In a recent speech, Fed Governor Gramlich tackles the problem of “smart growth.
FRB Speech, Gramlich–“Livable Communities: Linking Community Development and Smart Growth”–November 7, 2002
The fundamental principle of smart growth is that development should be of a holistic nature. That is, rather than just paying attention to job or output growth, communities should focus on improvements in the ultimate quality of life of individuals. Communities should worry about whether the growth actually benefits their residents or whether it merely makes their communities larger. They should worry about congestion and pollution. They should worry about a proper balance of benefits between high- and low-income individuals. In the language of economics, smart growth requires that all external benefits and costs be factored into development decisions. New industries should be enticed into the community only if the net gains exceed the value of any tax inducements.