Not the Same Old Incentives

You can probably tell from previous posts that I'm not a huge fan of
playing the incentive game when it comes to retaining or attracting
businesses. It is usually a zero-sum game, where one city's gain is
another's loss; good for the winner, bad for the loser, and neutral
for the overall region. You might even argue it's a negative-sum
game, what with all the disruption and cost of moving.

But the fact of the matter is that companies are increasingly mobile,
and doing nothing when other localities are doing something will mean
a lot of firms will leave you and not a lot will come to you. So how
to compete without turning the whole thing into a negative-sum game?

Let's take a detour in the business world for a sec. Let's say you
sell a product. Others sell the same product. In order to win a
customer, you either have to be less cost or more quality than your
competitor, right?

Cost and quality are just two ways to win a customer, or in business
parlance, to have a competitive advantage. You can be the best
cost-quality trade-off, otherwise known as value. You can be the most
convenient, most appealing to social values, most durable, most
unique, and the list goes on and on and on. That's what great about
capitalist economies: lots of choices means companies get more and
more efficient, customers get better and better values, and everyone
wins.

So why can't cities compete in the same way? Cities that try to keep
or lure firms just by throwing tax breaks in their direction are
playing the same games that happen in the business world when you have
price wars. And you know how those end up.

Instead, cities should figure out what's unique about their location.
What's their competitive advantage, that can be no other city's
advantage? Sometimes it's price (low taxes). Sometimes it's quality
(great public services). Sometimes it's value, location, buzz,
history, or whatever. That's what's great about our country: so many
different kinds of cities, each with their own unique selling points.

So why do economic development offices in all these cities end up
throwing the same incentives at firms? Why don't they take the time
to figure out what's unique about their location and market the heck
out of it? That's what the Center City District is doing here in
Philadelphia. Sure, it offers some standard amenities to help bring
firms to the downtown area, like increased street cleaning and
security patrol. But its main thrust is to depict what's unique about
Philadelphia: its walkability, its restaurants, its night buzz.
There's a recruitment and retention strategy I could get behind.