Posts in Economics
The happy union of capitalism and technology

It's right there on the receipt. I just bought an 8 gig memory stick for 29 bucks. Makes you nostalgic for the good new days of unbridled capitalism, doesn't it? It even makes me feel a bit sorry for kids today. What sort of hard-luck stories will they be able to tell when they're old? "When I was a boy a terabyte of memory cost a whole dollar!" "Ah shaddap gramps, I gotta exabyte implanted right in my brain for a nickel last week." Whereas I remember the first time a colleague, whose research involved a significant database, got a one gigabyte hard drive. We literally trooped into her office to gawp at it. This Tuesday on a whim I threw two one-gigabyte USB sticks into the cart for $6.99. OK, $6.99 each, plus tax. Still not 20 bucks total.

Ten years ago I wrote about the technological miracle that every computer I ever bought cost roughly $2,000 despite huge increases in computing power. It turns out those were, in that sense, the bad old days. This week I went on what would once have been an electronics spending spree, helping someone choose both a laptop and a desktop far more powerful than they could ever use, for just $1400. Combined.

As I doddered through the store, boring everyone within hearing --a small group, thanks to earbuds and the pounding music in stores today, which isn't even music but noise -- I realized my parents' first computer, a 1981 Apple IIe with a daisy wheel printer, set them back ten grand, considerably more than a cheap car, whereas the $450 I just paid for a 360-gig-hard-drive desktop is less than a decent bicycle. As for the $29.99 webcam we also threw in, you could spend that on fast food. And while the ability to see my face in all its horrible detail from another continent might not seem the pinnacle of human social evolution, it is technically impressive.

All of which prompts the question: If government is so great, why does it keep getting more expensive? Years ago David Frum made the point that the excuse we often hear for rising health care costs is advancing technology, and yet in every other field but the public sector that same factor keeps lowering costs -- as you'd expect, since technology in the modern sense means an ongoing, even relentless series of improvements in the technique, materials and organization of production.

A modern car, Frum pointed out, costs about as much adjusted for inflation as a Model T. But it offers rather more comfort and performance. Uh, except under communism, where the infamous East German Trabant generated just 18 hp to the Model T's mighty 20.2. Wikipedia says the Model T, produced from 1908 to 1927, boasted a giant 2.9L engine offering a dazzling top speed of 72 km/h, regrettably at some 18.7 litres per 100k (though on the plus side it could burn gasoline or ethanol). All of which I discovered in three minutes online, speaking of technological advances that leave you shaking your head at the government's ongoing incapacity to generate electronic medical records.

In case you want to try the financial comparison at home, the Bank of Canada's online inflation calculator (www.bankofcanada.ca/en/rates/inflation_calc.html) says the 1909 Model T price of $850 would be about $17,000 today and the 1915 price tag of $440 about $8,300. The cheapest new cars I could find in Canada today both list for just under $10,000. Mind you both have 110 hp engines and warm interiors and stuff.

Technology won't get us into heaven, of course. But on its own terms it works. Under capitalism it continually improves everything but morality and taste. Even the lowly sewer.

Earlier this year I got a fascinating explanation, from the good people who manage Ottawa's sewers, about modern techniques including the "trenchless" system that permits relining of sewers through a process not unlike arthroscopic surgery, that sprays a coating so technically fierce that if the old sewer rots away totally the lining will carry on for years. The engineers and tech guys who work for the city know and love their sewers.

But your municipal tax bill just keeps on rising. Wonder why?

While shopping for Canada Day goodies, try comparing the selection in the supermarket with, say, that on display in the latest federal or provincial cabinet shuffle. Because now that I come to think of it, today's gormless youth, in gormless old age, will at least be able to describe life back when George Smitherman's performance as health minister was thought to qualify him to run a super-ministry combining energy and infrastructure.

I'm pretty sure it has something to do with not getting a money-back receipt for Premier McGuinty.

[First published in the Ottawa Citizen]

Sadly, no one wants to play the numbers game

The new Ontario budget is a highly instructive document. And I don't mean that in a good way. The first thing it illustrated was the risible level of contemporary partisan shrillness. Let me single out provincial Conservative leader John Tory accusing the McGuinty Liberals of being "addicted to spending," as if he'd be any different, and federal Tory MP Pierre Poilievre following his finance minister's undignified pre-emptive criticism with an instant response that plumbed new depths of brazen implausibility by saying "We came today in a spirit of partnership to ask (Premier Dalton McGuinty) to reduce the job-killing taxes he's imposed on Ontarians".

