Arts policy at the local level in the United States has taken a turn towards emphasis on economic development. In particular, a lively cultural scene is held to be an attractor of mobile, skilled workers, entrepreneurs, and businesses, both in providing a location with interesting opportunities for consumption of culture, and as providing an ambiance that could lead to greater productivity in all industries that rely upon creativity and innovation. This paper assesses the hypothesis that public investments in the arts can spur local development, and the implication for the choices over which are the most effective public investments if the hypothesis is true. It critically examines changes in state and federal arts policy that have shifted focus towards creative places and cultural districts, rather than just artists or nonprofit arts organizations.