Opinion: Daily Journal

No to Claptrap and Flimflam

Local officials in North Carolina, particularly those who reside in distressed communities, should be wary of the twin dangers of claptrap and flimflam. If you aren’t careful, you’ll buy bogus information and hire bogus “experts” — and your community will be worse off.

I’m a big fan of etymology, of efforts to trace the origins of words. “Claptrap” is an etymologist’s dream. It appears to have originated in the 18th century as a slang word around theaters. It referred to a line or performance that had no real artistic merit or relationship to the plot but was inserted as a shameless play for applause. Thespians would launch into a patriotic speech or pander to the audience in order to entice (i.e., trap) them into clapping.

As for the related concept of “flimflam,” the word seems to have arisen in England by the 16th century, and is related to an older Norse term for a deception or pretext. Practitioners of the flimflam con typically use the rhetorical equivalent of a bright, shiny object — and sometimes, let’s face it, an actual bright, shiny object — to distract their marks while pockets get picked, shoddy products get sold, or unfair contracts get signed.

A common element here is the motivation of the audience. Tricksters take advantage of noble or natural human instincts to market questionable ideas or products. When it comes to local officials and economic development, there is both the noble motive of creating jobs and opportunities as well as the natural motive of preserving one’s job by satisfying a needy constituency.

Unfortunately, individuals perfectly capable of making careful, rational decisions about their own money, households, or businesses are often taken advantage of when they are spending someone else’s money. For example, many of the state and local officials who fell for the Randy Parton Theatre scam in Northeastern North Carolina were intelligent, capable people who made a poor decision out of desperation, irrational exuberance, or some combination of the two.

The John Locke Foundation is about to publish the results of a massive literature survey I have completed of scholarly research on economic growth. Beginning in 2012, I constructed a database of 681 studies published in peer-reviewed journals since 1990 that examined relationships between state and local policies on the one hand and economic performance on the other.

What government policies are closely associated with economic growth? I’ll detail those findings another time. Today I’ll just tell you what the vast majority of scholars — Left, Right, and Center — advises public officials not to do.

Ohio State University professor Mark Partridge, for example, is one of the nation’s most prolific scholars on regional economic growth. In a 2011 essay he co-wrote for the journal Applied Economic Perspectives and Policy, Partridge listed a long string of economic-development fads — ranging from industry clusters to “green jobs” to “creative class” economies — that governments across the country have bought into, spent gobs of tax dollars on, and realized little to no net benefits from. “There is usually very little empirical research basis to support [these fads] aside from charming anecdotes,” he and co-author Rose Olfert observe.

Instead of buying the claptrap and falling for the flimflam, they recommend that officials focus on broad-based policies with substantial empirical support. On tax policy, for example, “the most appropriate counterfactual to offering firm-specific targeted tax incentives is offering across-the-board lower taxes for all businesses,” Partridge and Olfert write. “Implementing across-the-board lower overall business taxes (or better services), which does not require oracle-level information about the future growth industries or about the nonlinearities of localization or urbanization economies, is much more likely to be successful.” As you can see, Partridge and Olfert are not free-market ideologues (not that there’s anything wrong with that…). Another alternative to fad-based policy, they suggest, would be to spend more dollars on education and infrastructure, and to fund such programs on a regional rather than local basis.

Essentially, if an economic-development guru is peddling something that sounds too good to be true, it probably isn’t true. And if something is too iffy for you to buy with your own money, don’t be tempted to buy it with someone else’s.

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Hood is president of the John Locke Foundation.