The 10 Best U.S. States for Growth and Innovation 1

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"The national economy" is a myth.

It's useful for Washington to talk about a continental network of people and businesses, because Washington's policies affect everyone. But to speak of the national economy, in the singular and definitive, belies the fact that the economy is not an organism, but rather a collective of organisms. Companies that make clusters. Clusters that define cities. Cities that reside in states. States that power regional economies.

The states come in all shapes and schemes. Compare Massachusetts and Alaska. Massachusetts is the educational powerhouse of the country, if not the world. Boston's matrix of research universities and hospitals makes it a core of our health care innovation sector. It's also a high-tax, high-regulation state that scores poorly in most business-friendly surveys. Now consider Alaska, a low-tax, low-regulation state that thrives mostly because of what's in the ground: oil, gas, and trees. Alaska might not invent the world's next aorta gadget, but in the last few years, it's led the country in growth.

In the long run, we want the fastest growing states to be the ones where innovation happens. In the short run, that's not necessarily the case. The states with the fastest growing jobs, income and economy, are Alaska, the Dakotas and Wyoming, according to a new report from the Chamber of Commerce. In other words, they are resource-rich, but people-light. On the other hand, the states with the strongest innovation and high-tech scenes, according to the Chamber, are all in the west: New Mexico, Colorado, Utah, Montana, and Texas fill out the top five. Arizona, Idaho, California and Washington join in the top ten. The Eastern Time Zone entrants are Virginia and Maryland, the bread in the federal government sandwich, and the beneficiaries of government largesse in the form of science investment, IT consulting, and defense contracting.

The 10 Fastest Growing States


The 10 Best States for Entrepreneurship and Innovation

Last note: By combining innovation and entrepreneurship, the Chamber of Commerce list leaves out states like Massachusetts that score extremely high on human capital scores -- education, R&D, innovation -- but less impressively on start-up rates. As I wrote here, Massachusetts leads the nation in R&D funding, patent formation and concentration of scientists and engineers. But it also suffers from an erosion of tech firm start-ups, as innovative product lines have a tendency to flow to lower-cost, lower-regulation states like New Hampshire.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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