Category Archives: Politics

321 – Communicating economics to policy makers

When it comes to communicating research results to policy makers, economists have some advantages over other disciplines. But economists commonly make a range of mistakes when trying to communicate to policy makers.

Included amongst the advantages that economists have are that economics can be used to clarify the pro’s and cons of different decision options, and this is exactly what policy makers need in many cases.

Secondly, a good economic analysis is holistic, bringing together all, or at least most, of the relevant elements, including social, biological, physical, financial, behavioural elements, accounting for risk and uncertainty.

Thirdly, economics tries to assess outcomes from the perspective of society as a whole, rather than a particular interest group, so it can be seen as more balanced and independent than some other disciplines.

On the other hand, economists often squander these advantages by making basic communication mistakes. Too often they fail to cut out the technical jargon that is meaningless and perhaps annoying to their audience. They focus too much on abstruse technical details of their analysis, rather than focusing on why it is important and what the results mean. They explain things in abstract, conceptual terms, rather than giving examples and telling stories to make things tangible and real. In short, they are often not tuned into, or don’t understand, the perceptions and needs of their policy-maker audience.

In July I attended the annual meeting of the Agricultural and Applied Economics Association, in Atlanta, Georgia. One of the highlights for me was the presidential address by new president Keith Coble from Mississippi State University. His address was on “Relevant and/or Elegant Economics”, but mainly on making sure economics is relevant. I got a nice surprise when, about half way through the talk, he started talking positively about an old paper of mine on communicating economics to policy makers (Pannell 2004).

In that paper, I reported results from a small survey, including responses from economists who work in the policy world, senior bureaucrats, past or present politicians and a former ministerial adviser.

The most strongly emphasised advice provided by these people was to understand the policy maker’s situation and perspective.

Other messages included to be practical and pragmatic, to be persistent, to understand the importance of timing, to establish networks in order to build support, to not tell your target audience that they are wrong, and to keep your communication brief and clear.

There are many other useful pieces of advice in the Pannell (2004) paper, so have a read.

Further reading

Pannell, D.J. (2004). Effectively communicating economics to policy makers. Australian Journal of Agricultural and Resource Economics 48(3), 535-555. AgEcon SearchJournal web page * IDEAS page

Gibson, F.L., Rogers, A.A., Smith, A.D.M., Roberts, A., Possingham, H., McCarthy, M. and Pannell, D.J., (2017). Factors influencing the use of decision support tools in the development and design of conservation policy, Environmental Science and Policy 70(1): 1-8. Journal web page * Pre-publication version * IDEAS page

308 – Vote yes for marriage equality

Australians currently have a chance to vote for marriage equality by postal ballot. I know this is a bit off the usual topics for this blog, but it’s something I feel strongly about. If you have the right to vote, here are six reasons to vote yes.

1. Because it’s the kind and decent thing to do. It would create joy for many thousands of people without hurting anybody.

2. Because gay people still face prejudice in many forms, and still attempt suicide at higher rates than their peers. Voting yes would be one small step towards turning this around.

3. Because we should not let the religious beliefs of a minority dictate how the rest of us live our lives. There is and should be a separation of church and state in Australia. Nobody should be required to follow the dictates of a religion to which they do not voluntarily subscribe. That is the real issue of religious freedom here – quite the opposite of what some “no” advocates are claiming.

4. Because the position of some Christians against same-sex marriage is not supported by the Bible anyway (Whitaker, 2017). The Bible has vastly more to say about being kind and generous than the few vague fragments it includes on homosexuality. Nowhere does it actually proscribe same-sex marriage. In the Old Testament, it does say that a man lying with another man instead of his wife is an “abomination”. But (a) this is about adulterous sex, not marriage between a loving couple, and (b) there is an interesting list of other things that the Old Testament also describes as abominations, including wearing mixed-fabric clothing, tattoos, mocking the blind by putting obstacles in their way, and trimming your beard. Why are we not having a postal plebiscite on the trimming of beards? The highly selective focus of some Christians on homosexuality is hypocritical. Neither testament of the Bible says anything whatsoever against lesbians.

