Three possible solutions to “American cities and states spend[ing] up to $90 billion in tax breaks and cash grants” to companies

After discussing why American communities spend so much money and effort to attract companies, Derek Thompson proposes four solutions:

First, Congress could pass a national law banning this sort of corporate bribery. Mark Funkhouser, a former mayor of Kansas City, Missouri, envisions the law as the domestic version of the Foreign Corrupt Practices Act, which makes it illegal for Americans to bribe foreign officials.

It’s not entirely clear whether that would pass constitutional muster. The Supreme Court hasn’t ruled decisively on whether the Commerce Clause gives Washington the authority to ban interstate bidding wars. In the 2006 Supreme Court case DaimlerChrysler Corp. v. Cuno, Ohio taxpayers sued the state after it paid the automaker DaimlerChrysler about $280 million in tax exemptions and tax credits. The Sixth Circuit Court sided with the taxpayers, striking down Ohio’s subsidy as a violation of the Commerce Clause. But the Supreme Court avoided a final judgment on the matter by finding unanimously that the plaintiffs did not have standing to bring the suit.

Second, Congress could make corporate subsidies less valuable by threatening to tax state or local incentives as a special kind of income. “Congress should institute a federal tax of 100 percent” on corporate subsidies, Jack Markell, a former governor of Delaware, wrote in The New York Times. “This would not include investments in public infrastructure, work force development or other investments that can attract employers while also providing a significant long-term benefit to taxpayers.” Taxing subsidies would hopefully force cities to change their economic-development strategies, from importing other states’ companies to building their own—through investing in research universities, building more housing, and welcoming immigrants, since foreign-born Americans have the highest rates of entrepreneurship.

Finally, the federal government could actively discourage the culture of corporate subsidies by yelling, screaming, and penny-pinching. As Meagan Day wrote in Jacobin, “The federal government could withhold funds from governors and mayors who threaten to poach jobs from other states, or who won’t disclose their incentive packages.” Washington tends to look on quietly when cash-strapped states break the bank to welcome glitzy tech firms. But an attitude change at the top could trickle down to the local level. Donald Trump, or another president, could have made a national address after the HQ2 announcement slamming Amazon for soliciting taxpayer funds in a silent auction. He could have called a summit to encourage the nation’s mayors and governors to offer the same tax subsidy for HQ2—zero dollars and zero cents. Even a tweet could suffice: “7 BILLION FOR BEZOS?? Trillion-dollar companies in America don’t need our welfare! Bad!”

Interesting options. I have argued before that this practice leads to a race to the bottom between communities. They can even pit suburbs and cities within the same region against each other.I wonder if both businesses and communities would complain. Businesses would want to get the best deal they can. Why shouldn’t they be able to compare different offers? They may go as far as to argue that the tax breaks help them be more profitable which means they can then spread more wealth to workers and investors. Communities might prefer to keep competing because it gives them a chance to entice a business that otherwise might not move there. If tax breaks became less valuable, would certain industries and kinds of firms gather in a limited number of attractive locations? Open competitions for companies gives communities a chance to get their name out there and build a brand. Furthermore, these tax break opportunities allow local officials to show that they are making a concerted effort to bring jobs to an area.

I do not see this practice stopping soon even as we see the fallout of the Amazon race. While it may take time for the federal government to step in, communities could decide to opt out from such competitions. What would happen if in a situation like the Amazon one, the major contenders refuse to pander to the corporation?

What the losers for Amazon HQ#2 might gain

Amazon may be leading the way to more highly public location searches and there is one way this could help the communities who lose out:

All may not be lost for the 237 also-rans, though. They’ll have thick books filled with available sites, potential incentives and glossy pages touting their best attributes, and they’ve learned lessons for their next big pitch.

“A positive outcome of this could be the self-reflection of communities throughout the country,” Sessa said. “They’ve had to be very honest about where their strengths are and where their weaknesses are. Only one is going to be selected, and the other 237 will have assembled a lot of good information. If the weaknesses are addressed, the beneficiaries will be the companies who reside there now and the companies looking to move there in the future.”

This is a positive takeaway from what promises to be a disappointing outcome for numerous major cities: they will be better positioned to make the next pitch. But, I can imagine multiple ways this self-reflection and self-improvement will not work in the long run:

  1. There are not many future large-scale searches like this for cities to participate in. Amazon is a special case both because of its size as well as its desire to add jobs (rather than relocate existing facilities and employees).
  2. It is unlikely there are enough major companies for every major city to win something in the coming years. Additionally, major companies tend to want to locate near other major companies and in hot areas.
  3. The tax breaks and incentives required to attract these companies may not be worth it, particularly in an era when many communities are struggling to generate revenues.

In my mind, honest self-reflection in many communities would involve the realization that fighting for the biggest companies is not in their best interest.

