The Canadian National Energy Program and Its Aftermath: a Game

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The Canadian National Energy Program and Its Aftermath: a Game Canadian Public Policy The Canadian National Energy Program and Its Aftermath: A Game-Theoretic Analysis Author(s): Patrick James Reviewed work(s): Source: Canadian Public Policy / Analyse de Politiques, Vol. 16, No. 2 (Jun., 1990), pp. 174-190 Published by: University of Toronto Press on behalf of Canadian Public Policy Stable URL: http://www.jstor.org/stable/3550964 . Accessed: 08/10/2012 13:36 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. University of Toronto Press and Canadian Public Policy are collaborating with JSTOR to digitize, preserve and extend access to Canadian Public Policy / Analyse de Politiques. http://www.jstor.org The Canadian National Energy Program and Its Aftermath: A Game-theoreticAnalysis* PATRICK JAMES Department of Political Science McGill University L'analyse a l'aidde a thoriejeuxee des des politiquesespubliques a t jusqu' maintenant plus de nature prescriptive que descriptive, soulevant ainsi des questions quant a son utilite pratique. Une facon de rectifier ceci est de rendre operationnels les concepts de solution de la theorie des jeux de facon a permettre la comparaisonavec des choix sociaux observes.Ce texte se penche sur une periode interessante en soi de la politique 6nergetique, soit la politique d'energie nationale du Canadaet ses cons6quences durant l'annee qui suit son introduction. Il se divise en cinq parties. Premierement, nous d6crivonsla structure du jeu qui porte sur la confrontationintergouvernementale au sujet de cette politique d'octobre1980 a septembre 1981.Deuxiemement, les solutions th6oriquespertinentes a ce jeu de negociation sont identifiees. Troisiemement,des valeurs mesurables sont deriv6es de ces concepts. Quatriemement, les valeurs obtenues des solutions de la theorie des jeux sont comparees a la distribution des paiements correspondants a l'entente Canada-Alberta de septembre 1981. Finalement, les consequences dee ces resultats et les voies de recherchefutures sont examin6es. Game-theoreticanalysis of public policy has followed a prescriptive rather than descriptive path, thereby raising questions about its practical relevance. One way to rectify this divergence is to operationalize solution concepts from game theory, in order to permit comparison with observed instances of social choice. The purpose of the present study is to examine an intrinsicallyinteresting phase of energy policy, the CanadianNational Energy Program (NEP) and its year-long aftermath, in those terms. There will be five stages to the investigation.ongame-theoretic First, the setting will be described, referring to the phase of intergovernmental confrontationontin Canada over the NEP from October 1980 to September 1981. Second, relevant solution concepts for this bargaining game will be identified. Measurementsare to be derivedfor these concepts in the third stage. In the fourth phase, the values generated by the game-thetheoreticsolutions will be compared to the pay-off distribution correspondingto the Canada-AlbertaAgreement of September 1981. Fifth, and finally, implications of the findings will be explored, along with possibilities for further research. I think a categorical disavowal of descriptive <,ver the last three decades, game content is implicit in the entire game-theoreti- theorists appear to have followed Rapo- cal approach.Game theory is definitely norma- port's advice. Yet the separation of descrip- tive in spirit and method. Its goal is a pre- tion from prescription has entailed certain scription of how a rational player should behave drawbacks, especially in the context of in a given game situation when the preferences policy analysis. On the one hand, contem- of this player and of all the other players are gi- porary solution concepts in game theory are ven in utility units (Rapoport,1960: 226-7). presented in increasingly rigorous, formal expositions. On the other, these prescrip- Canadian Public Policy - Analyse de Politiques, XVI:2:174-190 1990 Printed in Canada/Imprim6 au Canada tions about rational behaviour have be- ber and identity of the players, whether the come so far removed from the practical play results in constant-sum pay-offs, and aspects of social choice that, at least in some co-operativeversus non-co-operativecondi- instances, it is reasonable to question their tions. normative relevance.1 Prescriptive viabil- Most fundamental among the questions ity would seem to entail that an ostensible to answer about the energy game are the solution have either some empirical basis number and identity of the players. James or intuitive plausibility. But these aspects (1989) found compelling evidence that the tend to be more descriptive in orientation crisis phase in energy politics at the outset and therefore have received relatively little of the current decade involved two players, attention from game theorists. By contrast, the Canadian federal government and the other scholars usually have studied nego- Government of the Province of Alberta. tiation through the 'descriptiveaccount' of The normal configuration of interest a given interaction (Zartman,1983:6). Thus groups receded during that period, with it is tenable to argue that game theory as bargaining restricted to governments that policy analysis might benefit from efforts engaged in a struggle over substantial and toward practical application, while under- presumablyescalating economicrents from standing of policy-oriented negotiations energy resources. The game of confronta- might be enhanced by a rigorous approach. tion politics between the central govern- Given these concerns, one way to ment and the principal energy-producing proceed is to operationalize solution con- region, Alberta, lasted from the an- cepts from game theory, in order to permit nouncement of the NEP in October1980 to comparison with observed instances of so- the signing of the Canada-AlbertaAgree- cial choice. The purpose of the present ment in September 1981. Given the poten- study is to examine an intrinsically inter- tially vast revenues from taxation of oil and esting phase of energy policy, referring to natural gas at the start of the 1980s, it is the Canadian National Energy Program not surprising that energy politics crystal- (NEP) and its year-long aftermath, in those lized into an intense competition between terms. There will be five stages to the inves- relatively autonomous levels of govern- tigation. First, the game-theoretic setting ment.3 will be identified, referring to the phase of Some description of the NEP's formula- intergovernmental confrontation in tion and implementation, along with the Canada from October 1980 to September politics it inspired, may be useful in demon- 1981. Second, relevant solution concepts for strating that, although societal actors did the game will be identified. Measurements not disappear from the scene, the usual are to be derived for these concepts in the levels of consultation with interest groups third stage. In the fourth phase, the values did not hold true during the phase of con- generated by the game-theoretic solutions frontation. To begin, the NEP consisted of will be comparedto the pay-offdistribution a set of decisions preparedby a small circle corresponding to the Canada-Alberta of policy-makers. These individuals de- Agreement of September1981. Fifth, and fi- signed its provisions within a broad direc- nally, implicationsof the findings will be ex- tion of policy set forth by Energy Minister plored, along with possibilities for further Marc Lalonde. Thus public officials re- research. sponsible for energy policy, not societal demands, provided the impetus for the The Game-theoretic Setting NEP. Of course, as Doern and Phidd (1983:476) observed, 'the NEP was much Several components must be identified in more a marriage of interests between min- order to proceed effectively with a game- isters and bureaucrats,spawned by intense theoretic framework of analysis: the num- partisan conflict,' as opposed to a 'bureau- The Canadian National Energy Program 175 cratic imposition'. Furthermore, professional associations in- For society-centred models, such as plu- fluence policy in other fields, for example, ralism, groups like the energy industry the legal and medical associations with re- would be expected to have input into the gard to justice and health care, respectively policy-making process. The energy pro- (Doern and Phidd, 1983:80-81). While the gram of the Liberal government, however, oil and gas industries, along with Ontario took virtually no notice of the demands of utilities and consumers, looked on with energy producing corporations. The NEP great concern, these groups did not partic- emerged almost entirely from within the ipate directly in the phase of inter- government and bureaucracy. This result governmental bargaining over the NEP.4 is not surprising, given the pre-NEP situa- Both before and after the confrontationpe- tion. It will become apparent - based on a riod, however, such interest groups con- later review of Alberta's July 1980 Pro- tributed to the evolution of energy policy posals - that the Liberal government
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