5. Because Australia is lagging behind the rest of the civilised world. Same-sex marriage is already legal in The Netherlands, Belgium, Spain, Canada, South Africa, Norway, Sweden, Portugal, Iceland, Argentina, Denmark, France, Brazil, Uruguay, New Zealand, the UK, Ireland, the US, Luxemburg, Colombia, Greenland, Finland, Slovenia, Germany and Taiwan.

6. Because this change is inevitable, and saying no now would needlessly delay us doing the right thing. It prolongs the debate and increases the number of public expressions of anti-gay prejudices.

Post your completed survey form back by 31 October to be sure of meeting the deadline.

Further reading

Whitaker, R.J. (2017). Same-sex marriage: What does the Bible really have to say? Here

307 – John Kerin’s memoirs

John Kerin was Minister for Primary Industries in the Australian Government between 1983 and 1991. His memoirs are now available as a free download. Having seen him speak several times since he ceased being a minister, I think his memoirs should be fascinating and very informative. Agriculture was very lucky to have him as minister during this period of great change and disruption. 

John Kerin was unusual as a minister in that he knew a lot about the issues he was responsible for. Not only was he experienced as an agricultural producer, but he was also trained as an agricultural economist, and worked for a while in the Bureau of Agricultural Economics.

Apparently, his expertise was not always appreciated by his department. In the last part of the book he says “the ethos of some government departments was that they preferred ministers who knew nothing – the better to manage or control them. However, I thought that it was not necessarily an impediment to know something about your portfolio areas. The constant rotation of ministers is not good for policy making.”

Not only did he know a lot, he was clearly very thoughtful and remarkably frank. “Nor … do I want to give the impression that I was always sure about what I was doing, what the outcome of some policy options may be or where the changes and reforms we were introducing may lead. … By nature I am a pessimist, slow to come to decisions and generally believe that I am wrong until convinced of the path to take.”

A landmark event during his term as minister was the wool crisis. His eventual decisions for the industry were critically important and rather heroic as they faced fierce opposition from the whole industry, which seemed determined to do itself almost unlimited damage.

Some of his perspectives are all too relevant in our current political climate. “I have always been terrified by people in politics who are absolutely sure they are right, have God on their side or tell me they are ‘men of principle’. Such people seem able to blind themselves to their own hypocrisy and humbuggery – and are dangerous.”

I’m really looking forward to reading the book.

Further reading

Kerin, J.C. (2017). The Way I Saw It; The Way It Was: The Making of National Agricultural and Natural Resource Management Policy, Analysis and Policy Observatory, Melbourne. Available here: http://apo.org.au/node/76216

Pannell, D. (2014). Supply and demand: the wool crisis, Pannell Discussions no. 266.

301 – Inequality in the USA

Following the catastrophic result of the US unpopularity contest last week, one of the many suggested explanations was the level of economic inequality in the country. This made me think of the graph below, which I saw last year. It shows that, when it comes to inequality, the US is truly exceptional.

The graph shows the Gini coefficient (a measure of inequality) for 115 countries, plotted against their GDP per capita (a measure of their average income). There is a very clear pattern. Above a certain level of inequality (Gini coefficient of about 37), almost all countries have really low average income levels, while above a certain level of average income (GDP per capita of $12,000), almost all countries have fairly low inequality.

 

gini

Source: http://visualizingeconomics.com/blog/2006/01/04/gdp-per-capital-vs-gini-index

 

The exception is the US, which has both high average income and high inequality. There is a lot of wealth in the US but it is concentrated into a minority of hands. As one illustration, between 2009 and 2012, 95% of income gains in the US accrued to the top 1% of income earners. Other data seems to show that their inability to share around the wealth has become worse over time. Other countries with a similar level of inequality have about one eighth as much average income.

If it is true that inequality is behind this incredible electoral result, we can perhaps draw some solace from the fact that inequality is so much less in all other wealthy countries.

On the other hand, inequality was clearly not the only factor. Already, like-minded politicians around the world are feeling empowered and emboldened to spread their noxious views throughout their societies. We can see that happening in Australia, France and The Netherlands, for example.

