Local residents fight to keep data centers out while government officials offer tax breaks to bring them in. Sound policy requires weighing those tradeoffs.

Data centers are physical facilities housing computers, servers, storage systems, and networking equipment used to store, process, and deliver digital information. Though the data center boom stretches back to the late 1990s, data centers have recently become highly contentious, challenging public policy decisionmakers as their size and numbers continue to grow across the US. The balance has shifted over a short period, especially with the rapid growth of hyperscale data centers with their large footprints. The public’s posture of indifference toward data centers shifted to hostility and rage against them. Several states and local jurisdictions have either placed moratoria on data centers or are asking voters whether to impose such moratoria.

Opponents (who include local people and outside environmental and anti-AI groups) contend that data centers are bad for communities and the country, but many communities just don’t want them irrespective of the evidence. They have complained about, among other things, higher electricity prices, water use, the noise, congestion, climate change, and pollution. On the positive side, data centers supply the computing power behind the AI tools poised to revolutionize scientific research, automation, and cloud services. Economically, they have the potential to raise productivity, wages, and the quality of life. Data centers have the potential to spur local economic development and expand the local tax base.

Three concepts in economics are pertinent for policymakers, especially local government officials, responsible for the permitting of data centers. They affect the timing for building data centers, the handling of local opposition, and the government’s role in promoting them. The last two topics present a conflict between the local population and government officials. Overall, the three concepts tell us that public policy on data centers is unlikely to lead to the best outcome from society’s perspective, if only because political forces will dominate rational economic thinking.

...read more at thedailyeconomy.org