This paper owes its origin to pure curiosity on the part of the writer about the construction placed upon the National Emergency Transitional Powers Act, 1945, by the Judicial Committee of the Privy Council. It is somewhat remarkable that eleven eminent Canadian jurists out of thirteen should agree substantially in their interpretation of this Canadian statute and that their opinions should be decisively, one might say emphatically, rejected by the Committee.

The Nolan Case, as it is commonly known, came before the Chief Justice of the Trial Division of the Court of King's Bench of Manitoba in March, 1948. The question to be determined was whether the Canadian Government, acting through the Wheat Board, could legally appropriate 40,000 bushels of western barley belonging to a grain merchant named Nolan under the powers conferred upon it by the National Emergency Transitional Powers Act. The trial judge in a closely argued opinion held that the federal administration had exceeded its powers. This decision was appealed by the Government in the Manitoba Court of Appeal where the five justices, unanimously and in strong terms, upheld the verdict of the trial court. On a further appeal to the Supreme Court of Canada five Supreme Court justices, including the Chief Justice, out of seven who sat on the appeal, rejected the contentions of the Government.

R. F. Kahn's recent review article on the literature of “full-cost pricing” brings out the fact that the controversy which began with the article by Hall and Hitch in 1939 remains unresolved. Because the actual pricing of manufactured products takes place within a very restricted range of plant capacity, and under dynamic conditions which limit the entrepreneur's horizon, some writers have argued that the pricing process is necessarily arbitrary and based on rule of thumb. Most theorists, on the other hand, maintain that, however restrictive the data from which business-men form their decisions, the pricing process may be interpreted by marginalist concepts of profit maximization.

The gap between these points of view has been substantially narrowed in recent years. Extended subdivision of the theory of imperfect competition into individual market situations has brought that theory close to the methodology of “industry studies,” at least of those studies which have included some attempt at generalization. There remain, however, several obstacles to closing the gap between the deductive and the inductive analysis of the price mechanism. In particular, the available data are usually so unrefined that appeals to empirical cost and revenue schedules are misleading, or inconclusive, or contradictory. Joint costs, indeterminate demand schedules, and the natural reluctance of producers to reveal their private information all hinder the theorist searching for empirical support. In the face of these formidable difficulties some economists (notably the exponents of full-cost pricing) have turned to the technique of the questionnaire. This procedure is open to a serious methodological criticism: information derived from questionnaires is more likely to reveal the entrepreneur's idealized conception of his own behaviour than to show what his behaviour actually is. The phrases “usually full cost,” “cost is the normal guide,” or “the initial guide” recur throughout the replies to the Hall-Hitch questionnaire. These qualified answers are unrevealing for the same reason that the Marshallian long run (when all the various forces have had time to work themselves out) is a poor guide to real-world price determination. Normative statements such as those obtained in the studies mentioned above cannot be regarded as empirical data.

Exchange control can be considered as an extension of the principle of war-time rationing. There is a scarcity of the means available for making payments and therefore purchases abroad are limited. As a result the central authority allocates these resources according to its own list of priorities, instead of leaving the selection of the needs to be satisfied to be determined by competitive bidding in the market. This requires the control of imports and may also be taken to include restrictions on transfers of capital and other foreign payments. Another feature of exchange control—the requisitioning of assets which can be realized for foreign exchange—can similarly be regarded as part of the general policy of commandeering resources necessary for the purposes of war. But a comprehensive system of exchange control involves a further essential feature—the pegging of exchange rates. Theoretically it would still be possible for the central authority to leave exchange rates to be freely determined in the market, although the quantities demanded and supplied were controlled by such methods; for the possible dangers of inflationary increases in domestic prices could be overcome by the use of subsidies to offset exchange depreciation.

However, several important reasons can be given for a country at war maintaining fixed exchange rates. Bear speculators might have a bad effect on the country's prestige especially when the fortunes of war were adverse. Secondly, it is easier to requisition international assets on terms which do not give large windfall profits to the sellers, if extensive depreciation of the currency can be avoided. Thirdly, consideration of the “terms of trade” offers the most substantial ground for maintaining exchange stability. In conditions of total war the resources that are used to produce exports must be reduced to the minimum. For this reason the object of policy must be to achieve the best possible price for a restricted quantity of exports rather than to expand the volume of exports by offering them as cheaply as possible.

“If we introduce overmuch idealism into explaining the formation of either of the North American polities, the record of mankind is against us. So is our own history. The thirteen colonies came together not primarily because of the joy in making a great free American community, but because disintegration stared them in the face and men of substance saw in union salvation for their fortunes. It is no reflection on British North Americans that they too made their union under duresse.”

