Principles for rethinking the federal government's role in economic development

This article begins with a discussion of differences between economic and community development. A three-dimensional policy framework for analyzing subnational economic development policy is presented. One dimension consists of the goals of efficiency and equity. The confusion between the equity objectives of poverty alleviation and helping distressed communities is explained. The second dimension includes three sets of government and market failures that are rationales for federal intervention-provision of public goods, the mismatch in political and economic federalisms, and the mismatch between political and economic time horizons. The third dimension is the funding mechanisms for development programs-people, places, and people through places. The last section contains recommendations for restructuring federal policy.