The great extensions of government activities in all industrialized countries since the War have not been balanced by an equivalent development of the theory of public finance. The need for analysis of the relation of large government expenditures and taxes to the system of individualist enterprise is urgent.

It is true that many specific inquiries have been made into the repercussions of taxes and tariffs, into the inequalities of incidence as between industries and regions, into government financing, government investment in depression, and so on, but a survey of these attacks reveals the lack of a method adequate to cope with the questions. The existent theoretical structure, established by the classical writers, was evolved to handle a system of public finance and a system of individualist enterprise, which have been greatly modified in the twentieth century. Consequently many of the modern questions confronting economists are really outside the assumptions of classical theory, and are therefore unable to be grasped by the weapons of the classical analysis. Apart from this practical difficulty, it is to be expected that the post-war developments in economic science itself—the new knowledge of monetary systems, of business cycles, of imperfect competition, and of short-time analysis—necessitate a reconsideration of the theory of public finance. In the future the subject-matter of public finance will probably be systematized along these lines, but meanwhile the need is for a sifting of the materials.

The principal differentia of the Canadian economy are familiar. Because of the nature of her resources and her situation, Canada depends chiefly upon the production in quantity of a few staple commodities for export to those regions having less specialized resources and more diversified economies. Canada is thus subjected, willy-nilly, to a violent alternation of boom and depression by the fluctuation of demand in her foreign markets. Geography, moreover, has afflicted Canada with a transportation problem, which has two phases: in time of boom, the problem is how to obtain quickly more and cheaper transportation; in time of depression, how to pay out of her shrunken national income the heavy fixed costs incurred by the construction of transportation facilities.

The past two decades embrace a period in which Canada has become established (since 1922) as the premier wheat exporting nation of the world; in which wheat prices touched the highest point (September, 1920) and the lowest depth (December, 1932) in Canadian grain trade history; in which centralized co-operative pool marketing of wheat was conducted for several years on a larger scale than that of any farm product in any country; and in which the federal government has experimented with policies in relation to the marketing and price movements of wheat ranging from established regulatory functions to monopoly handling through a government board and minimum price guarantees. These two decades include three periods of favourable prices and active export demand (1917-20, 1924-9, and 1936-7), with the intervening years characterized by distress prices and restricted foreign demand. Amid these fluctuating economic conditions of the wheat industry there has occurred significant experimentation with different marketing systems, involving shifting relationships between the organized producers, the organized private trade, and the provincial and federal governments.