Do you find mathematical economics scary? You should… because it’s coming for your wallet and your economy.
It’s coming disguised as B.C. premier Christy Clark, currently threatening to block the Northern Gateway pipeline unless Alberta, whose oil would be shipped through it to the ocean and foreign markets, pays up and big. Which just sounds like an extortionate attack on Canada’s infrastructure. Except Clark comes armed with a number, and statistics are trumps in the modern world. She says all B.C. will get out of this energy megaproject is $6.7 billion.
Poor baby. I know I’d throw that back. No, not the money. The statistic. What is this thing and where did it come from?
It turns out it’s the B.C. government’s “calculation” of how much extra tax revenue they would get over 30 years if the pipeline were built. And how do they know that? Because they know how much extra economic activity would occur in Canada over 30 years if the pipeline were built, how much of it would happen in B.C., and how the resulting tax revenue would be divided between the federal government and the provincial one.
Wow. And how do they know how much extra economic activity would occur in Canada over 30 years if the pipeline were built? Simple. The way you always know the difference between two numbers: You calculate each one then subtract. So first they figure out exactly what the Canadian economy will do for the next three decades without the pipeline. Then after lunch they figure out exactly what it will do for the next three decades with the pipeline. Then the subtract the former from the latter.
Oh, they also know exactly how tax revenue will behave in the next 30 years. These guys are smart.
Well, either that or they’re blowing mathematical smoke. And at the risk of seeming small-minded and unequational, I note that their efforts to predict revenue, spending and taxes each year in their budgets generally turn out badly.
So they don’t know what the economy will do next year. But we’re meant to believe they know what it will do for the next 30, and give them a bunch of money because of it.