private partnerships ( ppps ). these take different forms. many employ a mix of public and private funding, with the operation and maintenance of the infrastructure performed by a private enterprise on behalf of the government. the most familiar example of a ppp is the confederation bridge between new brunswick and prince edward island. but there are still relatively few existing ppps in canada. other countries, such as the united kingdom and australia, offer many examples of successful ppp infrastructure. unlike most jurisdictions in canada, these other countries already have a well - developed legal and regulatory framework for ppp investments. each of these methods has advantages, but also problems. in the final analysis, it is all a question of incentives. for example, when infrastructure projects are solely publicly funded, the usual incentives to build and operate efficiently — the incentives to avoid bankruptcy and to make a profit — are not the driving motive behind the investment. the most efficient and timely allocation of resources for infrastructure occurs when the incentives are right. and that framework of incentives usually includes some expectation of profit. this applies this is partly due to varying definitions of infrastructure and the high level of subjectivity involved in assessing " need. " the government of ontario, for example, estimates that the cost of correcting past underinvestment and of building the public facilities that the province needs to accommodate future growth may exceed $ 100 billion. 3 / 4 equally to decisions on what to build and to decisions regarding how to operate the infrastructure once it is in place. the hardest incentive to get right is that of proper pricing. a lack of pricing that appropriately reflects demand and supply conditions may be one reason why there have been relatively few ppp infrastructure projects in canada. it is particularly important to improve pricing mechanisms for services that are provided through public infrastructure. governments have often been unwilling to price - to - market infrastructure - based services. as a result, shortages are managed through non - price rationing, such as rolling electricity blackouts, highway congestion, or waiting lists for government documents or services. and occasionally, we get the opposite problem — an over - build of infrastructure that cannot be justified by demand. new technologies, such as transponders on vehicles to monitor road use, and meters that allow peak - hour pricing of electricity, provide new opportunities to gauge demand for these services, and to price them accordingly. another key incentive with respect to infrastructure investment is the incentive to manage risk. private financing of infrastructure through the markets tends to lead to better assessment of the

david dodge : improving canada ’ s productivity remarks by mr david dodge, governor of the bank of canada, to the canadian council for public private partnerships, toronto, 28 november 2005. * * * investing in productivity today i want to discuss the importance of efficiency in canada's economy. specifically, i'll focus on some of the elements that contribute to productivity growth in canada — a subject that i've addressed before and that you've been hearing a lot about lately. let me start by explaining what we mean when we talk about productivity. measures of productivity tell us how much output we produce from the use of tangible inputs — such as skilled workers and capital equipment — and intangible inputs — such as technological advances and managerial and entrepreneurial know - how. productivity rises over time as we boost output by finding new and more efficient ways to use these inputs. when measuring productivity, economists often prefer to use a measure called total factor productivity, which includes all these inputs — capital, labour, innovation, and know - how. in practice, however, it is very difficult to measure total factor productivity. that's why analysts usually focus on the more commonly used and better - understood measure, labour productivity. this measure tells us how much output is produced per worker or per hour worked. labour productivity has the added advantage of being closer to measures of standards of living and more directly comparable across countries. of course, labour productivity is affected by experience and education, by the amount of capital equipment ( notably machinery and equipment ) that is available to workers, and by innovation and know - how. we care about productivity because it is critical to our national standard of living. there are other factors that affect our living standards — changes in our terms of trade and in employment - topopulation ratios, for instance — but productivity growth is the main contributor to sustained improvements in real incomes and rising standards of living over the long term. but productivity growth in canada, measured as real gross domestic product per hour worked, has averaged less than 1 per cent per year so far in this century. frankly, we must do better. the components of productivity but what does " doing better " actually mean? first, it means increasing the amount and the quality of physical capital per worker — giving employees better tools to work with. it also means allocating resources more efficiently and being more innovative. in my remarks today, i'm going to focus on the two latter elements — efficient allocation and innovation. i'll start