Cocktail Party Economic Analysis

In markets both positive and negative results can occur from government interventions. In particular, the Canadian government’s intervention in agricultural markets has caused issues with the grain industry according to a Globe and Mail news article entitled the Grain Industry Pushing for Market-Driven Rail Reform. The article along with Cocktail Party Economics’

(CPE) can aid in the knowledge of government interventions in markets and whether or not efficiency and equity occur due to the actions of the government.

The news article references the federal government’s removal of the amount of grain railway companies are required to haul for farmers. Since, market demand drives the trade in wheat, canola and other crops the farmers feel a need

Essentially, suppliers of grain are unable to meet the demand internationally to export their product. Their inability to transport their product in the larger quantities they require was limited by the federal government’s policy on the railway. The farmers and grain companies have been experiencing inefficiencies in the quantity of product they are able to product and move towards buyers. As mentioned in CPE, “When a government intervenes to change price or quantity to a number other than the efficient free market amount, economists say that the government is distorting the market” (pg. 142). To an extent, the market has been distorted in the situation between grain farmers and railway companies. The government had intervened to improve the transport of grain by railway companies since the large quantities farmers had where not being moved sufficiently. Prior, to the intervention the efficient free market amount was not reached, and with the intervention the efficient amount was only closer to being obtained. Now with the removal of the government intervention, railway companies need to expand their capacity to be able to accommodate the demand from farmers for their services for efficiency to be

Railway companies barely focused on rail lines that were smaller, slower and went to the United States. The three major ports of Vancouver, Prince Rupert, BC, and Thunder Bay, ON had the most attention and improved change. Certain farmers were treated unfairly with the thresholds because they were located near a major rail line. The decision by the government pleases these farmers as they can now lobby for their own changes along with a review of the Transport Act.

Overall, the Canadian government’s intervention in the agricultural market to improve the movement of grain through the railway was both positive and negative with its impacts. The initial intervention allowed for more grain to be hauled due to the thresholds, although, some farmers where not helped with the intervention due to their rail lines access. The intervention prevented an efficient free market from occurring, however, improvements were made for a better quantity to be reached. It seems the removal of the threshold is for the best since railway companies are now meant to continue reaching farmers’ demand and improving their resources as