Canadian Public Policy

Economic Growth: Prospects and Determinants by John Sargent; Long-Term EconomicProspects for Canada: A Symposium by John SargentReview by: Peter KennedyCanadian Public Policy / Analyse de Politiques, Vol. 13, No. 1 (Mar., 1987), pp. 121-122Published by: University of Toronto Press on behalf of Canadian Public PolicyStable URL: http://www.jstor.org/stable/3550565 .

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tion require some measure of uncertainty, if industrial policy aims at maintaining stability, or worse, at intervening on behalf of those who do not adjust, the net result may well be to inhibit

entrepreneurship. While I believe that Brenner and Courville

have made an interesting and challenging contri- bution to the industrial policy debate, they take their point too far. If the goal of industrial policy is only to foster entrepreneurship, then much of the ground explored by the Macdonald Commis- sion, and indeed by Trebilcock, falls by the

wayside. Industry policy encompasses more than inducing entrepreneurship and indeed more than adherence to Pareto optimality.

From my perception, what is missing in these

monographs is a recognition that economics may not be very useful as the sole rationale for industrial policy. The Pareto criterion is so

rigorous and demanding that government actions on the industrial policy and regional fronts will

virtually always fall short of the mark. To be able to demonstrate that any and all such government intervention are inefficient and inappropriate is an unacceptable state of affairs in a world where

governments everywhere are flexing their mus- cles on the industrial policy and regional fronts. Traditional economic theory contains precious little in the way of incorporating the role of

government. Public choice goes to the other extreme by evaluating government actions only in terms of positive economics. The challenge is to find some middle ground.

BERNARD BONIN, Ecole Nationale d'administration

publique

Economic Growth: Prospects and Determinants by John Sargent, Research Coordinator. Toron- to, University of Toronto Press, 1986. Pp.xvi, 229. $17.95.

Long-Term Economic Prospects for Canada: A Symposium by John Sargent, Research Coordinator. Toron- to, University of Toronto Press, 1986. Pp.xv, 300. $19.95.

These books are volumes 22 and 23, respective- ly, of the Collected Research Studies of the

tion require some measure of uncertainty, if industrial policy aims at maintaining stability, or worse, at intervening on behalf of those who do not adjust, the net result may well be to inhibit

entrepreneurship. While I believe that Brenner and Courville

have made an interesting and challenging contri- bution to the industrial policy debate, they take their point too far. If the goal of industrial policy is only to foster entrepreneurship, then much of the ground explored by the Macdonald Commis- sion, and indeed by Trebilcock, falls by the

wayside. Industry policy encompasses more than inducing entrepreneurship and indeed more than adherence to Pareto optimality.

From my perception, what is missing in these

monographs is a recognition that economics may not be very useful as the sole rationale for industrial policy. The Pareto criterion is so

rigorous and demanding that government actions on the industrial policy and regional fronts will

virtually always fall short of the mark. To be able to demonstrate that any and all such government intervention are inefficient and inappropriate is an unacceptable state of affairs in a world where

governments everywhere are flexing their mus- cles on the industrial policy and regional fronts. Traditional economic theory contains precious little in the way of incorporating the role of

government. Public choice goes to the other extreme by evaluating government actions only in terms of positive economics. The challenge is to find some middle ground.

BERNARD BONIN, Ecole Nationale d'administration

publique

Economic Growth: Prospects and Determinants by John Sargent, Research Coordinator. Toron- to, University of Toronto Press, 1986. Pp.xvi, 229. $17.95.

Long-Term Economic Prospects for Canada: A Symposium by John Sargent, Research Coordinator. Toron- to, University of Toronto Press, 1986. Pp.xv, 300. $19.95.

These books are volumes 22 and 23, respective- ly, of the Collected Research Studies of the

Macdonald Commission. Volume 22 contains five high-quality, unco-ordinated papers dealing with disparate aspects of long-term growth and

prospects. Michael Denny opens the volume with an excellent survey of the productivity slowdown literature, arguing that the existing evidence suggests that we do not know why we have experienced a slowdown, and that no special policy actions are required for recovery.

John Helliwell, Mary MacGregor and Tim Padmore use the MACE econometric model to examine the main factors underlying Canada's growth. Their methodology is to express per capita real income as the product of seven 'great ratios' of macroeconomic growth, allow- ing growth to be broken into seven sources. The most crucial ratios, as far as their conclusions are concerned, involve 'normal output,' the output that would be produced if the quantities of

capital, labour and energy now being used were used at average utilization rates. Unfortunately, it is not explained how this unmeasurable con-

cept is estimated. In contrast to Denny, these authors claim that the productivity slowdown can be explained (by relative price changes and cyclical factors), but nonetheless advance the same policy advice - inaction.

