Monster Mash or Cournot Nash?

 

Well, the season of Halloween is upon us and the music of the season is certainly something that we all have memories of over the years.  Of course, one of the most famous songs was Bobby “Boris” Pickett’s Monster Mash which was a smash hit in 1962.  This was his most famous song and later attempts to emulate its success were not as successful.  Nevertheless, it has inspired a host of replications and imitations ranging from this one on Sesame Street to this one or even this.   Well, I have been feeling particularly whimsical this week and in the spirit of the season, with a little help from my AI, I decided to see if I could adapt the lyrics to an economics theme - specifically a song about Cournot-Nash equilibrium.  After all, Monster Mash-Cournot Nash – they both have a certain lilt to them.  So, without further ado, take a look at the results.  Of course, please feel free to perform it, make a video and send it along!

 

In the land of game theory, where minds collide,
There was a concept, Cournot-Nash, they could not hide.
Firms strategized, each aiming to improve their gains,
Seeking equilibrium, where competition remains.

They did the Nash, they did the Cournot Nash,
The Cournot Nash, it was an equilibrium bash.
They did the Nash, it was a game theory smash,
The Cournot Nash, a most strategic clash.

Players in a market, with goods they'd supply,
In Cournot's world, they chose how much to magnify.
Each one anticipating, their rival's every move,
Balancing their choices, in a dance they would prove.

They did the Nash, they did the Cournot Nash,
The Cournot Nash, it was an equilibrium bash.
They did the Nash, it was a game theory smash,
The Cournot Nash, a most strategic clash.

Fierce competition, but still a sense of peace,
Cournot equilibrium, where conflicts find release.
Finding the optimal output, they would ascertain,
With profit maximization, the ultimate aim.

They did the Nash, they did the Cournot Nash,
The Cournot Nash, it was an equilibrium bash.
They did the Nash, it was a game theory smash,
The Cournot Nash, a most strategic clash.

So let's explore the strategies, in this grand parade,
Game theory teaches us, how choices are made.
In Cournot's footsteps, we can understand the game,
And dance to the beat of equilibrium's fame.

They did the Nash, they did the Cournot Nash,
The Cournot Nash, it was an equilibrium bash.
They did the Nash, it was a game theory smash,
The Cournot Nash, a most strategic clash.

 

 

A New Research Project in the North and for the North

 

Northern Ontario has faced demographic and labour force challenges for several decades now.  Northern Ontario accounts for 90 percent of the province’s land mass but only about 6 percent of its population and though overall population appears to have stabilized since 2016, that share of population continues to decline as the rest of Ontario grows faster than its north.  To this long-term trend has been added the impacts of technological change and the digital economy as well as the effects of the COVID-19 pandemic.  As a result,given its aging population structure, issues of labour shortage have also come to mark the northern Ontario economy.

 

How to attract and retain labour in northern Ontario in both the short and long term is a pressing issue for the future growth and welfare of this diverse and sparsely populated region.  To date, much of the literature on labour force shortages and migration has been descriptive.  What factors are important in attracting and retaining population and labour forces in northern Ontario?  Given the presence of a substantial post-secondary education sector in the region, what factors and determinants are crucial in retaining skilled graduates for the labour force of the future.? To this effect, a pan-northern research team (of which I am pleased to be a member of) has begun a research project to address these questions and has obtained Social Sciences and Humanities Research Council of Canada (SSHRC) grant funding to help obtain some answers.

