Thursday, January 23, 2020

HERB'S BELIEVE IT OR NOT (with my apologies to Ripley's)

Here are some facts that may astound you.


It may astound some to learn how Trump’s record compares with that of the three presidents in office before him:

Between 1996 and 2016, the number of people using bicycles to commute to and from work in Canada’s largest metropolitan areas increased by 88 percent while the total number of commuters increased by only 35 percent. Canada is doing its share of reducing green house gas emissions and saving the planet from climate change.
However, it might astound some that the number of commuters using bicycles as a percent of all commuters in Canada’s large metropolitan areas was 1.2 in 1996 and 1.6 percent in 2016.
Which raises the question whether the costly and congestion-increasing policies encouraging the use of bicycles are worth it. The reduction in green house gas emissions created by these policies is likely to equals the production of these gases by one of the coal-using electricity creating plants in China in less than one day.

The first of these popular slogans is based on this table from Statistics Canada, which contains the most recent data available:
It shows that the median income of the bottom quintile (the “poor”) increased 5 percent over the 13 years covered while the income of the highest quintile (the “rich”) increased by 20.7 percent and that the middle three quintiles (the “middle class”) increase by an average of 14.3 percent.
In assessing the “fairness” of the changes in the distribution of income it is important to know that different Canadians appear in each of the quintiles shown every year. For example, many of the poor in 1999 were students, apprentices or temporarily unable to work because of illness, unemployment or moving between jobs. In later years, these individuals had incomes that placed them into higher quintiles. Their place in the bottom quintile was taken by new crops of students and others with temporarily low incomes.
Income Dynamics
The following table provides important evidence on the mobility of Canadians into and out of poverty and other income quintiles. It is based on data provided by Revenue Canada, which has electronic records of income tax returns filed by Canadians over many years, but which have been analyzed only recently for the first time.
The key information in this table is that of Canadians who were poor in 1993, in 2012 only 11 percent were still poor. 23.6 percent had incomes in the top quintile and were rich. These data suggest that the poor are not getting poorer, they are getting richer.
Of course, the 1993 poor who had become rich in 2012, as a matter of logic, must have taken the place of people who in preceding years were rich and had moved to lower income quintiles. The data (not shown here) record this: Of those who were in top quintile in 1993, 15.6 percent, 18.5 percent and 34.6 percent had respectively moved to lower quintiles 5, 10 and 19 years later.
It may be astounding to some that these two different indicators of the fairness of the distribution of income exist side by side but that almost all political discussion of the subject is based on the data contained in the first table.
When you were young, studying or entering the labour force, how much did you care about the fact that some people had much higher incomes than you and how much were you concerned that you will raise your income in the future and that Canada’s institutions enable you to do so and reward your hard work?
Our compassion and government assistance for the poor should focus on the small proportion whose handicaps cause them to remain poor for long periods of time or even their entire lives. Governments already do much to assist these unfortunate Canadians and public discussion should focus on the adequacy of this assistance, not how much support should be going to students and other temporarily poor.


Searching Google with the key words “automation robots and job losses” brought 17.9 million references. The subject obviously has been researched widely and intensively.
Here is the references to a recently, well-researched and -written study of the subject covering conditions in British Columbia, Canada, which is typical of the plethora of published studies in the field.
Searching Google with the key words “Canada aging population and labour shortages” brought 8.79 million references, another well-researched field. Here is a reference to a study of the subject published by Statistics Canada.
Searching Google with the key words “Canada aging population and immigration” brought 9.6 million references.
Here is the one at the top of the list of references:
Searching Google with the key words “Canada labour shortages and unemployment caused by automation” brought no relevant references. Those showing up repeat the results from searching “aging population and immigration.
You may be astounded by these results. There appear to be no studies linking the increased supply of labour due to automation with the increased shortage of labour due to population aging. Is this because these trends are likely to eliminate or greatly reduce the need for government intervention? Or is it because the offsetting trends will eliminate or greatly reduce the need for immigrants to fill job vacancies?

