When a Catalyst Imports Itself to the Same Local Economy

I recently traveled to western Pennsylvania through eastern Ohio.  During my travels I couldn’t help but notice the poor condition of the roads.  Interstate 70 was in particularly bad shape with “car swallowing” potholes.  I also noticed in areas that were previously in the middle of nowhere during my past travels, there were now newer restaurants, gas stations, hotels and shopping centers.  And multiple billboards seeking to recruit employees for the oil and gas industry loomed large amongst the scenery.  The “boom” appeared to be everywhere.  With such catalytic change, I couldn’t help but wonder about the implications of this industrial development on the local economy.

The impact to a local economy when a catalyst imports itself can be both beneficial and concerning:

  • beneficial in the form of spending which, in turn, supports additional jobs, development of new business, and increased overall prosperity; and
  • concerning in the form of the need for new infrastructure with spending by local governments on upkeep of roads, sewer, water, and emergency services.

Wassily Leontief (1906-1999) developed the input/output theory[i]  of economic development which can help us project what can occur when the economy expands at a rapid pace, and aids in the comparison of global economies like Kuwait City and Dubai, or domestic economies of the energy boom towns located in North Dakota or Alaska.  By using Leontief’s model and comparing the output of those economies that have experienced rapid expansion, a prediction can support the development of an infrastructure plan that can support the growth that is occurring.  Conversely, as the economies retract, and the boom ends, predictions can also be made that project what level of reduction will occur in the same local economy.

History shows us that in the past, the reduction of an economy that grew from a boom experience is generally greater than the original growth that occurred from the boom.  Loss of local tax dollars spent on infrastructure that is no longer needed could be applied elsewhere.  The cost of justice can also increase at a higher rate after the bust than was needed during the boom.  Unemployment is high; businesses suffer (some closing); and the economy eventually levels out at a new, lower standard.  Luke 12:48 provides us with wise insight for consideration here:

“Much will be required of everyone who has been given much. And even more will be expected of the one who has been entrusted with more” (Holman Christian Standard Bible).

Planning is critical during the economic expansion to support a recession plan in case one is needed quickly.  By planning for the worst during the economic growth, economic recession[ii] or depression[iii] can be avoided, for “the plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty” (Proverbs 21:15 English Standard Version).

[i] Input-output analysis shows the extensive process by which inputs in one industry produce outputs for consumption or for input into another industry. The matrix devised by Leontief is often used to show the effect of a change in production of a final good on the demand for inputs.(“Wassily Leontief,” 2008, para. 2)

Wassily Leontief (1906-1999). (2008). In the Concise encyclopedia of economics online. Retrieved from Library of Economics and Liberty. http://www.econlib.org/library/Enc/bios/Leontief.html

[ii] Recession. (2016). In Business dictionary online Retrieved from

[iii] Depression. (2016). In Business dictionary online. Retrieved from

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