The second thing the provincial budget illustrated is that contemporary budgets aren't accounting documents at all and no one seems to expect them to be. I was 12 pages into my third newspaper Wednesday morning before anyone bothered mentioning total projected spending for the coming year (a surely noteworthy $96.2 billion). Meanwhile, the top "News" item on the Ontario government website that day was "McGuinty government invests in skills" which sounds like good news until you realize it's ours, not theirs, they're talking about.

Despite the demise some years ago of Keynesian economics, finance ministers and their critics spar over budgets as if their main purpose were to secure prosperity, not safeguard the public purse. Even when forced to admit that the economy has recently performed in ways as disappointing as they were unexpected, finance ministers routinely insist that this year they know all and see all when it comes to stimulating the economy.

The subtitle of Ontario Finance Minister Dwight Duncan's 2008 budget speech was "Growing a Stronger Ontario," not "What we're spending and where we hope to get it" or words to that effect. And in the speech, I found only one instance of the word "spend" (on page 11) but 29 of "invest" or some variant (referring to the government; there were also seven references to private investment which gives you a pretty clear idea of the relative importance they attach to the two). As for the government's plan to raise $96.9 billion and spend $96.2 billion, it appears nowhere in the budget speech.

Indeed, you have to reach page 93 of the quasi-detailed Budget Papers for the first figure and page 107 for the second. Even there they don't commit the ugly word "spend" to paper. Instead "Total expense over the medium term is projected to increase from $96.2 billion in 2008-09 to $102.6 billion in 2010-11, reflecting investments to promote economic growth and job creation through the government's five-point economic plan."

At least it sounds like a moderate increase. But wait. In its 2005 Budget Papers this government projected both revenue and expense three years out (that is, for this fiscal year, 2007/08) at $88.5 billion and they were actually $96.6 and 96.0. Should the Liberals be equally wrong this time, the real 2010-11 expense figure will be $111.3 billion. Exactly the sort of thing that, if this were an accounting document, would attract sustained attention. As would health spending hitting $40 billion. If we were doing "value for money" audits we might ask what we were getting for all these billions, and even on purely actuarial grounds there's room for sober discussion of trend lines.

Instead we get a weird mix of vaguely defensive economic projections and vainglorious political rhetoric about vital improvements to key social programs and the spending restraint that is to come, without any mention of why the 64 percent surge in program spending since 2001 underlined by Terence Corcoran in the National Post didn't do the trick but this time for sure it will work.

Imagine if, in 2003, Ontario's finance minister had told us we're raising health spending to $28.1 billion and education spending to $14.1 billion but these figures are so pitifully insufficient that by 2008/09 they'll be $40.4 billion and $19.3 billion and it still won't be nearly enough, so trust us, we know what we're doing.

No, I don't think they're withholding information. I fear that what you see is what you get when it comes to politicians' understanding and attention spans. That's why budget documents are primarily campaign boasts about how much more money your wise and prudent government is pouring into key programs because the incredible sums they already spent didn't work.

Considered as an accounting statement, that's pretty scary. From a policy perspective it's not much better. On the bright side, you can download the government's budget "Highlights brochure" from the finance ministry website in 16 different languages.

As I said, most instructive.

[First published in the Ottawa Citizen]

Columns, EconomicsJohn Robson
How capitalists are saving the planet

It’s opera. My wife is listening to opera while jogging. The heroine will, one assumes, come to a tragic end. But the batteries won’t, because she’s using a digital player. On which, I trust, I can record the sound of environmentalists applauding the technological advances capitalism brings. Strange. I hear nothing. But I’ll keep trying. For like most journalists, I tape things a lot. That once meant a “tape recorder,” huge wobbling inconvenient piles of cassettes or microcassettes and a pile of batteries to warm the heart of any pink mechanical bunny. Not any more. Now my digital devices record MP3 files I store on my computer, and their batteries recharge right through the USB cable while I download.

Searching an MP3 file for a clip is much faster than rewinding a squealing microcassette. MP3s don’t snap at bad moments and are way, way easier to make backup copies of, with no loss of sound quality. It’s also way easier to search one CD or DVD than three dusty (my wife’s word) desk drawers full of cryptically labelled tapes. And because they don’t have to drive a tape around a spool, digital recorders use a lot less power so you don’t have to lug 10 extra batteries up, say, the Golan Heights so your tape deck won’t die at a bad moment.

They’re also cheaper for much the same reasons. You don’t have to keep buying batteries, tapes and furniture to store the tapes in. Did I say cheap? I just bought an external sound card for about 70 bucks that lets me digitize all my old tapes and chuck them. And an inexpensive scanner lets me preserve documents I accumulated in half a lifetime of pack-rattery before, in a similar process, going digital with my letters and file storage. The stuff I keep may still be rubbish, but it won’t fill a dump. PDFs, like MP3s, should bring a smile to the face of any environmentalist.

