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Question: Schumpeter speaks in terms of “ordinary” vs “quality” competition.  Firms facing ordinary competition focus on reducing costs to promote profits while firms facing quality competition focus on innovation to maximize profits. 

07 May 2023,5:06 PM


AAE 520, Community Economics

  1. Business Climate

Part A:                 A vital element of community economic development policy centers on how we think about business climate.  Over time, as the economy and our understanding of the economic growth and development process has changed, our thinking about what constitutes a positive business climate has changed.  What are some competing views around business climate and what are the theoretical justifications for those competing views?  Think in terms of economic growth theory as well as firm location theory.  Use those different theoretical perspectives to explain (defend?) the competing views of business climate.

Part B:                  What, in your opinion, is a positive business climate?  Identify and describe half a dozen (+/-) specific strategies that communities can put in place to foster a more pro-active positive business climate.


  1. Innovation and Economic Development

Part A:                 Economic historians have understood that innovation is key to economic growth and development for many years, but a consistent theory that explains why innovation occurs was not available until the introduction of endogenous growth theory: profit motivation encourages firms to invest in research and development to capture short-term monopoly rents.  But firms do not operate in a vacuum and are directly and indirectly influenced by the community/region in which they are located.  For example, are they part of a dynamic regional economic cluster.  Using the Rural Innovation Report (linked here and also available in the course announcement were this exam is posted in Canvas) as a point of reference, how “innovative” is the Wisconsin economy?   What does Wisconsin “have going for it” and/or “going against it"? (Wisconsin in this context is a “typical” U.S. state.)

Part B:                  Entrepreneurship is fundamental to the innovative process.  Why? 


10 Points Each (pick five)

  1. Define what makes an effective economic cluster ala Porter?  Pay particular attention to how social capital fit into an effective cluster.


  1. Schumpeter speaks in terms of “ordinary” vs “quality” competition.  Firms facing ordinary competition focus on reducing costs to promote profits while firms facing quality competition focus on innovation to maximize profits.  How can this simply dichotomy influence how communities think about economic growth and development?


  1. As we have discussed throughout the semester the role of quality of life and amenities (both natural and human-made) are becoming increasingly important to community economic development and growth.  Today investing in quality of life and amenity factors is widely referred to as “Placing Making” or the “4th Wave”.  What is the logic behind “Place Making” and why have some argued it’s a “win-win” strategy?


  1. Community economic development is sometimes accused of being a “zero-sum game” where the growth of one community comes at the expense of another.  Is this a fair accusation?  Think about it in the presence incentives aimed at encouraging firms to relocate from one community to another.


  1. One of the main themes of the course is that community economic development is a truly interdisciplinary area of study.  How each community approaches economic growth and development will be slightly different because of different local institutions, broadly defined (think varieties of capitalism at one level and cultural traditions at the local level). Describe how a community’s values and norms will affect the community’s approach to economic development.


  1. To most people economic development means “jobs, jobs, jobs”. Is there a difference between economic growth and economic development? What challenge does this present for the community economic development practitioner at the local level?


  1. Your job finds you living in a smaller community on the edge of a larger city.  The larger city has seen some better days and your new community has some empty store fronts downtown and some pockets of poverty.  As a new resident you want to become engaged/active in local development activities (a citizen volunteer, your job has nothing to do with this).  How would you proceed?


  1. Many communities jump into thinking about economic growth and development after some crisis in the community such as a major employer closing.  Are all communities ready to undertake economic growth and development?  What needs to be in place before a community can effectively undertake economic growth and development efforts?


  1. “This community is strugglingly because taxes are too high!”  As an academic how would you respond to this statement, now how would you respond as a community economic development practitioner or even a concerned citizen?
  2. Community economic development, which is a blending of the traditional areas of community development (building the capacity of the community) and economic development (creating economic opportunities), requires an interdisciplinary perspective for two reasons: (1) the norms of society, or informal rules of behavior, and (2) community economic development often takes a holistic approach. The challenge with this is that community can become cumbersomely complex. We discussed two systems thinking approaches at length in the course, what are those two approaches, and what are the pros and cons of each of these two approaches?



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