Nov. 20 – Nov. 24 2023; In the world of competitive policy, understanding the nuances of price regulation is crucial. During our PPOL699: Competitive Policy lecture, we delved into the complexities and implications of various price regulation methods. Which was timely as it was a week before we hosted a guest lecturer from Power Advisory LLC (more to come in next week's reflection post).

Methods of price regulations include:

  1. Traditional (Cost-Based) Pricing: prices are set on the average cost incurred by a monopolist. It's straightforward when costs are observable but gets tricky when they're not.
  2. Rate of Return (ROR) Model: regulators estimate a firm's revenue requirement, considering various costs such as taxes, capital & variable costs, and depreciation expense. The Rate Base, combining debt and equity, forms a crucial part of this model.
    • The ROR model is particularly intriguing. Since total or average costs are often not fully observable (like the cost of capital), regulators must make educated guesses. The aim is to approximate a zero-profit outcome, similar to average cost pricing, but the practical application involves various complexities.
    • Three potential inefficiencies arise from ROR:
      • X-Inefficiency: Lack of profit motive may lead to inadequate cost minimization by regulated firms.
      • Gold Plating: Firms might inflate their rate base to increase profits, leading to unnecessary capital expenditures.
      • Averch Johnson Effect: Firms might overinvest in capital while underutilizing labor, distorting the balance for optimal production.
  3. Incentive Regulation: This includes several approaches like Price Caps, which use the RPI-X model (Retail Price Index minus expected efficiency gains), and Automatic Rate Adjustments. The goal is to encourage efficiency while maintaining fair pricing for consumers to minimize dead weight loss.
    • The RPI-X model, despite its simplicity, faces challenges in setting the 'X' factor and adapting to market changes. It aims to balance cost-reduction incentives with allocative efficiency but can be difficult to manage effectively.
  4. Negotiated Settlements: whereby buyers and sellers coordinate to reach an agreement that considers public interest. It's a nuanced process that balances individual and collective interests.

During our PPOL602: Markets and Public Policy lecture, we explored several key concepts related to stablization policy, with particular focus on its pivotal role in shaping economic outcomes. A key takeaway is the significance of Gross Domestic Product (GDP) as a policy target, revered for its strong correlation with vital societal metrics such as life expectancy. Policymaking, split between government and the central bank, utilizes the levers of fiscal and monetary policy to steer the economy. Fiscal policy operates through government expenditure and tax regimes, while the central bank modulates monetary policy, primarily by adjusting interest rates to maintain price stability and economic growth. I have provided more details on both policy mechanisms in week 10 reflection post. We explored the pivotal role of the aggregate demand, which illustrated illustrating how government and central bank policies can shift demand and impact economic activity. However, a critical aspect of policy implementation is timing; missteps here can render policies ineffective or even harmful, underscoring the need for strategic planning and execution.

Transparency emerged as a cornerstone of sound economic policy. Predictable and transparent policy decisions enable households and firms to plan effectively, minimizing the risk of economic shock from policy inconsistencies. The Bank of Canada’s explicit inflation targets and its detailed Monetary Policy Reports exemplify this transparency, offering a roadmap for economic expectations. Similarly, government communication of long-term fiscal objectives serves to stabilize economic projections.

The lecture shed light on the aggregate production function, where output is a function of labor, capital , and technological advancement. It highlighted how the interplay between these variables dictates the economy’s output. This allowed us to further distinguish between economic short-run—where capital stock and technology are deemed constant—and long-run, which allows for their variability and consequent influence on output capacity.

We then explored the ebbs and flow of business cycles, examining how policy responses to economic shocks could mitigate adverse effects on the economy. The debate around policy intervention is split among activists advocating for proactive measures, pessimists warning against potential exacerbation, and fence-sitters who see the efficacy as situational.

