Grandinite

As an economist, one of my biggest pet peeves in life is the misuse and abuse of numbers in politics, as portrayed through the media circus. Here is the perfect example of what I call “Unanchored numbers in media”:

Calgary Herald: Stelmach slams study on emission target’s economic impact on Alberta

CALGARY – Alberta and federal leaders lashed out Thursday against a new study that forecast the province could see economic growth slow by 12 per cent by 2020 in meeting aggressive carbon emission reduction targets.

The research, commissioned by the Pembina Institute and David Suzuki Foundation, showed Alberta would be hardest hit by proposed climate change initiatives. Instead of a 3.7 per cent annual rate of growth to 2020 under the federal target, the province would see GDP grow by 3.3 per cent under policies mandating carbon taxes and cap and trade markets, the report said.

Premier Ed Stelmach came out against the report, saying Alberta contributes enough to federal coffers, $117 billion in the past decade, besides having mandated a carbon levy on large emitters.

“There won’t be another wealth transfer to Ottawa under my watch,” Stelmach said at the legislature in Edmonton. “The money stays in Alberta. It’s to be invested in technology.”

An unanchored number occurs when journalists fail to provide context for any quoted number. In this case, the appropriate benchmark would be some recent GDP growth figures for Alberta. We want to know how this growth forecast compares with recent performance in the Alberta economy. So, I’ve decided to do just that, using some StatsCan data for expenditure-based GDP growth since 2004. Here is the Average growth from 2004-2008, by province (click to enlarge):

The Pembina Institute is saying that Alberta’s forecasted GDP growth rate under the “no climate action” scenario is 3.7%, but under the “climate action” scenario, it’s 3.3%, for a loss of 0.4%. So how does this 3.3% compare with Alberta’s recent growth rates?

Alberta’s actual GDP growth over 2004-2008 was 3.43% annually. Given the large errors surrounding economic forecasts, Pembina’s 3.3% growth more or less equivalent to recent growth. Pembina is effectively stating that Alberta can have its cake and eat it, too, because we’ll maintain the same pace of economic growth while meeting our climate goals.

Ed, on the other hand, only sees an opportunity to bash Ottawa over a fraction of a percent of GDP growth that may or may not exist. I wish our leaders could see past the either/or paradigm and view things in terms of BOTH. We can have our cake, and eat it, too.