On June 1, 1959, Canada's Department of External Affairs may look back upon a history of half a century's duration. Even so it is not the oldest foreign ministry in the overseas Commonwealth. That distinction belongs to the Australian Department of External Affairs, which became one of the original departments of the new federation created in 1901. The Canberra innovation seems not to have excited the slightest interest in Canada, despite the appearance during the same year of a book by a Canadian author containing what is probably the earliest written advocacy of separate foreign ministries for the self-governing colonies or dominions. In The Canadian Contingents and Canadian Imperialism, W. Sanford Evans developed at considerable length the case for “the creation in Canada, and in each of the other self-governing Colonies, of a Ministry of Imperial and Foreign Affairs.” It was, however, far from his intention to provide machinery for conducting a foreign policy distinct from and perhaps in defiance of that of the mother country. Evans was a staunch supporter of imperial federation, who looked on his project as a means of strengthening the imperial connection by adding to the power and influence of the centre.

The historian of the future, in attempting to interpret developments in the middle years of the twentieth century, may well be appalled by the mass of documentary evidence that confronts him. Particularly is this likely to be the case if he is foolhardy enough to explore the decisions of governmental regulatory agencies and the processes by which such organizations undertook to define the public interest. These public bureaucracies, exposed to strong political pressures and staffed largely by lawyers, characteristically accumulate very large masses of testimony, oral and written, in the course of their hearings. Partly for reasons of expense, this testimony is seldom published, and the lay inquirer, if he delves into the morass, is more than likely to find himself confused rather than enlightened by the unfamiliar phraseology and by the sheer bulk of the record.

Nevertheless, such agencies have come to play a very significant role in determining the rate and direction of economic development in the United States and Canada, and it is important that we should understand the kind of reasoning that underlies their decisions. The present inquiry stemmed initially from an interest in the Canadian natural gas industry, and from curiosity about the impediments that seemed to be delaying the export of Canadian gas to the United States.

No conscience molten into gold,

Nor forged accusers bought and sold,

No cause deferred, nor vain spent journey,

For there Christ is the King's Attorney. …

—Sir Walter Raleigh,

A Passionate Man's Pilgrimage

In English history the seventeenth century is the locus classicus of the struggle between the prerogatives of the king and the rights of Parliament. And the student, looking beyond James II and Charles I, tends to see the Revolution of 1688 and the Civil War of the 1640's latent in the first two decades of the century. Indeed, the struggle between James I and Parliament in these years has more than once been stated in moral terms: the supporters of prerogative were wrong, Parliament and the common law were right. More than one student has regarded the seventeenth century as Tanner did: a drama, the prologue of which is the reign of James I, and the final act the Revolution of 1688. The suggestiveness of this analogy obscures the real nature of the struggle; one looks for events on the stage and neglects the world outside it.

On April 25, 1950, when convening the House of Commons Select Standing Committee on Public Accounts, Mr. L. Philippe Picard, M.P., remarked: “This committee, so far as I understand, has sat only about six times in the last twenty years, and it has been traditional that the committee would sit upon a request by any member to the elected chairman. There is no fixed date, no definite time at which we should sit. I wish to inform the committee that I have received a letter from the member for Winnipeg, Mr. Stewart, asking for the committee to be assembled.” The haphazard approach then taken by the committee towards its work, despite the importance of parliamentary control of public expenditure, was actually rather worse than its chairman's observations suggested: the committee had not in reality met in six of the previous twenty years for the consideration of public accounts, but on occasion had taken up quite other matters, as in its romp through the Bren Gun Contract in 1939. It is true that during those years other committees of the House of Commons studied various aspects of public finance, and that modern governmental procedures of accounting and auditing have made almost redundant the additional examination of some parts of the public accounts by legislative members.

When Graham Wallas published his Human Nature in Politics, just over fifty years ago, it was already becoming apparent that the machinery of representative democracy was not working as smoothly as its liberal creators had intended. The successful operation of its institutions, which implied the existence of a society of rational well-intentioned individuals, was being frustrated by oligarchic party structures, self-interested pressure groups, the apathy and ignorance of the mass of the population, and the power of irrational persuasion. As the gulf between the theory and the practice of democracy became more obvious, there resulted a disillusionment which led many to a complete rejection of the democratic thesis. It was this setting that led Ostrogorski, Michels, and others to prophesy the collapse of democratic political machinery.

But to prove that the institutions set up by men to achieve a certain ideal are inadequate for that purpose is not the same as to prove the worthlessness of the ideal. Such was the essence of Graham Wallas' thesis. The founders of democratic theory believed they had discovered the means for a fuller expression of human dignity and a more complete development of the individual's potential. An unfortunate over-emphasis on the role of reason in political activity, however, made impossible the realization of their ideal through the machinery they had established, especially the machinery for the election of representatives. Democracy, nevertheless, remained an ideal that might still be attainable if some adjustments were made to account for previously neglected facts about human nature.

The index-number theorem is the theorem that, if two sets of price and quantity data on consumption are compared, the Laspeyres (base-weighted) index-number of the price or quantity of one collection as compared with the other will be greater than the Paasche index-number for the same comparison: the Laspeyres index will show a larger increase or a smaller decrease than the Paasche index, as the case may be. In symbols, the theorem is that

where p and q refer respectively to price and quantity, and the subscripts 0 and 1 to the base and the other collection of price and quantity data.

As developed by J. R. Hicks, the index-number theorem is presented as a deduction from, and an empirical test of, the “preference hypothesis” (that consumers choose according to a scale of preferences). But R. L. Marris has shown that the theorem is not necessarily contradicted by a change in tastes, so that it cannot be regarded as a test of the hypothesis of given preferences; rather, it is an inference from, and test of, the hypothesis that consumers' preferences are consistent. As such, it depends on an assumption, which must either be argued in general or proved in the particular case, about what consumption would have been had relative prices been the same in the two situations. The purpose of this paper is to explain the index-number theorem, and the assumptions on which it depends, by means of an application of the geometry of the familiar two-goods case.

The sheer size of the United States economy makes it vitally important to much of the rest of the world. Indeed cyclical and structural changes within it may have more profound effects on foreigners than on Americans. Foreigners are understandably concerned about their vulnerability, and it is clear that this problem has for some time been recognized by economists and policy-makers everywhere.

In particular, since the experiences of the 1930's, United States recessions have assumed the ominous role of an economic plague capable of rapidly and seriously debilitating productive activity in many countries. The principal cause of this debilitation is the curtailment of United States imports. Only if economic activity is maintained at reasonably high levels in the United States does this problem appear to be manageable. An optimistic view of the possibility of avoiding deep depression is widespread, and it is supported by the record of the past twelve years; but less severe or “normal” cyclical activity is something we must live with, and recessions of the magnitudes of those of 1948-9, 1953-4, and 1957-8 may be capable of sufficiently strong “side effects” on imports to cause serious difficulty in other countries. That this danger has been a principal theme of international economics in the post-war period is reflected in recent commentaries on its failure to materialize in 1957-8. The discovery that recession in the United States need not seriously depress imports is perhaps the most surprising feature of the 1957-8 downswing.