusters and Innovation and Knowledge-based Economics as economic development policy.

One final aspect of a theory which should be mentioned. Theories have values built into them; some are intended, others less so. Theories are NOT value-free. First, what do we mean by values? Values are subjective preferences. Scholars frequently allude to the “normative” aspect of a theory. Examples of values common to political and economic theories are equality (or inequality), efficiency, justice, security, liberty, reliance of private markets versus government.

Usually, again consciously or not, theories exhibit a preference order among values. For instance, growth economics values growth higher than other values. These values and their preference ordering are often unarticulated and far from evident. Yet they are very critical to understanding the theory. Innovation and growth economics, as we exposed last month, contains a clear, but unarticulated preference for a strong active government which drives private markets. Economic developers pursuing innovation policies may, or may not, support this preference, but more than likely they are fairly unaware that such a preference is built into the theory and may be amazed when somebody throws a tea bag at them.  Theories can easily be captured by one or another of the in vogue political ideologies.

These unarticulated values are even more obscured when the articles and research supporting the theory include mathematical, modeling and statistical methodologies. The “myths and mists of math” can convey or create a sort of “the numbers are what the numbers are” mentality. But the numbers are never what they are; that’s why statistics lie. The math and methodologies in general often flow from the questions, assumptions, key variables, and values within the theory. Each theory will gravitate to certain methodologies which best suit answering the questions it seeks to answer.

The types of data to be used as supportive of the theory will also vary. For instance, growth economics relied quite extensively on international patent datasets as well as datasets of national and international growth rates. Use of different datasets can quite logically result in different findings (which account for the various counter-theories running around within each academic discipline). In short, the practitioner, who is not ever going to be aware of these normative and methodological biases inherent in any theory, should, at least, recognize they exist and make reasonable efforts to uncover these silent preferences as they evaluate the theory’s utility for use.

To summarize all this we list four verbs: “explain” and “predict” (the purposes and benchmarks of a theory), “limit” (the questions under observation) and “simplify” (the real life behavior of the phenomena being observed) are constraints inherent in a theory which ought to be appreciated by any who pursue policy or program actions flowing from the theory. Theories are “heuristic”, meant to be useful but not meant to be semi-religious articles of faith, deviance from which sends one to paradigmatic hell. And theories are NOT value neutral. They are value laden and contain preferences regarding which values are more important than other values.

Before the Journal’s readers receive mutterings from the Curmudgeon regarding more specific programs and policies, such as business climate or export-enhancement programs, he wants the readership to be sensitive to the theories (and values) from which they flow.


I don’t know whether it’s just me or if everybody else encountering problems with your site. It appears like some of the text in your posts are running off the screen. Can somebody else please provide feedback and let me know if this is happening to them too? This may be a issue with my internet browser because I’ve had this happen before. Kudos

Comment by stone island scarf on October 24, 2015 at 5:00 pm

/Thank you for the feedback. I am not expert on these matters and will refer then to the site administrator. I do not have this issue ofte, but once every so often. I do suspect it is your browser–if only based on my own personal experience. I will keep you posted if I find out differently. Again thank you.

Comment by The Economic Development Curmudgeon on October 26, 2015 at 2:18 am

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