Word for Wednesday: managerialism (again)

John Quiggin11 Comments

Nobody agreed with my attempt two weeks ago to link neoliberalism, and particularly ‘new public management’ with the ideology of managerialism, and the supporting academic ‘discipline’ of management as embodied most notably in MBA programs (for more on the reason scare quotes are appropriate see this piece by Henry Farrell).

I agree that the two are superficially dissimilar, and that their practitioners do not have much to say to one another. I also concede that my supporting argument, resting on the proposition that the two are united in opposition to professionalism was inadequate. Still, I believe it is an empirical fact that the two are generally found together and this fact can be given a theoretical basis. So I’m going to reformulate my argument.

The central assumption of new public sector management is that, if organisations are given the right (financial) incentives, they can deliver socially desirable outcomes without reliance either on direct political control or on any assumption that the organisation is committed to some concept of public service. In practice, in the sentence above the first occurrence of ‘organisation’ should be replaced by ‘managers of organisations’ while the second refers to the members of the organisation considered collectively.

So new public sector management embodies the hypothesis that managers can ensure that organisations pursue whatever objectives are determined for them by policymakers choice of incentives. From a free-market viewpoint, the most congenial way this hypothesis could be satisfied would be for the incentives to be transmitted from top management through the levels and departments organisation. In effect, this would imply a system of piecework with the prices mirroring the incentives chosen by policymakers. But if everything could be done by piecework, there would be no need for the organisation and particularly no need for the senior managers.

So in practice, new public sector management applies direct incentives only to top management and assumes that there exist a set of generic management skills that can produce the desired outcomes even when the individual interests of the organisation’ staff are not directly tied to those outcomes. So, new public sector management depends on managerialism.

The converse link is weaker, particularly since managerialism is first and foremost a private sector doctrine. However, it’s clear that, even in the private sector, managerialism and neoliberalism reinforce each other. Managers clearly get more of the autonomy they want in a neoliberal policy setting, and neoliberal policies of Îlight-handedâ regulation are justified by the assumption that, provided the rules of the game are set correctly, unfettered managerial discretion will yield the best possible outcome.

PM Lawrence on canals and railways

John Quiggin1 Comment

Occasionally my comments thread gets a contribution that deserves a fully-fledged post of its own. I posted one from Observa some time ago. Now regular commenter PM Lawrence has presented a history of transport in the UK, which I think deserves a bit more prominence than a comments thread.

Here is where it begins

As promised – an overview of the economic history of UK transport since the canal age (much omitted, obviously, e.g. no stage coaches or aircraft).

Of course, this should also provide some insights of wider applicability. I shall take the opportunity of making a few asides about things they told me during my Monash MBA studies that weren’t true, which I had more sense than to tell them at the time.

The idea and practice of canal building reached England in the late 17th century, from Holland, which had got them in turn from northern Italy (the term “canal” actually comes from the Italian).

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Monday Message Board

John Quiggin34 Comments

Roll up yet again for the Monday Message Board. All topics welcome, civilised discussion, no coarse language please.

Suggested discussion starter 1: Why do the great majority of visitors read blogs, but never comment?

Suggested discussion starter 2: What’s your favorite self-referential paradox?

Update Although others came close, Chris Sheil gets the prize for recognising the subtle link between my two topics. Anyone who comments on topic 1 instantly disqualifies themselves, since I want to find out what motivates non-commenters.

Further update Controversy rages in the comments thread, with some participants maintaining the c8to should have been given the prize, and others rejecting the identity politics inherent in my supposition that commenters are not qualified to comment on the motivations of noncommenters. All this makes James Russell’s head explode. Read, enjoy, and comment!

Libertarianism, continued

John Quiggin6 Comments

Jason Soon has settled down in London and written a long response to my post on libertarianism. I agree with his conclusion that

the non-purist libertarians can be seen simply as a species of utilitarians/consequentialist who have arrived at different results from their fellow utilitarians/consequentialists who end up as left-liberals or social democrats because of different interpretation of history/policy/economic paradigms.

and I didn’t intend to say anything inconsistent with this. My point, perhaps not stated clearly enough, was that acceptance of the liberal/consequentialist position of say JS Mill doesn’t imply a conclusion one way or the other on free markets vs social democracy, and Jason clearly agrees with this.