Permit me, then, to wipe it off deftly by pointing out that self-interest is what’s driving this greener technology. Most of us value the environmental benefits to some extent. But for all of us, digital technology means going green without suffering. Which will displease some in the organic-hair-shirt crowd.

It will upset others that companies are succeeding where governments often fail. The European Union’s environment commissioner just admitted that biofuels promote rainforest destruction. Legally mandated efficient light bulbs may give some people skin problems. The failure of governments to build nuclear plants has contributed massively to greenhouse-gas production. But over there in the private sector, it’s just progress progress progress. Wretched, isn’t it?

The progress is enormous. That digital dictaphones use less power not only means fewer dead batteries full of weird metals chucked into landfills, it also means fewer new batteries manufactured then schlepped about using fossil fuels. The DVDs we store MP3s on require far fewer resources to manufacture, and generate far less trash when they’re history, than LPs, spools or the aforementioned three drawers’ worth of microcassettes. (And just wait until I discover external hard drives.) Fourth, a subtle refinement, early digital dictaphones required proprietary software CDs and connection cables that also had to be manufactured, transported and, one day, discarded; newer ones send standard files through standard USB ports or wireless. Fifth, we e-mail, FTP and stream this stuff instead of couriering or mailing physical copies.

If you’ve ever been in a darkroom while “film” was being “developed” (Google it, kids) the stench of sodium thiosulphate tells you instantly that digital photos convey at least equal benefits. (And how, incidentally, do you dispose of old photos you no longer want? Landfill? Burn? Yuck. Whereas now it’s right-click, delete, empty recycle bin, goodbye ex-mother-in-law.)

Some greens advocate going back to a time when the human “footprint” on the environment was smaller. But we actually have to go forward, technologically speaking. The “footprint” of a portable cassette device was far larger than that of a digital player, while a medieval monk would have had to lug some nit with a lute on his back to enjoy Greensleeves while he jogged, to say nothing of plucking geese, skinning sheep and mixing who knows what gunk to write down the sheet music.

True, he would have heard something less appalling than opera or rap; technology can’t make moral or aesthetic choices. My wife is, as I noted, listening to opera and I can’t fix that.

Oh wait. I can. Press one little button and it’s all erased, leaving lots of room to record the stormy applause for capitalism I expect to erupt among environmentalists. My finger’s hovering over the record button. Yup, any moment now …

[First published in the Ottawa Citizen]

I've seen this show before

Those who forget history are doomed to repeat it. And you don’t have to go all the way back to the Danegeld to get the experience. Try this Monday’s release of the latest report by the National Round Table on the Environment and the Economy. At the risk of seeming weird, I should explain that on the weekend while clearing atrocious junk out of my attic, I wound up digitizing some old cassette tapes including, it turned out, a 2002 Citizen editorial board meeting with the NRTEE. On that occasion, they told us global warming was a crisis, urgent action was needed, there was substantial scientific and corporate consensus and market mechanisms were needed but they hadn’t yet worked out the details.

Fast forward six years. Monday, January 7th, 11:00 a.m., the National Press Theatre. Key members of the NRTEE told us global warming was a crisis, urgent action was needed, there was substantial scientific and corporate consensus and market mechanisms were needed but they hadn’t yet worked out the details. I recognize that I personally may, when in my cups, repeat anecdotes. And I know environmentalists favour recycling. But this is ridiculous.

If you’re a climate skeptic, then you have horns and a tail. No, sorry, I mean you’re happy enough to sit through this presentation every six years. But what if you really believe we have one decade to solve the climate change crisis, which has been the orthodox position for the last 15 years? Does it not disturb you that we just spent six years running in place?

Of course you’d have to know about it first, and it wasn’t prominently featured either in the NRTEE presentation or in subsequent coverage of same. Jeffrey Simpson in the Globe and Mail did observe that “the NRTEE’s message repeated the obvious, since even the Harper government and the Canadian Council of Chief Executives accept the need for a carbon-emission trading market.” But why say “even the Harper government?” I remember when it was a distinguishing mark of the right-wing lunatic to think market methods had something to contribute on environmental problems.

It was in the early 1990s, when I worked at the Fraser Institute. In a familiar pattern, the idea provoked ridicule, then hostility, then agreement, at which point its origins were quietly forgotten. (See also “let’s measure health care waiting lists.”) Indeed, that incentives matter, in environmental and other areas, is now so broadly accepted that it’s hard to believe it was once routinely denied in principle or that it’s still so widely ignored in practice. In intellectual matters one does see movement in this country. Policy is another matter.