 

The project is titled “Northern Ontario Labour Force Retention and Attraction in a Post-Pandemic, Digital Economy.”   This is a broad-based survey project building on a pilot study that investigated factors influencing  local graduate retention rates for Algoma University in Sault Ste. Marie. The pilot developed and tested a survey and then completed a review on labour retention policy in the region. This research project scales up the investigation of graduate retention and contributing factors to migration in Northern Ontario, and the retention rates of all the region’s post-secondary institutions to identify factors influencing the regional retention of graduates qualified to fill labour shortages. Of special interest are the region’s unique demographic patterns, push and pull factors, migration networks, labour attraction and retention policies, and leveraging graduates’ temporary work permits.  A combination of student and  graduate surveys, focus groups, and secondary data will be used to examine the significant factors of graduate retention and ultimately aims to develop recommendations for how the region can retain more of its existing skilled labour pool and attract more skilled migrants. The study will also investigate the effectiveness of the Rural and Northern Immigration Pilot (RNIP) program in graduate retention.

 

The research team is interdisciplinary and includes social and community development experts, Northern Ontario economists, and labour market experts. The university-based research team includes Dr. Nusrate Aziz (Algoma) as Principal Investigator, Zeel Patel (Algoma) as Senior Research Assistant, Dr. Sean Meades (Algoma), Dr. Sadequl Islam (Laurentian), Dr. Livio Di Matteo (Lakehead) and Dr. Natalya R. Brown (Nipissing).  To date the project has also hired two students (Alex and Kashfia) – one based at Laurentian University and the other based at Lakehead University - to assist with the conduct of surveys targeting students enrolled in 3^rd, 4^th, and 5^th year (graduate) studies as well as focus groups involving university and college level staff and administrators involved in recruitment and retention initiatives.  The surveys have begun, and the subsequent pool of data will yield a rich source of socio-economic data on a demographic vital to the future prosperity of northern Ontario. If you are contacted by our team for input, we hope you will take the time to help us out. 

 

 

The Recession That Was Not There

 

Yesterday upon the stair,

I saw a recession that was not there,

It was not there again today,

I wish, I wish, it would go away.

 

With apologies to William Hughes Mearns, Antigonish 1899.

 

 

The release of yesterday’s employment numbers by Statistics Canada once again threw a wrench into the ranks of those who have been predicting a recession by revealing a continued resilience to the Canadian economy’s job generation machine.  Total employment in September of 2023 was 20,270,000 – an increase of 0.3 percent over the previous month with 64,000 jobs created.  There were of course both gains and losses across regions and sectors with Quebec and British Columbia seeing the biggest employment increases while Alberta and New Brunswick saw declines. 

 

As well, there were increases in employment in education, transport and warehousing and declines – not surprisingly given the slowing housing market – in finance, insurance, and real estate.   Nationally, the unemployment rate remains unchanged at 5.5 percent.  When one adds to this the fact that the U.S. economy in September added over 300,000 jobs and their national unemployment rate remained unchanged at 3.8 percent, one has to come to the conclusion that the North American economy is still quite robust despite the unprecedented surge in interest rates over the last year. 

 

Despite the ever present and mentioned spectre of recession with numerous forecasts and projections painting dire scenarios it remains that the recession is not here yet unless of course we are planning to redefine the context within what the definition of a recession is.  After all, the most recent GDP release also showed that as of July 2023, the economy was flat, neither up nor down. And one forecaster has said the economy will get “back on its feet” next year after a few negative quarters that will see the unemployment rate hit 5.9 percent followed by an easing of interest rates to the 3 percent range.    If a 5.9 percent unemployment rate is the worst this recession will bring, then one must wonder if a recession has simply become a psychological mindset perpetuated by endless speculation and anxiety of hard times to come. 

 

After all, as the accompanying figure shows, both interest rates and unemployment rates have been much higher during past recessions.  The 1981 and 1991 recessions both had much higher interest and accompanying unemployment rates than anything at present.  And notwithstanding the COVID spike in unemployment, unemployment rates have trended down since the 1990s and remain at close to historic lows bettered only by those of the mid 1960s. I suppose the only remaining case for a recession coming is that in both of those recessions, interest rates spiked and remained high for quite some time before unemployment finally surged.  Still, a forecast of 5.9 percent unemployment because of the current spike in interest rates does not seem like a recession at all when placed in historical context.

