A wealthy businessman became overwhelmed with the desire to have grandchildren, wanting to enjoy their company before he died. The man had two sons and two daughters. All were married. None had shown any interest in children.
At the family’s annual Christmas dinner that year, the elderly fellow gently scolded his children for not giving him any grandchildren, then added: “Last week I went to my lawyer’s office to set up a $100 million trust fund that leaves almost all my fortune to the one of you that is first to produce a grandchild. Now let’s bow our heads and give thanks for the Christmas meal.”
Most people when they hear the word “economics,” immediately think of money. But actually, economics is more about incentives and the way incentives shape human behavior, than it is about money. Money is something that follows the incentives, the same way ducklings follow their mother. The above story is a tongue-in-cheek explanation of incentives and how they work.
Unfortunately, when responding to incentives, the business community is often accused of greed. When the business community reacts negatively to government imposed disincentives and regulatory roadblocks, it is then accused of selfishness. Both are unfair. The fact is that responding to incentives or disincentives is a reflection of common sense.
Many years ago, Mother Teresa and her Sisters of Charity wanted to open a homeless shelter in a North American community that was teeming with needy people. They got hold of an excellent facility in a suitable location, only to find themselves faced with a government bureaucracy that demanded very expensive and very unnecessary alterations, before the building would be approved.
Mother Teresa backed out of the project. Her commitment to the poor didn’t end, nor was she being greedy or selfish. She simply recognized that the government had given her an incentive not to establish a homeless shelter, even though the need was overwhelming. She knew the money would be better spent helping poor people elsewhere, than in satisfying inordinate and highly excessive bureaucratic decrees.
Government is in a class by itself when it comes to creating disincentives. Here in Alberta, apart from what the government is about to do to people and businesses with Bill 36 and Bill 50, which together will triple industrial power rates and give government the power to rip up legal agreements and contracts, our province is pretty much leading the country when it comes to tying up business with red tape and unnecessary disincentives.
Every year the Canadian Federation of Independent Business (CFIB) rates the provinces and territories so far as red tape and bureaucratic obstacles are concerned. The objective is to see which provinces are business friendly and which are not. For 2011, there were two provinces and two territories that received an outright “F”. They were Yukon, Manitoba, NWT, and Alberta. For 2012, the highest rated province is BC (Rated “A”). Yukon, Manitoba, NWT, Nova Scotia, and Alberta are all rated either D or F.
NOTE: CFIB has accumulated a number of great first-hand stories about the impact of red tape and unnecessary regulation in what it calls The Red Tape Diaries.
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