Scope of Government Activity
One of the most difficult problems for the student of the Canadian
economic system is to maintain the appropriate perspective about the
scope of government activity in the market economy. On the one hand,
one can look at the thousands of laws, regulations, and policies that affect
firms and households and decide that a general reduction in the role of
government would be desirable. On the other hand, private decision
makers still have an enormous amount of discretion about what they do
and how they do it.
One danger is to become so concerned with the many ways in which
government activity impinges on the individual that one fails to see that
these various government activities nonetheless leave individuals free to
make the vast majority of their own decisions in a market system. It is in
the private sector that most individuals choose their occupations, earn
their living, spend their incomes, and live their lives. In this sector, too,
firms are formed, choose products, live, grow, and sometimes die.
The opposite danger is to fail to see that a significant share of the taxes
paid by the private sector is used to buy goods and services that add to
the welfare of individuals. By and large, the public sector complements
the private sector, doing things the private sector would leave undone or
would do differently. For example, Canadians pay taxes that are used to
finance expenditures on health and education. But certainly Canadians