Why does doing economic development matter? Businesses, of course, have been starting, growing, expanding and locating for millennia long before there was an economic development profession. Simply put, the practice of economic development maximizes the number of economic development projects and hence, the quality of life for a community. We explain this in terms of the 3 Laws of Economic Development.
Consider Newton’s 3 Laws of Motion. The apple falling on the head of Isaac Newton, prompting him to discover the law of gravity, is perhaps the most well-known legend in science. It helped Newton formulate his Laws of Motion, which took him years to work out and which he first published in 1687 at the age of 45 in his book Mathematical Principals of Natural Philosophy (commonly known as Principia).
Many people learn these three laws if they study physics in high school:
- Law of Inertia: Objects in motion tend to stay in motion and objects at rest tend to stay at rest unless acted on by an unbalanced force. (The apple falls because of the force of gravity.)
- Law of Acceleration: Force equals mass times acceleration (F = ma) (You can measure gravity, and it ends up being 9.8 meters per second.)
- Law of Action & Reaction: For every action, there is an equal and opposite reaction. (If an apple sits on the ground, the apple is pushing down on the ground with the same force as the earth is pushing up on it.)
These laws matter because they form part of the foundational understanding of physics, which is a key building block in the development of all technology and hence quality of life. I would maintain that there are three fundamental laws in economic development, which also provide a foundational understanding of why it matters. Here they are, along with key points (principles) that support the idea:
1. Law of Resources
Businesses provide the resources needed for Quality of Life.
- Quality of Life (food, clothing, housing, utilities, healthcare, education, transportation, activities, etc.) costs money.
- Money is the product of value creation in the market, whereby a person or business creates something of value to sell that someone else wants to buy. This is why a government can’t simply print more money to solve problems. Value has to be created.
- Businesses create value and generate the money needed in the form of jobs, taxes, and philanthropy.
- Businesses generate money in three different ways: directly, through suppliers, and through employees.
2. Law of Projects
Economic Development Projects increase the resources available for Quality of Life.
- There are three types of economic development projects – business formation, business expansion, and business location (i.e., a business establishes a new location in a community, also known as attraction).
- Economic development projects must have job creation, investment, or both.
- Economic development projects are when the big jumps in JTP (and resources available for quality of life) happen.
3. Law of Practice
Economic Development Practices increase the number of Economic Development Projects, and Professional Economic Development practices achieve superior results.
- Economic development practices increase the number of projects that happen.
- Economic Development is a profession that applies and shares knowledge, skill, proven methods, and best practices to achieve superior results.
Proceed to the next article in the series – History & Reporting.