The economics of the Senate

Reductionist Keynesianism is what most people retain from any economics they took in high school or university, so if I say “the economics of the Senate,” you probably think of the $91 million we spend on the institution annually and how good or bad a job is performed by honourable senators, if that term may still be used, in getting this money “back into the economy.” The news suggests they are particularly generous to the transportation and entertainment industries, who will miss them when they’re gone.

In fact, economics is only a little about Keynesianism and much more about incentives and allocation. How is the allocation of resources different as a result of this or that policy or institution? How do people behave differently because of it?

If you live in Prince Edward Island — let me rephrase that: if you’re from Prince Edward Island, it having become clear that representation implies nothing about residence — maybe your behaviour does change. PEI has four Senate seats. There are 96,550 Islanders over the age of 30, the minimum age for appointment. That gives you a one in 24,138 chance of winning the Senate lottery. At $135,000 a year until the age of 75, plus a pension, plus extensive perks, it’s one of the best lotteries going. How much it’s worth in total depends how old you are at appointment but let’s say, conservatively (or Conservatively), $3 million. A one in 24,138 chance at a $3 million lottery gives you an “expected value” of $124.29, way better odds than for any other lottery going.

And you can boost your odds substantially by attaching yourself to a political party and giving your soul over to its bidding for 10 or 20 years. The real-life equivalent of the skill-testing question is that it has to be the party that will control appointment when you’re ready to take your Senate reward. That used to be a no-brainer: Pick the Liberals, now and forever. But it’s more difficult now. And if you do guess wrong, you’ll have to take up honest work following your political years.

In considering whether to keep the Senate as a form of “taskless thanks” for party bagmen, apparatchiks and sympathizers in the press, we should think about the alternatives. Elementary economics, not to mention basic human relations, dictates that if people do dedicate themselves to a political party, the party eventually will need to express its gratitude. Were the Senate to disappear, such people might be appointed to “taskful” jobs where they could do real damage to the economy. By this measure of “opportunity cost” the Senate doesn’t look half bad.

Mind you, economists often argue that cash is more effective than in-kind transfers. So perhaps we should turn the Red Chamber and environs into condos and establish a $50-million fund that parties could give to whomever they were grateful to for whatever reason, all proportioned out according to each party’s share of the popular vote.

A brief word about bagmen: Stricter rules about the financing of elections probably mean bagmen (and bag ladies?) are less crucial than they used to be.

But their influence has been replaced by pollsters, strategists and spinmeisters. It’s a question of taste, but many of us would prefer a Senate full of money men and women to one peopled by professional dissemblers.

Cui bono (referring to “who benefits?” not Bono’s younger brother) is the truest test of the economics of anything. Who benefits from abolition of the Senate? The provincial premiers do, for it creates a vacuum in Ottawa for regional representation (even though the House of Commons itself includes members from every region, not to mention county, in the country). Into this vacuum the premiers will leap, full of moral righteousness in their role as representatives of “the regions.” If, like many Canadians, you find the prospect of puffed-up provincial premiers stomach-turning, you will prefer Senate reform.

Easier said than done. If rocks, trees and open spaces should have votes, too, and not just people, then representation should not be proportional to population. As Justin Trudeau has inadvertently pointed out, however — he was speaking in French, which he evidently thinks is a secret code — the current allocation of 24 seats for Quebec and just six for Alberta does seem a little unfair even allowing for the great weight of Quebec’s Laurentian Shield.

But what is the right allocation of seats? Quebec nationalists will say 50 for Quebec, 50 for everyone else since we are “two nations.” Smaller provinces will push the U.S. model: the same number for every province. Well-intentioned compromisers will say 25 seats for each region. But then who’s a region? Is B.C. a region? Or is it part of the Prairies? Is the North a region? There are only 39,000 people over 30 in the North. If it gets 25 Senate seats, they’ll all want to become political flunkies and fixers.

The other main beneficiary of Senate abolition would be any future federal majority government, for abolition would remove even the possibility of resistance and delay to the wishes of such a government. Ninety-nine per cent of the time the Senate is an antiquated and anachronistic embarrassment, but if every once and a while it gets up on its heels and stops a bull-headed prime minister from committing a stupid blunder, that can be a good thing.

At bottom, applied economics is about costs and benefits. Two questions: Do we currently get $91 million a year of benefit out of the Senate? And if we don’t, what will happen to the $91 million after abolition? That the money will be allocated by the federal government doesn’t raise my confidence it will go to less wasteful purposes. A new ship for the navy? At the inflated prices Canadian shipbuilders charge, $91 million might get you a poop deck. An extra tranche of dollars for our new super-duper venture capital fund, in which appointees from the worlds of finance and science get to play Lion’s Den with your money and mine?

If the government raised everyone’s basic personal income tax exemption by $10 a year or whatever amount would reduce income taxes by $91 million, that would be dead easy to do and Canadians could be trusted to put the extra $3 a year per man, woman and child to good use. That it would only be a small refund — representing just 0.03 per cent of total federal spending — is no reason not to make it, despite what politicians would argue.

A final lesson of economics is that if a situation doesn’t change, it may represent the best you can do, given the costs of change. After the shameful shenanigans of the last few months it’s hard to believe that would be true of our Senate. But above all else, economics favours a reality-based view of the world.

I write all this as a public service, of course, and not merely because I hope to be called myself.

Original Article
Source: canada.com
Author: William Watson