My Response to Very Valuable Feedback from a Reader re: Supply Management
I really do love being challenged on what I write, especially if it is respectful and constructive
I published a very… let’s say “high-spirited” post yesterday on the Canadian Senate passing Bill C-202 unanimously — a bill that was previously passed unanimously in the House of Commons. I normally try to avoid being “too colourful”, as one of my PhD advisors warned me when I was writing my dissertation, but I felt it was appropriate to go against this advice this time because as I have often written in the past, there is (usually) no good argument in favour of cartels.
I have no regrets about my vibrancy in that post.
But there are still parts of that post where I was not as clear as I should have been in terms of my intentions and beliefs, and one of my readers very respectfully gave me some great feedback which made me realize that fact. I already responded to this person during a very enjoyable back-and-forth conversation, but I want to repeat some of those points here (with some new clarifications) because I think they are good ones to make more openly.
And on that note, I really value all constructive and respectful feedback, because it helps me become a better communicator, as well as to understand what I am writing more thoroughly. I thank this reader for helping me do so.
But of course, if I continue to be unclear on anything, it is entirely my fault.
Dog-Whistling to the “Western Alienation” Crowd
The aforementioned reader did not use the term “dog-whistling” — they used much more respectful and constructive wording — but I think it is appropriate because I am always worried about unintentionally giving that impression, including while editing my last issue of this newsletter.
But even with that concern, I wrote the following:
Finally, there is a question which I rarely hear addressed by proponents of supply management: why are dairy, eggs, and poultry so in need of protection, other than they are primarily located in Ontario and Quebec?
I certainly do not want to appear like I am shouting out to the Western Alienation crowd, even though I understand why it appears I am doing so. There are certainly legitimate concerns from this crowd, which I discussed here, but the most extreme members of this crowd — the separatists and the separation-curious — seem to suffer from a victim complex, which I do not support. I am firmly against any Canadian separatism, as I explained here.
Nonetheless, I feel pointing out the fact that Ontario and Quebec are the main beneficiaries of supply management would also speak to Atlantic and Northern Canadians, who also feel like they are being neglected by the federal government for the purpose of winning elections with support from Ontario and Quebec.
But in general, my point with the Quebec reference is that the only reason many (if not most) politicians care so much about protecting dairy, eggs, and poultry (DEP) is because they want votes from Quebec. To back up that argument, I refer you all to Martha Hall Findlay who wrote the following (page 20):
Unfortunately, good policy does not always make for good politics. Too often, getting elected takes precedence over policy. Many politicians acknowledge, privately, that supply management should go, but they say that they must continue to support it because there are too many votes at stake. Unfortunately, this perception highlights how one cannot underestimate the power of a good lobby.
Not All Politicians Are Necessarily Just Pandering for Votes
After I made the previous point to my reader, they followed up with the following very reasonable counterargument: while these political motivations do exist, there are likely many politicians who really do still think supply management is good for Canada as a whole. I agree, and I should be more careful to not put all of those eggs in one basket (no pun intended).
I am certain some (if not many) politicians in favour of supply management think it is the best for society, especially more left-leaning ones like those in the NDP. I am less upset with them because I understand why they do not trust free markets, and they have much more faith in government intervention than me — although again, I do believe in government intervention to counter market failures, which are easy to find in terms of market power, public goods & common resources, externalities, informational asymmetries & uncertainty, and inequalities.
My wrath is mainly directed at the Conservative politicians like Pierre Poilievre, who frequently preach the supremacy of free markets, as well as an inability of governments to make things better, not to mention regularly tossing out “socialism” as a supposed insult, as if “socialism” is the same as “communism”. Every country in the world with any kind of government support programs is socialist to some degree.
On a side-note, it was also Poilievre who explicitly argued the Nazis were socialists simply because they called themselves socialists. By that logic, North Korea is democratic because its full official name is “Democratic People's Republic of Korea”. Same with the former East Germany (“German Democratic Republic”).
But I digress.
