22 June 2010

Pesky Academics With Minds of Their Own

As we've seen, debate over climate change perversely tends to bring out authoritarian calls for uniformity of perspective. Here is an example from Australia where the civil servant head of the Treasury department, himself an an economist, bemoans the fact that academic economists have a diversity of views:
THE Treasury chief, Ken Henry, has re-entered the tax debate, issuing an extraordinary call for economists and tax experts to ''put down their weapons'' and get behind proposals such as the resources super profits tax. . .

''Whenever an idea is ventured publicly by a person, whether that person is a policy adviser or whether it's a government minister, there's at least a handful of academics who will contest it,''
The horror! Henry goes on:

''I've seen it on both sides of politics - this is not a partisan comment at all. But for governments, government ministers who are seeking to get ideas legislated, it is unbelievably frustrating, incredibly frustrating.

''It is a great strength of economics as a discipline … But I think there are occasions on which economists might, at least for a period, put down their weapons and join a consensus.'' . . .

''I'm not going to comment about the resource super profits tax but I will talk about the emissions trading scheme. Most academic economists accepted, at least behind closed doors, that it was a sound policy idea. Yet there were no end of academics who wanted to say for example, it's not bad, but a carbon tax would be better. That did not increase at all the chances of a carbon tax being legislated. All it did was reduce the chance of an emissions trading scheme being legislated.

''In the way in which political debate occurs in Australia, such statements do enormous damage to the prospects of sensible reform. There are times when it would serve the national interest if economists could just call a halt to the war for a while.''

In response, Warwick McKibben, director of the Australian National University's research school of economics and member of the Australian government's Reserve Bank Board, took strong issue with the idea that academics need to get in line behind government policy proposals (emphasis added):
[McKibben] said he was stunned by a call from Mr Henry on Monday for academics to ''put down their weapons'' rather than nit-pick over government proposals such at the emissions trading scheme. ''I don't know whether Ken was fingering me but there weren't too many other people out there arguing against an ETS,'' he said.

''I have enormous respect for Ken Henry but he can't believe that you should have consensus because it is better to have bad policy that everyone agrees with than eventually get good policy that will work."

''The ETS was a flawed scheme. Had the government got it through it would be dead by now because of the financial crisis.

''I also disagreed with the scale of the stimulus package … It wasn't evidence-based policy; they panicked. The government rammed those decisions through the economy even though they were fraught with risk. No one was consulted about an alternative view and if you did say anything you were attacked by the Treasurer and the Prime Minister in public.''

I do not share McKibben's credulity. For many in the climate debate, consensus on bad policy is indeed better than trying to arrive that policies that will actually work. And leading argument seems to be that if only those pesky academics would fall in line, we could more quickly implement those bad policies. Hmmm ... if only we had a list of pesky academics, we'd know who to ignore . . .

H/T Stochastic Trend


  1. It is very important to realise that there are political circumstances here that are odd.

    Dr Henry was appointed by Peter Costello, the former treasurer and a really strong character in the Howard government.

    The treasurer in Australia is traditionally a very important figure in the government. It's usually a more important post than deputy Prime Minister.

    However, as Kevin Rudd is disliked by his own party he could not trust anyone except Wayne Swan who went to his high school and whose other main qualification for the job was that he and Rudd shared a house in Canberra.

    However, as most people didn't respect Swan much, including Rudd, all he could do was be a voice for treasury. This has led to the elevation of Dr Henry.

    Dr Henry has been thrust into politics and made some unwise statements because of the weakness of the Federal Treasurer, his current statement is unwise but he should be given some slack and a new treasurer who is capable should be appointed.

  2. Academics (like me) tend to nit-pick about sometimes irrelevant details. The way I read Dr Henry's comment is to not nit-pick if we agree on the big picture.

    From my limited reading on the super-tax, it seems most economists think it is a good idea (perhaps disagreement on some specific details). The mining companies think the idea sucks (understandably) and the public seems to be easily convinced by the mining companies. In this context, I don't see a problem with Henry's comments, particularly if nit-picking contributes to a compromise with the mining companies which makes the policy worse then its original incarnation.

    There are more diverse views on an ETS and in that case, a more open public debate would be helpful. Henry's comments on the ETS seems to say that we cant be spiolt brats and sometimes we have to take a second best option for the better good. Public policy may, unfortunately, require some compromises from the theoretically optimal system.

    Basically, some debates are best for a conference room.

  3. Reminds me of the current depression in the Irish economy.

    Before the downturn, economists warned about the housing bubble, the imbalances in the economy, and troubling public finances. An Taoiseach (prime minister) asked one vocal critic why he did not commit suicide.

    Of course, politicians now spin the myth that nobody had warned them about the risks that proved very real.

  4. Dr Ken Henry is not the Treasury Minister, he is Head of the Treasury Department, a Public Servant. Wayne Swan, a Labour Party politician, is the Treasurer.

    I agree with what you say sien. Wayne Swan is IMO the weakest Treasurer we have had since Frank Crean & Jim Cairns in the Whitham Gov. in the early 1970's.

    Also for US readers it should be pointed out that Australia's Executive Government is, as in the UK, formed out of the party(s)which has the majority in the Lower House, the House of Representatives. The executive is appointed from electors, of both the Representatives and the Senate (States House), from this majority.

    The popularity of the Prime Minister, Mr Rudd, has nose dived and part of the reason for this is that he moved consideration of the ETS out 3 years into the next term. This is despite Mr Rudd saying previously that AGW was "The Greatest Moral Issue of our Times". Recall that it failed to pass Parliament before Christmas when the opposition changed leaders on this issue and it was rejected by the Senate.

    Australia has to go to a federal election by April 2011 but the most likely time is this coming October. Another option is that the government can call what is called a double dissolution, where both Houses are dissolved (including all the Senate)and an election follows. The difference here is that normally only half of the Senate is elected, with all the Representatives, every 3 years. Technically this is still possible (rejection of key legislation is a prerequisite & exists)but unlikely now. IMO Rudd should have done this last Feb when their popularity was much higher and they were way ahead in the polls.

    As regards Dr Ken Henry I think the strong reaction to the proposed mining tax, the RSPT (Resources Super Profit Tax) has unhinged him. On this same occasion he also mused about a Super Profit Tax for all companies. Kevin Rudd, I suspect, was not impressed.

  5. -4-Geoff, many thanks, now corrected.

  6. Amazing, no sooner had I pushed post on my previous comment then news broke in Canberra (I'm watching Sky) that Kevin Rudd may be finished as Prime Minister. The right faction power brokers in the Labour Party & Unions (AWU) have turned against him. It looks like tomorrow Australia may have its first female Prime Minister, Julia Gillard, who is currently deputy leader. The only faction holding out for Kevin Rudd is the left; which is ironic as Gillard is from the left.

    Its 10.25pm here & Kevin Rudd is just giving a news conference. There will be a vote on the leadership by the Labour caucus Friday morning at 9am. Rudd will be standing.