Increasingly Rank: The Use and Misuse of Rankings in Economic Development

Debates over the merits of competing schemes for ranking metropolitan areas as hightech centers shed little light on the important policy questions that should be the core of economic development policy. There are no strong theoretical reasons for preferring one ranking system to others. Rankings often conflate different industries and ignore history, obscuring the varied and often idiosyncratic processes that drive growth in different regions. Although an occupational perspective is a useful one for examining economic activity, it is a supplement to, not a replacement for, a careful understanding of metropolitan industrial specialization. Practitioners should not put too much weight on any ranking system but instead should work to develop detailed knowledge of their region’s special economic niche and to develop relationships and strategies that build on established strengths.

Heterogeneity and time

Although heterogeneity and time are central aspects of economic activity, it was predominantly the Austrian School of economics that emphasized these two aspects. In this paper we argue that the explicit consideration of heterogeneity and time is of increasing importance due to the increasing environmental and resource problems faced by humankind today. It is shown that neo-Austrian capital theory, which revived Austrian ideas employing a formal approach in the 1970s, is not only well suited to address issues of structural change and of accompanying unemployment induced by technical progress but also can be employed for an encompassing ecological-economic analysis demanded by ecological economics. However, complexity, uncertainty, and real ignorance limit the applicability of formal economic analysis. Therefore, we conclude that economic analysis has to be supplemented by considerations of political philosophy. Copyright 2006 American Journal of Economics and Sociology, Inc..