Policy in 500 Words: applying economics to politics

Rational choice theory can be defined as the application of economic methods and insights to the study of politics. It can help inform major questions in public policy, including:

• Should we try to get people to change their behaviour, perhaps ‘for their own good’ or to act in the ‘collective’ rather than their own narrow self-interest?
• If so, how? Should we rely on the state to address ‘collective action problems’?
• If so, should we use incentives, coercion, and/ or ‘nudges’ to change behaviour?

In other words, we ask if it is appropriate to change public behaviour and, if so, what means are most effective.

A classic approach is to make some simplifying assumptions – for example, about people’s ability to process information and rank their preferences when making choices – to help us imagine how they might act in particular situations.

For example, people might ‘free ride’ if they can benefit from a good or service without paying for it. This insight underpins the argument that the state must intervene to solve ‘market failure’, such as in the provision of ‘public goods’ (which are ‘non-excludable’, i.e. no-one can be excluded from enjoying their benefits, and ‘non-rival’, i.e. their use by one person does not diminish their value to another).

Or, people might contribute to Hardin’s ‘tragedy of the commons’: the potentially catastrophic, cumulative effect of individual choices regarding scarce ‘common pool resources’ such as fertile land, unpolluted water, clean air, and fishing stocks. It is in our collective interest to act collectively to manage such resources, but individual interest to take a little bit more. So, if we all act individually, not collectively, the scarce resource is ruined.

Hardin’s solution to this problem is ‘mutual coercion, mutually agreed upon’, such as state intervention. He recommends taxation as a good example of a coercive device. However, state intervention is not a panacea and it produces major unintended consequences. So, this recommendation prompts two key discussions that are central to contemporary studies of public policy:

1. The Institutional Analysis and Development Framework (IAD) is a key development

Elinor Ostrom’s Nobel prize-winning work challenges the idea that state intervention is necessarily the best solution to collective action problems. It demonstrates the potential for non-market solutions based on a combination of trust and less coercive means to minimize the costs of monitoring and enforcing collective agreements. This approach involves individuals seeking agreements with each other that could be enshrined in a set of meaningful rules (institution). The rules may be enforced by a private authority, and the ‘commons’ would remain common and actors would observe each other’s behaviour and report rule-breaking to the third party that everyone pays for and agrees to respect.

2. Should we nudge instead of coerce?

Behavioural economics takes insights from psychology to identify the cognitive biases that influence human choice. It has become associated with the idea of ‘nudge’, in which we influence people’s behaviour by exploiting their biases (such as by having them opt-out-of rather than opt-into services, or making it easier to process the information required to make choices).

Take home message for students: don’t just reject rational choice because you read that it uses wackily unrealistic assumptions. Instead, focus on the practical benefits of different ways of thinking. In this case, what issues do these simple models raise? Then note the links between classic and modern studies. Behavioural economics draws insights from psychology to get a better understanding of ‘rational choice’ but you can see the same broad aim to understand how people might act and if we should try to change such action. The IAD also informs the study of state and market failure: can we say with any certainty what governing set-up is best?

500 words series https://paulcairney.wordpress.com/500-words/

1000 words series https://paulcairney.wordpress.com/1000-words/

Scottish Parliament committees: when radical change isn’t radical change

You can find some very useful suggestions for Scottish Parliament committee reform in the summary and full speech (2015) by former Presiding Officer Tricia Marwick. They follow some useful suggestions by the Consultative Steering Group, which set out its plans for the committees in 1998.

The theme in both cases is: let’s find a way for the Scottish Parliament to be important, and for business-like committees (not partisan plenary debate) to be at the heart of its operation. Put more critically: let’s produce some good structures or reforms in the hope that political parties don’t act like political parties.

So, while the CSG expressed some hopes that the committees would perform a new role consistent with Scottish Constitutional Convention’s hopes for ‘new politics’ (‘more participative, more creative, less needlessly confrontational’), Marwick perhaps expresses some disappointment that it didn’t work out too well.