Board games for which I am thankful

On Thanksgiving, I’ll take this opportunity to highlight some board games I enjoy and some I wish to explore further. On a sociological note, these games are great ways to both enjoy time with friends and family as well as have structured competition. To the lists:

Games I enjoy the most (in rough order starting with my current favorites):

  1. Agricola. My favorite game set in Germany several centuries ago in an agricultural setting. This game has its complications but if you play with the card decks (which provide occupations and minor occupations), there is a lot of variety even as you try to acquire the same elements each game. In other words, it has some predictability alongside intriguing variation. And with the Farmers on the Moor expansion we recently acquired…
  2. Diplomacy. Awesome game, difficult to actually finish since you need seven players and lots of time. It is like Risk but there are no dice: your armies can only advance at the beginning by either cooperating with other players (who support your moves or don’t block them) or fighting them. There is a lot of negotiation. I’ve played a few complete games via email – a round per week – and this involved hundreds of emails.
  3. Race for the Galaxy. It took us forever to read the instructions and understand all the different symbols but the payoff has been really good.
  4. Innovation. This card game is like pursuing the technology tree in the game Civilization but with each player seeing different cards and paths from the Stone Age to now each time. There is a nice mix in the cards allowing actions you can take against other players, things you and other players can both do, and things you can do with your own tableau.
  5. Puerto Rico. Even though the rough idea is similar – build your own social group – to Settlers of Catan, I prefer this one much more. Perhaps it is because you can be a different role each turn? Perhaps because they are no numbers on your hexes deciding your fate?
  6. Trivial Pursuit. Yes, it is often seemingly random knowledge. Yes, the games can take forever – in recent years I have been part of several family games that took over three hours. Still, where else can people who know all sorts of “trivial” information come together?
  7. Stratego. In my mind, the key to this game is that you don’t know what pieces your opponent has across from you until you risk an attack. Few games have this much secrecy.
  8. Suburbia. I’m a sociologist who studies suburbs. The board game does a nice job simulating suburban growth (and the recent expansion pack we purchased adds some new elements). See my earlier quick review.
  9. Carcassonne. The building aspect plus seeing random tiles adds up to fun.

Games that were close to the favorites list: Guild Hall, 7 Wonders, Bohnanza, Chess (a game I am not very good at but is still alluring).

Games I would like to explore further/play for the first time:

  1. Memoir ’44. I haven’t played many war strategy games but this one consistently receives high marks.
  2. Splendor. This is on my Wish List for this year.
  3. Patchwork. It is hard to find good two player games and even though I have only played this once, I think this one could have a lot of replay value.
  4. For Sale. I’ve played this a few times and it is a rare filler game I would want to play a lot.

Games I used to like more but would still be happy to play:

  1. Monopoly. Still fun at times. However, too many family games of this ended in predictable ways.
  2. Scrabble. I like the game. However, different people want to play with different variations (i.e., not using a dictionary at all, using the latest official dictionary, looking up words in said dictionary).
  3. Careers. Lots of fond memories of playing this as a kid. But, if I only played once every years now, that would be enough.
  4. Settlers of Catan. The game that may have introduce Euro games to the United States. I generally like it but it is not a favorite and would almost always prefer a game from the favorite list above.
  5. Pandemic. Cooperative games can be interesting and this one, particularly with some of the expansions, offers some fun opportunities. But, it is almost too hard: even on the easiest levels, those epidemics break out too often.
  6. Ticket to Ride. This game always plays out the same way for me: I reject the long routes early on because I’m not sure I can complete them, I build a lot of short routes, and few points result. Still, the concept is fun.
  7. Risk. Somewhere between my notes above on Diplomacy and Monopoly.

Perhaps I tend to like longer building games with structured variety. These can take up a lot of time but they do require both more attention (with the player often thinking they alone hold their fate in their hands) as well as prolonged interaction with other players. I’m not entirely convinced that Euro games are more enjoyable for everyone just because they get to build something but most of the favorite games I listed above do allow for multiple strategies for winning.

To close, a quick peek at our main game storage area (though other games, both classic and new, are scattered elsewhere):

gameclosetnov2316

 

GE moved to Boston to be near big ideas, disruption, competition

Big companies moving back to big cities is a trendy thing and here the CEO of General Electric describes their recent move back to Boston:

Immelt: You know, we wanted to get to a city. At the end of the day, I think for the company we wanted to get into a place where there was more of an every day where you could get up and be part of an academic setting. So I think it was important to get to a city...

I have to say it’s real. I thought it was a little bit of B.S. initially, I wasn’t sure. And when I looked out the window—when I was in Connecticut, it was beautiful, awesome, great office—but when I looked out my window, I saw nothing, there was nothing going on. I could watch cars go on the highway, things like that.

I’ve been Boston now six weeks and you just walk out the door. You’re in the middle of an ecosystem that quite honestly for a big company, it makes you afraid. You’re where the ideas are. You get more paranoid when you’re doing that and that’s a good thing. So I thought it was—

Isaacson: Only the paranoid survive!?