Rodney Dobell and Bruce Kennedy offer an excellent review of the global modelling litera- ture, but the paper seems out of place; I winced each time they valiantly tried to advance impli- cations for the Royal Commission. Gregory Jump and Thomas Wilson provide a comprehen- sive review of saving in Canada, stressing the need for inflation adjustment. It is not apparent to me, however, that inflation adjustment is required for all uses to which savings figures are put, an issue which the authors should have discussed. Douglas Green, Judith Gold and John Sargent complete the volume by carefully outlin- ing demographic projections, along with impli- cations for dependency ratios and impacts on government spending.

Volume 23 reports the proceedings of a conference on long-term forecasting of the Ca- nadian economy. The contents include views on long-term growth paths for the macroeconomy by three leading private forecasting groups, commentary by sectoral specialists on prospects for energy, transportation, communications, ag-

Macdonald Commission. Volume 22 contains five high-quality, unco-ordinated papers dealing with disparate aspects of long-term growth and

prospects. Michael Denny opens the volume with an excellent survey of the productivity slowdown literature, arguing that the existing evidence suggests that we do not know why we have experienced a slowdown, and that no special policy actions are required for recovery.

John Helliwell, Mary MacGregor and Tim Padmore use the MACE econometric model to examine the main factors underlying Canada's growth. Their methodology is to express per capita real income as the product of seven 'great ratios' of macroeconomic growth, allow- ing growth to be broken into seven sources. The most crucial ratios, as far as their conclusions are concerned, involve 'normal output,' the output that would be produced if the quantities of

capital, labour and energy now being used were used at average utilization rates. Unfortunately, it is not explained how this unmeasurable con-

cept is estimated. In contrast to Denny, these authors claim that the productivity slowdown can be explained (by relative price changes and cyclical factors), but nonetheless advance the same policy advice - inaction.

Rodney Dobell and Bruce Kennedy offer an excellent review of the global modelling litera- ture, but the paper seems out of place; I winced each time they valiantly tried to advance impli- cations for the Royal Commission. Gregory Jump and Thomas Wilson provide a comprehen- sive review of saving in Canada, stressing the need for inflation adjustment. It is not apparent to me, however, that inflation adjustment is required for all uses to which savings figures are put, an issue which the authors should have discussed. Douglas Green, Judith Gold and John Sargent complete the volume by carefully outlin- ing demographic projections, along with impli- cations for dependency ratios and impacts on government spending.

Volume 23 reports the proceedings of a conference on long-term forecasting of the Ca- nadian economy. The contents include views on long-term growth paths for the macroeconomy by three leading private forecasting groups, commentary by sectoral specialists on prospects for energy, transportation, communications, ag-

Reviews/Comptes rendus 121 Reviews/Comptes rendus 121

This content downloaded from 185.44.77.146 on Sat, 14 Jun 2014 10:09:20 AMAll use subject to JSTOR Terms and Conditions

riculture, forestry, mining and manufacturing, and two evaluations of the role, record and limits of long-term projections. These last two papers are the most interesting; Chris Caton gives an insider's view of the forecasting business, and Mervin Daub summarizes the literature on fore-

casting accuracy. The private forecasting groups produce very

similar forecasts, probably because they all forecast using a conservative extrapolation methodology. However reassuring this similari- ty may be, it is disturbing to see them ignore without comment the advice of researchers, such as that provided by Denny on productivity growth, and to leave unexplained internal incon- sistencies in their forecasts, such as long-run Canada/US inflation differentials alongside a steady exchange rate. Amalgamated forecast- ing, in which several forecasts produced by independent methodologies are averaged, is

arguably the best existing forecasting method. This conference would have been more produc- tive and interesting had it been structured along this line.

The sectoral forecasts for energy and agricul- ture illustrate how wrong forecasts can be (these forecasts were made in 1983). They underline the only conclusion one can safely draw from these two volumes: Difficult-to-predict socio-

political factors play a key role in determining the future; our only policy option is to ensure that our institutions are sufficiently flexible to allow Canada to adapt readily to unexpected changes.

PETER KENNEDY, Department of Economics, Simon Fraser University

The Social Policy Process in Canada

byA.R. Dobell and S.H. Mansbridge. Montreal, The Institute for Research on Public Policy, 1986. Pp.xxi, 121. $8.00.

This study is animated by a fear that social policy concerns are being overwhelmed in contempo- rary policy debate 'by the obsession with narrow indicators of international competitiveness and

productive efficiency' (p.3). This concern leads the authors to examine the strengths and weak- nesses of the diverse network of groups that seek to champion the needs of the poor and other beneficiaries of social programs: advocacy

riculture, forestry, mining and manufacturing, and two evaluations of the role, record and limits of long-term projections. These last two papers are the most interesting; Chris Caton gives an insider's view of the forecasting business, and Mervin Daub summarizes the literature on fore-

casting accuracy. The private forecasting groups produce very

similar forecasts, probably because they all forecast using a conservative extrapolation methodology. However reassuring this similari- ty may be, it is disturbing to see them ignore without comment the advice of researchers, such as that provided by Denny on productivity growth, and to leave unexplained internal incon- sistencies in their forecasts, such as long-run Canada/US inflation differentials alongside a steady exchange rate. Amalgamated forecast- ing, in which several forecasts produced by independent methodologies are averaged, is

arguably the best existing forecasting method. This conference would have been more produc- tive and interesting had it been structured along this line.

