Highlights of a speech by Federal Reserve Chairman Ben S. Bernanke at the Greenlining Institute’s 13th Annual Economic Development Summit in Los Angeles, April 20, 2006.Community development

Ben S. Bernanke

English

Research Papers in Economics

Remarkable strides have been made in developing and analyzing
social and economic data at the community level. The information that
can be extracted from detailed data profiles of individual communities
supports economic development in several distinct ways. 
First, by making companies, entrepreneurs, and investors aware of
new opportunities and by promoting competition in underserved areas,
such information helps put market forces in the service of community
development. Second, both government policymakers and community
development organizations need the reality check that only hard data can
provide. … Third, the increased availability of community-level data
facilitates independent research. … 
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Highlights of a speech by Federal Reserve Chairman 
Ben S. Bernanke at the Greenlining Institute’s 13th Annual
Economic Development Summit in Los Angeles, April 20, 2006 
By the
Numbers
Data and Measurement in 
Community Economic
DevelopmentAlthough government agencies continue
to be an important source of data on com-
munity development, data collection and data
analysis in this area are increasingly becoming
the province of the private and nonprofit 
sectors, notably including community devel-
opment organizations themselves. …
I will discuss some specific ways data and
quantitative measurement have been used in
community development. To be clear, I do not
believe that all aspects of economic development
can or should be quantified. … Still, improving
the measurement of inputs and outcomes is 
critical to better development policy. … 
Good data support community growth
and development by helping to identify pre-
viously unrecognized market opportunities.
Free markets can be a powerful source of 
economic development, but markets work less
effectively when information about potential
opportunities is absent or costly for private
actors to obtain. Several noteworthy initiatives
have helped to provide better information. 
For example, the Local Initiative
Support Corporation’s (LISC) MetroEdge
initiative seeks to demonstrate the market
potential of diverse communities through
customized data analyses of each communi-
ty’s demographics and buying power. Such
analysis can provide investors with a different
perspective. … Similarly, Social Compact’s
Neighborhood Market DrillDown method-
ology uses a multilayered research process to
provide profiles of the market potential of
high-density, lower-income communities.
This approach focuses on business indica-
tors—buying power, market size, unmet
needs, and market risks—rather than on the
deficiency statistics typically used to describe
inner-city neighborhoods, such as rates of
poverty, crime, and overcrowding. Social
Compact, a coalition of business leaders, has
applied its DrillDown approach to 101
neighborhoods over the past five years. … 
The growth and maturation of communi-
ty development financial institutions (CDFIs)
provide another impetus for data develop-
ment and analysis at the community level.
CDFIs are private-sector financial intermedi-
aries with community development as their
primary mission. Like banks and other more
conventional financial intermediaries, CDFIs
are in the business of attracting funds and
putting those funds to work in productive
ways. Also like conventional intermediaries,
CDFIs depend heavily on the production of
accurate information both to guide invest-
ment decisions and to provide a basis for
attracting new funding. … 
To attract more return-oriented
investors, including both conventional
investors and those with social as well as
financial goals, CDFIs must demonstrate
financial viability as well as the ability to ful-
fill the broader development mission. For
example, the Opportunity Finance Network’s
CDFI Assessment and Rating System
(CARS) gathers data to evaluate a CDFI’s
overall creditworthiness and its effectiveness
in using its financial resources to achieve its
development objectives. …
Although still in its early stages, this 
initiative, if successful, will have the double
benefit of attracting more funds into commu-
nity development and helping to ensure that
those funds are effectively used. More gener-
ally, the movement toward quantifying the
performance, risk, and community impact of
CDFIs is essential to the growth and sustain-
ability of the field, in my view. By demon-
strating both financial viability and social
impact through hard data, CDFIs are better
positioned to obtain the funding necessary to
maintain their operations and to respond to
emerging needs and opportunities. … 
In the community development field, to
be sure, financial returns and social returns are
not necessarily the same, which is why meas-
urement should include both financial and
social indicators. Potential investors, including
public-sector and foundation sources of funds,
will naturally differ on the weights they put on
financial and social returns. To attract the
widest range of funding, both types of infor-
mation should be provided. 
Quantitative information plays yet
another important role: increasing the effec-
tiveness of policies and programs. The 
systematic collection and analysis of data on
program inputs and outputs is an increasing-
ly important part of learning about what
works. For policymakers, data on program
results help guide policy development and
improve the allocation of scarce public funds. 
& Banking Communities 7
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11Learn more about community development 
financial institutions (CDFIs) in:
New England Community Developments
A quarterly publication covering emerging issues in community
development and consumer affairs.
Issue 2 is just out and includes:
“An Overview of the CDFI Industry,”by Brandy Curtis 
The latest on community development financial institutions—
nationally and in New England.
Check it out at
http://www.bos.frb.org/commdev/necd/index.htm.
For community development
organizations, participation in broad-
based data-gathering serves at least two
goals. First, in the long run, their
analyses of the activities and the associ-
ated outcomes in diverse communities
will help them achieve the greatest
impact for resources expended.
Second, such analyses help community
development organizations demon-
strate their effectiveness to public and
private funders. A number of methods
for evaluating community develop-
ment projects are currently [in use or
in development, including the
NeighborWorks America’s Success
Measures Data System and] the
Community Investment Impact
System developed by the Department
of Treasury’s CDFI Fund. …
Each of these data-driven initia-
tives shares the goal of increasing
understanding of opaque markets to
support investment, policy, and
research. The need for data and tools is
the driving force behind the Brookings
Institution’s Urban Markets Initiative.
… The think tank is focusing on ini-
tiatives that can demonstrate untapped
market potential. One such effort is
the National Infrastructure for
Community Statistics. It will include a
central web-based repository that inte-
grates data from federal, state, and
local governments and from commer-
cial sources. The ultimate goal of this
project, which is under development
in collaboration with more than 100
participants from government, non-
profits, and private-sector industries, is
to aggregate and to make accessible the
data needed to inform decisions about
economic development activities. … 
Accountability and feedback,
facilitated by data development and
quantitative analysis as well as by
more-qualitative information, are criti-
cal for success. Goals should be modest
at first; but knowledge is cumulative,
and sometimes good results can be
replicated at larger scales. Research,
both quantitative and qualitative, 
furthers learning.
None of this is easy, particularly
since the data have a way of challeng-
ing our views about what works and
what doesn’t. But a great deal is at stake
both internationally and domestically,
and serious empirical analysis has no
substitute. The development of more
and better data on economically dis-
tressed communities, together with
sophisticated tools for analyzing those
data, is essential for continued progress
in community economic development. 
Read the entire speech at
www.federalreserve.gov/boarddocs/
speeches/2006/20060420/default.htm.
The data have a
way of challenging
our views about
what works and
what doesn’t.
This Communities & Banking article is copy-
righted by the Federal Reserve Bank of Boston.
The views expressed are not necessarily those of
the Bank  or the Federal Reserve System.  Copies
of articles may be downloaded without cost at
www.bos.frb.org/commdev/c&b/index.htm.

By the numbers: data and measurement in community economic development

http://www.bostonfed.org/commdev/c&b/2006/fall/benbernanke.pdf

By the numbers: data and measurement in community economic development

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