Productivity and Price: The Case of Gold Mining in Ontario

G.J. Daniel was a Toronto-based engineer.

Alan Green is a Professor in the Department of Economics at Queen’s University. The research for his paper was sponsored by the Centre for Resource Studies and was “aimed at improving knowledge of the Canadian mineral industry and the political environment in which it operates.” His brief monograph examines the Canadian gold industry and the relationship between commodity price and mining productivity during the past twenty or so years.

Professor Green argues that when the gold price was fixed, between the mid-1930s and the late 1960s, productivity gradually improved; however, following the delinking of central bank prices from the open market, productivity started to decline. To support this view he describes a method of measuring productivity based on costs of labour, capital stock, energy, and materials, then analyzes the data and offers various reasons for the perceived trends.

It is shown that price is the main determinant of productivity. Technological change, employee expertise, and company organization appear to have only minor effects. The fixed price and rising costs caused the industry to shrink in size and focus its energies on gold extraction at the expense of mine development. It can be seen that this plan was rational at the time, but it appears rather short-sighted in retrospect; this paper should encourage governing bodies to refine strategies of resource conservation to ensure long-term viability of the industry.

The paper is an exercise in pure political economics without the polemical discursion. Altogether it is an interesting read, but more discussion on the harmful effects of poor resource management would have livened the tone, ensured wider appeal, and provoked some useful dialogue.