The federal government is going to spend the year doing a program review, with an eye to identifying places where spending can be cut. And it may well be that many of the services provided by the federal governments should be left to the private sector. But there is one agency where a thoughtful program review would recommend increasing funding: Statistics Canada.
The economics of Statistics Canada aren't the same as for the goods and services that inhabit most economic models, and so the usual market-is-best results of the First and Second Welfare Theorems don't apply.
Public finance theory offers two dimensions in which goods can be classified: rivalry and excludability. If a good is a purely private -- that is, rival and excludable -- then the welfare theorems apply, and there's no obvious case for government intervention. But a database is different. Although intellectual property laws can provide a mechanism for owners to control access, it is non-rival: many users can benefit from a database just as easily as one can. Data provision is a natural monopoly.
But what pricing strategy should the data monopolist adopt? The most efficient solution would set price equal to marginal cost. In this case, the marginal cost of providing access to a database is essentially zero: once it is set up, the cost of accessing the database are trivial. So in an ideal situation, Statistics Canada's databases would become a pure public good: universal access at zero cost.
This is pretty much the model adopted by the United States. A trip to the websites of the Bureau of Economic Analysis or the Bureau of Labor Statistics will get you a wealth of data at the price of a couple of mouse clicks. And over at the Census Bureau, fees only seem to be incurred by those whose projects require working at their offices in Washington.
Things are different in Canada. If you go looking for data at the Statistics Canada website, you end up looking at a price list. For reasons going back to the Mulroney-era budget cuts, Statistics Canada is expected to generate a significant portion of its revenues on its own. In 2009-10, some $109-million of its $612-million budget came from 'cost recovery' income obtained by selling access to its data. Private-sector clients are not the only people who pay for Statistics Canada's data: government departments and public-sector agencies at all levels must pay for access as well.
The effect of this pricing model on research activity is considerable, setting the stage for a complicated shell game that would be comical if it wasn't so detrimental to the advancement of our understanding. A Canadian researcher who works at a publicly-funded Canadian institution must obtain research grants from another publicly-funded Canadian institution in order to purchase Canadian data -- that have already been collected! -- from yet another publicly-funded Canadian institution. Too often, the game ends with the researcher abandoning the project or choosing to use U.S. data instead.
One of the core competencies of any government is to provide public goods, and that includes publicly-produced databases. Access to those data should be free, and Statistics Canada's budget should be increased by the $100-million it would cost to take down its paywall.
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