It’s clear from reading our blogs that, even though our views on policy issues are usually different, Jason and I are working within a common philosophical framework, and can therefore engag with each other’s arguments. By contrast, as I said in my critique, I find the claims of ‘purist’ libertarians to be fundamentally incoherent. And conversely, although I often agree with the postmodernist left on specific issues, I find it difficult to engage in any sort of debate in this framework.

There’s a bit more on libertarianism, from a newish member of the ubersportingpunditempire, Objectivist John McVey.

What I'm reading, and more

John Quiggin4 Comments

Riemann’s zeta function by HM Edwards (includes translation of Riemann’s original paper as an Appendix) . What with A Beautiful Mind and the proof of Fermat’s Last Theorem a few years back, the Riemann hypothesis is the last big maths question accessible to amateurs like myself. It’s hard going though – heaps of complex analysis applied to concepts as simple as those of prime numbers and factorials. In fact, the zeta function is a relatively simple modification of the factorial n!, extended from positive integers to complex numbers in general, and the Riemann hypothesis says that all zeros of this function lie on a given line. With a bit more work I hope to understand this better, and will try to post or link to a good explanation.

Meanwhile, Sunday being the day of religious observance in Australia, I finally did something about the change of religion I announced last year, taking the family out to the Gabba. I’m pleased to report an exciting victory by the Brisbane Lions over the Hawthorn Hawks, 14.9 (93) to 11.15 (81). As a neophyte, I was happy,if surprised, to learn that my new club song is to the stirring tune of La Marseillaise.This set me thinking about other possibilities -perhaps the Horst Wessel Lieder would fit Carlton and Rupert Murdoch’s rugby league teams could use The Star-Spangled Banner.

This was the first AFL game I’ve ever been to, and the first top-grade Aussie rules game I’ve been to since I followed West Torrens in the SANFL 40 or so years ago (In the intervening years, I’ve lived in rugby league territory almost continuously). Things have changed in all sorts of ways, but the change in relative prices is the most obvious. Back then (B&W) TV was a luxury while going to the footy was taken for granted. Today I could get a brand-new colour TV for the price I paid for tickets for the family (not the cheapest on offer, but nothing special). It’s not hard to explain given technology, wages and so on, but it’s striking nonetheless. And despite the prices, the ground was packed.

Producers and consumers

John Quiggin11 Comments

I was struck by a recent exchange in the comments thread to my post on libertarianism” in which commenter 24601 took violent exception to the suggestion by another participant in the debate that libertarians focused on the concerns of producers rather than consumers. This, 24601 said, was like asserting that libertarians are “greedy, nasty, evil people who like to kill babbies and don’t care about those silly consumers.”

Allowing for the overstatement characteristic of comment threads, this captures an important point about the free-market side of the policy debate in Australia. Concern with the interests of people considered as producers, in preference to the interests of the same people, considered as consumers, is regarded, quite literally, as evil.

I wrote about this in the Fin last year, also covering the themes of managerialism and professionalism. Some extracts

The last ten years have not been good ones for producers in Australia, whether the item produced is as basic and solid as steel or as abstract and intangible as academic research. Work is central to life, but disillusionment with and demoralisation about work has never been greater. Demoralisation is particularly evident among those groups of workers who derive meaning from theh good or service they produce, rather than just their paypacket. Examples include nurses, teachers and many workers in skilled trades.

It is not surprising that producers are having a hard time. Public policy has been dominated by economists who are openly hostile to ‘producer interests’ and see their mission quite explicitly as ‘shifting power from producers to consumers’. …

The fable of the straw that broke the camel’s back is, among other things, a warning about overburdening those who actually do the work. Economic reformers and enterprising managers have been adding straws to the bundle for at least a decade. It’s time to reduce the burden.

The alignment of free-market economics with a focus on consumers is not surprising. The most appealing feature of capitalism, after all, is the shopfront glittering with an unimaginable variety of goods. It’s during the eight (or nine or ten) hours a day spent producing those goods, if you have a job at all, that you get to see the less pleasant aspects of the system.

The economic record of the Howard government

John Quiggin23 Comments

I’m writing a chapter for a book on the Howard government, in which I’m assessing its economic policies. Here’s my draft conclusion (comments much appreciated).

