Are we too relaxed about those who promote policy failure?

Some years ago, when universities were still relaxed places committed to teaching, a colleague of mine read a news item to his monetary economics class. It said that the eminent monetarist economist Milton Friedman now recognised his advice to the Chilean Government was quite wrong and he had returned all his consultancy fees. The students were astounded, until it dawned on them it was April the first.

A hoax it may have been, but it does raise the question of when consultants should admit they were wrong and what they and we should do about it. Many consultants will tell you they never make mistakes (even when it is not April Fools’ Day) – and then tell you the dreadful mistakes made by their competitors (with the implicit plea of ‘hire me’). Instead they prefer to forget their past mistakes and move onto the next ones. In contrast to the theory that consultants who fail should not be hired again, too often they are.

I was reflecting on this when thinking about a huge policy cockup which, literally, caused unnecessary deaths. The consultancy fees for the health redisorganisation of the early 1990s were in the order of hundreds of millions of dollars; the consequence of the advice was that there was a deterioration of the services health professionals delivered and higher mortality. Yet nobody took responsibility for the failures.

Admittedly the Minister of Health in charge was sacked, but he continued a successful political career in policy areas where he seemed to have more competence. The Prime Minister blamed his National Party’s massive fall in voter support between 1990 and 1993 on the failure of the health redisorganisation. So there was a kind of political accountability, although given the number of policy cockups it is hard for an electorate to discriminate among them. (National only squeaked back into power in 1993 because Labour, still being punished for their Rogernomic policies, lost votes too.)

But what about those ‘independent’ consultants who supported National’s health redisorganisation policies? The defence that ‘we were only doing what we were paid for’ does not work; never has for my generation since Adolf Eichmann, one of the major organisers of the extermination camps in Nazi-occupied Eastern Europe, was in 1962 found guilty of war crimes despite his plea that he was only following orders.

Instructively, as far as I know those who personally opposed the health redisorganisation, often at great personal cost, never got any public recognition. (Though some are so modest they may have turned honours down.) Why do not we make more use of the critics of failed policy? Does getting it right put you outside acceptable circles?

Of course, many of today’s generation will mention in their memoirs a positive contribution but it was not noticed at the time. I was vastly amused by politicians’ memoirs of earlier times which mention their opposition to the Vietnam War which, if you read carefully, began when it became a popular movement rather than earlier when an unpopular movement was laying the groundwork for the mass opposition. A lot of leadership in New Zealand politics is from the middle of the bunch.

There is a similar problem with the economic changes we call Rogernomics although the dealing with the failure is slightly different. Defenders talk of the success of implementing their policies without mentioning the poor economic outcomes; sometimes they make vague claims of better economic performance, unsubstantiated by any evidence (and which generally contradicts them).

My concern comes from my methodological training. Karl Popper says that when you want to criticise an argument, put it into its strongest form. (What a contrast with much of our public criticism, such as it is, which deals with the opposition by setting them up with the weakest arguments available, if necessary misrepresenting them.) I have tried to put up a strong argument for Rogernomics, but it is far from compelling. What I should like is someone sympathetic to what happened to defend it (other than by the weak argument that they were the right policies even if they did not improve economic performance).

The closest that I know of someone trying to do this is Don Brash in his 2014 memoir Incredible Luck. It refers to a 1990 report which only promised there would be major gains from the Rogernomic policies. In fact there were a further three-plus years of economic stagnation or worse. Is that the best he can do? See what I mean about avoiding the hard thinking?

There are numerous other examples of policy failures where I cannot find anyone who today will defend them. I have deliberately steered clear of current examples, not just because there is a possibility they might come right in the future, but this column would not want to commit the irony of preventing some from getting an honour from the Queen or contract work from the government.

I notice this government appears to be using some of those who failed in the previous policy round. (It is complicated by the fact that some policy failures, such as the Performance Based Research Fund and Working For Families, were initiated by the previous Labour Government; the intervening National Government did little to address them.) One fears that such advisers will see the problem as modest fine tuning rather than going back to basics and so the fundamental failures will truck on.

I am reminded of the story of the tenor making his first appearance before a La Scala audience, famous for its discernment. There were loud demands for an encore after he sang his aria; he repeated the aria and another encore was called for. Exhausted he asked how many times he had to sing it. From the back came ‘until you bloody well get it right’.

Comments (8)

by James Green on April 02, 2018
James Green

There is a term for arguing against the strongest version of an opponents argument: steel-manning. It contrasts with the more common straw-manning, where a weaker version of an opposition argument is constructed in order to then be pulled apart.

As you note, the problem comes when a steel-manned argument still seems pathetically unconvincing: how can you tell if you steel-manned the argument or were unconsciously straw-manning given that you already know you are biased against the argument.

https://en.wiktionary.org/wiki/steelman

by Charlie on April 02, 2018
Charlie

Three problems Brian:

Firstly publicy policy and its outcomes are multivariant. You cannot isolate the effects of a policy change from all the other dynamics occurring over the same period. You cite the health reforms of the 90's as an example but I can create a long list of other changes which occurred over that same period which could have impacted the health outcomes.

Secondly, the effects of a policy change sometimes only occur many years later so it becomes impossible to confirm a link between cause and effect.

Lastly, when making a change in policy what are you comparing its effects to? Previous performance? If that is so, then it is invalid. You need to compare its effects to what would have happened if no change had been made. Unfortunately we don't have the luxury of being able to re-run history as a series of scenarios.

 

 

by BeShakey on April 03, 2018
BeShakey

That response seems too strong by half - if you really believed that it would essentially be impossible to determine if any signficant public policy was ever successful. It's certainly complex, but do you really want to be committed to never being able to assess any policy ever?

by Ross on April 05, 2018
Ross

Charlie must be too young to remember Think Big, or, as it's commonly referred to, Sink Big.

by Charlie on April 07, 2018
Charlie

Ross. So you consider Think Big was an abject failure?

The projects:

Motunui Methanol plant: Still in operating and contribute 45 million per year to our exports. Therefore a great success.

Kapuni ammonia/urea plant: Still in operating and providing fertilizer for our farmers. At the very least it is an import substitution, thereby improving our balance of payments. So thereore a long term win.

Marsden Point Oil Refinery expansion: Still in operation and a roaring success

New Zealand Steel plant expansion: Still in operation and providing roof sheeting and reinforcing bar for us. At the very last an import substitution. Employs thousands.

Electrification of the Main Trunk line between Te Rapa and Palmerston North. A failure because it slowed down the trip between Auckland and Wellington. Now being removed.

A third reduction line at the Tiwai Point: Still in operation and contributing to our exports. Thus also a great success.

The Clyde Dam. Still in operation and providing renewable energy for us. A marvellous success.

So most of the projects have stood the test of time and were ultimately great investments. So what was bad about them?

1. They were too expensive because they were government run projects run through the Works Department instead of a commercial project management organisation.

2. They were funded by expensive foreign debt which ultimately helped cripple NZ finacially

3. Bad timing. They came into operating as the commodities price they produced fell

It's a pity 'think big' scared NZ off major capital projects such as this, because there is opportunity for more.

 

by Brian Easton on April 08, 2018
Brian Easton

Charlie, every one of the projects you mentioned was funded by the tax payer at a loss. 

by Charlie on April 08, 2018
Charlie

At a loss for whom Brian?

If you deduct these projects from NZ's balance sheet today you will find it would be considerably poorer.

They employe people and pay tax. So the investor has gotten his pound of flesh this last 30 plus years.

 

by Brian Easton on April 09, 2018
Brian Easton

A substantial loss to the tax payer, Charlie. 

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