The Ozzie winners for 2012: Cautious knowledge trumps dogmatic ignorance

The 1947 Grand Ozzie winner holds our restrained Austin Holmes Memorial Trophy.

The 1947 Grand Ozzie winner holds our restrained Austin Holmes Memorial Trophy.

The Ozzies are, of course, Club Troppo’s annual awards for think-tankery. Handed out ever since Troppo’s founding in 1863, they are … oh, all right, I made all that up. The Ozzies are an excuse for me to write up a few papers I missed at the time and make a point about two Australian institutions I admire. Though hey, Ken, Nick, if they take off, we could probably make a few quid out of an awards dinner!

Without further ado, on to the prizes.

The Ozzie for best think-tank which is actually a blog goes to The Urbanist, the blog of the remarkable Allan Davies. It started out as the Melbourne Urbanist, but Crikey did the nation a favour by giving Davies a higher podium from which to speak and asking him to address issues outside Melbourne. Davies is now doing the nation a favour by bringing sanity to the debate about the shape of our cities, perhaps the most under-rated of our national issues.

Davies’ ability to write prodigiously at high quality on a wide range of topics is pretty much unequalled. His blog posts are better than most think-tanks’ full papers, and there are more of them. Just in December 2012, he dissected high-speed rail claims, argued in favour of the latest Sydney light rail proposal, highlighted the ungreenery of much public transport, skewered a dodgy Age report about traffic forecasts, explained why Sydney’s CBD is growing more slowly than Melbourne’s, and much more. Early in the year, he pointed Australian readers to the latest literature on infrastructure project costs. He has been the most compelling critic of the Victorian government’s barmy plans for an Avalon Airport rail link. His approach is always to stress that the right solution for a city problem relies on a complex mix of factors. Yet he can tease out the factors that matter most, and he writes in a style which allows any educated Australian to absorb his arguments.

More than anyone else, Davies demonstrates why the traditional think-tank model is under threat from Internet-enabled individual experts.

The Ozzie for best speeches which are really think-tank papers goes once again to the Reserve Bank of Australia. The RBA is to the Ozzies what the Mazda MX5 is to best-car awards: year after year, it just keeps making the list.

In 2012, the RBA’s extended leadership group once again delivered up a series of speeches which were actually policy essays. They frequently laid out new ideas rather than summarising what had already been published. While they sounded fine in the audio, they worked best when read.

This is partly because RBA speeches generally reject or at least downplay the hackneyed preacher formula – “tell ‘em what you’ll say, tell ‘em, then tell ‘em what you said”. They typically do not start with a position and then defend it, lawyer-style. Instead, they start with a couple of ideas, a piece of evidence or three, an interesting puzzle – and then tease that out until they produce an interesting, well-constructed conclusion. They are true essays in the original French sense – “essais”, attempts to figure something out. When you read an RBA speech, you see wisdom and intelligence at work, rather than mere rhetorical force.

This willingness to walk through a thought process is arguably the mark of great essays. As a style, it has been almost lost from public debate. The RBA is its finest Australian defender. You can see the care the staff is taking to create lines of thinking rather than just covering dot-point lists. You can see them looking for the flaws in their own arguments (they actually detailed their own forecasting weaknesses this year in a research paper). They address themselves unashamedly to the smartest of the people who follow and care about financial and economic policy. They rarely patronise and they keep their language as simple as it can be and still make their case. This is all in part the legacy of the late Austin Holmes, the Ozzie after whom these awards are named.

None of that would matter if the RBA had nothing to say. But it employs a disproportionate number of Australia’s brightest economists, and it has a great deal to say. To me its most interesting 2012 idea was RBA governor Glenn Stevens’ suggestion that our soaring savings rate – and by definition, our collapsing consumption rate – is responsible for the much-noted gap between public economic pessimism and solid economic growth. More people should have noticed this argument; Wayne Swan’s office should have grabbed it and run with it.

Meanwhile, the unOzzie for worst think-tank paper goes to The Australia Institute, which essentially made a public declaration that it has no quality control process of any kind. Its paper The rise and rise of the big banks spent a remarkable amount of time on the bizarre notion that a shadowy cabal controls Australian banking, unnoticed for years despite its obvious presence on the banks’ share registers and in every bank annual report.

“On average, over 53 per cent of each big bank is owned by shareholders that are among the top 20 shareholders in all the big banks,” said the paper’s author, David Richardson, in a statement issued by the Institute. “The last thing these common shareholders seem to want is genuine price competition.” Essentially, he claimed, bank ownership is a giant conspiracy.

This would be a sensational find if it were right. In fact, it’s BS with a special topping of dumb. The common shareholders Richardson frets about are nominee companies who hold shares as custodians on behalf of a owner such as a superannuation fund like, say, a union-run industry fund. (This structure is used mostly to reduce the risk of fraud on the fund.) The nominee companies are also among the major shareholders in most major Australian listed companies.

To describe these ownership arrangements as some sort of shadowy cabalistic conspiracy is either deceptive or awesomely stupid. The paper should ensure that no-one takes The Australia Institute seriously on matters related to business or the law for a very long time.