The experience of seven years of nearly uninterrupted expansion under Howard, following three or four years of tentative economic recovery under Keating has given the government a reputation for good economic management. This reputation has been reinforced by the maintenance of low interest rates.

It is hard to see, however, that the government has contributed much to these outcomes. As in standard nowadays, the Reserve Bank is primarily responsible for the maintenance of macroeconomic stability. The Reserve Bank has judged monetary policy well since the mid-1990s, and, as a result, Australia has gradually recovered the ground lost in the 1989-92 recession.

But whereas the then Treasurer, Paul Keating, must share significant responsibility, along with the Reserve Bank, for the disastrous misjudgements that gave us ‘the recession we had to have’, the current government can claim little credit for the correct judgements of the Reserve Bank. It cannot even claim credit for not interferign. The policy of central bank independence has turned out well in Australia in the last, but it failed badly in New Zealand, where bad monetary policy contributed to a string of recessions in the 1990s.

In its first term in office, the government claimed credit for the decline in interest rates on the basis that the tight fiscal policies associated with the 1996 Budget cuts. The merits of the ‘crowding out’ hypothesis underlying this claim are debatable, particularly in a world of unrestricted capital movements.

More importantly, the government has abandoned any claims to fiscal rectitude since 2001 when it dissipated what remained of the budget surplus, Since then, the government has more or less officially adopted a zero budget balance (on whichever of the various accounting systems seems most appealing in any given year) as its target. This policy ensures that an economic downturn will produce large budget deficits and a substantial reduction in public sector net worth. If the government took its own rhetoric about fiscal prudence seriously it would be running surpluses to prepare for such an event.

Similarly at the microeconomic level, it is hard to see any basis for claims of superiority in economic management. The government has neither produced an alternative to the microeconomic reform agenda of its predecessors nor made any significant contribution of its own beyond the completion of unfinished business and some desultory swipes at the trade unions.

In retrospect, it seems likely that the long expansion of the 1990s will be viewed as a missed opportunity. Such a period of economic stability does not come along very often and is unlikely to persist indefinitely. Yet Australia has surprisingly little to show for this long period of prosperity, except for massive additions to an already impressive stock of housing, now valued at equally impressive prices. Unemployment has fallen a little but is still above the low points reached in previous expansions. No new initiative has been made to deal with the problems of financing retirement for an aging population; there has not even been much progress in tidying up the tangled web of policies inherited from the Keating government. The most important single investment in the future is education: if anything, we have gone backwards in this respect, particularly in relation particularly in relation to post-secondary education, the main area of Commonwealth responsibility.

In 1964, Donald Horne described Australia as ‘a lucky country, run by second-rate people who share its luck’. This epigram could be applied, with equal or greater justice, to the Howard government and its term in office, particularly as regards economic policy. Sooner or later, however, this kind of luck will run out.

Update Lots of useful comments already! I’m grateful for substantive, stylistic and typographical corrections and suggestions. As well, the comments thread has some good discussion of things like measures of unemployment. I’m very encouraged by this and will probably post more.

Improvements?

John Quiggin6 Comments

I’ve made some changes in the right-hand sidebar.

First, I’ve made the picture smaller in response to people who’ve had trouble with the sidebar sliding under the main posts (this happens if your viewing window is too small relative to teh (fixed) size of the picture).

Second, following the lead of Crooked Timber, I’ve replaced the list of the most recent 10 posts with a list of the 10 before that (thanks to Kieran Healy for advice on how to do this)

Third, I’ve replaced the 10 most recent comments with the 10 most recently-commented-on posts. (thanks to James Russell for advice on how to do this)

The main idea is to overcome the “top of the page” problem, by which attention is focused on the most recent two or three posts. I’d like to think that, as we get better at this kind of thing that we can maintain discussions running over weeks, rather than, as at present, a few days.

I’d very much appreciate your responses and suggestions

War and health

John Quiggin9 Comments

Also on Mark Kleiman’s blog

The Pentagon says the occupation of Iraq is going to cost about $50 billion per year, indefinitely. That’s not counting reconstruction costs. Keeping Afghanistan safe for its warlords is now costing about $10 billion per year. Can you imagine how much safer a world we’d have today if we’d been willing to spend half that much on rebuilding the fragments of the Soviet Empire in the years just after 1989? Or how much a tenth of that, well spent, could do for human and economic development in Africa? Or how big a horselaugh you would get if you proposed spending anything like those sums on an activity that didn’t also include killing people?

