Regulatory responsiveness and industry policy

Image result for new industries and regulationI’ve been arguing that our current approach to efficient regulation is blockheaded for as long as I can remember. I’ve even pointed out how one might possibly do quite a lot better with a less ideologically Manichean approach in which regulatory policy is a battle between Good (markets) and Evil (governments). I sketched out an alternative and tried to sell it as pro-innovation on the grounds that it’s easier to sell ideas through popular buzzwords – or to put it more charitably – when one can answer that difficult question that good business negotiators know they have to answer: “What’s in it for them?”

That meant that I could get funding to develop the ideas, but, it was all a bit abstract for innovation departments who mostly want to get those binoculars out and look around until they see some innovation and then ask how they could get more of it, their imaginations and the political economy of the exercise then turning to doling out money.

But it’s becoming possible to articulate lots of very concrete prospects for an approach to industry policy in which regulatory responsiveness becomes an important aspect of policy as the march of technology reconfigures one industry after another. Thus Jay Weatherill, the South Australian Premier has sought to promote investment in R&D in driverless cars South Australia by promising responsive regulation in the area. Just this afternoon I picked my son up from Paintball who, I discovered on speaking to them, had spent a few years with Victorian regulators to get their game suitable for over-16 year olds instead of over 18 year olds and to develop a slightly milder game for much younger age-groups.

That’s a drop in the ocean, but as I was sitting around I read this story in the Economist. Timber buildings are becoming much more viable, with an 18 story wooden building going up in Canada and a 40 story one in Stockholm on the drawing boards. There’s an 80 story concept building for London which, as you know has buildings named after household objects – as with the Gherkin, the Cheesegrater, the Can of Ham, the Walkie-Talkie and the Shard. The Economist suggests that the 80 footer wood building could be called the Toothpick. Be that as it may, as the Economist notes “One big obstacle to this wooden renaissance is regulation”.

I sketched out a similar idea – over a canvass that comprehended both service provision and regulation in my “Innovation without Money” agenda thinking particularly of health and education when I was Chair of Innovation Australia. But so far no dice.

After thirty years of its own and its progenitors’ existence, Australia’s Office of Best Practice Regulation shows no sign of thinking of this kind of thing. It has no ‘mission’ or ‘vision’ or other simple assertion of corporate religiosity. It is defined, not by its aspirations but by its functions which are focused inward towards government and are more or less exclusively reactive. It’s functions are outlined here and summarised on the PM&C website as:

assist[ing] policymakers to comply with the Government’s regulatory impact analysis requirements. It assesses Regulation Impact Statements and Post-Implementation Reviews and prepares regular compliance reports. It also publishes Regulation Impact Statements and Post-implementation reviews on the Best Practice Regulation Updates website”.

Anyway, there must be lots of other examples. Indeed I expect I’ve thought of some of them, and even documented some previously on this blog. In any event, I’d appreciate any commenters adding to the list.

Posted in Economics and public policy, Innovation, regulation | 3 Comments

Judges have bad days: SHOCK!

Emotional Judges and Unlucky Juveniles
by Ozkan Eren, Naci Mocan – #22611 (CH HE LE LS)


Employing the universe of juvenile court decisions in a U.S. state
between 1996 and 2012, we analyze the effects of emotional shocks
associated with unexpected outcomes of football games played by a
prominent college team in the state. We investigate the behavior of
judges, the conduct of whom should, by law, be free of personal
biases and emotions. We find that unexpected losses increase
disposition (sentence) lengths assigned by judges during the week
following the game. Unexpected wins, or losses that were expected to
be close contests ex-ante, have no impact. The effects of these
emotional shocks are asymmetrically borne by black defendants. We
present evidence that the results are not influenced by defendant or
attorney behavior or by defendants’ economic background.
Importantly, the results are driven by judges who have received their
bachelor’s degrees from the university with which the football team
is affiliated. Different falsification tests and a number of
auxiliary analyses demonstrate the robustness of the findings. These
results provide evidence for the impact of emotions in one domain on
a behavior in a completely unrelated domain among a uniformly
highly-educated group of individuals (judges), with decisions
involving high stakes (sentence lengths). They also point to the
existence of a subtle and previously-unnoticed capricious application
of sentencing.

Posted in Law | Leave a comment

Drug Treatment Centers and Local Crime

Image result for drug harm minimisationby Samuel R. Bondurant, Jason M. Lindo, Isaac D. Swensen – #22610 (HC HE PE)


In this paper we estimate the effects of expanding access to
substance-abuse treatment on local crime. We do so using an
identification strategy that leverages variation driven by
substance-abuse-treatment facility openings and closings measured at
the county level. The results indicate that
substance-abuse-treatment facilities reduce both violent and
financially motivated crimes in an area, and that the effects are
particularly pronounced for relatively serious crimes. The effects
on homicides are documented across three sources of homicide data.

Posted in Uncategorized | Leave a comment

Smerdon v Carlsen 1/2-1/2

Australian Chess Grandmaster and one time Treasury economist David Smerdon is at the Chess Olympiad in Baku and managed to get Magnus Carlsen into a fair bit of trouble, before settling for an easy draw. Here’s the game if you want to look at it. Why 21. Bxh7+ wasn’t played is a bit of a mystery not only to me, which would be unsurprising, but also to the engine.

Well done David!

Posted in Chess | 1 Comment

Ian Marsh: Australia’s gridlocked Parliament

Image result for multi party systemsA friend of mine Ian Marsh sent me this op ed which one of the papers said it would publish last week. Personally, I’m not surprised that they didn’t. They’re waiting for it to be validated by being put through its paces here at the Troppo Grinder first. No change there.

