REPLY ALL Shouldn’t all policy be science-BAsed?

Jennifer Winter and Trevor Tombe

What — and the Conservatives — atives were short-sighted in “letting” miss when it comes to economic policy. Shell’s Voyageur project be cancelled. He states, “An $11-billion project to process raw bitumen was cancelled with Certains aspects clés échappent à Tom Mulcair — seemingly no concern for the loss of et aux conservateurs — en matière de politique tens of thousands of value-added jobs.” économique. But why should the government fund a project that a company has deemed un- profitable? If our sole focus is creating jobs, we can just start generating electri- city using bicycles, or start transporting crude oil using a bucket brigade instead of pipelines. Pushing for government sub- om Mulcair’s article “Building specific policy Mulcair supports in this sidies for “value-added” projects violates a Balanced, Sustainable Energy regard; he specifies only that the prin- the laws of economics (thus jeopardizing TFuture” in the May issue of ciple of “polluter pay” should reign. our prosperity), just as surely as denying Policy Options, where he identifies “sci- The evidence on how to achieve en- climate change is contrary to evidence ence-based” environmental policies vironmental objectives with the least from climate science. as key to NDP priorities is, overall, a economic cost is clear: put a price on To get to the heart of the matter, thoughtful piece. But he neglects the carbon. More specifically, governments what exactly is a “value-added” job? importance of science-based policies should favour carbon taxes or cap-and- Value-added is the difference between generally, and economic policy in trade systems. It is disappointing that total sales revenue and the total cost particular. Since science can speak to Mulcair also fails to acknowledge the of components, materials and services more than just environmental policy, strides already made in reducing green- purchased from other firms. It is an in- shouldn’t all policy be science-based? house gas emissions. He states: “Pro- dustry’s contribution to GDP. Jobs in ex- To be clear, this neglect is not specif- jects that fail to uphold basic principles tractive resource industries are value-add- ic to Thomas Mulcair and the NDP but is like polluter pay are being met with ed jobs. Let’s look at the evidence: Sta- found among all politicians, policy-mak- increasing hostility.” Referring to oil tistics reports that in 2008 the ers and many members of the media sands projects in this way ignores the value-added per hour of work in mining who report on these issues. Speeches, fact that Alberta has a carbon tax on and oil and gas extraction equalled $305, official statements and news articles those large emitters and is considering while the corresponding value-added are rampant with buzzwords and mis- raising the price tag on carbon. per hour in manufacturing was barely conceptions about economic concepts When discussing energy issues, over $50 (CANSIM table 383-0022). It is and consensus policy prescriptions. But politicians seem unable to resist mak- hardly an evidence-based claim to say Mulcair’s article is an example of specific ing another dangerous claim: that that primary sector employment is not policy claims that are inconsistent with “value-added jobs” (read: oil upgraders, “value-added.” In fact, almost every job evidence-based economic policy. refineries or manufacturing) should be is a value-added job, and the free mar- The first issue he raises in the arti- given special consideration. Mulcair ket will eliminate those that are not (ex- cle is how we can best achieve environ- argues the export of raw resources is not cept when the government interferes). mental objectives. It is unclear what a path to prosperity, and the Conserv- n his article Mulcair also continues to Ipromote the Dutch disease view, stat- Jennifer Winter is a research associate at the School of Public Policy, University ing, “The Conservatives’ single-minded of Calgary. Her research focuses on the effects of government regulation on the focus on the export of raw resources...has development of natural resources. Trevor Tombe is an assistant professor in the contributed to an artificial rise in the value economics department, University of Calgary. He examines the intersection of of the Canadian dollar that is hollowing international trade and macroeconomics. out our other export industries.” There

52 OPTIONS POLITIQUES JUIN 2013 reply all is no clear evidence for this claim (as is drawal). Second, he seems to be wary On environmental policy, the Conserv- borne out by the studies from the Univer- of foreign investment, calling for “full atives’ approach is equally inconsistent sity of Calgary School of Public Policy by and public consultations” instead of with evidence. Their regulatory, com- Matt Krzepkowski and Jack Mintz, and by the Conservatives’ within-government mand-and-control approach is among Wardah Naim and Trevor Tombe). reviews. They are both wrong. Foreign the least efficient methods to achieve Consider, for example, the fact that investment in Canada should be un- environmental goals. The evidence in the Canadian manufacturing sector has hindered. Barriers to foreign direct in- this regard is nearly as strong as the case been declining at a similar rate to the US vestment will lower investment, lower for free trade: carbon taxes or a cap-and- manufacturing sector. Canada’s manu- capital accumulation, decrease wages trade system will achieve environmental facturers also purchase a huge amount and lower productivity. In short, inter- goals with the least economic damage. of intermediate inputs from abroad, and nationally mobile capital promotes pros- “Science-based” means looking at a rising dollar means cheaper access to perity, not the reverse. evidence and objectively evaluating that inputs, to the benefit of domestic manu- evidence free of normative value judg- facturing. Oil sands firms also purchase he failure to use a science-based ments. It means making claims about many inputs from manufacturers in cen- Tapproach to policy-making (in all the world only when evidence warrants. tral Canada. We do not wish to claim the areas) is a feature of politics, not par- We hope that politicians of all stripes case is closed one way or the other, but ties. The Conservatives’ recent feder- learn to accept evidence in all aspects of a science-based view of economic policy al budget contains a large number of policy-making. would surely means admitting when the evidence is import tax increases on thousands of see tremendous benefits. n unclear. We simply do not have enough items that will increase prices and lower evidence to definitively say whether oil Canada’s international trade flows. The exports harm Canadian manufacturing. magnitude is striking, with nearly $1.1 Policy Options welcomes responses from readers to There are also some minor slip-ups. billion in increased import tax revenue the ideas and policy proposals carried in our pages. First, Mulcair claims “Canada [is] the projected over the next five years. Evi- Send responses to [email protected]. only country in the world to withdraw dence from economic science couldn’t Options politiques invite ses lecteurs à réagir from the .” In fact, Japan be clearer: free trade increases prosperity. aux idées et propositions avancées dans ses and Russia elected not to sign on to the There is almost no other issue where the pages en adressant leurs commentaires à Kyoto extension (essentially a with- consensus view of economists is clearer. [email protected].

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POLICY OPTIONS 53 JUNE 2013