Success from Satisficing and Imitation: Entrepreneurs’ Location Choice and Implications of Heuristics for Local Economic Development

Decisions about location choice provide an opportunity to compare the predictions of optimization models, which require exhaustive search through very large choice sets, against the actual decision processes used by entrepreneurs choosing where to allocate investment capital. This paper presents new data on entrepreneurs’ self-described decision processes when choosing where to locate, based on scripted interviews with 49 well-placed business owners and senior managers in charge of location choice. Consideration sets are surprisingly small, especially among those who are successful. According to entrepreneurs’ own accounts, locations are frequently discovered by chance rather than systematic search. Few describe decision processes that bear any resemblance to equating marginal benefit with marginal cost as prescribed by standard optimization theory. Nearly all interviewees describe location choice decisions based on threshold conditions, providing direct evidence of satisficing rather than optimization. Imitation is beneficial for small investment projects. Decision process data collected here suggests a need to rethink standard policy tools used to stimulate local economic development

Struggling over the Soul of Economics: Objectivity versus Expertise

The topics of this chapter are the notion of objectivity and the role for experts in economics. It will argue that core methodological debates are at heart debates about the notion of objectivity and about how objective a science economics can and should be. It will then introduce an alternative notion and show that for economics to be objective in the new sense, expert judgments are likely to play a much more prominent role than they currently do (or, more precisely, ought to do following the traditional ideal). It is quite obvious, however, that making expert judgments more prominent alone won’t suffice. The right kind of expert judgment is needed. The chapter will therefore end with some thoughts about what a better economic expertise might look like