Central planners take note. Here’s a slice from the Fayetteville Observer piece:
Fayetteville residents should take note of Memphis, Tenn., which has aggressively used tax incentives in an attempt to create jobs. For 18 years the city’s program offered property tax exemptions to select companies adding jobs in the city. The result? A study by George Mason University’s Mercatus Center revealed that Memphis’ unemployment rate ballooned from the national average in 1990 to 7 percent in 2006 — two full percentage points above the national average. Furthermore, the poverty rate in Memphis grew to 21.5 percent, twice the national average.
Here’s why incentives don’t work in the abstract:
In his classic essay “Individualism and Economic Order,” Nobel Prize-winning economist F.A. Hayek tackled perhaps the most fatal flaw of central economic planning. As Hayek saw it, possibly the greatest single point that separates free-market advocates and those that favor strong government intervention in the economy is a “dispute about whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.” This sentiment was a perfect summary of the current contrast between economic incentive supporters and critics.
Hayek argued that the sea of knowledge necessary to grow the economy and create value for society simply can not be held by any individual, or even a committee of lawmakers. Rather, such knowledge is dispersed among millions of individual actors making decisions that affect their own interests. When lawmakers intervene in the economy in an attempt to add jobs, they are delving into a complex system that involves literally millions of varied priorities, needs and outlooks contained in the collective — yet dispersed — knowledge of consumers and entrepreneurs.