That said, Marwick’s suggestions get to the heart of many practical limits to the operation of committees. To demonstrate, look first at the way I summarised parliamentary life so far (for the Sunday Post):

“The Scottish Parliament’s committees have always suffered from a gap between expectations and reality. When the Scottish Parliament was introduced, there were high hopes that it would function far more effectively than Westminster. The architects of devolution rejected a second chamber in favour of a powerful unicameral Parliament with committees at the heart. To make up for the lack of a revising chamber, they front-loaded the legislative scrutiny process, with committees tasked first to consider the principles, then amend, draft bills. To reinforce committee power, they made many of them permanent, and gave committees the functions of two different kinds of Westminster committee – Standing (to scrutinise legislation) and Select (to monitor government departments and ministers). They have the ability to hold agenda setting inquiries, monitor the quality of Scottish Government consultation, and initiate legislation. The idea is that committees become specialist and business-like (leave your party membership at the door) and their members become experts, able to hold the government to account, and provide alternative ideas if dissatisfied with the government’s response.

The reality rarely lives up to the rhetoric. The party system still dominates, with MSPs whipped to ensure government control of parliamentary business (apart from the brief period of minority government from 2007-11). Parties control committee membership and have overseen a large turnover, which undermines MSP expertise. The committees are ill-resourced, and they struggle to generate the amount of information they need to perform scrutiny well. So, it is no surprise that committees struggle to keep on top of the evidence given to them. They have the ability to do little more than one piece of work before moving on to the next”.

Marwick’s suggestions at least address the latter points

Scottish Parliament committees are ill-resourced and their MSPs are spread too thin. They will often serve more than one committee and move between committees – which, if combined with high MSP turnover in every election, undermines their ability to become specialists in their field. So, Marwick recommended a smaller number of larger committees to reduce that thin spread and encourage more effective scrutiny.

Marwick also pushed for elected convenors to address the problem of committee/ government distance. Right now, the governing party can appoint its share of convenors (and members) and ensure that there is little distance between the governing/ scrutiny roles. The Scottish Parliament is also small and there is not the same chance (as in Westminster) to make a career out of being a backbencher/ convenor of committee. Electing those roles would make convenors ‘directly accountable to Parliament’ rather than subject to the whims of parties (maybe).

These moves would represent radical reforms in the Scottish Parliament, but …

I wonder if anyone outside of Holyrood would notice the difference. Certainly, they would not radically change the fairly traditional Westminster-style relationship between government and parliament in which the government governs and the parliament struggles to provide scrutiny with limited resources. Nor would they change the very strong tendency for MSPs to act along party lines. You can train new MSPs in the ways of the parliament (an abstract concept that takes time to appreciate), but also expect them to be socialised and whipped by their parties (a concrete process that you’ll be expected to recognise immediately).

These reforms would take place during a time of diminishing parliamentary influence

In a Political Quarterly article, I identify two aspects of devolution that may diminish the Scottish Parliament’s role in the near future:

1. further devolution from the UK to Scotland will see the Scottish Parliament scrutinise more issues with the same paltry resources
2. further devolution from the Scottish Government to local public bodies will see the Scottish Parliament less able to gather enough information to perform effective scrutiny.

Both issues highlight the further potential for the Scottish Parliament, heralded as a body to ‘share power’ with the government and ‘the people’, to play a peripheral role in the policy process. To all intents and purposes, the new Scotland Act will devolve more responsibilities to Scottish ministers, without a proportionate increase in parliamentary resources to keep tabs on what ministers do with those powers.

Perhaps more importantly, the Scottish Parliament can only really keep tabs on broad Scottish Government strategies. What happens when it devolves more policymaking powers to local public bodies, such as the health boards that give limited information to committees and the local authorities that claim their own electoral mandate?

In other words, the proposed reforms address the practical limits to parliamentary influence at a time when those limits are being further tested.

Are there any issues on which the parties can agree?

They also don’t really solve the problem of partisanship, which means (for example) that it will be difficult to get the parties to agree about the kinds of issues they should examine in depth. To be effective as a group, MSPs really need to prompt the Scottish Government to do something (perhaps more quickly) that it already wants to do, or find an issue that transcends party politics (perhaps such as the representation of women in the Scottish Parliament, as part of an inquiry into the extent to which it represents important social groups). In most cases, this won’t happen.

So, let’s welcome some parliamentary reform but be realistic about its effect.

[I discussed these issues briefly on Good Morning Scotland, 10.5.16 at 7.07am. It’s true – ask my cousin. He heard the whole thing.]