Gutter politics

A post by Harry Clarke bemoans the fact that policies regulating alcohol often fail to apply simple benefit-cost analysis. This got me thinking about some of the other issues upon which I’d like to see a little more rigorous benefit-cost thinking, and a little less off-the-cuff moralising.

  • Road safety. At many Canberra intersections, a red turn arrow prevents right turns when the road is clear. My guess is that if we weighed up the cost (thousands of hours of lost time per year) against the benefits (fewer accidents), we would probably find that that former exceeded the latter. In other words, I think Canberra has a sub-optimal number of traffic accidents. 
  • Pornography in Indigenous communities. A bipartisan movement has pushed to reduce the amount of porn available in remote NT communities. But this will only help reduce sexual violence if pornography is a complement for violence rather than a substitute. What little evidence exists seems to favour the substitute theory rather than the complement theory. In other words, perhaps the costs of this policy outweigh the benefits (and I’m ignoring any benefits to the porn buyer).
  • Regulation of prediction markets. Since most policy regulation is concerned about the cost of problem gambling, the information benefits of prediction markets are often ignored. So we end up with a situation where Australian betting agencies cannot run markets on (for example) the unemployment rate a year from now. Justin Wolfers and I highlighted this issue last year, and a team of 22 economists has just done the same in a recent issue of Science magazine.

Of course, there’s an easy alternative to weighing costs and benefits. As usual Stephen Colbert puts the case best:

ladies and gentlemen of the press corps, Madame First Lady, Mr. President, my name is Stephen Colbert and tonight it’s my privilege to celebrate this president. We’re not so different, he and I. We get it. We’re not brainiacs on the nerd patrol. We’re not members of the factinista. We go straight from the gut, right sir? That’s where the truth lies, right down here in the gut. Do you know you have more nerve endings in your gut than you have in your head? You can look it up.

This entry was posted in Economics Generally. Bookmark the permalink.

6 Responses to Gutter politics

  1. Aussie Equitist says:

    Other obvious policies which I strongly suspect would fail even a cursory costs-benefits analysis are the many effectively exclusive non-means-tested regressive WEALTHfare scams for the elite and/or incorporated which were introduced and/or enhanced during what I call the “Howardian Era”.

    Most notably, under the pretext of the Intergenerational Reports, the so-called “Biggest Changes to Superannuation” were extremely costly to the current and future budgets and simply served to exacerbate pre-existing inequities and inefficiencies in Superannuation subsidies, whilst doing little, if anything, to improve the lifetime Superannuation savings of women and other low-middle income earners and therefore were unlikely to substantially reduce the future budgetary burden of pensions for that group!

    I would go so far as to suggest that those changes to Superannuation were cynical, wasteful, fiscally irresponsible, discriminatory and counter-productive.

    In addition to their blatant disregard of due diligence in relation to costs-benefits analyses, it would seem that the lawyers Howard and Costello had little appreciation for the concept of “opportunity costs”.

    So much for the conservative side of Australian politics and their claims to superior economic management, eh!?

  2. Of course.

    But then, by a similar argument as your traffic signal example, one might argue that Australia has too few terrorist attacks.

    Try making that argument publicly and see how far you get 🙂

  3. Aussie Equitist says:

    On another note, I am keen to see rigourous costs-benefits analyses (which factor in double-handling and opportunity costs) in relation to the inter-related:

    * Job Network

    * Work for Unemployment Benefits (officially known under the despicably vilifying name of “Work for the Dole”);

    * Welfare to Slavery (euphemistically known as “Welfare to Work”); and

    * Dependent Spouse Rebate (which, incidentally, was increased from 1 July 2007 i.e. the same day that thousands of vulnerable and disadvantaged mothers of 6 year olds were officially forced out to work under threat of losing below-subsistence income support payments under Welfare to Slavery).

    I would contend that many Howardian policies stemmed more from dogma and political desperation than data and economic responsibility – and I’m hoping that Andrew and his peers will be forthcoming with some poignant analyses of the polarising dichotomy of Howardian WELfare and WEATHfare policies in due course.

  4. The ‘secondary purpose’ clauses of the Privacy Act?

    Benefit: provide some reassurance to those who worry about companies collecting data on them.

    Costs: prevent major data integration projects.

  5. I have yet to see a C/B analysis of blogging by tenured (or non tenured for that matter) acas.

    Are we getting value for $?

    Where are the NPVs?

  6. Patrick says:

    [Edited to remove personal abuse – AL]

    In the spirit of Aussie above, I’d love to see a rigorous cost-benefit analysis of unemployment benefits, job protection legislation and the ‘safety net’ generally, factoring in opportunity costs (both to the taxed and to immigrants) and health and social intervention costs.

    Maybe Australia has a sub-optimal number of poor dead people.

Comments are closed.