Economic development is predicated on long-term investments in the generation,
dissemination and absorption of new ideas, as well as infrastructure. Economic development
requires collective action and large-scale investments with long time horizons.
Infrastructure
projects, a traditional concern of economic development, now extends to the digital realm. The
standard of literacy is expanded at a time when labor force participation requires a bachelor’s
degree with the expectation of continued lifetime education and training. Economic
development is predicated on cooperation between the public sector and private enterprise but is
defined by conditions established by government and public investments. Though it is certainly
possible to have growth without development in the short or even medium-term, economic
development creates the conditions that enable long-run economic growth.
Based on a review of the literature, we define economic development as the development
of capacities that expand economic actors’ capabilities. These actors may be individuals, firms,
or industries. While actors have different perceived potential, it is difficult to predict the next
new idea or to understand how genius may arise. In contrast to a resource-based economy, where
location was constrained to natural endowments,
a modern, knowledge-based economy depends
on capacity that is constructed over time. Many dynamic regional economies may have been
initiated by historical accident, whether we are thinking of the birthplace of Henry Ford or
Goodrich (Buenstorf and Klepper, 2009) or the William Shockley’s locational preferences
(Saxenian, 1978). These accidents are difficult to replicate; the most unexpected individuals
often come up with great ideas that enrich society. And yet, fortune favors the prepared: the
ability to benefit from serendipity relies on actors’ underlying capabilities (Feldman & Francis
2003). The argument that advantage is due to capacity investments that yield a long-term return
is gaining acceptance (Rodríguez-Pose and Storper, 2006). In the absence of any clear bets, the
best strategy is to enable every individual to fully participate in society and to realize their
potential.
