Comparative advantage, collective action problems, and rent-seeking

I was thinking more about the blog posting I wrote yesterday, in which I
talked about comparative advantage at the local level (apparently, I'm
on this kick again), and I had a couple interesting thoughts.

First, why does local government intervention in local markets differ so
markedly from national government intervention in national markets--that
is, anecdotally, government intervention in markets is typically bad,
corrupt, rent-seeking, inefficient, and a host of other undesirable
things. Just ask Uncle Milton. On the other hand, the local government
interventions in local economies that I see down here don't seem to me
to be self-evidently associated with rent-seeking behavior. Instead, it
makes sense that most of government activities I see actually make
governments _more_ efficient by addressing local market failures or the
absence of certain institutional elements that permit the presence of a
market.

After another interview I had this morning in which I talked to the
municipal agricultural official, I asked why the municipality used so
many resources in supporting agriculture, and in particular, ranching,
which is a major economic activity here. His idea went along with the
comparative advantage idea--"we gain from the development of industry
here in the municipality. It's good for us economically, and it gains
us political support when we can help people out... we support ranching
because our environment here is well suited to ranching--the soil here
is thin and fragile, so agriculture isn't always good, but the
environment here is good for cattle, and San Ignacio also has a history
of ranching going back many years."

This got me thinking that, essentially, the municipality was working to
support industries that had already made the choice to be here in San
Ignacio. Why would they attempt to promote firms that would not be
successful here? But they know that the municipality has a long history
of successful ranching, and the municipality is aware that by supporting
ranching through infrastructure development and other projects, they
will improve local economic conditions, local standards of living, and
they will gain political support in the process. Based on this history,
economic support to ranching won't be wasted, because ranching has
proven to be a successful source of local economic growth in the past.

In effect, the invisible hand of the market had already decided that
ranching here is an efficient local industry, and the government is
working to solve collective action problems and direct public investment
so that ranching and other appropriate agricultural activities (dairy,
coffee, chickens) can be more successful, and can efficiently compete
against similar industries in other areas.

At the local level, where the pie is already pretty small and the
government faces stiff competition from other factions for control, does
it typically make political sense for governments to promote efficiency
in markets, rather than become involved in rent-seeking?