Information and Market Failure in Local Economic Development: A New Role for Universities?

Abstract

One of the crucial assumptions regarding the efficiency of the private market is that all involved actors have full information about market opportunities, costs, and benefits. However, this assumption is likely to be only partially fulfilled in many local economic development efforts. In fact, those who stand to benefit most from such efforts may be least able to secure critical information regarding development possibilities. In contrast to most publicly supported top-down initiatives, university researchers may more effectively enhance local development by focusing on the provision and analysis of information to private participants. This article first explores the twin potential information gaps involved in regional industrial development that may affect both private and social investment perspectives. The recent efforts to add value to the highly vulnerable agricultural sector of Colorado’s San Luis Valley then highlight the potential direct economic and indirect methodological impact of such assistance.