November 13, 2017 - Incentives matter. If there is one thing that economists can tell policy makers unconditionally, this is it. It seems the message is beginning to get through, at least to local leaders, here in Northern Ontario.
Smooth Rock Falls, facing a changing economy, demographic decline and plummeting tax revenues, has launched an aggressive re-branding campaign that includes 90% purchase discounts for land in the community. Not only did the community decide to subsidize the land, they also decided to get the word out about their discount. A press release trumpeting the cut price land resulted in national stories on radio, TV and in print, not to mention across social media.
This is a clever usage of “nudge” economics, the blend of behavioral psychology and economic theory pioneered by Richard Thaler, this year’s Nobel award winner in economics. The idea is simple, people can be “nudged” to make better choices or to make less bad choices. More importantly, the nudge need not be that large, but it helps, apparently, if it is delivered as part of a positive message in an upbeat way.
Smooth Rock Falls got that point too. Their new brand is “near north, near perfect”. They are not asking people to buy into a losing proposition. They are marketing a great opportunity. Good transportation, great schools, easy access to large markets, low cost of living, safe community, an available workforce. The land incentive isn’t about enhancing comparative advantage, it is about drawing attention to the great community that is Smooth Rock Falls and breaking natural human inertia. Come on in, the water’s warm, you know you want to.
North Bay is looking to be the next to get on board, again with the “near north” messaging. But, like me (see the introductory sentence in my second paragraph above), North Bay ever so slightly misses the point of nudge economics. The message coming out of North Bay, and repeated in the Ontario legislature is “we are hurting”. The argument is that government needs to do something to make us more attractive with incentives, or tax reductions, or tax exemptions. That’s the wrong story line, and it is doomed to fail.
The correct message is the one from Smooth Rock Falls: we have an amazing community here, we want to help you take advantage of it. Focus on the opportunities in Northern Ontario, what newcomers gain from coming here, and committing to helping THEM realize THEIR dreams. That does not mean tax incentives and cash transfers are not the tools to use. Free land, subsidized moving expenses, or tax breaks for the early years while costs are higher have been reliably used to help people help themselves.
But the point is we are helping them, not us. As nudge economics clearly understands, people behave in certain ways to make themselves, not others, better. Better financially, better emotionally, better socially. Even just better relative to what they were, or how they were perceived by others, just yesterday.
Taking advantage of this is very much a matter of tone over substance. Northern Ontario does not have “surplus infrastructure”, we have exceptional colleges and universities that are affordable and accessible. We don’t have a labour shortage, we have good paying jobs in sustainable industries in communities where you can live, play and raise a family without a two hour commute or living house poor. We don’t have a succession issue, we have successful businesses for sale.
As in Smooth Rock Falls, however, it is not just government and quasi government entities that have to get on board. The entire community needs to be a part of this effort. Especially the business community. You have jobs going wanting, opportunities available for the next generation. Don’t limit those opportunities just to the people born five minutes from your door. Employers, like government, need to be prepared to help newcomers achieve their dreams. Whether those newcomers are from the other side of town or the other side of the world. That means sharing some of the risk. At some point in every family’s history someone else lent a hand, took a risk, or made an investment. Everyone benefitted, and that’s the point.
Charles Cirtwill is President and CEO of Northern Policy Institute. This op-ed first appeared in Northern Ontario Business, November, 2017.
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