The Mercatus Center at George Mason University recently launched a project to study the economic development, entrepreneurship, and resiliency in America’s state and local governments. The project builds on over a decade of the Mercatus Center’s research on these issues in both the domestic and international contexts in places as diverse as South Africa’s townships; Memphis, Tennessee; post-Communist Romania; and post-Katrina Louisiana; and aims to better understand the institutional arrangements and their effects on economic opportunity, change, and resiliency on the local level.

For half a century, Washington has designed programs to help fix America’s cities. They have almost all universally failed. The reason for this, we hypothesize, is that the planners fail to understand and take into account the natural and true engines of prosperity: entrepreneurship, innovation, and markets. Moreover, they have created perverse incentives for entrepreneurs and policy makers at all levels and failed to appreciate the complex organic nature of modern economies.

The goal of the State and Local Policy Project is to spur the scholarly and political debates about how to improve policy and economic outcomes in America’s states and cities. Only through a better understanding of what actually happens on the ground and the natural progression of economies can scholars and policy makers hope to craft better policies that foster the growth of their economies.

This project will draw on the insights of the Austrian economics, public choice, and institutional analysis traditions in the social sciences and will employee, among other research techniques, ethnographic fieldwork to identify:

• The role of intergovernmental transfers and fiscal dynamics;
• The effects of institutional design and “rules of the game” in the interaction between public policy and markets and the evolution of the relationships between various levels of governments;
• The role of culture and social networks in economic growth; and
• The constraints facing entrepreneurs.

The importance of this project at this critical juncture cannot be overstated. Many states and most cities are facing crushing budget deficits, and unemployment and other economic and social ills are on the rise. The current economic crisis demonstrates that America’s states and cities are increasingly dependent on a Washington that precludes the federalist system from working effectively.

Contact Daniel Rothschild at (703) 993-4898 (office) (202)558-0248 (mobile) or drothsch@gmu.edu for more information on the State and Local Policy Project.