Monday, 30 March 2015

The Value of Nothing

Cormac Staunton: A serious suggestion doing the rounds at the moment is that we should have an independent body that costs political party manifestos so that politicians can’t mislead voters with unrealistic promises of tax cuts or spending increases. This is important, but if we are to do it, we need to do it right.

Arthur Beesley in an Irish Times video argues that we need to be able to understand the quality of the individual policies proposed by parties. However, he also says it’s not about saying that one policy is better than another, merely to give the public an outline of the costs.

If we are to evaluate policy and make informed choice we can’t just focus on costs.

In a recent Irish Time Politics podcast “Inside Politics” Fiach Kelly described a government decision to focus on after-school care (homework clubs) rather than pre-school care (childcare). The interviewer Hugh Linehan asked: “Is that because it was a lower cost or a more effective solution?” It’s a question we hear so rarely in our political debate.

If we only looks at the cost, not the effectiveness, we will end up with something like this: Two parties suggest building a bridge across the Liffey. Both have their proposals costed. The results are:

  • Bridge by Political Party A costs €10m funded by a small tax increase. 
  • Bridge by Political Party B costs €5m and it will be funded by savings elsewhere. 

At first glance my vote goes to Party B. It does the same job and it costs me nothing. Vote winner!

But will they tell me anything about the quality of Bridge B? Will they say what the effect of the ‘savings’ elsewhere will be?  Will I end up with buyer’s remorse when Bridge B costs another €5m to repair in 10 years’ time and the ‘savings’ meant my local school lost a teacher?

Measuring the effectiveness of proposed policies is a lot harder than just measuring the costs. But it’s not impossible; there are plenty of researchers whose entire careers are devoted to it. At the very least, a new body should be able to give an indication of the benefits of a proposed policy, not just its costs.

Ideally, proposed policies should be evaluated against what they seek to achieve. Why would you build another bridge over the Liffey? Assuming it’s to reduce traffic congestion there are other ways to do this – like investing in public transport, or promoting cycling. All of these measures will have different costs and different benefits and these need to be factored in.

What we really need is a cost/benefit approach – where the total costs of a policy (including all inputs, externalities and alternatives) are appraised against measurable (and costed) benefits to society.

This is a much more difficult job than merely outlining the costs. But if we don’t do it, we’ll end up like Oscar Wilde’s cynic: knowing the price of everything, but the value of nothing.

No comments: