Wednesday, September 18, 2019

Canada Needs Immigrants, Just Not So Many

Canada tries to manage its immigration to make it serve the national interest through policies that set the number of immigrants admitted every year and select the candidates to be admitted based on the specific characteristics of the following main groups of applicants: principal economic class immigrants and their immediate families; the extended families of Canadian residents; and refugees and asylum seekers. Several European countries are in the process of revising their immigration systems and are looking at Canadian policies with respect to the economic class immigrants for inspiration. An op ed even recently appeared in the New York Times touting the Canadian system as a model for the United States. So, has it really worked that well?
The selection process for principal economic immigrants under the Federal Skilled Worker Program, which is the largest single program for economic class immigrants, uses a points system to assess an applicant’s prospect for succeeding in Canada’s highly-developed economy by considering six selection factors, namely: English and/or French language skills; education; work experience; age; arranged employment in Canada; and adaptability. Only applicants with a point score of 67 out of 100 or above are approved and are eligible to be admitted. The Canadian Experience Class and Federal Skilled Trades Program, which are also aimed to pick labour-market-ready immigrants impose similarly rigorous criteria and allow for Express Entry.
Unfortunately, as rational and appealing as this process seems at first glance, it is only a small part of an overall system that has failed to deliver on its goal of providing Canada with a flow of immigrants who perform as well as other Canadians in the labour market. The sad fact is that Census data show that immigrants who arrived since the mid-1980s have on average earned incomes and paid taxes much lower than other Canadians, even after they have been in the country as long as 20 years.
A main reason for this surprising outcome is that the so-designated principal applicants, who have passed the points test under the Federal Skilled Worker Program or qualified for the Canadian Experience Class or Federal Skilled Trades Program and were expected to be economically successful in the competitive Canadian labour market, routinely only make up about a sixth of all immigrants.
The rest, who make up most of the immigrants admitted, have not been subjected to the points test or similarly rigorous admission criteria under other programs. They comprise: the immediate family of the principal applicants (spouse and minor children); the numerous so-called family class immigrants, who are members of the extended families of earlier immigrants and refugees; the refugees and asylum seekers; and immigrants admitted under many other smaller economic class immigration programs like Live-in Caregivers and Immigrants Investors, which are problematic in their own right. The Provincial Nominee Program, which varies from province to province and is too complicated to go into here, also is largely labour-market focussed.
The incomes of all these various classes of immigrants, who are not subject to the rigorous points system, are included in the calculation in the average incomes of all immigrants and are likely to be one of the main reasons why this average is so disappointingly low as reported in the Census. Parents and grandparents are a group of family class immigrants whose numbers are not large, but whose earnings are particularly low.
The second pillar of Canadian immigration policy involves the determination of the number admitted annually. The government now sets this number and submits it to parliament in the Annual Report to Parliament on Immigration, where it is passed routinely without debate. This number has increased steadily from an annual figure of under 100,000 in the middle 1980s to 330,800 in 2019 and is proposed to increase further to 350,000 by 2021. It goes without saying that the larger the number of immigrants selected the more difficult it is to find only those with the strongest qualifications likely to be successful.
Moreover, compounding the problem is that during this period, almost 60 per cent of immigrants have settled in Canada’s three largest cities, Toronto, Montreal and Vancouver, where they have raised the cost of housing and created traffic congestion and over-crowding of hospitals, educational institutions and recreational facilities to a much greater extent than have occurred in the rest of the country.
The private sector and government have invested heavily in housing and infrastructure facilities during this period in part to accommodate the inflow of immigrants. But as Canadians can see, they have obviously not done a very good job of relieving the existing shortages, which implies that the number of immigrants is greater than the country can absorb without reducing the well-being of the Canadians already here who have to compete for housing and the use of infrastructure.
How can these problems of Canada’s immigration policies be remedied? Most obvious is the need to curtail or stop entirely the acceptance of immigrants who qualify only because they are members of the extended families of earlier immigrants. Such a policy would make it possible to meet the target number of immigrants and replace the extended family members with principal applicants and their immediate families selected under points-based economic class immigration programs who should be economically much more successful than the extended family class immigrants they replace. This is exactly the opposite of what has been happening in recent years, largely in response to political pressures from existing immigrant groups anxious to bring their family members to Canada.
As an aside, it would also be desirable to reinstate the past practice of having an immigration officer personally interview all candidates for admission. No corporation would ever hire someone sight unseen for a lifetime job. So why should the government do any differently?
Only through a process of trial and error is it possible to determine the number of immigrants that matches the country’s absorptive capacity in the short run. Thus, it makes sense to temporarily reduce the number of immigrants to be admitted to, say, 150,000, as was recently proposed by Maxime Bernier, the leader of the Peoples’ Party of Canada. And then we must watch closely to see what happens to immigrants’ earnings and cost of housing and congestion. If they continue to be a problem, the number admitted needs to be lowered some more. If they improve, the number could be maintained or even raised.
Canadians deserve a public discussion about the merit of the current immigrant selection policies and the numbers admitted annually. The campaign for the upcoming federal election provides a good opportunity to get it underway. Bernier has started the debate, let’s hear what the other parties have to say about the problems he’s identified and the solutions he's proposed.
Herbert Grubel is professor emeritus of economics at Simon Fraser University.
Patrick Grady is with

Wednesday, November 21, 2018


According to a recent report of the World Bank, the world generated 2 billion tons municipal solid waste in 2016 and “unless urgent action is taken, it will increase 70 percent to 3.4 billion tons in 2050…and we will literally be living in waste if nothing is done.”

This prediction seems a bit alarmist since governments in high-income countries have effective programs to recycle waste or dispose of it in environmentally safe ways. Low-and middle-income countries are creating more and more of such programs as their economies and government revenues grow. In addition, it is likely that new, efficient and low-cost techniques for the disposal of wastes will be developed in the future.

Existing recycling efforts are very effective in high-income countries where households create most of solid waste, sort it into four main types, even though many consider this system to be inefficient once the cost incurred by household in sorting, the cost of extra trucking separate types of waste and the imperfect sorting by households are considered.

Food and other organics make up 44 percent by weight of the total. Some of this waste is used to feed animals and produce compost for agriculture, but most goes into landfills. The biggest problem facing the disposal of this type of waste is the growing scarcity of landfill sites, which is caused by public opposition based on concerns about the environment and by the rising cost of government regulations.

The second-largest type of household waste at 17 percent is paper and cardboard. Most of it is turned profitably into recycled products, just as it has been before the government recycling programs were created. Crushed glass (5%) is used to improve the quality of concrete and asphalt on roads. Metals (4%), especially aluminum, are absorbed in the production of new metals. Wood (2%) can be burned.  Rubber (2%) and “other” substances (14%) also are burned or go to landfills.

The third largest category of waste at 12 percent is plastics, which receives the largest amount of public attention – the media regularly display pictures of sites on land and of waterways filled with plastics and of animals suffering from entanglement with containers and nets and even drinking straws. Much media attention was recently given to the plastics covering large areas of open oceans and the threat to marine life caused by their break-down into micro-particles.

One reason for this public and government attention to plastics is that their disposal is very difficult and costly. Thus, because of the particular molecular structure of some types of plastics, in 2016 only eight percent of the annual 32 million tons of it in the United States was recycled and turned into new commercial products. The remaining 90 percent was incinerated, creating commercially valuable energy but also polluting the air, was buried in landfills where it can take up to 10,000 years to decompose or simply remained uncollected creating health hazards for humans and endangering wildlife on land and in the oceans. This problem is especially serious in low- and middle-income countries of the world where most plastic waste is uncollected. Plastics are also the target of many regulations to reduce their use by consumers such as the contentious ban on plastic shopping bags and drinking straws.

The good news is that a new technology has been developed for the productive re-use of plastic waste. Information about it can be found at the company website BYFUSION, which claims that it “Turns plastic trash into profit by taking any type of unsorted and unwashed plastic waste into an advanced building material”. (Disclaimer: I have no relationship with this company).

The new technology shreds unwashed and unsorted plastic products, super-heats these shreds with water until they are ready to be compressed into blocks that remain solid without the use of adhesives or other chemicals. These blocks are extremely durable, offer very good insulation from temperature and sound and do not emit harmful fumes. They can be used in many types of construction but are likely to be particularly useful in building low-cost homes in developing countries. Holes can be drilled into the blocks to allow the insertion of stabilizing rods, pipes and wires. For appearance and comfort, they can readily be covered with drywall, wood or stucco.

The machines needed to convert plastic trash into useful bricks are simple in design and can be operated by few, mostly low-skilled workers. They fit onto flat-bed trucks and can be driven to location where plastic waste has accumulated.

The machinery used to produce the bricks can be purchased and operated by government agencies or by private entrepreneurs, who can obtain the plastic inputs they need from municipal collection stations at low or zero cost, possibly even being paid for doing a job the stations no longer need to do. These operators can sell the plastic bricks at prices competitive with those made from clay or concrete.

The biggest potential benefits of producing plastic bricks from waste is in low- and middle-income countries where almost all plastic waste ends up in open dumps. The owners of the machines can buy the plastics from scavengers now working these dumps or who collect it from the environment. There is a growing market for low-priced bricks for construction of simple, low-cost homes in these countries.

Governmental aid-giving or private non-profit organizations might consider subsidizing the owners of the machines turning waste into useful products, reduce environmental pollution, encourage economic development and prevent the world from “living in waste.”

Herbert Grubel
Emeritus Professor of Economics, Simon Fraser University
Senior Fellow, The Fraser Institute

Thursday, November 15, 2018

Politicians act like they’re 'solving' Canada’s housing problems while continually making them worse

There has emerged in recent months a near consensus in Canada that more government intervention is required to ensure housing affordability.
Suggestions for government fixes for housing markets are coming even from the market-friendly Macdonald-Laurier Institute (which called for government support for down payments) and conservative economist Herbert Grubel (who argues for reducing immigration to relieve housing pressures).
Recently, former Toronto chief planner Jennifer Keesmaat penned a Maclean’s commentary lauding the City of Vancouver’s housing strategy — 83 pages of central-planning initiatives intended to fix the city’s housing problems.
Keesmaat suggested a “myriad” of opportunities for government intervention, including “innovative taxation policies” and government loan financing.
And all this comes on the heels of the Trudeau government’s $40 billion National Housing Strategy, which justifies its spending on the basis that “housing rights are human rights.”
But the need for housing is no reason for massive government intervention. Quite the opposite: whenever politicians take action to make something more available to the public, or to improve its quality, they almost always make things worse instead. We’ve already seen that minimum wages intended to improve employment make jobs less available, business subsidies intended to encourage industry penalize efficient firms to reward the inefficient, and education and health spending grow as outcomes get worse.
The most counterproductive “solution” to housing has been government rent control, which reduces rental supply and provokes a deterioration in the existing rental stock. Polls find that over 90 per cent of economists agree rent control is destructive. As economist Assar Lindbeck, a socialist, once remarked, “In many cases rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”
Unfortunately, Ontario and British Columbia have been championing rent control laws. Vancouver Mayor Gregor Robertson recently mused to the CBC that he is hoping for provincial support “to entrench more rent control going forward.”
The Vancouver strategy relies on the wisdom of politicians not only to control prices, but also to produce the “right supply” of housing. But governments can’t possibly presume to know the right supply of any market good, let alone the specific location, size and type of house that people will want today, tomorrow, and next year.
The Trudeau government’s National Housing Strategy puts the same misplaced faith in bureaucrats to know the “right” type of housing. For example, according to the federal government’s plan, “housing investments should support Canada’s climate change agenda.” That’s why the policy “includes ambitious targets to reduce greenhouse gas emissions” — which is obviously a demand coming from Liberal politicians and not from those Canadians struggling to pay for housing.
What will be the result of politicians increasingly exercising control over housing investment? Milton Friedman once remarked that the consequences of well-intentioned government programs could accurately be predicted by reversing the expectations of those advocating the programs. Evidence from Vancouver and Toronto already affirm Friedman’s observation.
In September, a report found that 1,000 units planned for rental in Toronto were cancelled or turned into condominiums following the province expanding rent control in the spring. And in Vancouver, government housing policies are also backfiring. As reported recently by The Globe and Mail, developers confronted by “a maze of contradictory demands and agonizingly slow permitting times” are cancelling rental unit projects and reconsidering future building plans.
We already have enough government solutions for housing making things worse for people trying to secure housing. The last thing we need is more of them.

Herbert Grubel

Financial Post editorial, January 2, 2018

Regulating fake news will only ensure that we only see regulated fake news

The recent surge in fake news has created the demand for government regulations, mostly out of concern that it influenced the last U.S. presidential elections. Regulations would be warranted only if fake news actually affected the outcome and if it could also be inexpensively identified and eliminated.
Fake news very likely had no effect on the election outcome under the reasonable assumptions that both major parties used it to the same degree and their targeted audiences were equally likely to evaluate it properly. The amount and success of fake news originating in Russia is not known but its existence should prompt policies aimed at it alone, not all U.S. communications. That is because the cost of discovering and eliminating fake news is very high, requiring large and costly banks of computers and sophisticated algorithms. The data in the computers conjure concerns over privacy. Importantly, the interpretation of the algorithms risks that the individuals doing the work will let personal ideological and political preferences influence it.
I have had some personal experiences that illustrate this risk. In 1975, I presented a lecture on the future of the international monetary system to the graduating class of the Diplomatic Academy of Chile in Santiago. To my surprise, I found no evidence of the public protests against the Pinochet regime that I had expected after seeing them regularly on CBC.
To understand the difference between the TV news coverage and reality, I asked Canada’s ambassador to Chile, who said other Canadian visitors made the same observation. He then told me that a few days earlier his people had learned that a CBC TV crew had landed in Santiago without following the normal protocol of informing him of its arrival. He discovered that the TV crew had a pre-arranged meeting with a Chilean group in a poor part of the city. The Chileans arrived armed with anti-Pinochet placards. They waved these placards and chanted slogans while the CBC crew filmed them from an angle that suggested a larger crowd. He said the crew paid the villagers who then stored the placards for later use and dispersed. The day after the performance, Canadians saw on TV a supposedly big demonstration in Santiago protesting the country’s president.
In the 1980s, I saw fake news about South Africa, where I taught economics for a semester at the University of Cape Town. There I befriended a Dutch doctor and his wife. They were interns at the famous Groote Schuur hospital, and their parents in the Netherlands were worried that they might get caught in the deadly riots that Dutch newspapers regularly described. One of their letters included a newspaper picture of a scene allegedly showing the aftermath of such a riot. The scene was of the hospital’s courtyard. The same, landscaped yard the couple saw each day and where staff often ate their lunches and took naps on the grass. It was no riot scene. Something had been faked.
These two episodes illustrate the extent to which supposedly objective media can and do produce fake news slanted by the political views of their managers and employees. We should expect the same from any proposed agencies charged with the objective task of suppressing fake news. For these reasons, it seems better to prevent the likely small cost of fake news by relying on the common sense of the common people rather than rely on the decisions of a few employees of government agencies.
Herbert Grubel is emeritus professor of economics, Simon Fraser University.
Financial Post editorial, May 2, 2018

rudeau, after bungling it on trade and pipelines, needs better advice — fast

There’s no doubt Prime Minister Justin Trudeau’s been having a hard time lately — dealing with nasty remarks from President Donald Trump with regard to tariffs and fallout in connection to the Kinder Morgan pipeline project.
However, Trudeau’s handling of these important matters has been lackluster and it appears that he could use some better advice in dealing with three key issues.
First, the new U.S. tariffs on steel and aluminum, which President Donald Trump justified by reference to the national security argument for protection. In an emotional speech, Trudeau lamented Trump’s neglect of the two countries’ history of military alliances in a number of wars, and said “that Canada could be considered a national security threat to the United States is inconceivable.”
In fact, the national security argument is invoked when imports threaten the very existence of national industries producing weapons and other goods needed by the country’s military. It is argued that the global glut of steel and aluminium caused mostly by mistakes made by China’s economic planners poses such a threat as countries buy these products from China at a discount and sell them to American companies at a higher price.
This is not the place to examine the validity Trump’s argument generally and in the case of Canada. The tariffs may actually be designed to meet his election promises to the firms and workers in these protected industries rather than save them from demise. His use of the national security argument is simply a convenience since he is legally entitled to justify tariffs on this ground without having to face a possibly antagonistic Congress.
The second issue involves the purchase of the Kinder-Morgan pipeline by the Trudeau government. For reasons difficult to understand Trudeau failed to defend the policy by pointing out that it will yield a very high rate of return. Assuming that with his political reputation at stake he will get the pipeline built, the increased capacity to move oil to tidewater and sell it at world prices will eliminate the currently existing gap between the oil prices in the world and in North America caused by the current shortage of capacity to transport oil to world markets.
The new pipeline will bring the federal government at least $3.2 billion in additional tax revenue every year
The elimination of this gap will increase the profits of Canadian oil producers by $16 billion a year without increased production and more if output is increased. Assuming a corporate income tax rate of 20 per cent, the new pipeline will bring the federal government at least $3.2 billion in additional tax revenue every year, which is enough to repay the $17 billion involved in acquiring and building the pipeline in less than six years.
After that, the tax revenue can be used to fill the Liberal promise of helping the middle class by lowering taxes or the cost of housing. These policies can be financed earlier once pipeline business is sold back to the private sector without significant losses.
The third issue involves Trudeau’s failure to explain the double standards used by Canadians who protest the construction of the pipeline. On the one hand, they insist that the environmental cost of oil spills is so high relative to the economic benefits that no risks could justify the construction of the pipelines and the subsequent oil tanker traffic along the B.C. coast. Some protesters, who are fighting global warming, also oppose building the pipelines.
Yet, they misrepresent the risk. There is no such thing as perfect safety. We all face a certain amount of danger just by getting out of bed and pursuing life’s routine activities: According to statistics from 1993 (the latest available) one Canadian male dies every four hours as a result of vehicle collisions, every nine hours from accidental falls, every 16.5 hours from accidental poisoning and every 18 hours from homicides. These accidents happen in spite of great efforts by individuals and governments to avoid them. That cannot stop us from doing the things we need and want to do.
The risk of oil spills has been lowered so much by government regulations that it is likely to be very similar to those encountered by individuals every day and the economic and social benefits of the production and sale of oil to Canada are comparable to those enjoyed by individuals going to work every day. The consumption of consumer goods emitting greenhouse gases goes on simply because there are no alternatives reducing total emissions by significant amounts.
Protestors need to be shamed by exposing the double standards they apply to their own actions and those of firms producing, transporting and selling oil that serve the public interest, while contributing trivial amounts to total greenhouse gas emissions in the world.
Herbert Grubel is professor emeritus of economics at Simon Fraser University.

Predicting the Political Landscape after Electoral Reform in BC

Politicians have a notoriously bad record predicting the consequences of policies they have adopted. Recent tax increases on the highest income earners in Canada were predicted to raise revenues by $3 billion but in the first year (2016) the amount of taxes these Canadians in the top one percent paid were $4.6 billion lower than they paid in the preceding year

Politicians love forecasts of doom, which increases their power and status as they adopt policies to prevent it. Politicians created recycling programs after the Club of Rome in 1972 predicted that the world was running out of natural resources. The depletion of oil reserves was the conventional wisdom around the turn of the century.

As a wit once said, predictions are very difficult, especially about the future. Predictions like those by the Liberal government, the Club of Rome and energy analysts often turn out wrong because of improbable events that could not be foreseen – the black swans discussed by Nassim Taleb. But predictions also are often wrong because predictable events are not properly considered. History has shown convincingly that high-income earners always shift income through time, space and into low-taxed investments to reduce their tax obligations. Consumers always reduce purchases when the price of a good increases and producers react by increasing supply so that the world will never run out of resources.

The predictions by politicians and pundits about the political landscape in British Columbia resulting from the adoption of a proportional representation system for elections is likely also to be false. The leaders of the NDP and Greens initiated a referendum on this change in the expectation that they would continue to receive at least the same proportion of votes as they did under the old system and thus together would be able to form government easily without precarious majorities as they have since 2017. The Greens believe moreover that they will receive more votes than they did under the old system as voters will realize that they no longer “waste” their votes on a party that has no chance to be in government.

The defenders of the current electoral system predict that the new one will bring into parliament politicians representing existing parties that have never had electoral success before, such as Libertarians, Communists, Christian Heritage, Cascadia, Social Credit and, until the 2017 election the Greens, all of which were on that year’s ballot. They also predict the formation of entirely new parties with policy agendas that are “extreme right-wing”, “racist-fascist”, “anti-immigrant”, “single issue”, “communist “, “libertarian unlimited immigration” etc.

It is quite unlikely that any of the small existing parties or the expected new parties will get more than five percent of the vote, which will be a threshold required by the proposed new voting system leading to seats in parliament. The votes they receive will come from the supporters of the existing major parties but affect them unpredictably and in the aggregate could lead to major changes in their election platforms.

However, in the above list of parties are absent some, which have large constituencies with strong bonds among voters and a good chance to win seats in future elections. These parties are likely to be rooted in the large ethnic populations living in Richmond, Surrey and other suburbs of Vancouver. Opportunistic political entrepreneurs could gain votes with the promise to get spending programs and regulations benefiting their regions in return for joining a ruling government coalition.
There are also likely to be opportunities for new, populist parties that attract voters who want to see changes in some policies made unchallengeable by the code of political correctness. According to opinion surveys, this is the case for reform of Canada’s immigration and refugee policies. Maxime Bernier has successfully formed a federal party with such a policy as an important part of its agenda.

