Economic Shocks: Defining a Role for Government

Gordon C. Shaw is professor emeritus in the Faculty of Administrative
Studies at York University.

The authors define and give examples of economic shocks that can affect
the people of a community or a region. These include “natural
shocks” such as the 1997 Red River floods, “market shocks” such as
the 1973 oil crisis, and “government shocks” such as the
government’s failure to recognize declining cod fish stocks in
Newfoundland. The authors give examples of government intervention in
each of these situations and then analyze the effectiveness of the
intervention. They hope that lessons learned from these examples will
encourage governments to be more effective in responding to future
shocks.

Economic Shocks is a C.D. Howe Institute publication, so it is not
surprising that the authors advocate limited government intervention.
While they suggest that “distributive justice” warrants some
government assistance, they also maintain that the aid-giver should
define exactly what the assistance is intended to accomplish (besides
the solicitation of votes). They argue that aid should be limited in
time and directed primarily to lower-income people. This well-written
and well-documented book should be priority reading for policymakers
concerned with government responses to future economic shocks.