
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, November 26, 1993                   TAG: 9311290162
SECTION: EDITORIAL                    PAGE: A14   EDITION: METRO 
SOURCE: ROBERT STAUFFER
DATELINE:                                 LENGTH: Medium

DON'T BUY GROWTH FOR GROWTH'S SAKE

IN THE NOV. 14 Commentary section, David Rusk (``Better jobs mean more neighbors'') presents evidence that rapid population growth is linked with above-average growth in incomes. He therefore concludes that ``A larger population and new talent are key components ... for sustained, high-quality growth.'' There are at least two major flaws in Rusk's arguments.

First, mere correlation of two trends doesn't prove causation. Perhaps whatever forces that are causing rapid income growth are also responsible for attracting greater population to the area. If that's the case, rapid population growth is not a prerequisite for economic growth, but rather a result of it.

Second, his statistical evidence of this correlation between income growth and population growth is highly suspect. He adjusts regional-income figures using national inflation rates, and ignores the fact that the cost of living varies tremendously from area to area. It's very possible that those areas with the highest income growth and highest population growth also experienced a much higher increase in the cost of living over the 1950-1990 period. Regional cost- of-living data are not widely available for 1950, but to ignore this factor altogether, as Rusk did, makes any regional comparisons invalid.

As an example of the importance of regional cost-of-living differentials, let's compare 1990 census data on income in Roanoke County ($42,225) with Northern Virginia's Prince William County ($52,080). Rusk's methodology would conclude that the average standard of living is 23.3 percent higher in Prince William. However, this overstates the real differential by a huge amount since the average cost of living was about 18 percent higher in Prince William in 1990 (according to the American Chamber of Commerce Researchers Association). If one adjusts for this difference and calculates real purchasing power, the income differential is only about 5 percent in Prince William's favor. The cost of housing and services, both of which are sensitive to population pressures, are the main reasons why the cost of living is higher in Northern Virginia.

It's very possible that much of the long-run ``economic progress'' in high- growth regions is simply an illusion; higher incomes have been offset to a large extent by a higher cost of living. Proponents of rapid population growth are then left with the argument that rapid growth is somehow inherently good. This brings to mind the old observation that ``growth for the sake of growth is the ideology of the cancer cell.''

\ Robert F. Stauffer is an associate professor of economics at Roanoke College.

by CNB