I made the identical point here (full text here, with some reasonably hard numbers

Consider, for example, the alternative option of allocating the money to improved health care or public safety. Under current conditions, marginal health care and public safety interventions in the United States typically cost around $5 million per life saved. Thus, if the direct war budget of $50 billion had been allocated to public health instead, the lives of around 10 000 Americans could have been saved.
…It seems certain, however, that the war will herald a sustained increase in military expenditure of at least $US100 billion per year. A more reasonable comparison, therefore, is the ambitious proposal of the Commission on Macroeconomics and Health, led by Harvard Economist Jeffrey Sachs. The Commission aimed to achieve, for all a poor countries, a two-thirds reduction of 1990 child mortality levels, a three-fourths reduction of 1990 maternal mortality ratios and an end to the rising prevalence of major diseases, especially HIV/AIDS.

As the Commission pointed out, in addition to the humanitarian benefits of saving as many as 8 million lives per year, reductions in mortality are directly correlated with a reduced frequency of military coups and state collapse. These provide the breeding ground for terrorism and dictatorship and ultimately lead, in many cases, lead to US military intervention. The estimated cost for the Commission’s seemingly-utopian program over the next decade is estimated at between $US 50 billion and $US 100 billion per year.

Of course, there’s nothing new here: the same point has been made over and over again for decades. What’s frustrating is that the advocates of war as public policy seem to have no answer to this except to dismiss it as politically unrealistic.

Drugs and Prohibition

John Quiggin4 Comments

Via some critical responses from Kevin Drum, I found this piece by Mark Kleiman opposing the legalization of cocaine. There are some good arguments, and evidence, for drug prohibition. However, it’s crucial to apply a consistency test here. Most of the arguments and evidence that support prohibition of cocaine can also be used to support prohibition of alcohol. (Mark’s “adjustment costs” argument about unemployed coke dealers is an exception, but not, as Kevin notes, a very convincing one).

I wrote a piece for the Fin a while back, looking at the experience of Prohibition in the US and concluding as follows:

In summary, Prohibition produced greater benefits than the War on Drugs, at a lower cost in terms of crime and social dislocation. The idea that it is impossible to change the status of currently legal drugs, does not stand up to an examination of the evidence.

The real reason we will not even attempt to make society drug-free is that we do not want to. I don’t want to give up my evening gin-and-tonic, even if it does me more harm than good. Similarly, despite the appeal of ‘Just Say No’ and the priority placed on abstinence rather than risk reduction in other contexts, no-one seems to be suggesting the promotion of even voluntary abstinence from alcohol.

We are then, left with a paradox. Through the governments we elect, we are willing to turn our homes into fortresses and our streets into battlefields in order to maintain the illegal status of drugs that have been widely used for decades. But the same governments are unwilling to take even modest steps against drugs whose only distinguishing characteristics are a longer history of use and abuse, and the existence of influential producer and consumer lobbies.

I do not know whether our social acceptance of established drugs is a good thing. But until we are prepared to take a consistent position one way or the other, we should stop talking about sending messages. The only message our current policies send is that we are a bunch of hypocrites.

You can read the whole thing here

Update Mark Kleiman responds, suggesting

Even believing that alcohol, on balance, creates a net social deficit, I don’t actually believe that alcohol should be prohibited. Given the enormous user base for alcohol, its prohibition would be operationally nightmarish as well as politically infeasible. Instead, why not ban its sale to those previously convicted of alcohol-induced violence or repeated drunken driving? That ban wouldn’t be perfectly obeyed, but it would have some good effect nonetheless, and wouldn’t create another huge illicit market.

I’m not sure this particular policy would work, but I’m with Kleiman on the point that a pragmatic drug-by-drug policy is needed. I’m reasonably satisfied that this would imply more restrictions on alcohol (e.g. on advertising), further tightening on tobacco, some form of legalisation for widely-used illegal drugs like marijuana and ecstasy and harm minimisation for heroin (needle exchanges, injecting rooms and some form of legal provision for registered addicts). I don’t know much about cocaine – for reasons I don’t understand, it never seems to have become a big deal here.