Ottawa Invests $6 Million to Enhance Productivity Research Network

In a significant move to bolster Canada’s economic research capabilities, the federal government is allocating $6 million to the University of Calgary. The funding is aimed at expanding productivity research through a new national network led by esteemed economist Trevor Tombe. This initiative, backed by the Social Sciences and Humanities Research Council, aims to develop insights that could ultimately enhance public policy and stimulate economic growth.

Evaluating Public Sector Productivity

A key challenge highlighted in Tombe’s recent commentary is the difficulty in measuring productivity within the public sector. While traditional productivity metrics often focus on output per hour—quantifying goods produced through their market value—much of the research output generated by this new initiative will not be sold. Instead, it will be made available for public benefit, raising a crucial question: what is the value of this research?

Countries like the United Kingdom have pioneered attempts to measure public-sector productivity, typically valuing outputs based on production costs. This approach has its limitations, as it does not adequately reflect the actual value generated. For instance, if a Member of Parliament declines a pay raise, it could be interpreted as a reduction in Parliament’s productivity, a notion that many would contest.

Most productivity data available focuses on the business sector, where products are sold, and market prices provide a clear indication of value. Nevertheless, even in this realm, complexities arise. For example, if one hundred autoworkers produce the same number of cars as their predecessors did two decades ago, productivity may appear stagnant. However, if the new cars are of superior quality, reflected in higher prices adjusted for inflation, the workers are indeed producing greater value.

Challenges in Measuring Research Productivity

For the research project led by Tombe, measuring productivity poses further complications due to the nature of academic work. Scholars do not adhere to a strict schedule, often thinking about their research outside conventional working hours. This makes determining “output per hour” a complex endeavor, as both the numerator (output) and denominator (hours worked) are difficult to quantify accurately.

While it is likely that the project will include methods to assess individual researchers’ productivity, such as the timely completion of agreed-upon tasks and adherence to acceptable research standards, the overall impact of their findings on national productivity remains uncertain. The initiative aims to address Canada’s pressing productivity challenges, which have shown signs of stagnation in recent years.

One major goal of the new research is to inform public policy in a way that enhances overall productivity. Yet, if productivity growth does improve nationwide, it may be challenging to ascertain whether this is attributable to the new policies or other factors. As Tombe notes, Canada’s productivity issues are complex and long-term, suggesting that solutions may also require a multifaceted approach.

Historically, significant drops in productivity growth have been observed, particularly after the 1973 oil crisis, which raised questions that researchers continue to explore. The consensus on the causes of such shifts often takes decades to develop, exemplified by the work of renowned economists like William Nordhaus.

There is hope that the productivity research generated by Tombe’s group will align with the ideas of economist Friedrich Hayek, who emphasized the importance of micro-level knowledge in understanding economic dynamics. For instance, how many hours are spent by businesses on non-core activities such as regulatory compliance, taxation, and diversity initiatives? Understanding these factors is crucial, as they can detract from the time available for actual production work.

As this initiative unfolds over the next several years, the research produced may provide valuable insights into Canada’s productivity landscape. However, the challenge of measuring its success will require careful consideration and innovative methodologies to ensure that the findings translate into meaningful economic improvements.