AN ECONOMIC APPROACH TO RURALITY IS PRESENTED. THERE HAS BEEN A STEADY REDUCTION IN THE IMPORTANCE OF AGRICULTURAL EMPLOYMENT. MANY RURAL AREAS ARE DISADVANTAGED. ECONOMIC DIFFICULTIES CONTRIBUTE TO OUTMIGRATION AND POPULATION LOSSES IN RURAL AREAS AND ARE REFLECTED IN HIGHER PERCAPITA COSTS FOR LOCAL GOVERNMENTAL EXPENDITURE. OUTMIGRATION HAS REDUCED THE PROPORTION OF THE RURAL POPULATION IN THE PRODUCTIVE AGES AND HAS INCREASED THE PROPORTION IN THE DEPENDENT AGE CLASSIFICATIONS. OPPORTUNITIES FOR FEMALE LABOR FORCE PARTICIPATION AND FOR FULL-YEAR EMPLOYMENT ARE REDUCED. LOWER LEVELS OF EDUCATION AMONG RURAL PERSONS HINDER ECONOMIC WELL-BEING IN RURAL AREAS. ALTHOUGH AGRICULTURAL EMPLOYMENT IN RURAL AREAS IS HIGH, MANUFACTURING EMPLOYMENT FOR BOTH THE RURAL-FARM AND THE RURAL-NONFARM POPULATION IS ALSO HIGH. MUCH NONAGRICULTURAL EMPLOYMENT IN RURAL AREAS IS IN LOW LABOR PRODUCTIVITY INDUSTRIES. THERE IS MUCH UNDEREMPLOYMENT. POLICIES DESIGNED TO CORRECT UNDEREMPLOYMENT EMPHASIZE THE POPULATION FACTOR PARTICULARLY AND OUTMIGRATION. INCREASING CAPITAL INVESTMENT FOR INDUSTRY LOCATED IN RURAL AND SMALL-TOWN AREAS REPRESENTS AN AN ALTERNATIVE POLICY. THE LATTER ALTERNATIVE INVOLVES MOVEMENT OF CAPITAL. CAPITAL AVAILABILITY IN RURAL AREAS IS UNFAVORABLE ACCORDING TO SUCH MEASURES AS VOLUME OF COMMERCIAL BANK DEPOSITS PER CAPITA, THE PROPORTION OF CURRENT PUBLIC EXPENDITURES FINANCED THROUGH FUNDING OPERATIONS, AND THE AVAILABILITY OF THE RESOURCES OF OTHER FINANCIAL SOURCES. NEW CAPITAL EXPENDITURES IN MANUFACTURING PROCEED MORE SLOWLY IN THE MORE RURAL COUNTIES. THE URBAN LOCATION OF NONAGRICULTURAL WEALTH EXAGGERATES THE ADVERSE CAPITAL AVAILABILITY. THE GEOGRAPHICAL AVAILABILITY OF INHERITED WEALTH IS ALSO ADVERSELY SITUATED. IF UNCHANGED, THESE IMPERFECTIONS IN THE CAPITAL MARKET WILL SERVE TO PERPETUATE THE ECONOMIC DISADVANTAGES CONFRONTING RURAL COMMUNITIES. A NUMBER OF FEDERAL PROGRAMS PROVIDE MEANS WHEREBY PERSONS IN RURAL AREAS CAN IMPROVE LOCAL ECONOMIC SITUATIONS.