John Legge almost makes a good point

From The Age:

The Productivity Commission is a complete waste of money at a time when we are assured that the government must make savings: whatever question is asked of it, the answer is known in advance. Any report the commission produces, the IPA will produce the same answers for free.

Actually no – the IPA couldn’t produce any of its work for free. The IPA relies on the support of members and donors for all of its good work.

But the point is well made – what is the Productivity Commission’s value add? At the expense of annoying Judith and Steve and the several people I know who are current or former employees of that organisation I think the answer, on average, is zero. Anyone who has read Adam Smith or Hayek or almost any sensible economist already knows the answers the PC should ever come to on any question. Generally it does. So what is the story?

One of my colleagues (a political scientist) recently explained to me that Australian decision makers are loathe to take responsibility for their decisions. Even for obvious decisions. So decisions are shunted off to commissions and audits and the like where disinterested professionals make recommendations that are then implemented. Sometimes. This provides political cover for the decision maker. So the real function of the PC is to provide legitimacy to politicians. Another colleague took that argument further – saying that without the PC many good policy decisions could/would never be taken.

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24 Responses to John Legge almost makes a good point

  1. Kingsley

    I think the theory about providing cover for pollies is right. How often do you see in big business, all levels of government etc that they are “waiting for the consultant’s report”. Some people I am sure, if the consultants report said “cut off your left testicle ” would immediately do so.

  2. One of my colleagues (a political scientist) recently explained to me that Australian decision makers are loathe to take responsibility for their decisions. Even for obvious decisions. So decisions are shunted off to commissions and audits and the like where disinterested professionals make recommendations that are then implemented. Sometimes. This provides political cover for the decision maker. So the real function of the PC is to provide legitimacy to politicians. Another colleague took that argument further – saying that without the PC many good policy decisions could/would never be taken.

    Yes, precisely. A very neat summary.

    Hiding places and decision support, neither of which does anyone any credit, and leads to an atmosphere of perpetual fraidy-catness.

  3. Badjack

    Why are consultants used by big business? It is understandable a small business may need some extra expertise but big business is full of supposedly smart people. People with titles like Director of Finance, Marketing, Operations etc etc. Consultants are used by senior management so they themselves can abdicate their responsibilities when it comes to the TOUGH decision making process. Same goes for politicians.
    Why do sporting organisations palm off tough decision making to ‘committees’..weak pathetic management, thats why. Consultants and committees are used by pathetic, weak Management teams.

  4. boy on a bike

    In other words, the PC is the equivalent of a Fake Charity.

  5. Driftforge

    Why are consultants used by big business?

    There are also times when even the largest of business has need for specialist skills that are not needed on a continuing basis.

    There is a large portion of work in the engineering field which achieves the same basic end – the assumption of risk. Make things cheaper, make things possible, tell someone its all going to work out just fine…

  6. sabrina

    If the PC goes, lot of Economists will lose jobs. If the consultants go, lot of Economists and Accountants will lose their jobs, in some cases university academic Economists will lose their additional source of income.

    Neither will happen, as the consultants are smart (and cunning) people, and there lot of vested interests on management side for not allowing this to ever happen to their consultant mates. Consultants deliver what the management want hear, mostly.

  7. Econocrat

    They say what economists say, which Governments like to go to as a last resort after having tried to get economic advice out of Treasury.

  8. entropy

    Speaking as a policy person, the only way people will give even five seconds to consider the range of possible issues, is to bundle it up in a document that has a halo of cred about it.
    Calls that someone help the poor car industry/cannery/farmers tends to cool down a bit once there is some august person publishing in a table how many handouts they have received in the last ten years. A public servant doing exactly the same (in fact might actually put the table together) would not be listened to.

  9. Badjack

    Driftforge, I understand what you are saying and I will admit that outside help is sometimes needed.
    However if it takes one engineer to tell another engineer how to do his job then the wrong engineer is employed by the company. Same goes for any profession. It is all about the great American business model…COVER YOUR ARSE.

  10. entropy

    They say what economists say, which Governments like to go to as a last resort after having tried to get economic advice out of Treasury.

    haha! True.

  11. Isn’t this called ‘Due Diligence’.
    Did Kerry Packer ever pay anyone to do ‘due diligence’ not required by Government regulation?

  12. wreckage

    I’d go with entropy on this.

    The PC gets listened to. Some guy off the street with an email he printed out from the IPA wouldn’t.

  13. David Brewer

    What to do might be obvious, but the PC may be able to say how best to do it.

    And it is the only tiny corner of the government that is actually mandated to think about efficiency rather than rights-based approaches, sustainability, gender equity, multiculturalism yada yada. It’s almost the only part that understands what markets achieve. Get rid of it and you have state planning as the default position of every piece of advice from the bureaucracy.