A Google search of “global warming and sea level rise” brings up 11.5 million references. The scary conclusion of research is that if all the existing glaciers in the world were turned into water, the world sea level would rise by 7 meters.
However, this information can benefit from some facts that may be wondrous to some.
Thus, the effect of global warming is documented extremely well by satellite pictures of the North Pole region, which are also used to support demands for controls on green-house gas emissions. These data permit precise calculations of the volume of sea ice that has turned into water every year. The graph below shows that during the years 2010 – 2017 the amount of polar sea-ice has been about a third of its level in the 1980s.
How much has the melting of this ice raised the level of water in the world’s oceans?
The answer may well astound you. The increase is exactly zero.
The correctness of this conclusion can be checked by a simple experiment: Fill a glass of water to the rim and drop into it an ice cube. Water will spill over until the glass is again full to the rim. Now watch what happens as the ice cube melts. You will see no more water spilling over the rim of the glass.
The same physical laws producing this result prevent the melting of the sea ice on the North Pole from raising the quantity of water in the world’s oceans.
At any rate, Greenland and the Antarctic make up 99 percent of the total ice on earth. Satellite images have been used to calculate that the cumulative amount of ice from these locations turned into water came to 6,500 gigatons between 1992 and 2014.
But as in the case of the switch to the use of bicycle used by commuters, these figures need to be seen in relation to the total: The volume of the Antarctic ice alone is 30 million cubic KILOMETERS. Someone had fun calculating that this is equivalent to 9 raised to the power of 1016 ice cubes! I could not find on the internet how many gigatons these ice cubes weigh, but the number is likely to be so large that the 6,500 tons lost in recent years is a very small fraction of the total.
The wondrous facts presented here do not imply that the world is free of trends in politics, income distribution and global climate that could develop into serious economic, social and environment problems for Canada and the world or that nothing should be done to fight them. But these facts should be useful for keeping recent developments in perspective and for raising questions about the effectiveness and certainty of current or planned policies designed deal with these problems and often promoted by individuals and institutions with political and ideological agendas.
The population of the world is better off than it has ever been. It is not in the interest of that population that the institutions and policies that produced this condition will be reformed in the name of preventing problems, the nature and magnitude of which are exaggerated and uncertain.
I will share with you future instalments of my Believe-it-or-not stories, especially if you encourage me to do so.


Robert Gregory is a distinguished Australian economist, who at a recent academic conference had this to say about immigration policy issues in his country:

“Over the last decade, …net overseas migration added between 1 and 1.2 million people every 5 years to the Australian population (around 5% of the population stock) …As a result, the infrastructure in Sydney and Melbourne, our two major cities where immigrants largely settle, has become increasingly inadequate…The Australian current housing boom…is being generated by… low interest rates and the [fact] that Australia has more people than expected… Government and all segments of the population at large have become increasingly dissatisfied with [these problems]…Australian immigration authorities therefore have begun to reduce the granting of permanent immigration visas.”

This account of conditions in Australia pretty well describes those in Canada. Immigrants have:

·       added to Canada’s population four percent over the last five years and are scheduled to add even more in coming years.
·       settled mainly in Canada’s largest cities, Toronto, Vancouver and Montreal. More than 300 newly arrived immigrant families are settling in the Vancouver Metropolitan are EVERY WEEK.
·       caused Vancouver housing costs to be the second highest of all North American cities.
·       caused serious traffic congestion. Schools, recreation and other public facilities are overcrowded. Hospitals in Ontario routinely place patients in linen closets and hallways.
Public opinion surveys show that most Canadians want their government to reduce the number of immigrants.

However, the response of Canada’s government to these conditions has been much different from Australia’s. Australia has reduced immigration; Canada has increased it, to unprecedented levels of over 300,000 annually.

Canadians, including the many recent immigrants, in the country’s large cities suffer much as a result of the government’s immigration policies. Their suffering could be reduced by cutting the total annual number of immigrants to 100,000 for a limited period of time.

During this period, construction could increase the supply of housing and infrastructure facilities to eliminate the current shortages; government agents could apply their limited resources to the selection of immigrants with the greatest prospects of economic success; and information could be gathered about the number of immigrants whose demand for housing and infrastructure facilities can be met by the construction industry and financed by governments.