(For your writer, this produced an interesting dilemma. I reported the findings relatively straight in Banking Day, on the grounds that people should at least know what was being said. In retrospect I wish I had made it clearer that the paper’s author did not know what he was talking about, and taken the time to contact him and ask why he wrote what he did. Most News Limited papers, of all outlets, reported the findings breathlessly. Perhaps to their credit, Fairfax and the ABC ignored it all.)

And the coveted Grand Ozzie for best think-tank paper of the year goes to the Grattan Institute for John Daley’s Game-changers: Economic reform priorities for Australia. Grattan is a huge institution by Australian think-tank standards (27 people, many with impressive CVs) , so it needs to be producing winners. Game-changers has upped the bar for quality analysis of Australian public policy. And because Daley is Grattan’s boss, his paper stands a chance of being a lasting example at least within that institution.

Game-changers starts by saying what everyone in the business knows but few acknowledge: worthwhile reform will take up time, energy and political capital. The obvious conclusion is that you should pick reforms that will actually make a difference to the country. Prioritise, the way Kevin Rudd failed to do. (It seems likely that Daley was influenced by former Rudd speechwriter and latter-day critic James Button, who happens to now run Grattan’s communications function.)

Game-changers aimed to quantify the gains from reform, as the Productivity Commission has long done, but over a wider range of subjects. Having done so, it ended up opting for three priorities: a broader-based GST, and greater workforce participation by women and older people..

But the special ingredient in Game-changers was its determination to look not just at what might come from a reform, but also at how confident Australians could be about the estimate. Health care reform, for instance, was assessed in the report as potentially an important reform. The problem is that we don’t actually know how to improve outcomes in what is already a very good system, as the report frankly states.

Do you think our problems would be solved by more individualist industrial relations laws? Or by a focus on innovation, decentralisation, industry policy, tougher attacks on oligopolies? Daley’s brutal conclusion is that all of these might matter, but there’s little real  evidence to justify new intervention right now. For instance, “Direct attempts to correlate historic changes in industrial relations regimes with economic outcomes are either inconclusive or unconvincing … Many businesses and business groups have argued that industrial relations reforms would reduce deadweight costs … However, these deadweight costs of industrial relations appear to be relatively small.”

Game-changers also unloaded on all the pundits who claim we have an infrastructure crisis. “Theoretical work on infrastructure over the last few years casts doubt on claims that infrastructure spending has a major impact on growth of a developed economy. Project-by-project analysis by Infrastructure Australia reveals relatively few projects ready to proceed, and most have modest net benefits.”

Daley’s willingness to address both the value of reforms and the probability of realising them made Game-changers the best think-tank output of 2012.

If you think the choice of Ozzie winners betrays a certain bias, you’re right. In an era where dogmatic ignorance often seems to be winning the battle, these awards reflect the virtues of cautious knowledge, of “evidence-based policy”, of recognising uncertainty – of what Richard Feynman called “a kind of leaning over backwards” to test whether you might after all be wrong. In an age when anyone can be a media outlet, think-tanks have to do more than just riff on their favorite ideological biases. A few are doing that. More power to them.

Footnote: Ken and Nick, if we do have an awards dinner, let’s get these two to host it:

This entry was posted in Economics and public policy by David Walker. Bookmark the permalink.

About David Walker

David Walker is the principal of publishing consultancy Shorewalker DMS where his current projects include editing Public Accountant magazine for the Institute of Public Accountants. David has previously been chief operating officer of publishing firm WorkDay Media, director of communications and advocacy for the Business Council of Australia, director of policy and communications for the Committee for Economic Development of Australia, site director for online finance start-up eChoice and an editor and columnist at The Age. He has written professionally on economics, business and public policy since 1987 and spent three years in the Canberra Press Gallery. Contact him on 03 8899 7790 or email [email protected]

2 thoughts on “The Ozzie winners for 2012: Cautious knowledge trumps dogmatic ignorance

  1. Hi David,

    you are a little uncritical here of the Grattan Institute report. Take for instance its big headline statement that a particular mix of tax reform is going to give us 20 billion reasonably certainly.

    Let us unpick this one. The basics of the proposed tax reform is to increase GST on health, education, and other forms of ‘consumption’ and to use that to reduce corporate tax (let us forget for a moment about income tax). The essential argument (buried in a footnote) is that individuals will not change their savings as a result, but will simply end up spending exactly the same amount on health, education, etc., simply consuming less whilst this in no way ‘costs them’ future productivity. This means it is assumed the consumption elasticity is -1 and that there is zero productive benefit of health. education, etc.. I hope you are starting to feel uncomfortable, David, but hold on, there is more…..

    The supposed ‘benefit’ of this broadening of GST is that business will invest 20% of the extra revenue, none of which will supposedly flow abroad or will crowd out other investments, which means that the total capital stock will increase over time and total GDP will also rise. With near certainty according to the report.

    Effectively you should see this as the equivalent of saying we should not consume today, but invest instead and consume more tomorrow. It is like saying we should be close to starvation today so we will have more to eat tomorrow. You will nearly always be right in such a prediction (except if you strongly believe in Keynesian demand effects), but this does not mean you should really do it as a country. And of course viewing education and health purely as consumption is a little off-center.

    What you are hence mainly looking at is an argument for taxing consumers more and giving it to producers. By an institute largely subsidised by…….

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