I would note two things:

1) I’ve never said I approve of the Covec report, either in a post or comments.
2) When Eric mentions the report favorably, he means in comparison to other reports where the authour made no effort to clear things up – or even worked to add to the confusion.

I understand what you are saying for sure. I cannot go any further in a negative direction talking about these reports, but I must point out that I haven’t done anything in a positive direction – there are definitely no stars (let alone gold ones) being handed out 😀

If you want to do something like a guest post where you say what you think about these sorts of reports I would be more than happy to put it up of course.

But then Treasury called Andrew Williams out on his ridiculous claim. Covec at that point decided their most face-saving option was to play-act the role of learned economists whose report had been tragically misunderstood by ignorant non-economists. The thing is, their report was designed to do that very thing. They had to come out against the conclusions that were being drawn from their report, because the conclusions that were being drawn were wrong, as they had intended them to be, because wrong conclusions were in the interests of their client.

When my children try that “It wasn’t me, I didn’t do it” line on me, it gets them nowhere. However it appears that in the arcane world of economic bloggers it will gain a fully-fledged adult economist a gold star 🙂

Hi Dragonfly,

I agree with what you are saying about the report per see, see here:

http://www.tvhe.co.nz/2010/03/26/im-sick-of-this/

I believe the favourable comment from Eric came from the fact that Covec came out against the conclusion taken from their report – see the comment here:

http://www.tvhe.co.nz/2010/03/26/im-sick-of-this/comment-page-1/#comment-23450

And the report here:

http://www.covec.co.nz/leaky-buildings

I don’t fully agree with even this justification per see, but it is an improvement.

“I understand why you might have an unwillingness to condemn others when you are not sure how you would behave yourself if offered the same opportunities, and many people do in fact think they are a lot better than they are. But to always refrain from making any moral judgement ever on others is to allow bad things to happen.”

Trust me, my personal opinion on these reports is a lot more colourful than the opinion I provide on the blog – and the sort of things I say about this in person also sounds different. If there is ever an “economics blogger drinks” I am sure what I say would sound entirely unfamiliar to anyone who reads the blog …

However, on the blog I refuse to hold economists to a higher moral standard than other disciplines – which in turn leads me to place the blame on those asking for the reports, namely parts of government.

And, curiously, it was Covec’s report on GST and leaky buildings that led me to these economic blogs. I first saw mention of Covec’s report on Bernard Hickey’s blog, where he was claiming that they had backed down on what they’d said in their report. I looked at the report and saw that Bernard was wrong, but nonetheless I was shocked by the nature of the report which seemed to me to be a shameless, made-to-order effort carefully constructed to entirely match the interests of Covec’s client, the North Shore City Council.

Also, there was an Orwellian pointlessness to the report, which attempted to quantify revenue collected by the state as a result of the leaky building issue, even though (and this is mentioned in the report) this revenue might have been collected anyway due to spending on other things in the absence of a leaky building problem. I cannot understand how such a report ever came to be commissioned.

If Covec had quantified the revenue to the state from the leaky building problem, then explained why, in isolation, that was a stupid and pointless exercise, and then left it at that, their report might have been acceptable. Instead they proffered this lame justification for the report:

“[The report] provides an estimate of the extent to which spending on repairs to leaky buildings would contribute to the Government’s tax revenue. Although this estimate does not in itself provide an economic justification for the Government to contribute towards the problem, it gives some context to the scale of weathertightness problems, and may provide information regarding the perceived fairness of any contribution of the Government as the entity responsible for establishing the overall regulatory environment within which this problem has arisen.”

That’s poorly reasoned to the point of being incoherent, in my view. Later in the report they go from bad to worse with some vague mumbling about why taxpayer assistance for leaky home owners is a good idea for all sorts of other reasons too. Really, it might as well have been one of those rambling, ill-disciplined letters to the editor for all the substance they provide in support of those arguments.

Matt Nolan says:

“But suppose a government department offers an economist money to describe a VERY SPECIFIC question looking at a VERY SPECIFIC set of costs OR benefits. They then use these specific numbers to (IMO) unjustifiably sell a policy they wanted to implement.”

Substitute “North Shore City Council” for “a government department”, and this is pretty much the story of Covec’s report. The question arises, though, whether Covec ever advised the council that the report was a dumb idea, or whether they were complicit in coming up with something, anything, to help the council come up with the conclusions that suited it.

It reminds me of the days when you could shop around for a WOF, but when you wanted to sell your vehicle and make a good impression you would get a WOF from the state-owned WOF providers. These providers did not do anything other than provide WOFs and they had a reputation for being impartial. As a result a WOF from them carried more weight than others did. Maybe it will come to be the same with economic consultancies.

Anyway, after reading the Covec report I began to wonder if this mindless cheerleading on behalf of clients is typical of reports provided by economic consultancies, and that is how I came to read on other economic blogs about the BERL alcohol report and the PWC report on adult community education. It was enlightening and dismaying, and, no, as the taxpayer/ratepayer who pays for this trash and then bears the cost of bizarre policies that arise as a consequence, I don’t think it’s alright.

My opinion is that just as giving a WOF to a vehicle that should not have got one is immoral, because of the potential to cause harm to others, so is writing a deliberately biased economic impact report. That too has the potential to cause harm to people who end up bearing costs on behalf of others. Maybe, for example, poor children end up with less access to health care and their lives may be severely circumscribed by the likes of rheumatic fever because taxes were instead spent on the relatively privileged owners of leaky homes.

It’s one thing to lay out the whole story in the interests of enabling informed decision-making (in which case I agree the economist most likely has no moral responsibility for actions later taken by those who commissioned the report). It’s another to collude with those commissioning the report and then calculatedly lay out half the story with the intent to misinform and assist in the biasing of outcomes.

I understand why you might have an unwillingness to condemn others when you are not sure how you would behave yourself if offered the same opportunities, and many people do in fact think they are a lot better than they are. But to always refrain from making any moral judgement ever on others is to allow bad things to happen. Understanding why people do bad things and recognising that you might be capable of the same in similar circumstances is quite different to condoning bad behaviour and taking no action.

Makes sense to me – its all about incentives 😉

I wouldn’t say the Comcom necessarily provides a perfect reputational feedback mechanism to all consultants though – I’m sure you would agree that sometimes there is work that “could be better”. But it does explain why that sort of work is usually to a much higher standard than some hypothetical “policy cost/benefit” work …

Unfortunately, reputational feedback mechanisms here seem perverse: willingness to produce shonky large numbers gets folks more clients seeking shonky large numbers, and the public seems unable to differentiate between shonky and sound figures.

I would argue that when it comes to public policy, this is probably true since once a number is in the publics mind the damage is already done even if the number itself is dodgy. I.e. the “court of public opinion” has paralells to a one shot game.

I think the reputational feedback mecahnisms are much stronger when you are dealing with the Commerce Comission and Courts since it is much more of repeated game. In this setting you are dealing with the same judges/comissioners on a repeated basis and people on the other side of the issue always hire opposing economists to look at what are you are saying.

Note: I also offer my usual disclaimer that I haven’t read all of the comments due to time constraints!