NORTHERN ECONOMIST 2.0

Sunday, 8 January 2017

Housing Prices in Sudbury and Thunder Bay: The Boom is Over

A key feature of housing markets in Canada over the last decade is the sustained price increases particularly in larger urban centers such as Vancouver and Toronto. Despite a relatively flat economy and stagnant population growth, even northern Ontario has seen a price surge in its two largest urban housing markets: Greater Sudbury and Thunder Bay. However, while Ontario’s housing price surge especially in the GTA shows little sign of abating, it appears that economic reality may have finally caught up with northern Ontario’s largest housing markets as prices appear set to level off.

Cap and Trade in Northern Ontario

Ontario has brought in its new cap and trade system as of January 1st. Northern Ontario is generally an energy intensive place in terms of its transportation needs as well as its industrial activity so one would expect some impact on costs. Business groups led by assorted Chambers of Commerce apparently would like to see the program delayed. In terms of the general impact on Ontario, I have a short piece here while Margaret Wente has another here. While dealing with climate change and saving the environment are important, doing it in a manner that causes more economic harm than good is not optimal policy but then Ontario has been raising the cost of doing business in the province for years and criticisms appear to be so much water off a duck's back. As for the specific effects on northern Ontario, you can check out this story on CBC regarding northeastern Ontario. Despite the optimism conveyed in this story there is a sense that there will not be a great deal of carbon emission reduction as a result. As for the northwest, another CBC story that also conveys a sense of opportunity despite the rise in costs that are anticipated given our colder winters and longer driving distances. It concludes with a quote from Chris Ragan at McGill that the impact will take a much larger bite out of lower income households.

Wednesday, 4 January 2017

Why No Research Chair in Economics at Northern Ontario’s Universities?

Northern Ontario’s universities are proud of their research intensiveness and success. Indeed, over the last decade they have made an impressive effort to acquire the flagships of research intensity – the academic research chair. Research chairs highlight and foster a specific area of research importance by dedicating specific resources to support the chair holder’s research. Along with budgets for research, these chairs allow a professor to concentrate on research by reducing their teaching load.

Many of the research chairs currently at northern Ontario three largest universities - Laurentian, Lakehead, and Nipissing are funded by the federal government via the Canada Research Chairs program. There are also other chairs that have been funded with partnerships with other agencies and funding groups as well as internal university resources. As noted in a previous post there appear to be 17 such positions currently held at Laurentian University, 16 at Lakehead University, 4 at Nipissing and one at Algoma. Moreover, these research chairs cover a wide range of topics stretching from applied evolutionary ecology to indigenous health and aerial robotics.

However, there is a curious omission when it comes to these many important topics – anything specifically to do with economics. Indeed, three important economic sub-fields given northern Ontario’s economy are nowhere in sight: regional economics, transportation economics and natural resource economics. Such an oversight is troubling especially given the constant use by universities of the words “economic development” or “economic impact” as background context whenever major research projects or research chairs are announced.

Looking Ahead to 2017

Economic historians will view the year 2016 as marking the end of the second great era of globalization that began in the late 1970s and picked up speed after the fall of the Berlin Wall. The year 2017 will usher in continuing significant economic and political change, tumult and adjustment. The three seminal signal events of 2016 - the Brexit vote, the election victory of Donald Trump and the Italian referendum –herald the new era. Global economics and politics will be marked by restraint of trade, reduced mobility, populist politics, more extremism and continuing slow economic growth as a result.

The first great globalization from 1870 to 1914 was marked by the spread of liberal economic and political institutions, industrialization and rapid technological change especially in transportation and communication. The prosperity of the pre-1914 era was marked by the centrality of Europe both economically and politically and combined free markets and trade to create a world economy with liberal legal and constitutional institutions in its primary economies and the British pound as the international currency. Moreover, it was an age of free movement not only for commodities but also in terms of labor with mass migration from the old world to the new.

However, the pace of rapid change and economic integration created strains in a world of nationalism and imperial governments and the result was World War I. The years from 1914 to 1945 marked the start of several traumatic decades in international economic and political history that included revolutions, the rise of communism and fascism, two world wars and the Great Depression. A dominant feature of the period from 1914 to 1945 was reaction to a series of major international economic and political shocks. We are embarking on a similar period – hopefully minus the specter of global armed conflict.

Despite the 2009 Great Recession, the world economy has grown dramatically over the last thirty years. The prosperity of the world economy that has been driven by free markets, technological change and the global institutions led by post World War II America and the US dollar as the international currency has given way to an era of multi-polar economics and politics. The rise of China and Russia led by its business oligarchs has been aided by the liberal economic order, which has helped grow their economies and trade. Indeed, autocratic oligarchs do well in a world of liberal economic and democratic rules that govern everyone's behavior but their own. Russian and Chinese business oligarchs buying property in Europe or North America to safeguard their wealth from their own capricious government action is the most obvious example of such behavior.

The people of the United States have now put in place their own set of oligarchs to counter a world that seems to be increasingly at odds with their own interests. Along with Donald Trump’s own economic status, the composition of his incoming cabinet leans toward ex-generals and billionaires – not much different from say how countries are run in the Middle East, never mind Russia or China. However, once everyone behaves like the oligarchs, growth of the economic pie will suffer. Less liberal regimes in the rest of the world whose economies have benefited from the economic environment maintained by the framework of American diplomacy and power will definitely get more than they bargained for as trade barriers rise. American policy will become even more inward looking and more explicitly self-interested.

The economic and technological progress of the last three decades owes much to the economic policies of the post 1970s – liberal policies ultimately rooted in the European Age of Enlightenment and the political movements of the early nineteenth century. These liberal economic ideas include rule of law, free speech, representative democracy, majority rule but respect for minority positions, property and human rights, and the exchange of goods, capital and labor in free markets. The result was more trade agreements, deregulation and some effort at more efficient government.

While the results of liberal economic policies can be imperfect and the benefits of trade and globalization unevenly spread, it remains that a retreat into populism and tariff barriers will make us poorer in the long run. It will take time and tumult to illustrate the poverty of the road that the world is embarking on. It will also take new ideas and policies on the part of free market and liberal economic advocates on how to better distribute the benefits of economic growth and deal with the labor market trauma of technological and economic change that has stoked populism.

Wednesday, 28 December 2016

Research Chair Infrastructure in Northern Ontario Universities: A Quick Inventory

The end of the year is a good time for taking stock and research infrastructure is something worth considering. The economic future in northern Ontario will be in services and the knowledge economy will feature heavily in this sector. Creation of new knowledge and its application in the servicing of population needs as well as servicing the traditional transportation and resource sectors will be the future. Northern Ontario universities are on the front line when it comes to research and the knowledge economy and they have been successful in boosting their research activity. One measure of research success is their ability to attract funding for and then recruit research chairs.

The role of a research chair is to boost research activity in a specific field or specialty by providing a faculty member with concrete resources to conduct their research as well as provide teaching release that enables them to focus more on their research. A research chair can often be financed by the public sector: for example, Canada Research Chairs. They can also be from private donors as the result of fund raising activity by universities or by universities investing their own budgetary resources.

In the case of federal Canada Research Chairs (CRC), there are two types: Tier 1 Chairs, tenable for seven years and renewable, are for outstanding researchers acknowledged by their peers as world leaders in their fields. For each Tier 1 Chair, the university receives $200,000 annually for seven years. Tier 2 chairs, tenable for five years and renewable once, are for exceptional emerging researchers, acknowledged by their peers as having the potential to lead in their field. For each Tier 2 chair, the institution receives $100,000 annually for five years.

A list of research chairs at northern Ontario universities was compiled from the Canada Research Chair web site as well as university research pages and is presented at the end of this post. Research chairs in northern Ontario universities are primarily dominated by CRCs. There are 24 CRCs currently listed as being held at northern Ontario universities: 1 at Algoma, 10 at Lakehead, 9 at Laurentian and 4 at Nipissing. Northern Ontario accounts for just under 2 percent of Canada’s population and holds just over 1 percent of CRCs. As well, most of the CRCs held at northern Ontario universities are generally more junior Tier 2 Chairs.

Along with these 24 CRCs, there appear to be another 14 assorted research chairs listed on university websites as currently being held. These are funded internally (for example a Lakehead University Research Chair), by the Ontario government (Ontario Research Chairs) or other funding agencies or resources (for example, Fednor or the Northern Ontario Heritage Fund). These additional research chairs bring the total in northern Ontario up to 38.

What is conspicuous by their absence in this list of northern Ontario research chairs is private donor financed named chairs in which an endowment is donated to finance a named research chair in perpetuity. This is something that is more common at much older, more established and more research-intensive universities. All these northern Ontario chairs ultimately rely on short-term financing, which once expired ends the chair meaning there is fragility to the current research chair infrastructure at these universities.

A challenge for northern Ontario’s research future is for its universities to engage in efforts to attract larger endowments to fund more permanent research chairs. This is of course a great challenge for any university in the current fund raising environment. In general, the weaker economy in northern Ontario poses unique challenges that are reinforced by the absence of corporate headquarters in the region. There are two other more specific challenges.

