NZ Public Service and Economics

Robert MacCulloch has written an interesting piece on economic advice within the public service in New Zealand (free link), with Eric Crampton noting a lack of trained economists in government as a key concern. Given the recent incoherent experience of rushed policy and advice on fuel taxes this seems like quite a pertinent discussion.

I’m a trained economist. And I’ve been working in government in New Zealand fairly recently, and am now actively employed in the private sector. So do I have juicy gossip?

No, not at all. I do have a perspective however that isn’t just about some arbitrary lack of hiring “well trained economists” – lets have a chat.

Tl;dr

For those who don’t want to read me go on a meandering journey the cliff notes are:

  • Bureaucracies respond to incentives – based on funds available and the type of advice demanded. So we can only understand this based on demand.
  • Ministers and public commentary determine what the demand will be.
  • Ministers need to appreciate these trade-offs are complicated, and invest in properly understanding them prior to making decisions, instead of rushing policy through.
  • Public “thought leaders” spend too much time talking about vision and too little time pointing out the trade-offs. This is where the true “economists”, which are about informing rather than telling us all what policy to pick, are MIA.
  • So instead of attacking the middle-person, subject matter experts need to get out there and communicate what is missing from policy debates – while Ministers and their offices need to learn some humility about what they know, and what it requires to generate knowledge about the true consequences of policy.

Tell us about yourself and policy

No. I’m sure if you use google you’ll figure out where I was working, and I had plenty of opportunity to work with analysts across government on economics issues – and I worked with a lot of insanely thoughtful, intelligent, and passionate people. If you find out where I worked, note that I hold these people in high regard.

Furthermore, when it comes to doing policy, describing trade-offs, and understanding the specialist nature of the subjects we were discussing there was no way I would have thought having significant economics training alone was sufficient. When I was working in this space I was constantly learning from other non-economists, and simply having more economists around itself would not have improved that – I’m not the flashiest economist in the world, but it isn’t necessarily a lack of economists that is the constraining factor on the advice.

Yeah, in broader government there were and are people who say dumb things about economics and try to discredit objective analysis across government – those are called human beings, and that has always happened and always will. However, the language of economics is still seen as a good and transparent way of describing issues.

And if you are one of the bureaucrats that doesn’t believe economics is needed to give policy advice, and likes to say dumb things about economics (i.e. suggesting we don’t look at economic research as its all discredited) – you don’t come off as a free thinker, you come off as an arrogant idiot who wants to fit into “fashionable circles”. Either grow up and learn to give policy advice that clearly identifies trade-offs, and so is self-aware enough to see if the policy choice hurts people, or get the hell out of policy and find a job where you won’t hurt people anymore.

Anyway I digress, what is the role of a bureaucracy? Operationalising and administering policy and acting as an active policy Wikipedia service to Ministers to help them understand trade-offs. For the later a core amount of economic knowledge is required, and most large agencies have a team that has some economics training to do this – and a research or analytics unit that provides further insights.

By its nature such work is almost always reactive in a small open economy, as we lack scale. It is impossible to analyse the trade-offs from every possible policy. As a result, what is being discussed in public and what is raised by stakeholders in consultation (including a Minister) will constitute issues to focus on. Things get more complicated sure, but this is the gist.

Demand for advice

So the concern appears to be that advice is done too quickly, and by people with insufficient training – leading to cherry picking of research, missed trade-offs, and ultimately policy advice being given that’s inconsistent. I of course can’t speak to that given the impeccable nature of anything that I was involved in 😉 – more seriously though, lets think about this.

The advice provided will depend on the resourcing available and the underlying demand for advice. During COVID pretty much every bureaucrat I know worked around the clock under ridiculous time pressure – not just because of COVID but because of demands to provide advice on any transformational policy that was dreamed up. At the same time there are constant public complaints that there are too many analysts – with some ridiculous pipedream that somehow people will be able to produce more higher quality advice with less support.

The high quantity, low quality, public discourse in New Zealand when it comes to economic questions drives this. And when, to quote an unnamed journalist “we should write all economics as if it is being read by an 8 year old” the consequent quality of the public debate does not put genuine pressure on Ministers to demand higher quality advice and invest in it.

In this environment a highly trained economist is not the sort of resource that really works well – research economists are thoughtful, engaged, argumentative, and slow. I’d know, as I am one (even if the thoughtfulness is debatable).

So when the policy advice that is demanded is high level, cursory, and fast it is entirely consistent that bureaucracies will not be hiring “highly trained economists” – they will bloomin hire people that can get the work done.

If that is the nature of things, then having external trained economist available to hire in for detailed work can be a solution – and my understanding is that is often how these things work. But for this to happen you need to know who to bring in. And to find the resource to bring that in there has to be the underlying demand for it!

What’s the solution

Nothing will change unless, to be frank, Ministers become embarrassed by their own incoherent knee jerk policy settings.

Do Labour party Ministers and their office staff think policy setting by poll makes them seem like pragmatic world leaders? Do they expect establishing rushed poorly thought out policy will lead to their statue being placed outside parliament? Do they take pride in ignoring the trade-offs associated with their policy, and the way that unintended consequences usually fall on those most vulnerable in society?

I know this isn’t your intention – but by rushing the policy process this is exactly how it looks! In this way, for the vast majority of people in politics who are genuinely interested in outcomes, the important thing is this – policies have unintended outcomes, and a big part of the process is investing is spotting those to make sure we aren’t hurting people we don’t intend to. The reforms of the early 1990s are seen as bad now, but at the time the rushed nature of that advice was not pointing to the harms we can now see!