It was also Stephen Harper’s CPC government that dismantled the Canadian Wheat Board (CWB):
The debate leading up to the dismantling of the CWB was highly politically charged. The Conservative government at the time, led by Prime Minister Stephen Harper, championed the end of the organization, arguing in favour of marketing freedom. A poll conducted by the CWB in 2011, however, found a majority of farmers favoured the single-desk model. Of about 38,000 Prairie farmers who voted, 62 per cent of wheat farmers supported the board’s monopoly on wheat sales, while 51 per cent of barley farmers supported its monopoly on barley. The Harper government dismissed the vote, saying such a plebiscite shouldn’t trump the “individual rights of farmers to market their own grain.”
So the Harper government argued for “marketing freedom” when it came to the CWB — an organization that was primarily beneficial to Prairie provinces like Saskatchewan and Alberta which tend to blindly vote Conservative regardless of its policies — but not so much when it comes to supply management which primarily benefits voters in Ontario and Quebec — who are much more open to voting for different parties in different elections depending on the issues.
And that was not only demonstrated with CPC MP votes in favour of supply management in recent years, such as with Bill C-202 and its predecessor Bill C-282, which passed the House but not the Senate before prorogation. It also goes back to the early days of the party, such as on November 23, 2005 when “a motion supporting supply management was passed unanimously in the Canadian House of Commons.”
In short, unlike members of other parties who might have genuinely supported both supply management and the CWB, Conservatives only supported the one in a region where they could not count on blind support.
Andrew Scheer drinking milk for a photo-op while running for leadership of the CPC also comes to mind:
But it is not just Conservatives that irk me in this respect. Prime Minister Mark Carney’s support of supply management also particularly bugs me because unlike most other politicians, he has expertise in Economics (and a PhD in it as well) so he understands very well why cartels are per se illegal under the Competition Act — meaning they are always illegal when not government-mandated, as opposed to abuses of dominance and mergers which can be either net-beneficial or net-damaging to the economy depending on the specifics of the case.
I understand Carney needs to be a politician now, but it still stings to witness him supporting a cartel.
Value Economists Place on the Supply of Necessities that Is Affordable, Reliable, Safe, and Resilient
I like to think most economists do place a high value on these things. But I also do not believe supply management achieves any of these goals.
Quite the opposite: while it does promote stability in consumption, it does not provide stability in production, as evidenced by the fact so much dairy is deliberately wasted due to overproduction.
Similarly with affordability: supply is restricted to make DEP less affordable for Canadians, all for the benefit of a very small (and shrinking) number of farmers.
With respect to health and animal welfare standards, such standards can be legislated and enforced without supply management. We can also block U.S. imports — or any other imports — if there is a worry that country is shipping us bad product, just as countries banned our beef during the Mad Cow scares in both 2003 and 2015.
As for putting the Canadian public ahead of the financial interest of investors, I share this goal. But again, supply management is designed to benefit the largest of farmers, and they are getting larger as the smaller ones go out of business. At least some small dairy farmers oppose supply management precisely because it is designed to benefit their much larger competitors while they are left to pick on the scraps:
To critics, Mr. Van Essen fell prey to a broken system they say is designed to protect larger farms, to the detriment of small-scale ones and – through artificially high prices – consumers.
In summary, I do not want to give the impression I am all for the free market. I am not even entirely focused on efficiency. I am all for regulations when they effectively counter market failures, but supply management does not do so.
In my opinion as a PhD economist with expertise in Industrial Organization & Competition Policy, and in International Economics, it is a purely political policy that does not do anything beneficial for Canadians as a whole that cannot be achieved otherwise.
Economists Need to Be Better Communicators
A problem with the politicians and lobbyists supporting bad policy — even ones who genuinely think it is good policy — is there are so few economists who even try to explain economics to the public.
There are important exceptions, such as Andrew Leach, Trevor Tombe, and Mike Moffatt — all of whom I respect immensely — but there needs to be more of them.
To be clear, the problem is not that economists do not care about subjects which primarily affect the less advantaged, such as various inequalities. In fact, there are many economists who devote their entire careers to these subjects, for example Development Economists and Public Sector Economists.
It has also been true for decades that almost all economists support carbon taxes as the most efficient and effective way to combat climate change, especially when it comes with a rebate — as it did under the policies of both Justin Trudeau and Rachel Notley.
