Ideas@TheCentre
The Economic Consensus We Could Do Without
Treasury Secretary Ken Henry this week accused academic economists of being ‘loath to come to a consensus position on anything’ and lamented that ‘whenever an idea is ventured publicly by a … government minister, there’s at least a handful of academics who will contest it.’ Henry argued they should instead ‘join a consensus’ that ‘would serve the national interest.’
Henry illustrated his point with reference to the government’s emissions trading scheme, an example that could hardly have been less apt. As Warwick McKibbin noted ‘I don't know whether Ken was fingering me but there weren't too many other people out there arguing against an ETS.’
Most academic economists do not see their role as being cheerleaders for government policy. There is a group of Australian economists who routinely put their names to open letters supporting government policy, but these letters are an attempt to manufacture consensus when there isn’t one. For every economist putting their name to these statements, there are many more who quietly object to such faux consensus-making.
Economists disagree about policy, not because they are perverse but because economics encourages caution in policymaking. As Friedrich A. Hayek wrote, ‘The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.’ This insight is not only inconvenient to governments, public servants, and their cheerleaders but also highlights why consensus can be dangerous for good policy.
The Rudd government recently spent $112 million establishing the Australian National Institute for Public Policy at the Australian National University in Canberra. The university’s grateful Vice-Chancellor, Ian Chubb, was under no illusion as to what this money was for:
Today’s announcement takes the relationship between the nation’s university, the nation’s public servants and the nation’s Government to a new level. The public policy precinct is a very tangible sign that ANU is a strategic endowment for the nation, working in the national interest.
With the government’s generous endowment of public sector think-tanks, there is a growing danger that independent voices in public policy debate will get crowded out. Ken Henry and the government will no doubt find such a government-funded consensus more comfortable, but it is hardly conducive to good public policy.