Bernier’s proposed reforms of immigration policies are widely condemned as racist and fascist by the political elites in Canada. In fact, they are neither but are designed to serve the national interest, just like the federal Liberals policies on supply management, culture and banking. A BC branch of Bernier’s Peoples’ Party under proportional representation might attract enough votes from all three major parties to enter parliament with uncertain effects on the establishment parties
Most of the parties with a chance to gain seats in parliament are unlikely to fit the traditional classification of left or right but they are likely to win enough votes from the NDP, Liberals and Greens to create major changes to the political landscape in British Columbia and with them bring unpredictable new social and economic conditions.

Voters in the BC referendum who do not want to see such changes should vote for the retention of the system that has made the province one of the most prosperous in Canada.

Herbert Grubel
Emeritus Professor of Economics
Simon Fraser University

Published in Vancouver Sun Predicting the political landscape after electoral reform in B.C.

Vancouver Sun editorial, November 4, 2018

The Ultimate Effects of PR on the Political Scene and Economics

BC Voters will soon be flooded by a growing amount of information about the superiority of proportional representation (PR) over the majority system (MS) presently used for allocating seats in parliament. If the past is a guide to the future, this information will be almost totally about how PR produces a “fair” distribution of seats, avoids having a government whose members in parliament received less than one half of the votes and thus leads to “wasted” votes.

The expected flood of information is likely to provide little detailed explanation the three different types of PR systems under consideration, mainly because the explanation is extremely difficult as each system involves complex, wide-ranging and fundamental changes in the size of electoral districts, the number of candidates in each and the procedures for allocating votes.

The forthcoming information can also be expected to be short on the discussion of important changes that PR will bring to the political institutions and environment.

First, the political environment will be changed fundamentally by the highly likely increase in the number of parties contesting elections. This prediction is based on a review of academic studies by Lydia Miljan and Taylor Jackson, which showed that the number of political parties is 2.5 in MS countries and 4.6 in PR countries.

Most of the additional parties that BC can expect under PR are likely to represent small groups representing narrow regional, industrial, religious or labour interests and, most disturbingly, members of distinct ethnic populations. The increased number and objectives of the increased number of parties will raise the divisiveness of election campaigns, parliamentary debates and the adoption of laws.

Second, the time it takes to form government after elections is 32 days in MS and 50 days in PR countries. Such an increase reflects the more turbulent political environment brought about by the enlarged number of parties and will reduce the efficiency of the electoral system.

Third, coalition governments formed under the PR system have shorter life-spans than those under the MS system, mainly because political differences among parties in the coalition after some time turn out often to be irreconcilable. The costs of the extra elections fall on taxpayers and the shortness of the life-span of governments impedes their ability to adopt complex legislative programs.

The forthcoming information campaign will also be short on the effects PR has on economic performance. Thus, the PR system gives small single-issue parties leverage over the passage of legislation that is greater than is justified (or fair) in the light of the share of the votes they received. This leverage arises because large parties need the votes of these small parties to form government, which they get only on the condition that they adopt some of the smaller parties’ legislative priorities.

This problem exists presently in BC, where the large NDP party has formed a coalition with the small Green party to form government. The legislative agenda of this government includes a resolute opposition to the construction of a pipeline, which was the priority of the Green party and played a much less important role in the NDP election platform.

The political agendas of small parties in PR countries often are designed to advance the ideology of the extreme political left, which they have not been able to achieve under the MS system and which explains why demands for the adoption of PR comes from them: more income redistribution, spending on social programs, culture, the environment and subsidies to select economic activities. All these policies result in higher government spending.

The extent to which government spending in PR exceeds spending in MS countries has been studied in a number of academic studies, which were summarized by Clemens spending as a percent of national income in recent years has been 2.3 percent for MS countries and 2.9 percent for PR countries. Important is the fact that this higher spending leads to correspondingly higher taxes to pay for it and often is financed through deficits, which raise taxes on future generations.

Why should the expected increase of government spending under PR be the focus of the public discussion? As revealed by many academic studies, increased spending beyond a certain optimum level leads to lower economic growth, lower per capita incomes and reduced freedom.

The present levels of spending and taxation in BC have been determined in past MS elections. Voters in the forthcoming referendum should consider that under PR their taxes will go up to finance increased spending that may or may not benefit them.

Let us hope that this fundamental issue will receive the attention it deserves, especially since supporters of PR are highly unlikely to bring it up.

Herbert Grubel
Emeritus Professor of Economics
Simon Fraser University

Published in the Vancouver Sun editorial, October 20, 2018