However, the main problem with the carbon tax was it became so political that Prime Minister Carney felt he had no choice but to get rid of it. No amount of information could convince most voters that eliminating the carbon tax would be a bad thing.
And that goes back to my point about informational asymmetries being a market failure: voters had inferior information, partly because anti-carbon tax people deliberately distorted information for political gain, but also because economists tend to be very bad communicators: many of us prefer to sit alone in the basement with our calculators and avoid talking to people, and many of us also prefer the comfort of hard quantitative facts over getting involved in politics which is messy.
Many years ago, Mike Moffatt also argued that we economists are largely to blame for people like David Suzuki not understanding the meaning of “externalities” because we keep to ourselves and publish in academic journals almost no one reads. It is getting better in that respect given Substack and other ways to disseminate ideas online, but there is still a long way to go.
Another problem with many of our economic models is we often focus on the long run effects of policies, but that is when “we are all dead”. Politicians, on the other hand have at most five years between elections, so they need to get support quickly and with minimal effort. That leads to catchy and easy-to-understand —but largely meaningless — policies like “Axe the Tax”, “Build the Homes”, and other forms of “Verb the Noun”, as Matt Gurney and Jen Gerson phrase it.
Furthermore, since large corporations and other rich people are the ones with the most money, even if there are campaign contribution limits, they influence politicians like Danielle Smith who openly defend accepting luxury suites at hockey games, for example. There are people whose jobs are to ensure politicians remain ethical — or at least they are supposed to remain at arms-length from the politicians — but Smith has also demonstrated how she can interfere with their work with apparently zero negative consequences.
But since we economists tend to be bad communicators, the politicians and lobbyists are the ones shaping voter opinions. And some of these politicians are more effective at doing so than other ones, as demonstrated by Danielle Smith’s popularity remaining above 50% despite all of her scandals, leaving people to ask “Where’s Nenshi?”.
I Greatly Value This Kind of Feedback
I enjoyed this conversation with my reader a lot, because explaining Economics and my views on it to non-economists helps me understand it better, as well as to be a better communicator.
That is one of the things I always loved about teaching undergrad economics: in addition to helping students understand the material, I also had to figure out how to explain everything without resorting to a lot of math. And when I did use math, I had to know how to explain intuitively what it all meant, as opposed to when I was in grad school and it was often enough to just memorize the equations.
Case in point: I remember taking the first graduate-level Microeconomics course when I was studying for my M.A. in 1997, and the prof literally spent two hours in class proving the Second Welfare Theorem of Economics mathematically. He then required us to repeat the proof on the final exam. It took me forever to memorize all of the equations when studying for that exam, and I still have no idea what it all meant! I understand the theorem logically, but the math went way over my head!
I believe I would be able to understand the math now that I have so much more experience teaching Economics, but I am not sure I want to try! It might be too triggering to see all of that math again!
It also reminds me of when I did my first media interview while studying for my PhD back in 2006. It was about the upcoming cut in the GST rate during the Canada Day weekend, and the interviewer asked if I could tell him exactly how much gas prices would go down. I tried to explain why it depends on the relative elasticities of demand and supply, and my first instinct was to draw a graph on the board to show what I meant. I immediately realized that was a losing strategy, so I just told him it is hard to know off hand.
I sometimes wish I could go back to that interview and explain myself better. But I am certain I am the only one who remembers it, so I just need to find away to drown out the voices in my head.
Similarly, when I was working at the Competition Bureau in 2008, we offered classes to teach the lawyers and case officers some basic Economics that was relevant to our work. One of the classes I taught was on Demand Estimation, and I did not know how it could possibly be taught without math, so I went back to my old Econometrics notes on the subject and taught from them. There were a lot of complaints about that class, and I don’t blame them.
So when I (coincidentally) left the Bureau to be a professor later that summer, I made sure to always think about how I could explain everything without math or graphs. I never wanted to see the horror/frustration on the faces in my audience every again!
Anyway, that is enough today. Thank you again to the aforementioned reader for challenging me on points made in my previous post, and I welcome more of them from anyone — as long as they are respectful and constructive, like the ones made by that reader.
And if you enjoy what I write and find it valuable, I ask that you consider a paid subscription, as it will help me afford the time and other resources to write more and better articles. It will also help me to become a better communicator!