Creating Economic Opportunities (Dynamic Model)
The static economic model is akin to a rain barrel which has inflows and outflows only. Prosperity decreases and increases based on dollars coming in and leaving the economy.
When we put the static rain barrel model into motion by adding in production activities of local businesses, local governments, and schools, we add a dynamic element to the model. These decision-making units combine local resources like land and buildings with non-local resources such as borrowed money and new inventions to make products and services sold both at home and away. The results of the community’s dynamic element are the creation of new income within the community to support local households.
When all firms, households, governmental units, and other producing and consuming entities are functioning at full capacity, the level of prosperity is high (the water in the barrel rises). When the productive forces slow down, the level of prosperity drops (the water in the barrel decreases).
A measure of the dynamic model is turnover of the dollar as it passes from one firm to another and from local firms to local households. When a new dollar enters the local economy and is respent locally a portion of that dollar leaks into the non-local economy. How much remains local depends on how much of a firms earnings become income for local households, which is dependent on the profitability of local firms and their purchasing patterns.
Key questions include: (a) how efficient and competitive are these units of production, (b) where do they buy their resources used to make goods and services, and (c) how much money leaks out of the community from household budgets, and (d) how much local money is being reinvested locally.
For more information go to Understanding your local economy, Kansas State University http://www.ksre.ksu.edu/library/agec2/L775.pdf
One needs to read the Kansas State University publication to get an explanation of the rain-barrel analogy that was posited. The publication provides considerable details regarding ways money flows into, and out of, a community. It also provides formulas that could possibly be used to analyze the Northeast Florida economy. The component of the publication that seems to have the most application to this region is the discussion of “Economic Base Theory.” The author(s) state, “This theory suggests that the way to expand the local economy is to sell more goods and services to outside customers.” The local implications of this statement seem obvious. Other publication components that seem to apply is the need for regional residents to buy local products and invest in local initiatives. Achieving these things is a “tall order” that will take time and commitment. Such changes do not occur by chance, thus, efforts are needed to formulate a regional vision for economic development, a strategic plan for development, and efforts to garner citizen support for the effort.
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