In Volume 2 of his Law, Legislation and Liberty trilogy, economist Friedrich Hayek explained that the everyday term "economy" doesn't adequately encapsulate the dynamics of functioning free markets. Hayek described "the order brought about by the mutual adjustment of many individual economies in a market." And he used word "catallaxy" to define this order of competing economies.
"Catallaxy" never captured public consciousness, of course. But the idea that economic competition takes place not only within particular regions or markets but also between different markets surely resonates with us. Living, as we do, in a Union of 50 states, we recognize that states compete with one another for opportunity, jobs, and business enterprise. A state's quality of life depends on its maintaining an economy that can effectively compete with the other 49 states, with a state's economic competitiveness vis-à-vis its immediate neighbors an imperative.
Now a special report just issued by CNBC offers Maryland a timely reminder about the state's pressing need to boost its business-friendliness and overall economic climate. In "America’s Top States for Business 2012," CNBC placed Maryland at #42 in "Cost of Business." Maryland also ranks #43 in "Cost of Living," making it the 8th most expensive state to live in.
CNBC ranks Maryland higher according to some other important indicators. But for business start-ups or existing enterprises looking to grow, bottom-line business costs are a critical determinate of where to locate or migrate operations. Moreover, where Maryland's score fares better, neighboring Virginia scores better still. Maryland's #24 ranking in "Business Friendliness" pales next to Virginia's #3 ranking.
CNBC's Special Report should clue Maryland policymakers to the work they have cut out for them. As we've blogged about previously, steps for Maryland to improve its economic climate and attract new jobs and business opportunities include: getting its continuing budget deficit and public pension liability problems under control, reducing its business tax rate to more competitive levels, avoiding new taxes and regulations that punish technology and entrepreneurship. Otherwise, the best economic opportunities will take place outside of Maryland's borders.