And there seems plenty to worry about from what could now happen in the US. The world’s most powerful country will soon be led by a deeply ignorant man of appalling values and character. Even by the low standards of politicians, he tells obvious lies to an extraordinary extent. I feel angry that so many Americans were taken in by this conman, and now the whole world will have to suffer the consequences.

The other thing I can’t stop thinking about is a certain historical parallel. Can you think of another prominent national leader from the 20th century who was elected on a promise of making his country great again? This other leader also used an ethnic minority group as a scapegoat for his society’s problems, and found a sympathetic ear from countrymen who felt they had been badly treated. He had notable authoritarian tendencies, fomented hatred and resentment, was not averse to jailing his political opponents, did not respect the rule of law or democratic institutions, and was unable ever to admit that he had made an error. He excited mobs with messages that were simple and bold but facile and dangerous. He was friendly with other authoritarian leaders (although that didn’t last). And he had a distinctive hair style.

I’m not expecting that the US will now proceed to annex Alberta as a prelude to invading all of the countries they can practically get to, but I do think there is a serious risk that voices of reason, balance, kindness and openness within the country will be repressed and perhaps even persecuted. We have to hope that good Americans will be able to moderate or even prevent the barrage of stupid and repugnant policies that will now come forth.

299 – Are higher house prices a benefit or a problem?

In the research reported in PD298, we used the impact on house prices as an indicator of the benefits of an investment in a public amenity. This is a well-established approach, but twice in recent times I’ve encountered an attitude that higher house prices are more of a cost than a benefit. Could that be right?

The issue that people have in mind when they raise this concern is housing affordability. This certainly is something that is worthy of attention. House prices in many parts of Australia (and other developed countries) are often so high that they place great financial stress on buyers with relatively low incomes or they result in too many people being excluded from the housing market.

However, talking to a former government minister last year, she said that measuring improved local amenity by the resulting rise in house prices was not acceptable because rising house prices are a problem for housing affordability.

housingAlthough I applaud her concerns for the welfare of low-income groups, her rejection of rising house prices as a measure of community benefits is not sound at all.

For one thing, it implies that rising house prices are a bad thing regardless of the cause of the rise. The logical extension of that thinking is that we would prefer completely impoverished suburbs with no amenities or services for residents. Let’s encourage crime, leave road potholes unrepaired, remove all street trees and encourage toxic industries to set up in urban areas. That would certainly result in affordable housing! This is obviously not the solution to the housing-affordability problem.

The second flaw in the politician’s logic was that it confused measurement with objectives. Improving the amenity of a suburb does result in benefits for the residents, and these benefits are reflected in the prices that people are willing to pay to become residents in that area. So the change in house prices that is attributable to the improved amenity is a sound quantitative measure of the benefits. There may also be spillover effects that are viewed as being negative, but the requirement then is to measure those negatives as well, not to reject the valid measurement of the benefits.

Thirdly, the politician is implicitly suggesting we should aim to achieve two different policy objectives (affordable housing and improved urban amenity) using only one policy mechanism, the decision about whether to invest in urban amenity. An important economic insight, known at Tinbergen’s Rule, says that you need at least one policy mechanism for each policy objective – in this case, one related to urban amenity (e.g. investment in drain restoration) and a different one related to affordable housing (e.g. increased land releases). If you try to achieve two objectives with only one mechanism, the community will end up worse off overall than it might have been.

I was completely unprepared for the ex-minister’s comment at the time, and so dazzled by its many problems that I wasn’t able to quickly provide a very coherent counter-argument. I’ll be better prepared if it comes up again.

Further reading

Borrowman, L. Kazakevitch, G. and Frost, L. (2014). Measuring Housing Affordability: What Types of Australian Households are in Stress? Discussion Paper 42/14, Department of Economics, Monash University. Full paper ♦ IDEAS page

Polyakov, M., Fogarty, J., Zhang, F., Pandit, R. and Pannell, D. (2016). The value of restoring urban drains to living streams, Water Resources and Economics Journal web site ♦ IDEAS page