Paul De Civita
Citizen Submission for Instruments for Government Action and Risk Management
April 26, 2004

Executive Summary:

The objective of the proposal is to provide more clarity and focus on this role.

The role of economics in designing smarter regulations in Canada was one of the central themes underlying the government-wide Regulatory Review in the early 1990's. One of the lessons of the Review was that economic analysis could help clarify what the advantages and disadvantages of a proposed regulatory objective and help choose the most effective instrument. This view has been reflected in the actions of governments in other jurisdictions such and the European Union, Australia and the United States (e.g. a number of Executive Orders in the US mandate the use of economics to serve outcomes).

The application of economics to policy issues may appear to be a complex and daunting task. Defensible applications require an expertise developed over many years of learning and practicing. This expertise is rare in Canada ; more so in regulatory program areas across the Public Service. A cursory inspection of how economics has been applied within federal government departments indicates the lack of applying best practices and the use inconsistent and irreconcilable approaches. This is a concern because faulty analyses can lead to the adoption of inefficient standards, and inconsistent approaches can make it difficult for policy initiatives to be compared across the federal government.

The proposal is to establish a core unit in a central agency that would provide leadership to departments on the defensible application of economic evaluation approaches to assess regulatory initiatives and non-regulatory alternatives. Providing this leadership will: improve the rational choice among alternatives; enhance consistency across programs; meet the challenge of trade obligations; and increase the understanding of the public benefits of policy initiatives. The core capacity would: establish guidance and minimum quality standards; develop models/tools/databases; maintain an effective network inside and outside the public service; transfer knowledge and capacity to departments; and monitor policy efforts with regard to their use of economics.

Recognizing that Ministers are ultimately responsible for their Departmental policies and programs, the proposed core capacity must necessarily build cooperative and trusting networks and demonstrate value added to departmental officials. The central role of the core group would be one of an enabler.

Proposal:

Establish a core unit to provide leadership to departments on the defensible application of economic evaluation techniques to the assessment of regulatory policy and program alternatives.

Purpose:

Promote and assist in the usage by departments of state-of-the-art methods, processes and tools of economic evaluation in order to:

• improve rational choice among alternatives;

• enhance consistency across programs and departments;

• meet the test of increasingly sophisticated trade challenges; and

• increase decision-makers' and stakeholders' understanding of the benefits of economic valuation in the efficient/effective operation of regulatory programs.

Rationale:

The Smart Regulations Strategy and the government-wide Regulatory Review of the early 1990's underscore the role of economic analysis in promoting accountability, transparency, professionalism and well designed and managed regulatory programs.

A long-standing issue has been the inconsistency and lack of credible economic evaluation of regulatory proposals. A further criticism of regulatory decision-making has been the lack of consideration of an appropriate range of both regulatory and non-regulatory alternatives.

In addition, the discipline imposed by performing economic evaluations requires the scientific evidence-base to clearly demonstrate the need for action. Such evidence is critical in defending regulatory actions before international trade tribunals.

The application of economics to regulatory initiatives is challenging and requires substantial experience and knowledge of the literature and available tools. Establishment of a core unit, staffed with qualified experts, can help bridge the gap between government needs and best practices.

Proposed Functions and Activities:

To coordinate and provide leadership on economic evaluation initiatives affecting Departments:

• Establish guidance manuals/documents/criteria to encourage understanding and minimum quality standards in economics applications

• Develop a vision and implementation plan to coordinate the development of models/tools/database/survey (research) required to deliver effective economic evaluations

• Establish an Economics Science Advisory Board (experts, academics, industry and government) to peer review economics work of Departments

• Organize conferences/seminars/workshops to advance learning, networking, best practices and the promotion of Government of Canada economic evaluation achievements – centre of excellence

• Establish a network of experts, academics, government and non-government institutions

Provide guidance on the quality and consistency of economic evaluations in federal government departments:

• Educate and promote the use of economics in decision-making and good practices

• Conduct/synthesize scans and forecasts of emerging economic evaluation issues

• Represent the Government of Canada for economic evaluation issues domestically and internationally

• Monitor policy efforts within the department to ensure and encourage that economics is being used appropriately and defensibly (quality assurance)

Location:

Treasury Board Secretariat, Privy Council Office, Finance Canada (i.e. central to Government of Canada)

Duration:

3 to 5 years (a review to determine if mandate is renewed)