Barring significant disruptions to worldwide growth and trade, cities, substate regions and states will increasingly become the locus of competitive advantage. Capital markets are now fully global and very efficient. It makes little sense for a national government to tie the hands of subnational units of government in seeking to attract investments to their areas. This is economic war, and states and localities need the flexibility to play it smart according to their economic strengths. It makes little sense for 100 Midwest economists, mostly free market advocates, to argue in favor of the federal government curtailing competition, especially when the Midwest has been the beneficiary of strategic incentive practices by states over the '80s and '90s.
Incentives are a cost of doing business.
Down the road it is conceivable that one or two states may adopt the contrarian strategy of competing without incentives. But for the majority of states, an invisible hand will contain the bidding wars. The public will continue to demand no new taxes and greater accountability from government. At the same time, devolution of responsibilities by the federal agencies will add to the increasing demands for state resources. These factors, together, force economic development in the opposite direction of escalating incentives.