Learning from reformed alcoholics.

A group of reformed alcoholics were asked if they would rather have $200 today or $500 in six months. That is a payment of 150 per cent for waiting six months. The question comes from a study about what economists call "time-preference." That's econo-speak for how much you prefer a quick payoff.

A high time-preference can be an economic disease. Billionaire investor George Soros has been warning about the danger for an economy when investors and governments are always looking for for quick payoffs.

A company with a high rate of time preference won't invest unless the payback period is very short. In Wawa, for example, Weyerhauser had the chance to invest in a cogeneration plant and greenhouse system to bring down energy costs for its strandboard plant. Supporters claimed the project would pay for itself in less than four years. But in October, Weyerhauser announced it would close the Wawa plant.

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More self-control and more self confidence seem to go with a lower rate of time-preference. In the study, only 53 per cent of the guys who had been on the wagon for less than two years took the $200, but 70 per cent of those who had been sober for five years or more wanted to hold out for the bigger payoff. Northerners don't have control and they don't seem very confident.

Today's forestry crisis discourages young northerners from planning to stay in the North. Without the promise of their skilled labour there is no way to build the value-added industries that would give them a reason to stay. If we din't expect they will stay, we don't need a good strategy for rebuilding the forests. If we don't have a strategy for adding value to the forest resource, there is no point in investing money in mills or communities.

The crisis is partly a result of a long-run failure to invest. In June, the Parliamentary Standing Committee on Natural Resources concluded that "the capital stock of Canada's forest industry as a whole is older and less productive on average than that its global competitors."The Canadian Labour Council agrees "we face a legacy of chronic industry under-investment in aging mills." Industry experts have been saying the same thing for decades. Low investment is a result of a focus on quick returns and a tendency to undervalue the future--in other words, a high rate of time-preference.

Where does the rate of time preference we use come from? Research is beginning to show that the value we place on the future depends on our confidence, our imagination and our ability to work together.

If we could somehow increase the value of tomorrow's forests for today's northerners, it would change everything. Northerners would begin to plan farther ahead, would invest more, would encourage their children in studies that help them stay and develop the forests. They would value their communities more. Companies would see a stable, skilled workforce and invest more. Making the future of northern Ontario more attractive would increase the value of northern resources and communities today.

Politicians know this very well--that's why the ones in power are always saying things are great. That's why Premier McGuinty went into damage control mode when Federal Finance Minister Jim Flaherty said Ontario was the last place business would want to invest in because of the high taxes in the province. McGuinty knew Flaherty's political attack could become a self-fulfilling prophecy.

But politicians' talk doesn't do nearly enough. It takes believable actions to make us believe in future benefits. That is the challenge the Province faces in developing the Northern Growth Plan. How can the government make the tomorrow's north more valuable for northerners today?

The usual fiddles and fancy words won't do it. The story about the drunks suggests an answer. A sense of control is the key.

Alcoholics who knew they had enough control to stay on the wagon could stand to give up a small gain now for a bigger one later. When northerners control the northern forests they will invest their money and themselves in developing the North. The secret of a Growth Plan that works is to change the system so that northerners have a real stake in the future of the forests.

Dave Robinson is an economist with the Institute for Northern Ontario Research at Laurentian University.

drobinson@laurentian.ca