Wednesday, June 27, 2007

Catch-up politics

In light of the government's broadband reaction this week as well as to climate changes over the last six months, ‘Is there merit in catch-up politics’? (Blogocracy-organised group blog (Joshua Gans, Tim Dunlop, Ken Parish, Kim, Robert Merkel, Andrew Bartlett and Tigtog, question 3).

My answer to this is a ‘two-handed’ economist response – on the one hand it sometimes is and, on the other, not. It is really an obvious point when you think about it – sometimes it makes sense to mimic someone else’s ideas, sometimes it does not.

Politicians can learn from each other and steal good ideas. That is the useful aspect of ‘catch up’ and applies when the community seeks a single best response to a policy issue. This works if there is no fundamental disagreement or division in the community over policy. Pollies can apply this type of catch-up, without losing face, by reverse engineering ideas to repackage them and by falsely claiming priority.

Indeed it is this imitation that should motivate people to advance political ideals and to argue them. Advancing ideals just to install one group of pollies into power is much less important than having the ideals voiced and pursued.

However if there is fundamental disagreement and views are bimodal – so different groups have markedly different views - then playing catch-up can lead to significant views in the community being underrepresented. This is the famous Hotelling Ice-Cream Salesman problem or the Tweedledum-Tweedledee theory of politics.

If the government is holding out in a bargaining situation (e.g. against Telstra re broadband) and faces an opportunistic, populist attack from an opposition party then, a desire to appear to be doing something could weaken its hand make us worse-off. I am not suggesting this is what happened in this case now.

Of course if one party holds silly policy views with populist appeal (e.g. support for ‘industry policy’) and another party copies it, then general ignorance increases as both parties go into populist overdrive and race towards idiocy. We are then all worse off.

While imitation of useful policy ideas is not necessarily harmful, a government that relies primarily on the policy ideas of others might not be thought of being able to deal effectively with the issues of the day in a closed-loop fashion. There should be reduced confidence in its ability to deal with new, unexpected circumstances.

Finally, imitation can lead to better policy, it can also cover up ‘free-rider’ externalities. If a government is not putting effort into coming up with effective policies and towards arguing the case for policies in the marketplace for ideas we all lose. This is so because aggregate effort falls on the part of the ‘free-riding’ party and because other groups then have reduced incentives in making this effort. The only way to avoid this failure is to give some reward to groups who do come up with innovative thinking.

I ran a bit short of time on this quiz as exam marking and doing a million other things.

Other contributions are:

Joshua Gans (proposer) responds here.
Kim’s view, those of Robert Merkel and Andrew Bartlett .
Tim Dunlop has just posed a view that I largely agree with.


robert merkel said...

In other words, who cares where the ideas come from, as long as they're good ones....

hard to argue with that!

Sir Henry said...

"... both parties go into populist overdrive and race towards idiocy. We are then all worse off"

This is pretty much our lot. If ever there is choice between principled, considered, intelligent, prudent and forward looking policy, and a knee-jerk, short-term, wrongheaded, easily sloganed hysteria inducing non-policy, the latter will win, almost by definition because populism does not brook complexity.

The political consequences of the former augurs political annihilation - the latter, success.

Despite HL Mencken's dictum: "For every complex problem there is always a simple solution; and it is nearly always wrong", it is political suicide to try to convince the crazed red-eyed beast that we call the electorate: either on principle or by way of reasoned logic.

Take for instance Arthur Calwell and the 1966 election fought on whether we should join the war in Vietnam. "Better fight 'em there than overhere" seemed the superior argument in terms of electoral success: Harold Holt won in a landslide.

Politicians do their utmost to remain in power by winning popular support, so we can't really blame them for doing what is their raison d'etre.

This is the politics we have and the politics we deserve.

Hence John Winston Howard.

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