When politicians increase immigrants to this optimum number, they can expect to be rewarded by voters at the ballot box.

Herbert Grubel
Emeritus Professor of Economics
Simon Fraser University

Tuesday, December 17, 2019

Germany’s Social Market Economy for China and Canada?

China’s use of a mix of central planning and competitive markets has increased the country’s national income dramatically for two decades. However, recently economic growth has slowed, and some serious planning mistakes have been made.
In the light of these developments, it is interesting that some high-ranking Chinese economic policy makers recently asked two German economists to let them know what policies had been used to create Germany’s rapid economic recovery after the devastation of the Second World War, its solid economic growth thereafter and its protection from the worst effects of the global recessions of 2001 and 2008, implying that China’s leadership may be in search of solutions to the problems its development model has produced.
These two economists sent to China a collection of essays, which explain the Social Market Economy Model (SMEM) that was used by Germany’s Chancellor Konrad Adenauer and his Minister of Economics Ludwig Erhard to shape the country’s early postwar economic policies in spite of much opposition from politicians who preferred socialism and economic planning. The model presently still informs most of Germany’s economic policies.
This model was developed by economists at the University of Freiburg in Germany. It argues that national income is maximized if individual and business incomes are determined in free markets for production and distribution while government regulations and spending are used to meet the requirements of the needy, provide public goods such as defence and construct economic infrastructure such as highways.
The effort of China’s leaders to improve its economic performance by learning about and adapting policies that have been successful elsewhere is not without precedence.  Deng Xiaoping in the 1980s considered the prosperity of market economies and replaced the centralized planning model with one that imitates their economic system.
The SMEM model should also be considered by Canada, which is experiencing a period of growing economic problems: low rates of growth, investment and productivity while unsustainable fiscal deficits are growing. These problems are in part caused by policies that violate the operating principles of the SMEM model in several important areas.
For example, farmers wanting to produce dairy products have to buy quotas and, in effect, join a cartel, which sets production levels and prices at which the farmers are allowed to operate. The farmers earn high and stable returns on their investments, but the industry operates with many inefficiencies and consumers pay much above world prices. The SMEM model suggests that these costs would be avoided if the production and sale of dairy products were left to competitive markets and farmers were paid subsidies out of general tax revenue at levels considered to be socially desirable.
Another example involves the market for medical services. Canada’s governments effectively own and operate institutions and employ health care workers to provide the public with all required medical services at zero cost at the point of use. This policy is designed to ensure that all Canadians have access to medical care regardless of their level of income. The SMEM model suggests that the medical services should be provided by the private sector and that subsidies should be paid to those who cannot afford to buy them.
Yet another example is the housing industry. Many municipalities impose regulations that allow the construction of multiple housing units only if builders spend funds on public art and build units to be sold or rented at below-market prices. These regulations raise the cost of all housing unnecessarily. The SMEM model suggests that builders should be allowed to produce housing without facing these regulations so that it can be constructed and sold at the lowest prices possible. General tax revenue should be used to pay for socially desirable art and subsidize those who cannot afford housing at market prices.
The drift away from SMEM in Canada has reached a peak with the 2019 passage of Bill C-69. It requires private investors in pipelines and other large infrastructure projects to obtain a “social license” by compensating all “stakeholders” whose interests are damaged by these investments. This bill will raise the cost of infrastructure investments and the services they provide for consumers. The SMEM model suggests that these costs should be avoided by allowing these investments to proceed without having to incur the costs imposed by Bill C-69 and that stakeholders’ interests should be taken care of by payments from general tax revenue.
Canadian politicians love imposing on private investors and producers the cost of non-market benefits of the sort just described. It allows them to buy the votes of the recipients of these benefits without having to impose vote-costing taxes on the public. But in the process, they are destroying the free market system that has brought Canada one of the highest standards of living in the world and history. They should consider the cost of the increasing abandonment of SMEM-model based policies, especially Bill C-69.
Herbert Grubel
Emeritus Professor of Economics
Simon Fraser University
Senior Fellow, The Fraser Institute

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