 

 

Still, the Bank of Canada’s next interest rate decision has been complicated by this much stronger economic performance and inflation still in the four percent range.  Moreover, with the sudden new instability in the Middle East, one can expect oil and gasoline prices to spike meaning inflation is unlikely to go down anytime soon.  Inflationary pressure is also being fueled by wage increases in the 5 percent range.  Indeed, Statistics Canada reported that incomes in general have been rising particularly in the bottom two income deciles as a result of wage gains for workers as well as increased benefits for retirees. 

 

Indeed, when one factors in all transfers to individuals including not only higher social security benefits and what is essentially a basic income for lower incomes with children via the Child Tax Benefit, it appears that disposable income in the bottom 20 percent has increased 20 percent. And, much of this goes to consumption spending as studies have suggested that lower income deciles have higher marginal propensities to consume and lower propensities to save.  Meanwhile, another Statistics Canada report suggests that the economy is doing better because of rising exports. Given the strength of the U.S. economy, that is not a surprise. Then there is the rising population and its associated demands on the economy.  Put it all together, and one cannot but help conclude that there is still a lot of inflationary stimuli being pumped into the economy.

 

Recession?  At present, the coming recession is a mere spectre, a mythical beast that is conjured up but is not there.

 

Thunder Bay, Burlington, Windrows and Civic Darwinism

 

Winter is approaching and it continues that compared to Thunder Bay, some southern Ontario municipalities are way ahead of the game when it comes to dealing with the lethal combination of climate change and aging populations.  In recent years, Thunder Bay has been getting heavier and wetter snowfalls which in the aftermath are quickly compacted into thick ice on residential streets.  Once the city snowploughs come through the neighborhood, usually several days after the snowfall, the result is a windrow at the end of one’s driveways.  Notwithstanding the snow already in one’s driveway, increasingly, we are not looking at six inches to a foot of snow left behind but massive walls of ice and snow which even a heavy duty snowblower is challenged to deal with.  The result for young and old alike is a period of massive exertion to exit one’s driveway which increasingly has been found to culminate in cardiac events not conducive to one’s longevity.

 

Now this blog has brought the issue of windrows up before but obviously to little avail in Thunder Bay.  A 2021 blog post noted that even Ignace Ontario was apparently getting its municipal snow grader outfitted with a “snowgate” while at the time it was noted that other cities in southern Ontario such as Richmond hill, Markham and even Toronto had windrow removal programs in place.  To this list can now be added the City of Burlington Ontario which according to a story in the Hamilton Spectator appears to have moved beyond a targeted windrow removal program (for seniors or people on disabilities) to a more general program that naturally comes at a charge.  As the story reads:

 

Burlington city council has approved enhancements to its program to clear snow left behind by plows, including increasing the number of available spots from 200 to 1,000 driveways.

In addition, service boundaries will expand to include all areas of the city.

As part of the city’s windrow program, crews will clear windrows within 36 hours of snowfall stopping and within 12 hours of residential road plowing. A windrow is the pile of snow that is left at the bottom of driveways by roadway plows.

Residential road plowing only occurs after accumulation of 7.5 centimetres or more of snow. Windrow-clearing services will run from Dec. 1, 2023, until March 31, 2024. A non-refundable fee of $125 plus HST per driveway entrance for the entire season must be paid at the time of registration.

In years past, the program was only offered to people with disabilities and individuals unable to clear their windrows. As part of the program’s expansion, the city now has the capacity to offer spots to any resident.

The city will continue to focus on providing spots to people with disabilities. Previous registrants will be contacted over the next week to secure a spot in the program. Following that, advanced registration for people with disabilities will open on Oct. 5 at 9 a.m. Registration for residents city-wide will open on Oct. 19 at 9 a.m.

