The discussion of the limitations of government and subsequent government failure is wholly absent from debate in Canada where, unfortunately, we still assume that governments act benevolently and without institutional constraints. That this is not true is plain to see in the pages of the reports of the Auditor General of Canada, which provide concrete evidence of the existence, and the extent, of government failure in Canada. The Public Choice school of economics, which applies traditional economic methods and techniques to explain the actions and decisions made by those who operate in the political marketplace, has striven to explain government failure empirically. This publication was written to inform Canadians about the theories and insights of Public Choice Theory, to document government failure from the reports of the Auditor General, to calculate a reasonable estimate of the costs of government failure, and to summarily describe the mechanisms available to reduce government failure.

New to this edition of Government Failure in Canada is the calculation of an estimate of the cost of government failure. Given the nature of the reports of the Auditor General, three methods were employed to calculate the costs of government failure.