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Economic Systems

residents. A larger tax base and lower levels of unemploy- BIBLIOGRAPHY
ment are equated with business expansion. Sustainable Parkin, Michael (2005). Macroeconomics (7th ed.). Boston: Addi-
development means that growth occurs alongside com- son-Wesley.
Shaffer, Ron (1998). “Playing by New Rules in Local Economic
munity goals of increased self-sufficiency and improved
Development.” Community Economics Newsletter, No. 263.
environmental quality. In fact, different forms of growth
Center for Community Economic Development, University
are encouraged. The sustainable development initiative is of Wisconsin-Madison.
not opposed to growth but rather focuses its efforts on Shaffer, Ron (1995). “Sustainable Community Economic Devel-
answering the question, “How do we grow?” opment.” Community Economics Newsletter, No. 224. Center
Successful economic development has been achieved for Community Economic Development, University of Wis-
in many communities pursing a sustainable development consin-Madison.
approach. Among the success stories is Kansas City, Mis- Thomas, Margaret G. (1999). “Strategies for Sustainable Eco-
nomic Development.” Community Economics Newsletter, No.
souri, which faced one of the most urgent economic
267. Center for Community Economic Development, Uni-
development problems of urban areas—urban sprawl.
versity of Wisconsin-Madison.
From 1960 to 1990, the population in the metropolitan
World Commission on Environment and Development (1987).
area grew by less than one-third while the land area devel- Our Common Future. Oxford: Oxford University Press.
oped more than doubled. The city’s population was mov-
ing to the suburbs while the inner city was slowly being
abandoned. As a result, the jobs moved with the popula- Ellen Jean Szarleta
tion, and the communities in the outer ring of the city
used traditional economic development tools, such as tax
incentives, to attract new business. The central city
attempted to compete by providing additional incentives. ECONOMIC SYSTEMS
The burden, however, was clearly felt by taxpayers, as this The fundamental economic problem in any society is to
increased over this period. provide a set of rules for allocating resources and/or con-
A Metropolitan Development Forum was formed to sumption among individuals who cannot satisfy their
address the community development issues associated wants, given limited resources. The rules that each eco-
with urban sprawl. The forum has been successful in nomic system provides function within a framework of
many areas: they have identified regional transportation formal institutions (e.g., laws) and informal institutions
needs, achieved agreement on the role of tax incentives in (e.g., customs).
the region as a whole, created a metropolitan greenway, In every nation, no matter what the form of govern-
and created local initiatives for economic development ment, what the type of economic system, who controls the
planning. government, or how rich or poor the country is, three
One community that has achieved long-term success basic economic questions must be answered. They are:
is Portland, Oregon. Portland has channeled the eco-
• What and how much will be produced? Literally, bil-
nomic growth in the city such that employment in the
lions of different outputs could be produced with
formerly dying downtown area grew from 50,000 jobs in society’s scarce resources. Some mechanism must
1975 to 105,000 jobs in 1998. This strategy has been suc- exist that differentiates between products to be pro-
cessful because they focused the development of business duced and others that remain as either unexploited
in areas that are close to developed transit systems, limited inventions or as individuals’ unfulfilled desires.
commuter parking, and controlled the expansion of
• How will it be produced? There are many ways to
growth into the rural areas.
produce a desired item. It may be possible to use
Kansas City and Portland are only two of many
more labor and less capital, or vice versa. It may be
examples of successful sustainable development initiatives
possible to use more unskilled labor to substitute for
across the country. As a community’s needs change and as
fewer units of skilled labor. Choices must be made
development is more broadly defined to include social as about the particular input mix, the way the inputs
well as economic indicators of progress, sustainable devel- should be organized, how they are brought together,
opment and planned growth initiatives will continue to and where the production is to take place.
take hold. There are many opportunities ahead for local
• For whom will it be produced? Once a commodity is
economies to grow and prosper in ways that recognize the
importance of improving the quality of life as well as the produced, some mechanism must exist that distrib-
utes finished products to the ultimate consumers of
economy’s overall productivity and income levels.
the product. The mechanism of distribution for
SEE ALSO Economics these commodities differs by economic system.

220 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION