- Email: [email protected]
The impact of the mining industries on the Canadian economy
Communication/Book
reviews volume of disposal is reduced by the same amount and this quantity of waste paper substitutes for a given quantity of wood pulp (an amount determined by technological relationships). This supply effect increases the size of the external benefit caused by the shifting away in time of the costs of disposal. It is concluded that if the discount rate is zero, a necessary condition for a waste paper buffer stock scheme to have an external benefit (in terms of lower disposal costs) is that the scheme
0
a
e
b
’ R. Kerry Turner and R. Grace, ‘Paper recycling and social policy’, Resources Policy. Vol 2, No 4, December, 1976, pp 256-266. In a case study of a possible
f
QUl3lltlty
Figure 2. Waste a ‘supply effect’.
paper
recycling
with
has a positive supply effect. Otherwise, the size of the external benefit is positively related to the size of the supply effect and negatively related to the rate at which future benefits are discounted. Paul Hallwood University
ofAberdeen
Aberdeen,
Scotland
This work is supported by a grant from the Social Science Research Council.
crediting
the scheme
with
savings
in all
buffer stock scheme for waste paper in Belgium, disposal cost savings were similarly credited, but an additional exaggeration of benefits was obtained by
periods, boom or slump. See Tractionel, Les View Papiers en Belgique. Belgian Ministry of Economic Affairs, 1976. * R. Edwards and A. Parikh, ‘A stochastic policy simulation of the world coffee Journal economy’, of Agricultural Economics, July, 1976.
terms. Moreover, they give their conclusions in verbal form in the first two chapters before embarking upon the econometric calculations - which are also well explained. The calculated effect of a complete removal of the mining industry from the assuming economy Canadian retention of the capital investment involved - would include a 5% increase in the cost of foreign exchange and a decline (in order of decreasing effect) in incidental to mining, the services utilities. construction, education, hospitals and health, and rail transport. Industries that would expand (in order of decreasing expansion) are petroleum refining, machinery, petroleum and gas wells, motor vehicles, aluminium rolling and extruding, miscellaneous manufacturing, iron and steel, rubber, and metal fabricating. The same calculation, assuming that capital is not would provide a lesser available, increase in the cost of foreign exchange; the declining industries are the same, and those that would expand are motor vehicles. machinery, textiles, clothing,
and metal fabricating. The maximum reduction in economic welfare would be 2.3%. The effect of expanding the mining industry was calculated to be essentially the reverse of removing it. An increase in mineral processing would have a similar effect, and would also cause an expansion of the mining industry. The authors investigate the effects of the 1966 tax and tariff structure (now regarded as the ‘good old days’) and find, surprisingly, that even then government policy was discriminatory mining and most primary against industries. The reader is frequently reminded that the model is static and cannot be related to real life, so I shall avoid the depressing conclusion that the mining industry seems to be totally irrelevant to the Canadian economy (although this is the obvious conclusion that can be deduced from the lack of correlation between mineral production and per capita GNP for most countries in the world). The questions that need to be asked are what would be the state of the
Book reviews THE IMPACT OF THE MINING INDUSTRIES ON THE CANADIAN ECONOMY bv
R.W.
Treddenick, Studies, Kingston,
Boadway Centre
and for
Queen’s Ontario,
1977,
J.M.
Resources University, 1 16pp
This book is an entirely economic study, based on 1966 input-output data, that computes the effect of the mining industry oq the Canadian economy according to a static equilibrium model by systematically testing the effects of removal or expansion of the mining industry. In so far as most economists persistently seem disinclined to consider the technical and scientific constraints of their activities (beyond noting that the effects may be important), scientists must, of necessity. attempt to penetrate the mysteries of economic manipulations. This feat is just possible with this treatise the authors consciously avoid economic jargon as far as possible, and define most of their
150
RESOURCES
POLICY
June
1977
Book reviews Canadian economy now if there had not been a strong mineral industry that generated significant foreign exchange in the past, and what are the invisible earnings from the export of Canadian exploration and mining expertise. On balance this is an interesting study, although as a geologist I find it difficult to accept entirely that today’s very high foreign exchange earnings from the mineral industry could readily be compensated for by adjustments elsewhere in the economy. It would be interesting to see what an economist would say about the book - his review would certainly be very different.
G.J.S. Govett University
of New Brunswick Fredericton,
Canada
BOUNDARIES OF ANALYSIS: An inquiry into the Tacks Island Dam Controversy edited by Harold A. Feiveson, Frank W. Sinden, and Robert Socolow, published for the American Academy of
Arts
and
Publishing
Science
Co,
l976,417+xii
WHEN Essays analysis, decision edited
Ballinger Mass,
pp
VALUES CONFLICT: on environmental discourse and
by Lawrence
S. Schelling,
H. Tribe,
Academy
by Ballinger
Cambridge,
Corinne
and John Voss, published
for the American Science
by
Cambridge,
Mass, 1976,
of Arts and
Publishing
Co,
17B+xvpp
These two volumes (complementary but each complete in itself) are concerned with the role technical analysis can and should play in the evaluation of major affecting projects the natural environment. This is an interdisciplinary venture - its 17 contributors are drawn from engineering, physics, ecology, and most of the social science disciplines. Although most of the chapters are by authors, considerable single and valuable crossfertilisation of ideas is
RESOURCES
POLICY
June
evident throughout.
The
summarised
by
(Boundaries
ofAnal~~~s,
main
the
theme
is
following
p 11):
Disciplined analyses brought to bear on a current societal dispute hardly ever do justice to the values in conflict. Terribly little is asked of analysis and analysts respond in a way that allows the potentialities of their disciplines to be undervalued . disciplined analysis has enormous unused capability.
The authors expose and analyse these ‘failures of discourse’ and grope towards solutions - first in Boundaries of Ana&sis in terms of a specific environmental controversy, and then in When Values Conflict in more general terms. Their case study, the on-going controversy over a proposal to construct a multipurpose dam across the River Delaware, is well chosen to illustrate a wide range of issues. The authors’ theme is nowhere better illustrated than by the ritual benefit-cost evaluation by the project’s sponsors, the Corps of Engineers. This characteristically distinguishes four benefits (flood control, water supply, recreation and hydro-electric power) and one category of cost (financial). Boundaries of Analysis shows how the analysis is so constrained by arbitrary procedures as to make it virtually irrelevant to rational decision-making. Some of these appear indefensible - for example, while the official discount rate for project analysis is currently 5$%, the Corps insists on applying 3$% in the Tacks Island case, on the grounds that this was the rate when the project was first financed. The benefits of water supply are assessed in terms of the costs of alternative means of supply which are conveniently evaluated at 49. Other procedures are presumably adopted for simplicity for instance, by Congressional decree, recreation benefits are valued at $1.35 per visitor day. However, not only does this figure appear to be the result of an arbitrary political compromise, but the underlying assumptions that benefits are proportional to visitations is absurd.
Alternatives
ignored
A major effect of the simplifications adopted is the suppression of alternatives. An accepted rule in evaluation of multipurpose projects is
1977
that alternative satisfaction of the objectives by a set of single-purpose projects (eg flood-plain zoning, water swimming pools, metering, urban nuclear power stations) is not to be considered. Contrary to this general rule, however, water supply benefits are valued in terms of the cost of an equal volume of alternative reservoir supply; no consideration is given to a wide approaches alternative range of discussed in Boundaries of Analysis (Chapter 5). It is powerfully argued (When Values Conflict, Chapter 6) that a very important role of analysis is to stimulate the search for new knowledge and new alternatives. It is therefore a serious criticism of the Tacks Island analyses that they are structured so as to inhibit such search. Another serious limitation is that important ramifications of the project are not even considered, because of their complexity and/or difficulties of valuation. For example, the extensive provision of recreation facilities would lead to added congestion on the roads, representing a serious social cost; this might be alleviated by road building, but this too would involve financial and environmental costs, and would also stimulate ex-urban development. The dam would stimulate development on the flood plain, and the increased availability of power and water would facilitate industrial development, perhaps at the expense of other less favoured regions. Similarly there is no evaluation of the project’s environmental costs, except in so far as these are reflected in the arbitrary figures for recreational benefits. Finally, no attempt was made to trace the distributional impacts of the project. Some argued that the recreational facilities would benefit the deprived urban poor, but this would have entailed a great improvement in involving a heavy public transport, subsidy (a cost which is certainly not reflected in the analysis). Although the distributional issue was thought by many to be of crucial importance, no serious analysis was done by the Corps or anyone else. The discussion is fascinating and thought-provoking, but the books are, perhaps inevitably, more sixcessful in raising problems than in suggesting remedies.
151
reviews volume of disposal is reduced by the same amount and this quantity of waste paper substitutes for a given quantity of wood pulp (an amount determined by technological relationships). This supply effect increases the size of the external benefit caused by the shifting away in time of the costs of disposal. It is concluded that if the discount rate is zero, a necessary condition for a waste paper buffer stock scheme to have an external benefit (in terms of lower disposal costs) is that the scheme
0
a
e
b
’ R. Kerry Turner and R. Grace, ‘Paper recycling and social policy’, Resources Policy. Vol 2, No 4, December, 1976, pp 256-266. In a case study of a possible
f
QUl3lltlty
Figure 2. Waste a ‘supply effect’.
paper
recycling
with
has a positive supply effect. Otherwise, the size of the external benefit is positively related to the size of the supply effect and negatively related to the rate at which future benefits are discounted. Paul Hallwood University
ofAberdeen
Aberdeen,
Scotland
This work is supported by a grant from the Social Science Research Council.
crediting
the scheme
with
savings
in all
buffer stock scheme for waste paper in Belgium, disposal cost savings were similarly credited, but an additional exaggeration of benefits was obtained by
periods, boom or slump. See Tractionel, Les View Papiers en Belgique. Belgian Ministry of Economic Affairs, 1976. * R. Edwards and A. Parikh, ‘A stochastic policy simulation of the world coffee Journal economy’, of Agricultural Economics, July, 1976.
terms. Moreover, they give their conclusions in verbal form in the first two chapters before embarking upon the econometric calculations - which are also well explained. The calculated effect of a complete removal of the mining industry from the assuming economy Canadian retention of the capital investment involved - would include a 5% increase in the cost of foreign exchange and a decline (in order of decreasing effect) in incidental to mining, the services utilities. construction, education, hospitals and health, and rail transport. Industries that would expand (in order of decreasing expansion) are petroleum refining, machinery, petroleum and gas wells, motor vehicles, aluminium rolling and extruding, miscellaneous manufacturing, iron and steel, rubber, and metal fabricating. The same calculation, assuming that capital is not would provide a lesser available, increase in the cost of foreign exchange; the declining industries are the same, and those that would expand are motor vehicles. machinery, textiles, clothing,
and metal fabricating. The maximum reduction in economic welfare would be 2.3%. The effect of expanding the mining industry was calculated to be essentially the reverse of removing it. An increase in mineral processing would have a similar effect, and would also cause an expansion of the mining industry. The authors investigate the effects of the 1966 tax and tariff structure (now regarded as the ‘good old days’) and find, surprisingly, that even then government policy was discriminatory mining and most primary against industries. The reader is frequently reminded that the model is static and cannot be related to real life, so I shall avoid the depressing conclusion that the mining industry seems to be totally irrelevant to the Canadian economy (although this is the obvious conclusion that can be deduced from the lack of correlation between mineral production and per capita GNP for most countries in the world). The questions that need to be asked are what would be the state of the
Book reviews THE IMPACT OF THE MINING INDUSTRIES ON THE CANADIAN ECONOMY bv
R.W.
Treddenick, Studies, Kingston,
Boadway Centre
and for
Queen’s Ontario,
1977,
J.M.
Resources University, 1 16pp
This book is an entirely economic study, based on 1966 input-output data, that computes the effect of the mining industry oq the Canadian economy according to a static equilibrium model by systematically testing the effects of removal or expansion of the mining industry. In so far as most economists persistently seem disinclined to consider the technical and scientific constraints of their activities (beyond noting that the effects may be important), scientists must, of necessity. attempt to penetrate the mysteries of economic manipulations. This feat is just possible with this treatise the authors consciously avoid economic jargon as far as possible, and define most of their
150
RESOURCES
POLICY
June
1977
Book reviews Canadian economy now if there had not been a strong mineral industry that generated significant foreign exchange in the past, and what are the invisible earnings from the export of Canadian exploration and mining expertise. On balance this is an interesting study, although as a geologist I find it difficult to accept entirely that today’s very high foreign exchange earnings from the mineral industry could readily be compensated for by adjustments elsewhere in the economy. It would be interesting to see what an economist would say about the book - his review would certainly be very different.