  14. Squirrel

    This touches on one of those naughty, heretical thoughts I have from time to time – if much (maybe not all) of the economic advice which goes to Government is so predictable (it looks that way from the outside), why pay comfy six-figure Australian remuneration, plus the costs of over-priced office accommodation etc. when you could probably get essentially the same advice, for a fraction of the price, from keen young English-speaking economists based in India (for instance). If off-shoring is good for others – and it is steadily working its way up the feeding chain – why not for those who have preached it so consistently, for so many years?

    Having unburdened myself of that, yes – as others have pointed out, bodies like the PC may, one way or another, help to inch things along, but if bureaucratic duplication in areas such as health, education, environment etc. is going under the microscope, it might be time to look at the range of economic advisors being paid for by the federal public purse. Interestingly, and perhaps unintentionally, this issue was raised – albeit briefly, and slightly tangentially – in yesterday’s episode of the Senate Inquiry into the Commission of Audit.

  15. Ant

    If the idea to ever get a tatoo takes hold with me, it’ll be one that says “I.P.A.”

  16. Infidel Tiger

    If the idea to ever get a tatoo takes hold with me, it’ll be one that says “I.P.A.”

    Indian Pale Ale?

  17. Ant

    Ha ha. It’d be on my butt, so (almost) nobody would ever see it.

  18. I am the Walrus, koo koo k'choo

    Econocrat and entropy have it, I think.

    There’s another point. Our politicians are for the most part not very bright. And they don’t know much about policy, and less about economic policy. Having the PC there to give advice as requested is a Good Thing for the country. The PC is less political than Treasury, they have a good rep for serious analysis (so good that Rudd, Swan and Gillard wouldn’t go near them because their proposals would be ripped to shreds) and their analysis has a credibility with the public which, for all their quality and seriousness, think tanks cannot replicate.

    The PC is cheap as chips and good value for money.

    That said, the proposal to outsource economics analysis to India is interesting! I think it’s only a matter of time becore it happens, and on balance I think it will be a Good Thing, although it threatens my job. Maybe I could get my skates on and start working on a business plan.

  19. Anon

    There is a saying in government that goes something like this. “No one ever got sacked for asking PWC”.

    Afraid to make a decision. No trust in their own staff. Why even hire qualified people if you are going to hoist every decision to a third party?

  20. samuel j

    Getting rid of the PC would be like cutting the department of finance. There are only a few friends in government that favour smaller government, lower taxes and freedom. The PC runs on the smell of an oily rag compared to the human rights bureaucracy. Wash your mouth out Sinc!

  21. Phillip W

    I am interested in the comments on why business uses consultants. When I worked as a management consultant I usually found that there was someone in the organization who knew the answer to the problem, but this person was somewhat idiosyncratic and was not being listened to by management, so the secret of successful consulting was to take their ideas, dress them up and represent them to management.

  22. Alamo

    Sorry if I’m deemed to be a troll by virtue of the fact that I disagree with the majority on this one, but I happen to think that (perhaps for the first time ever) that Age editorial was pretty persuasive. The Libs seem to be frantically bashing the delete key on Australian manufacturing. I’m young enough that I have to worry about what Aus will be like in 50 years time and this rapid de-industrialisation doesn’t sit well with me.

    And why is ‘corporate welfare’ the first frontier in the war on entitlement? Seems to me that we tax and regulate businesses here into being uncompetitive, allow the unions to ride roughshod over them, and then when they simply inform us that they cannot remain here under that dynamic without subsidies we call them entitled rent-seekers! I think that’s a bit rich!!

    I have an acquaintance who lives in a housing commission townhouse in an inner Melbourne bayside suburb, who openly admits that she could afford her own home, but it wouldn’t be as nice as the one she gets for free! She recently bought a $300 leaf blower so that she wouldn’t have to rake the flaming courtyard! No sign of the war on entitlement over at her place! Something is very wrong…

  23. Bons

    Leaf blower and free rent. Sick modern society in a nutshell – does she have a Harley that she starts early on Sunday morning to ride down to the coffee shop?
    Mavis, bring me the bloody gun it is time to start the revolution!

  24. Driftforge

    However if it takes one engineer to tell another engineer how to do his job then the wrong engineer is employed by the company.

    Don’t be daft. Being told by other engineers how to do a job is part of normal professional development. If you don’t listen to other engineers, shit breaks and people die. If you don’ t know when you don’t know, or you do but don’t ask someone who does, shit breaks and people die.

    Engineering, unlike science (or even worse soft stuff like economics or climate science), is utterly unforgiving.

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