A little less government, a little more ideology please
Calls for more “evidence-based policy” in Australia are routine. For former Prime Minister Kevin Rudd, under whose watch very little reform occurred, it was “at the heart of being a reformist government”.
But more “ideology-based policy” is what this country needs. Evidence is useless without underlying principles to guide what to do with it. Statistics are often crafted from poor data and reported tendentiously.
As the government mulls over a successor to Gary Banks, the outgoing chairman of the Productivity Commission, it would be wise to select a man or woman with a hardnosed attachment to a few key economic and political principles.
Sharing David Hume’s assumption, for instance, that “every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest” when designing public policy, would foster a healthy scepticism of bureaucrats’ incentives to provide objective advice and act ‘in the public good’.
Understanding what Frederic Hayek called “the pretence of knowledge” - the widespread but mistaken idea that governments can aggregate sufficiently accurate and timely information - would limit policy makers’ desire to disrupt the most efficient method yet found for allocating resources and sustaining prosperity: a free market.
Together with Adam Smith’s timeless observation that “the whole or almost the whole public revenue is in most countries employed in maintaining unproductive hands [and] little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice”, Australian policy makers have a ready-made reform agenda without any need for ‘evidence’.
How can we improve productivity in Australia? Shrink government and thereby expand the fraction of the labour force producing goods and services people are actually willing to pay for.
At the federal level, abolish patently absurd departments and their attendant expenditures - such as ‘innovation’, ‘climate change’, ‘agriculture’, and ‘families’. At the state level, contract out the management and operation of hospitals and schools and deliver subsidies direct to the people consuming these services.
Health and education have no more right to be nationalised than the production and sale of food, which in private hands has proved a marvel of efficiency, diversity and customer satisfaction. Health and education are `important’; but so is food.
At the local level, sack diversity officers and community outreach programs in favour of fixing potholes and approving new developments.
One might be sceptical principled policy ever existed. It did, with the accompanying economic miracle to boot.
John Cowperthwaite, the British finance secretary in colonial Hong Kong in the 1960s, was largely responsible for Hong Kong’s spectacular ascent from colonial backwater to gleaming, dynamic economic powerhouse. He kept the state to an absolute minimum and refused to collect official statistics; in a decade real wages grew 50 per cent and poverty collapsed by two thirds.
There wasn’t an evidence-based policy’ in sight. Cowperthwaite knew from first principles that “in the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster.”
Not only does evidence-based policy’ thwart sensible reform with a barrage of data, the very process of producing statistics and ‘evidence’ encourages governments to meddle with the economy.
No-one would pay to know Australia’s gross domestic product or supposed aggregate productivity, for instance. Australia would be far freer and more prosperous if government produced fewer statistics.
Australian businesses do not even measure their productivity in the way the Australian Bureau of Statistics does. They are more interested in profit, a far more reliable indicator of success.
To the extent any principle guides modern economic policy it is a crude utilitarianism that mandates fleecing the many to curry political favour with the few.
New government spending proposals think the $6.5 billion a year earmarked for Gonski review or the $8 billion National Disability Insurance Scheme give no consideration whatsoever of the economic costs, let alone the moral justification, of increasing the massive burden on Australia’s dwindling group of taxpayers.
Perhaps macroeconomic policy is even worse. Governments’ attempts to `stimulate’ their economies with borrowed money rob future generations of their income without asking, justified only by the flimsy and highly disputed theory that such action helps `growth’ in the present.
Equally, monetary policies that artificially create money increase the risk of inflation without seeking permission from hapless savers.
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