Immelt: No, no. It’s a good thing. When you’re a big company, it can get hidden but it’s important that you’re in touch with what the next idea is or what the next disruption is. And so I’m kind of a big believer that that’s the wave of the future.

The summary suggests this echoes Richard Florida’s approach to cities. Yet, when people talk about Florida, they often refer to his ideas about employees and the workforce: a talented, diverse, and tolerant workforce that is attracted to thriving cultural and entertainment scenes. Immelt is suggesting something else is also important: competition between ideas. In the suburbs, it is easy to become comfortable and become insulated from cutting edge thinking (and technologies?).

It seems like it wouldn’t be too hard to test this idea: cities produce more innovation and competition than suburban areas. Off the top of my head, it seems like Bell Labs did okay for decades in largely suburban office and R&D facilities. Are the various companies in Silicon Valley hampered by being in more suburban settings (or to put it another way, could they have been even more successful)? Is being in the metropolitan area enough to help spur innovation or does a physical location in an urban core (even opposed to being within city limits but not near thriving areas) near other firms and employees doing these things matter?

Cities that build their own highspeed internet services

Several American cities have put together their own highspeed Internet services:

Chattanooga isn’t alone. Cities like Wilson, North Carolina and Lafayette, Louisiana have likewise given up on waiting for private companies and started their own ultra-highspeed internet services. But some community efforts have been stymied by state laws prohibiting governments from competing with private internet providers…

The debate over the future of municipal broadband is central to both the economic development of communities across the US—and to the future of investment in broadband infrastructure. Improvements to the state of broadband can’t come soon enough. The US lags behind countries like South Korea and the Czech Republic in both speed and cost of internet access.

Sure, the rise of Google Fiber has spurred competition both in cities lke Austin, where Google has only recently begun rolling out service, and areas that some providers think could be next on Google’s list. But there’s no guarantee that Google Fiber will spread beyond a very limited number of cities, and some communities are being left further behind in the broadband revolution than others. While 94 percent of Americans living in urban areas can purchase broadband faster than 25mbps, only 51 percent of rural Americans can purchase access at those speeds, according to the report.

The report also says that 30 percent of homes have no broadband connection, and high prices for access is a big part of that. Plus, there’s not much competition in most cities: 40 percent of US citizens have only one company in their area that can provide fixed line connections faster than 10mbps—if they have any option at that speed at all. “Without strong competition, providers can (and do) raise prices, delay investments, and provide sub-par quality of service,” the report says.

While this article tends to emphasize the public vs. private provision of the Internet, I wonder how much these projects are intended to help raise the profile of these cities and give them an edge in attracting businesses and residents. Cities compete through a variety of variables including tax breaks, the existing collection of businesses, the human capital of residents, the cultural and entertainment amenities that each place has. I would guess highspeed Internet could provide an edge, particularly for firms that want to be part of an innovative and enterprising community.

Pivoting toward greater competition

Ryan Singel over at Wired magazine writes about a new start-up called LawPivot that helps start-ups with their legal questions:

LawPivot’s solution is to create a Q&A site where startups can ask legal questions confidentially and then get recommended lawyers to answer the question, which can lead to the former hiring the latter.

While California-based startups can now ask three free questions a month, LawPivot will soon be charging companies $80 for each question. For lawyers, the benefit is being able to land new clients for themselves or their firms, and to build a reputation — though they don’t get paid to answer a question.

Despite potential ethical issues and haughty dismissals by certain blogs, this certainly is where the legal profession is heading.  In a globalized world with plenty of lawyers looking for work, more competition is inevitable.  Fees are going to go down.

The highest-paid athlete of all time: a Roman charioteer

There is some discussion these days about the high salaries of modern athletes: are they worth it? Do these salaries demonstrate that society thinks these people are more or most valuable compared to others?

According to a new study, these high salaries are not just a feature of the modern era: a Roman charioteer is considered to be the highest paid athlete of all-time:

According to Peter Struck, associate professor of classical studies at the University of Pennsylvania, an illiterate charioteer named Gaius Appuleius Diocles earned “the staggering sum” of 35,863,120 sesterces (ancient Roman coins) in prize money…

Although other racers surpassed him in the total number of victories — a driver called Pompeius Musclosus collected 3,599 winnings — Diocles became the richest of all, as he run and won at big money events. For example, he is recorded to have made 1,450,000 sesterces in just 29 victories.

Struck calculated that Diocles’ s total earnings of 35,863,120 sesterces were enough to provide grain for the entire population of Rome for one year, or to fund the Roman Army at its height for more than two months.

“By today’s standards that last figure, assuming the apt comparison is what it takes to pay the wages of the American armed forces for the same period, would cash out to about $15 billion,” wrote Struck.

It sounds like Roman society was quite willing to make stars out of its athletes/competitors. I would be curious to know: what it is about societies that causes them to confer celebrity status and vast sums of money on people who compete (and win) in games or events?