The establishment of a wider Canadian union had been discussed for a number of decades before Confederation but the motivation in a common allegiance to Great Britain and in intermittent flashes of national sentiment had proven wholly inadequate to overcome the obstacles of provincial particularism and cultural differences, of paucity of communication and contact among the colonies, and of the contrasting economic orientation of central Canada and the Maritime region. In the years immediately prior to Confederation these divisive elements were finally outweighed by the mounting pressures of political dead-lock, economic uncertainty, and fear and jealousy of the United States. The leaders of the Confederation movement variously gave expression to these pressures. National sentiment was still a distinctly secondary factor, however, and only a few of the leaders betrayed in their speeches evidence of a broad vision of Canadian nationhood.

An interesting analysis of productivity in Canada from 1931 to 1949 has recently been published by Mr. A. Maddison in the Economic Journal. Mr. Maddison admits, however, that his choice of dates, which was limited by the lack of official estimates of the employed labour force prior to 1931, is unfortunate in that a strong cyclical influence colours the results. To overcome this difficulty calculations have been made of the employed labour force prior to 1931 (see Table III), thus extending the period that can be covered back to 1926. In addition this paper makes use of revised and more complete data published by the Dominion Bureau of Statistics. No attempt is made to duplicate Maddison's excellent summary of the diverse factors contributing to productivity, or his brief look at inter-industry shifts, except for the very important shift of labour from agricultural to non-agricultural employment. But more emphasis is placed on aggregate movements during particular periods and on the comparison of productivity in Canada with that in the United States. In brief, the two papers are complementary, and should be so considered.

Productivity is, of course, an elusive concept when applied to operations of more than one industry, or even to more than one line of production. Is an automobile, for example, really worth 1,000 bushels of wheat in terms of economic value, and is the productivity of a farmer low because he can produce only 2,600 bushels of wheat in a year on 100 acres, whereas the average automobile worker turns out perhaps 10 cars a year, worth 10,000 bushels of wheat or more? Yet the only way in which products can be compared is through the exchange values attached to them in the market. Any attempt to evaluate productivity on a national scale must therefore involve the weighting of goods produced according to the prices at which they were sold. The most that can be done to place production figures on a real basis is to attempt to eliminate variation in prices; and thus determine the extent to which the total volume of production of all goods in the economy, weighted according to their price relationships at some specific point of time, has grown over a period of years. In the discussion that follows, therefore, the gross national product in 1935–9 dollars is used as output. It would perhaps be better to use national income, but this is difficult to deflate in view of the inclusion of indirect taxes in price indices.

Modern macro-economic analysis has emphasized the role of saving and investment in economic fluctuations. As the totals of saving and investment are important, so are their components; for the more that is known about the components the more meaningful are the aggregates. Life insurance savings merit investigation for at least two reasons. In the first place, they constitute an important medium through which personal savings are effected. In Canada from 1926 to 1948, except for the war years, 39.0 per cent of total net personal savings were realized through the purchase of life insurance.

This voluminous flow of savings has produced an accumulation of investment assets which has attracted the attention of economists concerned with trends in the supply of equity capital and the stimulation of depression period investment. Since the rate of return expected on insurance investments is important in determining premiums, the investment practices of the insurance companies have a bearing upon the welfare of millions of Canadians. This concern of the economists about insurance investments is the basis of a second reason for examining insurance savings. In the various proposals involving insurance investment it appears that the savings side of the question has been too little emphasized. In the case of an investment intermediary, investment policy cannot be considered totally apart from the demand for the institution's product; the institution's demand for investment outlets is a derived demand.

British post-war experience constitutes the best case yet available for study of a conscious government policy of combining full employment and price stability within the framework of free collective bargaining. In this paper, a few of the unresolved problems inherent in a full-employment economy are examined in the light of British experience. The hard core of the problem of full-employment price instability is the difficulty of restraining demands for higher wages, not because labour is less “responsible” than other sectors of the economy, but because wages constitute the largest single item both of costs and of income. It is therefore interesting to determine whether British governments have produced a wage policy which could compress wage demands within the limits say, of the productivity of labour. Has any principle (other than uninhibited self-interest) provided a new orientation to the process of collective bargaining? Has collective bargaining with a fully employed labour force in Britain disturbed the traditional constancy of distributive shares to capital and labour and if so, what was the impact of this, in turn, on economic reconstruction? What, in general, has been the rationale of trade unions in the environment of full employment? Britain has attempted to discover answers to these problems. Only by knowing these answers can we intelligently appraise the policy of maintaining full employment.