Over to Ian …

There is a structural contradiction at the heart of the new parliament. Two diametrically different political systems co-exist. Incentives and expectations are at cross purposes. Until this contradiction is addressed the prospects for major legislative change must be judged slight.

On one side, the formal rules and procedures of Parliament remain in the two party mould. These tacitly frame the expectations of Ministers, advisors, the public service and just about everyone closely involved. The government proposes and the Opposition opposes. And an election determines whose legislative agenda will prevail. What could be clearer?

On the other side, we have an unacknowledged multi-party system. This is what the voters have endorsed. Look at the results of the last election: The Coalition: 42% in the House and 35% in the Senate. Labor: 34% in the House and 29% in the Senate. Only 75% of Australians voted for one or other of the major parties in the House and 10% of these switched their votes in the Senate. Regional differences also figured. One Nation polled 10% in Queensland, the NXT nearly 22% in South Australia. Moreover, around 20% did not vote, did not enrol to vote, or voted informal.

So this election was hardly a ringing award of legitimacy to anyone.

Here’s another fact. There is absolutely no sign that voters will ever restore either of the major parties to a dominant role. The voting system for the House sustains an illusion.

Compounding their loss of support, the major parties are both divided internally. The Coalition is visibly torn between its conservative and liberal wings. For the moment Labor looks united. But should it win it will have its own problems.

These internal fault lines can be as destructive of effective legislation as any divided Senate. The only solution is more free votes – in fact a hallmark of the liberal tradition.

So how do multi-party systems work? It is not that we are short of examples. Almost every European parliamentary state presents one or another version of this form of government. Continue reading

Posted in Best From Elsewhere, Political theory, Politics - international, Politics - national | 3 Comments

Damien Shen

DamienShenI went to this opening because I know the artist’s sister from The Australian Centre for Social Innovation (TACSI). Like sister like brother, some pretty interesting, reflective and classy stuff. If you’re in Melbourne go check them out for yourself.

More here.

Posted in Art and Architecture | Leave a comment

Weaving professional and practical knowledge together: TACSI launches open source human services in Australia

This is a reworking of an earlier post – but reworked with Chief Innovation Officer of The Australian Centre for Social Innovation (TACSI), Chris Vanstone, there’s quite a bit of new content for those who are interested. Cross posted at The Mandarin. There’s also the interview of the article and I try not to disappoint, knowing how Troppodillians wait, salivating for such productions.

If unpaid carers weren’t caring, the aged care system would fall apart. 46% of people in need of care rely solely on support from friends and family and conservative estimates put the financial value of carers at $6.5 billion per year. But caring can be very tough. Carers have some of the lowest levels of self-reported wellbeing of any groups in our community, impairing their physical and mental health which results in earlier admission to very expensive institutional care months or years before it would otherwise be necessary.

The Australian Centre for Social Innovation (TACSI) has spent years developing a new program called Weavers which throws out a lifeline to new carers. It’s been shown to substantially lift carer wellbeing to the benefit of carers, those they care for and the public purse. How does Weavers work? A network of volunteer ‘Weavers’ help carers in their neighbourhoods navigate the service maze, tackle isolation by staying connected with others and keep things together emotionally. Co-designed and trialled with carers in South Australia and independently evaluated, Weavers has won an Australian International Design Award. Now we’ve ‘open sourced’ it. So if you go to the Weavers’ website, you’ll be able to sign up and access all our hard work – for free!

Is there a catch? Well no, but a better question is ‘how do we make a return on it?’ since, following an establishment grant from the South Australian Government in 2009, TACSI receives no funding from government or philanthropy except for services rendered. The answer is that we’re giving away our knowledge (to the extent it can be codified) as a benevolent act. But like Red Hat and any number of other open source software vendors, we freely distribute a codified product and then charge for our services in developing the codified knowledge for organisations that use and adapt it. As Paul Steele of the The Difference Incubator (Tdi) who’s assisted with the project puts it “My IP is free. My time is not”.  

It’s all part of the doing well by doing good playbook. If things work out, the program grows its own ecosystem in which the codified knowledge we open source is complemented by an increasingly large, diverse and sophisticated community of practice. What’s there not to like? As one of us argued regarding the value of openness online:

Free rider opportunities now so dominate free rider problems that some of our most successful companies provide their wares as public rather than private goods. Google and Facebook could have marketed their products behind a pay-wall to monetise more of the value they generated. But seizing the free rider opportunity and, instead, providing their services as free, public goods, led to such vast value creation that monetising a small fraction of that value via advertising has lifted their combined market capitalisation to over three quarters of a trillion dollars.

In case you’re concerned, we don’t think we’re Google or Facebook. But their own evolution as businesses is, surprisingly enough, illustrative of our own thinking. You see both Google and Facebook could have tried to capture more of the value they created by providing their service as a private good – with users only accessing the service behind a paywall. But both understood that, providing their service as a public good would so vastly increase the total value they produced that this would maximise returns to themselves despite capturing a much smaller share of the total value produced.

Our hunch is that something similar can be said for Weavers. Its potential applicability is vast. Whilst it’s recently been trialled for older people experiencing cognitive decline, we’ve seen it work for people caring for those with disabilities too. We’ve had great interest from those responsible for palliative care. It could work for mental health, for younger carers, for diseases like cancer. It could flourish under consumer directed models including the NDIS. Weavers could support informal carer support groups as well as private health organisations. This is the same phenomenon that leads to the open source operating system Linux being reworked and released in any number of different distributions adapted to different needs, all of which add to the code base which is then available to others. The opportunities are too great for us to keep it to ourselves. Continue reading

Posted in Economics and public policy, Intellectual Property, Public and Private Goods, WOW! - Amazing | Leave a comment