The PPOL 619: Governance, Institutions, and Public Policy lecture, focused on Indigenous Governance, centered around a critical theme: “Whose Land is it Anyway?”. This theme encouraged us to grapple with the complexities of land use policy within contested Indigenous Territories. The goal of the discussion was to cultivate a nuanced understanding of inter-Indigenous conflict and the intricate policy challenges that arise, moving beyond the conventional examination of disputes between the Indigenous peoples in Canada and Canadian government encroachments.

This part of the course shifts the perspective to consider territorial contestations among different Indigenous nations themselves. Such internal disputes offer a distinct viewpoint and deepen the understanding of land disputes between Indigenous communities and the Canadian state. The curriculum underscores that Indigenous nationhood is multifaceted, involving a diverse array of factors including territory, language, history, politics, and relationships—all of which vary widely among different Indigenous peoples.

The readings and videos were meant to give us an in-depth understanding of these issues. Heather Devine’s article provides insight into Métis issues in Alberta, while Voth and Loyer’s work challenges the notion of Calgary as Métis territory, proposing an ethic of reciprocal visiting. The Interim Métis Harvesting Agreement of 2004 is also examined, highlighting legal and policy frameworks around Indigenous hunting rights. This was the topic of a backgrounder memo assignment, synthesizing the material and articulating a clear understanding of the nuanced interplay between Indigenous legal frameworks, historical treaties, and contemporary land use policies. I will be sharing my submission as a separte blog post.

Fraser Institute Guest Speakers

The Fraser Institute recently offered our cohort glimpse into the world of policy research and analysis. UCalgary MPP alumnus currently emplyed by the institue shared insights into employment opportunities within this renowned think tank on Monday Nov 20/2023. Known for its comprehensive research on pivotal societal issues, the Fraser Institute focuses on areas that directly influence Canadians' quality of life, such as health care, taxation, and education.

As an independent entity, the Fraser Institute emphasizes its peer-reviewed research process, ensuring transparency and credibility through scrutiny by a board of international scholars. They stand firm on not accepting government funding, which they believe guarantees their autonomy in critiquing policies and proposing solutions, even those that may be considered contentious.

The institute's financial sustenance is through contributions from individual supporters and organizations, allowing it to disseminate research and engage with the public across multiple platforms. Through their educational outreach, they strive to provide Canadians with the knowledge to discern the impacts of various public policies on their lives.

Although the Fraser Institute claims a non-partisan stance, it is perceived by some, inclduign me, to lean towards conservative ideologies, often scrutinizing the policies of Liberal and NDP governments. This perspective is particularly relevant for prospective employees or collaborators, who can expect to engage in work that, while aiming for objectivity, may align with a more right-leaning viewpoint on the policy spectrum.

The SCC Impact Assessment Act Decision Panel Discussion

On Nov 22/ 2023, I attended a panel discussion hosted by the Environmental Law Centre (ELC) and the Faculty of Law at the University of Alberta titled "The SCC Impact Assessment Act Decision: federal assessments – past, present, and future." This event featured prominent panelists Brenda Heelan Powell from the ELC, along with Professors Andrew Leach and Cameron Jefferies from the Faculty of Law at the University of Alberta. They convened to dissect the recent Supreme Court of Canada decision regarding the federal Impact Assessment Act, which found certain parts of the Act unconstitutional.

The session aimed to unravel the evolution of federal assessments, analyze the Supreme Court's decision, and speculate on the potential future of federal sustainability approaches. Andrew Leach, an economist with a legal background in constitutional law and climate change, alongside Brenda Heelan Powell, with expertise in environmental and natural resources law, and Cameron Jefferies, a specialist in environmental law and policy, provided a multi-faceted perspective on the topic.

Moderated by Jason Unger, Executive Director and General Counsel of the ELC, the discussion was a deep dive into how this significant judicial ruling will affect the federal assessment of projects and the broader implications for Canada's approach to environmental sustainability. The dialogue underscored the importance of legal frameworks in shaping environmental policy and the continuous need for their evaluation and reform.

*Photo: Banff, NP taken Aug/02 2020.

Summit photo