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Most of the literature on state-led economic development focuses on development at the international level.1 An intriguing case much closer to home - that of American Indians - is rarely considered in discussions of state-led development. In spite of decades of state-led economic development efforts, American Indians remain among the poorest groups in the United States. The 2000 U.S. census reveals that the median income per capita for American Indians is less than half that of all U.S. citizens. Poverty levels among American Indians are more than twice the poverty level for the United States as a whole. Perhaps more striking is the lack of adequate infrastructure - water, sewerage, telecommunications, and so forth - in many American Indian communities (U.S. Government Accountability Office [GAO] 2004). "Broadly speaking, one constant has characterized Indian reservations since their creation - poverty" (Harvard Project 2008, 112).
These facts are particularly perplexing because state-led economic development efforts on American Indian reservations face fewer problems than international state-led economic development. For example, American Indian economic development planning does not face problems of international political economy, such as numerous international bureaucracies, differing national strategic goals, and so forth. Although political economy issues still exist domestically, we would expect them to be smaller than those in the international arena for at least two reasons.
First, U.S. government resources in many American Indian communities are extensive, including access to significant amounts of funding and highly trained bureaucrats (relative to bureaucrats in underdeveloped countries). Therefore, domestic state-led development provides a somewhat "cleaner" test of state-led development because these issues are minimized. Second, American Indian reservations and the U.S. government are geographically in the same country, making sheer physical distance a nonissue. The country providing development assistance - the United States - lies within the same borders as the American Indians, making interaction between the two groups much easier and less costly. Monitoring of domestic economic development programs is also much easier than monitoring international programs. However, as Peter Boettke, Christopher Coyne, and Peter Leeson (2008) note, geographic distance is not what matters; knowledge distance is more decisive. The greater the knowledge distance between where the rule is designed and where it is to be implemented, the less likely the rule is to "stick." Although...