Here I would also like to remind you that in 2002 (Sept. 4, to be exact), in this newspaper, I dismissed environmental hopes and economic fears about the Chrétien government’s decision to ratify the Kyoto Accord. I said there would never be a plan, that the government “will never even try to implement the treaty.” I also said tradable emissions permits were theoretically sensible, but stressed how difficult it would be to work out the details.

I don’t want to rehash the scientific arguments about global warming, or more precisely the refusal of its advocates to argue the science. Been there, done that. But I do want to rehash the serious problem of governance in Canada in which a lot of high-flown rhetoric about consensus and compassion and crisis accompanies failure to come to grips with practical details, on issues from the gun registry to rebuilding the military to reforming health care to Kyoto.

The NRTEE (you can find them, and their latest report, online at www.nrtee-trnee.ca) are clearly not fools. But something is seriously out of whack when all that energy and intelligence goes into a cycle of planning to have a plan (see especially page 47 of their latest report). At Monday’s press conference Brian Lilley of CFRB radio pointed out that the price of oil tripled in the last decade without causing consumers to conserve energy and asked whether a carbon tax wouldn’t have to be pretty onerous to make a difference. The answer he got was that a computer model says it would all be OK.

If true, the NRTEE, or their computer, must know what could be done, in detail, and what would then happen. So why doesn’t somebody do it? Six years ago I was recording on environmentally unfriendly, energy- and resource-intensive microcassettes. Today I’m clean, green and digital. But in 2002 the government was planning to have a plan and in 2008 it apparently still is. Six long years out of the only decade we then had left.

Oh well. See you all in 2014 for the NRTEE press conference where … you know.

[First published in the Ottawa Citizen]

When the auditor comes calling

The auditor general’s report on how government money is being misspent was trumped on Tuesday by the Finance Minister throwing a bunch of it in your face. Welcome to modern democracy. But it’s no way to run a railroad.

Some journalists showed up for the AG’s lockup under the impression that if the government was suddenly dropping a mislabeled mini-budget on top of her report there must be something they wanted to bury. Not so. The timing simply indicates that Mr. Harper’s respect for Parliament is as high as ever. It was contempt, not cunning.

In any case, we weren’t distracted. The auditor general’s reports can’t all be Adscam and there was nothing here especially embarrassing to the current administration. But if you read the Citizen (and if not what are you holding now?) you’ll know all of Wednesday’s page A3 was taken up with her findings, mostly troubling national security issues from poor medical care for military personnel to egregious lapses in border security to failure to follow contracting policies.

At the risk of appearing controversial or archaic I’m a bit concerned about lack of focus here. When you think auditor, you probably think of rows of numbers in small sans-serif print. (If by contrast you think Canada Revenue Agency, and what nations don’t we have extradition treaties with, I won’t detain you although the RCMP might want to.) And in the old days, the auditor general’s report on a far smaller government was a far larger document, perhaps 2,000 pages in the late 19th century, listing every pencil and envelope. But since 1977 the AG has been charged with doing “value-for-money” audits that ask questions about efficiency and sound management. And although I agree that someone needs to do such things I can’t help thinking it’s mostly Parliament’s job to decide whether programs make sense.

I grant that there’s a grey area here. An auditor can rightly ask not only whether the budget for pencils was spent on pencils but whether the pencils worked. And a number of MPs have told me that the AG’s reports are invaluable to them in knowing where to start questioning government officials and agencies. But note also that her office has about 600 staff whereas each MP has about four and parliamentary committees are woefully short-handed. If they had better staff support the AG could focus a bit more on old-time auditing.

Mind you, when the federal government spends more than $7,000 a second it’s a lot of pencils to count. And neither the auditor general nor anyone else needs to count them all. It’s perfectly sound economics that people’s propensity to be careless or dishonest is determined by the risk of getting caught times the pain if they do. If the AG’s office has fairly dependable ways of finding egregious wrongdoing, as it does, then as with the old British practice of hanging the occasional admiral it will certainly encourager les autres.

Here I can even insert a brief defence of journalists’ preference for the lurid. Yes, we tend to read (or skim) such documents looking for scandal. But people in government offices across the land know it, and try reasonably hard to avoid appearing in the auditor general’s report in that sort of setting. Sometimes, of course, they fail, and we get to read about their antics.

Curiously, this brings me to my biggest worry about the whole process. In her 2007 Main Points summary, the AG describes some behaviour ranging from sloppy to downright appalling, then declares that every department or agency in question agrees with every criticism and suggestion her office made.