G.J.S. Govett University
of New Brunswick Fredericton,
Canada
BOUNDARIES OF ANALYSIS: An inquiry into the Tacks Island Dam Controversy edited by Harold A. Feiveson, Frank W. Sinden, and Robert Socolow, published for the American Academy of
Arts
and
Publishing
Science
Co,
l976,417+xii
WHEN Essays analysis, decision edited
Ballinger Mass,
pp
VALUES CONFLICT: on environmental discourse and
by Lawrence
S. Schelling,
H. Tribe,
Academy
by Ballinger
Cambridge,
Corinne
and John Voss, published
for the American Science
by
Cambridge,
Mass, 1976,
of Arts and
Publishing
Co,
17B+xvpp
These two volumes (complementary but each complete in itself) are concerned with the role technical analysis can and should play in the evaluation of major affecting projects the natural environment. This is an interdisciplinary venture - its 17 contributors are drawn from engineering, physics, ecology, and most of the social science disciplines. Although most of the chapters are by authors, considerable single and valuable crossfertilisation of ideas is
RESOURCES
POLICY
June
evident throughout.
The
summarised
by
(Boundaries
ofAnal~~~s,
main
the
theme
is
following
p 11):
Disciplined analyses brought to bear on a current societal dispute hardly ever do justice to the values in conflict. Terribly little is asked of analysis and analysts respond in a way that allows the potentialities of their disciplines to be undervalued . disciplined analysis has enormous unused capability.
The authors expose and analyse these ‘failures of discourse’ and grope towards solutions - first in Boundaries of Ana&sis in terms of a specific environmental controversy, and then in When Values Conflict in more general terms. Their case study, the on-going controversy over a proposal to construct a multipurpose dam across the River Delaware, is well chosen to illustrate a wide range of issues. The authors’ theme is nowhere better illustrated than by the ritual benefit-cost evaluation by the project’s sponsors, the Corps of Engineers. This characteristically distinguishes four benefits (flood control, water supply, recreation and hydro-electric power) and one category of cost (financial). Boundaries of Analysis shows how the analysis is so constrained by arbitrary procedures as to make it virtually irrelevant to rational decision-making. Some of these appear indefensible - for example, while the official discount rate for project analysis is currently 5$%, the Corps insists on applying 3$% in the Tacks Island case, on the grounds that this was the rate when the project was first financed. The benefits of water supply are assessed in terms of the costs of alternative means of supply which are conveniently evaluated at 49. Other procedures are presumably adopted for simplicity for instance, by Congressional decree, recreation benefits are valued at $1.35 per visitor day. However, not only does this figure appear to be the result of an arbitrary political compromise, but the underlying assumptions that benefits are proportional to visitations is absurd.
Alternatives
ignored
A major effect of the simplifications adopted is the suppression of alternatives. An accepted rule in evaluation of multipurpose projects is
1977
that alternative satisfaction of the objectives by a set of single-purpose projects (eg flood-plain zoning, water swimming pools, metering, urban nuclear power stations) is not to be considered. Contrary to this general rule, however, water supply benefits are valued in terms of the cost of an equal volume of alternative reservoir supply; no consideration is given to a wide approaches alternative range of discussed in Boundaries of Analysis (Chapter 5). It is powerfully argued (When Values Conflict, Chapter 6) that a very important role of analysis is to stimulate the search for new knowledge and new alternatives. It is therefore a serious criticism of the Tacks Island analyses that they are structured so as to inhibit such search. Another serious limitation is that important ramifications of the project are not even considered, because of their complexity and/or difficulties of valuation. For example, the extensive provision of recreation facilities would lead to added congestion on the roads, representing a serious social cost; this might be alleviated by road building, but this too would involve financial and environmental costs, and would also stimulate ex-urban development. The dam would stimulate development on the flood plain, and the increased availability of power and water would facilitate industrial development, perhaps at the expense of other less favoured regions. Similarly there is no evaluation of the project’s environmental costs, except in so far as these are reflected in the arbitrary figures for recreational benefits. Finally, no attempt was made to trace the distributional impacts of the project. Some argued that the recreational facilities would benefit the deprived urban poor, but this would have entailed a great improvement in involving a heavy public transport, subsidy (a cost which is certainly not reflected in the analysis). Although the distributional issue was thought by many to be of crucial importance, no serious analysis was done by the Corps or anyone else. The discussion is fascinating and thought-provoking, but the books are, perhaps inevitably, more sixcessful in raising problems than in suggesting remedies.
151