 

Now, one is not asking for the city of Thunder Bay to provide free windrow removal.  After all, Thunder Bay has pretty clearly stated what its priorities are when it comes to tax funded or assisted municipal services.  While Thunder Bay does spend one of the highest per capita amounts of major Ontario cities, it has chosen to prioritize three things: general government, police, and fire services.  Indeed, of 27 major Ontario municipalities, Thunder Bay historically spends the most dollars per capita of its of its tax levy supported operating budget on these three items.   Indeed, historically nearly 60 percent of Thunder Bay’s operating tax levy is spent on these three items - again, the highest of these 27 major municipalities.  However, the City of Thunder Bay does not even appear interested in pursuing an approach like that of Burlington where one could essentially pay for the windrows to be removed so after the residential street is ploughed.  It is probably too entrepreneurial an approach for a gvoernmental body in Thunder bay to attempt.  On the other hand, given Thunder Bay’s municipal cost structure, one suspects that even if such a service were offered, it would be substantially more expensive than what Burlington is planning to offer.

 

So, there you have it.  Winter is coming and with it Thunder Bay’s survival of the fittest approach to retirement living.  

 

 

Strong Mayors and Housing: Thunder Bay Edition

 

Thunder Bay City Council this week did not support Mayor Ken Boshcoff’s desire to acquire “strong mayor powers” in a quest to meet provincial targets for housing and reap the benefits of associated funding support.  In some respects, this is not a surprise, not so much because members of council are so concerned about local democracy but because it does represent an erosion of their power given that strong powers on offer allow mayors to pass bylaws with the support of just one third of council, as well as veto bylaws passed by council on matters involving provincial priorities. In addition, the mayor will be able to propose the city budget, reorganize city departments and hire or fire the city manager and even some department heads. If anything, this represents a major potential increase in workload for the Office of the Mayor and one suspects there will eventually be some hiring to provide the necessary support.

 

Thunder Bay City Council because of its unique structure of at-large and ward councillors has always had councillors whose electoral mandate pretty much matched that of the mayor given they were elected by city-wide voters.  What the new changes mean in Thunder Bay and indeed in municipalities across the province is that the power structure has been unilaterally changed by the province in an effort to get the provincial housing agenda kick-started.  Indeed, going down the road, what some future mayor might do with such powers is a real concern. Nevertheless, it would appear that the mayor is going to ask for those powers with or without council support because the mayor wants to commit Thunder Bay to a target set by the province of 2,200 new homes by 2031.

 

This target is an interesting one because it means that over the next eight years (2024 to 2031), Thunder Bay needs to build an average of 275 new housing units annually.  The accompanying figure plots the annual number of housing starts from 1972 to 2023 and also plots the annual target set at an average of 275 units per year.  The 2023 estimate is incomplete given that the numbers from Statistics Canada only go to August and the monthly average based on January to August is used to fill in the rest of the year.  Even that total seems an underestimate given the couple of large apartment projects that have emerged that might double the total for 2023.  

 

 

 

Needless to say, the target is an ambitious one given that since 2000, the annual average works out to about 105 units per year.  In other words, going forward, it will be expected that Thunder Bay has to achieve just over 2.5 times the number of starts than it has managed on average over the last two decades. 

 

Can a strong mayor somehow wield the influence and power to more than double the number of housing starts in Thunder Bay?  Given the shortage of building trade workers as well as the fact that for the houses to be built, there has to be a demand for the housing and interest rates have spiked at the moment, it will be a challenge.  Then there is the ability of developers to earn a profit on the new builds whether single detached houses, apartments, or condos, even with whatever financial support the province has in mind.  Again, one suspects this target may be a tough one to reach.  A lot depends on whether or not there really are a lot more people in Thunder Bay than official counts say there are and if those people are actually interested in permanent housing in Thunder Bay and more importantly have the ability to pay for it either as owners or renters.

 

One suspects that in the end, the real influence of strong mayor powers in Thunder Bay will not be so much on the future housing stock but on things like the city budget and even senior staffing.  The mayor’s position is about to get more important and as the adage goes, with great power comes great responsibility.