For the smalIer number that see politics as a game – stuff off. Rather than turning the sprinklers onto a policy problem and making it worse, recognise that making a genuine difference requires genuine investment in services, and in genuine data and policy infrastructure to make informed choices about the nature of these services.

Stats NZ is underfunded to the point of embarrassment. Compared to other countries we run our tax and welfare system on the smell of an oily rag. And the short-termism, and frankly undemocratic ramming through of policies under emergency legislation, undermines the quality and consistency of the policy framework in New Zealand – leading to a gradual erosion in people following the “intent” of legislation and the law, and eroding trust.

Of course, I don’t want to be overly harsh – it is clear that many Ministers do genuinely care about outcomes – but expertise matters, and trained economists are trained at describing these trade-offs. Demanding the same level of analysis overnight from an overworked and understaffed bureaucracy is a ministerial failure.

But if this is true, then it should make it easy for independent economists, at university and the private sector, to tear holes in advice right? So where is this?

The culpability of economist “thought leaders”

When a large number of “independent” economists and commentators appear to fawn over every “pragmatic” “strategic” “masterstroke” of a policy choice it is easy to buy into the hype. After all, if Archimedes can discover things in the bath then what is the issue of making policy in the same way.

Eric is a good fella who speaks truth to power – we need more Erics. But where are the New Zealand economists when it comes to communicating the economic science of trade-offs from policy choices?

Why do many of the consultancies feel so compelled sell us their “vision”, or to give government credit where none is due on the basis of vibes (although a shout out to my old buddies at Infometrics for being willing to call things out, and the NZ twitter economists who I also see keeping thing real).

Buddy, leave the vision stuff to politicians – they are better at it – can economists just inform us on trade-offs by explaining and quantifying unintended consequences!! Stop using the economist title to tell me you have a vision to increase productivity, improve housing, save the whales, and remove material poverty without any consequences – when you do this you are an advocate. There are always trade-offs, and what is constantly missing is the description of those.

I know if feels nice to show everyone that you can save the world with your great and grand vision, and gets you lots of attention – but if that is the game you want to play, stop calling it economics.

Now I don’t want to be overly harsh here, especially as I know I’d be the sort of person that would easy start doing the same thing (largely on poverty and inequality) – I recognise that this advocacy cares from caring about the issues, and caring about issues that do matter. But remember we all care about issues, and offering a compelling vision has it’s place. Most of the time what is missing is an economic description of trade-offs, not an impassioned advocate.

Framing it this way, I think it would be unfair to even criticise those who are publicly talking about economics now – they talk about trade-offs where they can, and play advocate on issues they care about.

Instead, where the hell are the real descriptive economists that can arm the rest of us with facts – and allow the rest of us to then debate what we value given the information they’ve provided.

We’re all allowed values and to care about things. But the economic expertise that is being discussed is in the ability to describe trade-offs from a policy choice – and surely an academic or industry economist who is focused on the market that is hit by the policy choice is best placed to communicate that.

Let’s be real. We don’t need people with the economist job title running around telling us what the “best policy” is – New Zealand is already massively overfilled with these people. We need people willing to apply the economic method to appropriate policy questions in order to understand trade-offs and inform policy makers and the public – with all the framework and data analytics based work that requires.

So you are blaming the private sector for public sector hiring

Only partially, the cavalier attitude of Ministers towards the time and effort required to give good advice is also very much to blame – but the lack of descriptive private sector commentators deserve more critique than they are currently getting. So I’ll do that here.

You may have noticed this concern in my recent posts – the only place with worse communication than the RBNZ at present is the business and economics media.

I’m from a different time, a time where consulting was about talking truth to power – when Gareth Morgan would call a spade a spade prior to his foray into cats and politics. I often disagreed, but the act of pointing out and unintended consequence and making people think about it was damned valuable. Discussion of a policy wasn’t based on who suggested it and how it fits within a horse race narrative of politics – it was instead a discussion of the merits, and costs, of the bloomin policy. And even when you didn’t agree with his conclusions, there was always a descriptive framework that allowed you to understand why – and why you might see things differently.

You might be cynical about my perspective as I’ve just said I’m in the private sector. I’d think the same, this sounds like branding. But I’m not working in New Zealand anymore, all my work is in Australia on Australian issues – so there is no benefit to me in discussing this. I just care about New Zealand a lot, and I want to see New Zealand be the best damned country it can be – protecting the vulnerable and while supporting voluntary exchange and positive community spirit.

This requires real transparent discussion of trade-offs from policy choices, and that has to start with open and honest discussion by people that understand these issues – the subject matter experts that are floating about outside of government. For many policy questions which require the government and public to make a choice knowing the trade-offs involved, economists do fill a key part of that.

So what is all of this saying – instead of slamming the bureaucracy for not hiring enough economists, maybe we need more subject matter experts (i.e. academic economists) taking an active role in explaining what is wrong when a discussion document is released. And to do that, we need Ministers to give genuine periods for consultation which would allow such people to build up their arguments. And a media that is willing to run with this type of expert communication.

Attacking a bureaucracy that is filled with capable people, but worked to their limit, without offering a solution doesn’t help – it infact misdescribes the issue, has a poor problem definition, and leads to incorrect conclusions, failing the very standards that people are being criticised for.

Economics is beautiful – if economists feel that the bureaucracy is underusing it then lets all get together and show them just how awesome it is at helping to describe policy issues, and how dangerous it is to do policy on rhetoric without an eye to unintended consequences.

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