Trudeau government suffers from 'denominator blindness' when it comes to big numbers: Fraser Institute

‘Aspiring politicians should be required to study the basic arithmetic of fractions before they run for office,’ says senior fellow Jock Finlayson

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The framing of the latest federal budget is an exercise in “denominator blindness,” according to Jock Finlayson, a senior fellow at the Fraser Institute.

The term refers to a cognitive bias where the focus is placed on a “big number” in a ratio or fraction while neglecting the broader context. This can lead to misinterpretations or skewed perceptions of the true meaning of the numbers involved.

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The concept is especially relevant in scenarios involving large numbers, such as financial figures, where understanding the broader context is essential. For instance, when a government highlights a large sum of money being spent on a project or policy without considering the total budget, it may lead to a skewed perception of the significance of that spending.

This issue is a prominent feature of political narratives, at both the federal and provincial level, according to Finlayson.

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He highlights that in the government’s recent economic update, Finance Minister Chrystia Freeland noted the International Monetary Fund’s prediction that Canada will lead G7 nations in economic growth next year.

This prediction, alongside the assertion that the federal government’s policies are enhancing economic growth, misses crucial context and inaccurately portrays Canada’s economic status, he argues.

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With a surge in population growth, the economic output is divided more finely, affecting the average individual’s share.

“The economy must generate a lot more output merely to stop the individual pie slices from shrinking,” Finlayson writes.

Although Canada’s economy is growing, it has recorded some of the lowest per capita economic growth rates in the past fifty years, he adds. The pattern worsened with the onset of the pandemic.

Finlayson notes that Canada is among the few advanced economies where output or gross domestic product (GDP) per person in 2023 has still not returned to pre-pandemic levels.

“In Canada’s case, modest economic growth combined with a skyrocketing population has resulted in a multi-year decline in per-person income and erosion of overall prosperity. Adjusted for inflation, GDP per person is still 2 per cent lower than in 2019,” he writes.

He adds, however, that it’s not the just the feds who suffer from denominator blindness. Finlayson points to the decisions of the Ontario and Quebec governments to invest up to $50 billion in subsidies and tax incentives to attract electric vehicle battery manufacturers to Canada.

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While politicians emphasize the job creation that will result from this investment, they overlook the larger employment picture, Finlayson argues.

“The vast sums being thrown at EV battery manufacturers will have essentially no impact on the aggregate job numbers and barely make a ripple, even in the manufacturing sector,” he writes, noting that Canada’s total employment is 20.1 million, with almost 1.8 million jobs in manufacturing.

Additionally, many of the jobs in the EV industry are not new but will likely draw workers from other sectors, Finlayson adds, arguing that the shift could intensify skill shortages in Canadian manufacturing.

With declining math scores recently reported in Canadian education, Finlayson adds that “aspiring politicians should be required to study the basic arithmetic of fractions before they run for office.”

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