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Community Economics: Economic Structure and Changes in Smaller Communities.

Community Economics: Economic Structure and Changes in Smaller Communities

MICROECONOMIC theory of the firm and consumer are the familiar building blocks of economic analysis used by economists in more traditional fields. Prof. Shaffer in his book Community Economics has undertaken the task of developing a similar set of basic tools for analysis of economic activity at the community level. Because communities are composed of individuals and firms at the regional level and operate within a larger macro economy, each of these theoretical orientations can contribute to our understanding of how communities function and how information can be used to improve their situation. This book is particularly timely given the current level of interest in rural development by national, state, and local policy-makers as well as the critical nature of issues facing rural communities.

The organization of Shaffer's book makes a logical progression from a review of regional economic development theories to an examination of the goals, policies, and programs to support economic development, followed by an examination of special topics in community economic development, such as the role of government, capital markets, and the functioning of labor markets in community development. The concluding section deals with methods of impact analysis and a review of economic base and input/output models.

While the theoretical background is important in guiding researchers, the lack of a generally accepted unifying theory on economic development has not prevented state and local economic development officials from pursuing a wide variety of economic development strategies. These strategies can be classified as guided by demand-oriented and supply-oriented theories according to the scheme presented by Shaffer. His review of theories includes only those that have direct policy handles or relevance for state and local policymakers. The supply-oriented development theories emphasize the importance of capital, labor, and other factors of production in creating more output and income. Demand-oriented theories suggest that local development results from an external or national demand for locally produced goods and services. Although it is not classified as a supply-or demand-oriented theory, the role of location theory in community economics was deemed important enough to devote a separate chapter to its discussion.

While Shaffer acknowledges the limitations of any development theory to provide a comprehensive explanation of community growth, the exercise provides useful guidance to communities in their development efforts. Of more practical concern and perhaps of more immediate interest to community developers are techniques for designing and implementing community economic development programs. A practical collary to the theoretical section is the discussion of five genetic strategies to promote community economic development: (1) attract new basic employers, (2) improve efficiency of existing firms, (3) improve ability to capture dollars, (4) encourage new business formation (5) increase aids/transfers received from broader governmental levels of units

Although fairly general, these five strategies are a useful way to begin organizing and considering economic development choices. Other practical information for community development workers is contained in the chapter on implementing community economic development programs. This chapter provides useful guides on organizing, setting goals, prospecting and targeting for industries. For business analysts interested in the retail and service development topics, the book offers relevant discussion on central place concepts for small area analysis including trade area analysis, gravity models, service and trade thresholds, and sales potential calculations.

Several important and controversial topics to community economic development are given special discussion. The role of capital markets as an important ingredient in the economic development process has been a topic of debate among regulators and deregulators of financial markets. Interventionists claim action is needed to fight market failure in capital markets while deregulation advocates claim that too much intervention is restricting efficient allocation of capital on rural markets. While sampling the debate on both sides of this argument, Prof. Shaffer appears to come down on the side of attmpting to assist capital markets in rural areas performing more efficiently.

A second controversial topic discussed is the role of governments in community economic development. Basic public sector tools for economic development, including tax and financial incentives, regulations, joint ownership, market expansion, government spending and capacity building, are examined along with arguments for and against their use. As indicated by the many forms of government assistance, the current debate is not about whether or not to involve the public sector, but rather identifying the most effective and appropriate types of involvement.

Emerging topics of economic impact analysis and several are dealt with in the final chapters of this book. The broad range of impacts accompanying economic change include physical, social, demographic, fiscal and economic. Because the economic and fiscal impacts are somewhat easier to quantify, a more detailed discussion of these effects is made. Because of the wide variety of socioeconomic impact assessment models available, the conceptual basis for undertaking an impact analysis as well as the bibliography of these models will be interesting and useful materials to applied researchers in the community development area.

While Shaffer provides a comprehensive and well-balanced discussion of the chosen set of issues, an additional set of topics vital to rural areas might also have been included. Additional critical issues in rural areas include public service provision, infrastructure, and public finance. The potential contribution on economic analysis of these topics suggests their inclusion would be of interest to this book's audience.

The more appealing aspects of the book are the sections devoted to discussion methods of community analysis, the design and implementation of community economic development programs, identifying and conducting trade area analysis and formulating impact analysis. Analysts interested in rural areas should find the guide to data sources and methods of analyzing substate regions extremely useful.

Although this book is developed from lecture notes for the classroom, much of the original basis for the materials is Prof. Shaffer's years of community development experience. Very few books in the regional economics area are able to combine a comprehensive discussion of community economic development theory with positive, practical contributions to practitioners in the field. Community Economics should serve as a useful training and reference book for students, researchers, and practitioners in the community economic development field.
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Author:Otto, Daniel M.
Publication:Business Economics
Article Type:Book Review
Date:Oct 1, 1989
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