Why Economists need to do more Economic Development

I am currently working as an Economic Development Officer in Medicine Hat, Alberta, a job which I had not envisioned myself in 2 years ago.

During school, my educational interests had always been in macroeconomics, financial economics, and national economic development. When I moved back to Alberta from Ontario, I managed to work, for a time with the local Chamber of Commerce here and, since then, have found employment with an Economic Development Association.

My training curve in this position has been steep. While my backgroudn in policy, politics and economics was an asset, Economic Development, at least in the context of what I am doing now, is a far throw from what I was studying in school and how I envisioned development economics might work.

While there are many differences between the two school of thought (here I refer to micro-economic development at the local level and macro-economic development at the national or global level). Micro-Ec. Dev. (or just Micro, for short) is about work, typically one-on-one with business owners, entrepreneurs and inventors to help them work through the way in which they do business. I work with these economic foot soldiers to identify barriers to helping their company or business grow, how to implement new ideas (or even brain-storm new ideas with them), and how to plan for their economic future. I do simple (or at times, not so simple) things like planning events for businesses in our area so that they can learn more about whats going on in their industry regionally or seminars and workshops to teach skills that seem to be lacking across the board. At the broadest level, I do research and analysis to determine potential sectors for investment attraction and cluster development.

Contrasting this, Macro-Ec. Dev. is focused on questions of policy on the overall performance of the economy. How can governments incent or disincent certain types of behavior? What financial tools will improve GDP? Employment? Exchange Rate?

When I made the shift from this latter field of study to the former, I discovered that the goals which I was trying to achieve with the work I was doing was more tangible than the goals of Macro-analysis. Macro work is intent on achieve average increases to "indicators" whereas Micro work is simply trying to improve the lives of business owner and his or her employees.

Herein lies the disconnect that exists between macro analysts and the average person: the disconnect between statistical output and the day-to-day life of an individual business owner. Analysts sensationalize the growth of positive indicators but often lose sight of the fact that these indicators are averaged estimates that give a positive or negative message for how individuals and businesses are doing.

I'm not saying there isn't a place for this type of indicator but a 3% rise in Canadian GDP (a pretty good growth indicator) doesn't necessarily mean that businesses within a particular region feel that the economy is growing. Their own market may be shrinking or their ability to hire the right employee may be becoming harder. Or, as has been a common case in Canada lately, lending money for expansion may be becoming harder and harder to come by.

Today an article in the Financial Post discussed a poll that was recently commissioned by the Economic Club of Canada that considered thow Canadians across the country felt about the economy. The article noted that 70% of those polled (n = 2878) felt that the country is in the middle of an economic recession. This despite the fact that economists would tell you that Canadian indicators are doing pretty well.

Clearly, the majority of this desconnect comes from a few things. First, the polled looked at Canadians across the country. A lot of the strongest growth in Canada has come from Saskatchewan and Alberta where oil has been buoying up the economy whereas the greatest centers of population are in Ontario where manufacturing continues to struggle after getting hit 3 years ago.

At the end of the day, however, economists need to be better at identifying how people act, and see the world. The ivory tower analysts need to spend some time in the grass and get a feel for what life is like for the "average business" which their statistics attempt to describe. Ultimately, this philosophical idea might lead to the development of better indicators. I've talked before about how a growth in GDP doesn't necessarily mean an improvement in the lives of Canadians. It may be the case that it was a more potent indicator in the past (a discussion for another time I think) but our indicators need to involve: even the ones that descibe businesses themselves. Policy analysts, macroeconomists, and government decision makers need to look at things like access to capital and skilled labour, labour retention, access to business support services and the efficacy of those services to get a more wholistic picture of what the "Micro-economy" outlook is.