The sectoral forecasts for energy and agricul- ture illustrate how wrong forecasts can be (these forecasts were made in 1983). They underline the only conclusion one can safely draw from these two volumes: Difficult-to-predict socio-

political factors play a key role in determining the future; our only policy option is to ensure that our institutions are sufficiently flexible to allow Canada to adapt readily to unexpected changes.

PETER KENNEDY, Department of Economics, Simon Fraser University

The Social Policy Process in Canada

byA.R. Dobell and S.H. Mansbridge. Montreal, The Institute for Research on Public Policy, 1986. Pp.xxi, 121. $8.00.

This study is animated by a fear that social policy concerns are being overwhelmed in contempo- rary policy debate 'by the obsession with narrow indicators of international competitiveness and

productive efficiency' (p.3). This concern leads the authors to examine the strengths and weak- nesses of the diverse network of groups that seek to champion the needs of the poor and other beneficiaries of social programs: advocacy

groups, service organizations, professional or- ganizations and schools of social work. In effect, the authors' aim is to initiate a debate over ways of strengthening the social dimension of our national policy agenda.

Unfortunately, the study is probably too dif- fuse to succeed in this. In part, its deficiencies are inherent in the methodology chosen. The

study is based on a survey of the perceptions and concerns of group representatives and govern- ment officials, together with their subsequent reactions to a draft of the report. While such attitudinal data are important, they need to be

supplemented with more analysis of the actual behaviour and capacities of social policy groups. With the exception of their funding basis, we learn surprisingly little about the major groups, their structure, their membership, their goals, their resources, their strategies, their successes, their failures. As a result, it is difficult to evaluate the mix of perceptions that emerges.

This diffuseness is accentuated by the organi- zation of the book itself. Part One presents a Discussion Paper on the general issues; Part Two summarizes the reactions of groups and officials to that Paper; and the Appendices then report the detailed findings of the survey. One wishes that the authors had simply treated these as the raw materials from which to construct their own more integrated analysis.

The book is sprinkled with recommendations for reform. Some of these are doubtful starters, however. For example, governments are urged to ensure the continuous involvement of social

groups in the decision process, to educate groups to the complexity of that process so that their

lobbying is better targetted, to provide complete access to all relevant data, and to open up the secret world of federal-provincial negotiations. Such injunctions are probably best thought of as wishful thinking, given the powerful incentives that normally lead governments to prefer a more closed process.

In light of governmental reluctance to reform the process, the recommendations directed to- wards social groups themselves take on even greater importance. The key proposal is for groups to seek a mixed funding base, on the

assumption that exclusive reliance on govern- ment funding inhibits fiercely independent anal-

groups, service organizations, professional or- ganizations and schools of social work. In effect, the authors' aim is to initiate a debate over ways of strengthening the social dimension of our national policy agenda.

Unfortunately, the study is probably too dif- fuse to succeed in this. In part, its deficiencies are inherent in the methodology chosen. The

study is based on a survey of the perceptions and concerns of group representatives and govern- ment officials, together with their subsequent reactions to a draft of the report. While such attitudinal data are important, they need to be

supplemented with more analysis of the actual behaviour and capacities of social policy groups. With the exception of their funding basis, we learn surprisingly little about the major groups, their structure, their membership, their goals, their resources, their strategies, their successes, their failures. As a result, it is difficult to evaluate the mix of perceptions that emerges.

This diffuseness is accentuated by the organi- zation of the book itself. Part One presents a Discussion Paper on the general issues; Part Two summarizes the reactions of groups and officials to that Paper; and the Appendices then report the detailed findings of the survey. One wishes that the authors had simply treated these as the raw materials from which to construct their own more integrated analysis.

The book is sprinkled with recommendations for reform. Some of these are doubtful starters, however. For example, governments are urged to ensure the continuous involvement of social

groups in the decision process, to educate groups to the complexity of that process so that their

lobbying is better targetted, to provide complete access to all relevant data, and to open up the secret world of federal-provincial negotiations. Such injunctions are probably best thought of as wishful thinking, given the powerful incentives that normally lead governments to prefer a more closed process.

In light of governmental reluctance to reform the process, the recommendations directed to- wards social groups themselves take on even greater importance. The key proposal is for groups to seek a mixed funding base, on the

assumption that exclusive reliance on govern- ment funding inhibits fiercely independent anal-

122 Reviews/Comptes rendus 122 Reviews/Comptes rendus

This content downloaded from 185.44.77.146 on Sat, 14 Jun 2014 10:09:20 AMAll use subject to JSTOR Terms and Conditions