It’s hardly surprising. When the AG comes calling, what’s your strategy? Argue, deny, bluster and get a nasty writeup in the report and then in the press, or nod, grin and promise? But now turn to the report by the Commissioner of the Environment and Sustainable Development, bundled with the AG’s this year. His main complaint is that for a decade departments have been nodding, grinning and not doing anything useful. And why would they? Who’s going to make them?

There’s where the wheel hits the steel. And where we should be careful not to expect more of the auditor general and her department than they can reasonably do. Modern governments are very good at promising but rather feeble at delivering, and I wouldn’t want MPs, or citizens, to get a false sense of security about who’s keeping things on track. It’s Parliament, or nobody.

We could certainly have waited a week for the executive to distract citizens and legislators from how public money is disbursed by flinging heaps of it at us. At that speed it’s easy to derail.

[First published in the Ottawa Citizen]

Columns, EconomicsJohn Robson
From him we don't need lectures

Hey. I finally found a public policy problem I can solve. Let’s tell Miloon Kothari to buzz off.

Not high on your list? Perhaps you missed the Tuesday Citizen story that after a quick tour of Canada this month, this international man of meddling pronounced himself “disturbed” by the lack of adequate housing in Canada. As opposed to where he’s from, namely India?

Mr. Kothari is the UN Human Rights Council special rapporteur on adequate housing. Which pretty much lets you guess what he’d say about housing in an advanced western democracy after a whirlwind tour talking to the usual advocates and activists. He’d say it isn’t up to international standards because we have a wretched exploitive market economy. And he did.

What I want to know is why the official reaction wasn’t “Ah shaddap!” Canada is a wealthy democratic country with lively debate on public policy and megabillion dollar social programs to solve every imaginable crisis including some we made up ourselves. If we haven’t solved the housing problem it’s not because some nit failed to do a fly-by and recommend socialism.

Mr. Kothari even had the gall to accuse us of not obeying international law, specifically the International Covenant on Economic, Social and Cultural Rights. OK, we did sign it. So let’s withdraw from it, pronto. Where did we ever get the idea that a superior method of creating fundamental law was an international body full of supercilious bureaucrats, scaly dictators and failed states instead of a parliament full of people we elected?

Does anyone out there honestly suppose we’ll give better attention to social issues because some representative of a body composed of nations like Russia, Saudi Arabia, Nigeria and Gabon tells us we don’t measure up to their high standards? Tell me: What’s the housing situation in Gabon?

The funny thing is, there are people who suppose exactly that. Mr. Kothari’s verdict was greeted with predictable enthusiasm by the Ottawa-based Alliance to End Homelessness. But it also prompted a spokesperson for Human Resources and Social Development Minister Monte Solberg to say the minister will review the recommendations, and whine that federal spending on housing is at an all-time high. CTV gave Mr. Kothari favourable coverage half-way through his tour and suggested that one in 100 Canadians are homeless. And when he was done the federal NDP aboriginal affairs critic chimed in that regrettably the Tories do indeed favour a market-based approach to housing. Uh, except on aboriginal reserves. Where the housing situation is, um, yes well …

When we’re handing Mr. Koothari his hat I suggest he make his next stop China, where the government has displaced over a million people to flood the reservoir behind the wobbly, environmentally disastrous Three Gorges Dam and plans to remove four million more. Lovely house. A bit damp, though. Is having running water in your house a right? What if it extends dozens of meters above your roof?

China is not just an egregious human rights violator. It is also, of course, a member of the UN Human Rights Council. So what’s the UN doing about repression there, including deliberately erasing the culture of Tibet? Sort that one out and a few other things like Darfur then get back to us about housing in Edmonton.

If Canada has a homeless problem it’s because homelessness is complicated, not because some high-falutin’ bureaucrat from the other side of the world didn’t drop in to hector us about bad economics. As for Mr. Kothari telling us to use a national housing strategy instead of markets, isn’t India, after wasted decades of Soviet-style planning, finally enjoying real economic growth because its government decided to let markets work?

Oh, and how’s everything in Mali? Also a member of the Human Rights Council. Would you like to try to explain why Mali is sending someone to criticize housing in Canada? Or why we let them? Of course in one sense these bureaucrats aren’t from Mali, Bangladesh or Djibouti (also HRC members) but from an international jet set elite, accountable to no one and contemptuous of ordinary people. But that doesn’t answer the key question. What on Earth prompts us to accept lectures from such people?

Obviously Mr. Kothari’s report is mostly harmless in the sense that it won’t produce anything besides headlines. But it’s discouraging that it doesn’t prompt bracing, common-sense, pro-democratic statements of contempt for him and the organization he flew in on.

There’s one problem I can solve. Shoo.

[First published in the Ottawa Citizen]