First, it is often easier to raise money for things rather than human resources. Donors can see the outcome from a new building or piece of scientific equipment but it is more of a challenge but not impossible to sell a research chair. Very often, private donors with a passion in a certain area of study will look for an opportunity to fund their passion. Finding and building such relationships is a long-term investment of development office resources.

Second, given current conservative rates of return – circa 4 percent – it would take an endowment of four million dollars to generate $160,000 in income. The salary, benefits and research funding such an amount can support at best means a relatively junior hire. It goes without saying that the fund-raising required to attract a more senior scholar near the top of their field is much more substantial.

Knowledge intensive economic activity will be the front edge of economic activity in northern Ontario. The challenge for northern Ontario universities is to grow their investment in research activity with research chairs representing key anchor points in their research infrastructure. Part of this growth must involve greater efforts to attract private donor funding to support those research chairs.

RESEARCH CHAIR INVENTORY FOR NORTHERN ONTARIO UNIVERSITIES

Algoma University

Canada Research Chairs

Antunes, Pedro

Tier 2, Natural Sciences and Engineering, Plant and Tree Biology

Lakehead University

Canada Research Chairs

Chen, Aicheng

Tier 2, Natural Sciences and Engineering, Analytical Chemistry

Fatehi, Pedram

Tier 2, Natural Sciences and Engineering, Chemical Engineering

Greenwood, David

Tier 2, Social Sciences and Humanities, Education

Levkoe, Charles

Tier 2, Social Sciences and Humanities, Geography

Mushquash, Christopher

Tier 2, Social Sciences and Humanities, Health Psychology

Rakshit, Sudip

Tier 1, Natural Sciences and Engineering, Chemical Engineering

Rennie, Michael D.

Tier 2, Natural Sciences and Engineering, Evolution and Ecology

Reznik, Alla

Tier 2, Natural Sciences and Engineering, Physics

Sameshima, Pauline

Tier 2, Social Sciences and Humanities, Education

Tocheri, Matthew W.

Tier 2, Social Sciences and Humanities, Anthropology

Other Research Chairs

Dr. Peter Hollings, Geology, Lakehead University Research Chair in Geochemistry and Ore Deposits (2017-2019)

Dr. Sandra Jeppesen, Lakehead University Research Chair in Transformative Media and Social Movements (2017-2019)

Dr. Kristin Burnett, Department of Indigenous Learning: Lakehead University Research Chair in Indigenous Health and Well-Being (2014-2017)

Dr. Doug Morris, Department of Biology, Research Chair in Northern Studies

Dr. Mitchell S. Albert, Department of Chemistry, Thunder Bay Regional Research Institute, Chair in Molecular Imaging and Advanced diagnostics

Dr. Lew Christopher, Director of the Biorefining Research Institute and Senior Ontario Research Chair

Laurentian University

Canada Research Chairs

Basiliko, Nathan

Tier 2, Natural Sciences and Engineering, Soil Science

Crozier, Gillian

Tier 2, Social Sciences and Humanities, Philosophy

Gunn, John

Tier 1, Natural Sciences and Engineering, Evolution and Ecology

Kraus, Christine

Tier 2, Natural Sciences and Engineering, Astronomy and Astrophysics

Merritt, Thomas

Tier 2, Natural Sciences and Engineering, Molecular Biology

Schinke, Robert

Tier 2, Social Sciences and Humanities, Other in SSH

Schulte-Hostedde, Albrecht

Tier 2, Natural Sciences and Engineering, Evolution and Ecology

Walker, Jennifer

Tier 2, Health Health Services Research – General

Ye, Zhibin

Tier 2, Natural Sciences and Engineering, Chemical Engineering

Other Research Chairs

Dr. Doug Boreham

Radiation and Health

Dr. Greg Ross

FedNor Algae and Environment

Dr. Michael Lesher

Mineral Exploration

Dr. Nadia Mykytzuk

NOHFC - Biomining, Bioremediation and Science Communication

Dr. Nancy Young

(No Specification)

Dr. Serge Miville

Franco-Ontarian History

Dr. Sheldon Tobe

HSF/NOSM Chair in Aboriginal and Rural Health

Dr. Tammy Eger

Occupational Health and Safety

Nipissing University

Canada Research Chairs

Bruner, Mark

Tier 2, Social Sciences and Humanities, Psychosocial Behavioural Research - General

Greer, Kirsten

Tier 2, Social Sciences and Humanities, Geography

James, April

Tier 2, Natural Sciences and Engineering Hydrology

Zarifa, David

Tier 2, Social Sciences and Humanities, Sociology

NORTHERN ECONOMIST 2.0