Editor's note: This is the third in a series of columns about Central Oregon's economy. See the first two installments of series at tsweekly.com under the opinion tab by clicking Guest Commentary.
"For of all sad words of tongue or pen, the saddest are these: 'It might have been!'
On Thursday July 23, the Board of Deschutes County Commissioners and the County Planning Commission are scheduled to meet to discuss what the agenda lists as "Destination Resorts." On Thursday, August 27 the County Planning Commission will hold a work session on the County's Comprehensive Plan Update. Economics, as we hope all the commissioners know, pervades both topics.
Imagine two paths of economic growth for Deschutes County. One-the Better Path-has more and better-paying jobs than the other-the Worse Path. Based on its current plan and policies and especially its record of applying and interpreting them, we think the County has chosen the Worse Path.
Our July 1 and July 8 columns of this three-part series in the Source focused on the too frequently perverse consequences of small decisions. We illustrated individuals who want to use their private properties as inputs to commercial enterprises. By itself, that's good. But those very enterprises would impose costs on other property owners, costs in the form of noise, congestion, and the like. Such property owners want to enjoy the benefits but dodge the costs. And that's bad. It's also a symptom of taking the Worse Path.
The choice between the Worse and Better Paths doesn't appear as a well lit and fully signed intersection. The county doesn't get to make a stark, informed choice between the two paths at a specific point in time. Rather its choice is, to quote the economist A. E. Kahn, "an accretion of steps, each small in their individual size, time perspective, and in relation to their cumulative effect." The County makes a seemingly small decision to grant an exception to the County's land-use plan. And another. And yet another.
A hypothetical helps illustrate the possible cumulative effect of a series of seemingly small decisions that ignore the economics (as well as common sense). Consider three proximate parcels on which the owners individually and separately: host commercial weddings and occasionally 2000 RVs; farm some commodity; and telecommute. The commercial weddings and RV parking lot impose costs on the telecommuter and, depending on the farming activity, on the farm. The farm, again depending on the farming activity, imposes costs on the other two properties, though more likely lower costs. While the telecommuter, unless the household has a barking dog and goes over the top on New Year's Eve and the 4th of July, far more likely than not, imposes trivial or no costs on the other two property owners.
And there's the rub. We fear the county won't notice those spillover costs until it's too late. It will have gone too far along the Worse Path. It will take too great an effort to retrace its steps.
We have no doubt the Commissioners face a formidable challenge. They must formulate plans and articulate policies that, in effect, allow them and their successors to compare the Better Path with the Worse Path, knowing that each path stretches into the future and is therefore unobservable.
At the same time, of course, we can't advise with certainty. But we can interpret the weight of the evidence, given our training, our experience and the data available. And the evidence, as we see it, seems clear: Human-capital growth yields economic growth. Attracting workers is good, but attracting highly skilled workers is better. Thus good public policy, among other things, should attract and retain highly skilled workers.
The evidence on Deschutes County is compelling. It has much of what skilled workers like and has attracted skilled workers at a rapid rate. You can cut the evidence in a variety of ways, each with pluses and minuses. But it all points in the same basic direction: Deschutes County saw large increases in human capital over the past 20 years.
Consider the changes in the composition of the population. In 1990, 19% of the adult (>25 years old) population in Deschutes County had bachelors or graduate degrees. By 2007 (the most recent year with census data available), this percentage had increased to 28%. The 9 percentage point increase in the share of the population with college degree trails only Hood River county (12 percentage point increase) and Multnomah County (11 percentage point increase) among Oregon counties over the same period.
Next consider the direct, percentage changes. Deschutes County leads all Oregon counties. Since 1990, there was a 206% increase in the number of BA-Grad degrees in living in the County. This is far above second place, Crook County (136%). Expressed as a percentage of the total 1990 population (instead of the 1990 total BA-Grad population), Deschutes County saw a 39% increase in BA-Grad degrees. Washington County saw a 33% increase, and Polk, Hood River, Clackamas, and Multnomah Counties saw 19-21% increases.
Deschutes County's growth in human capital is extraordinary. And, as we emphasized in our July 1 column in the Source, Deschutes County has none of the usual factors that explains such growth. It has, for example, no big, research university. But it does have abundant natural capital, which we described in our July 1 column. And until a better explanation for that growth appears, natural capital serves quite well.
Our concern with Deschutes County's land-use system is clear and straightforward. We think the County has jeopardized the causal link between the County's natural and human capital. We think it has allowed too many property owners to shirk their responsibilities. We think it has yielded to what Kahn called "the tyranny of small decisions." As a result in 10-15-20 years, we fear the county will be able only to imagine the Better Path and lament, "It might have been."
Bryce Ward is a senior economist at ECONorthwest and has taught at Harvard College, Lewis and Clark College and the University of Oregon. Ed Whitelaw is the president of ECONorthwest and a professor emeritus of economics at the University of Oregon. Andrew Kenny is a research associate at ECONorthwest and a senior at the U of O. The views are the authors' own and not in any representative capacity those of ECONorthwest, its clients or its other employees or of the University of Oregon, its other employees or its other students.