Trivial Pursuit - A Response

In the latest Quarterly Essay, I have a response to George Megalogenis’s contribution.
Response to George Megalogenis’s Quarterly Essay, “Trivial Pursuit: Leadership and the End of the Reform Era” (Nov 2010)

Psychologists have a theory they call the fundamental attribution error: the tendency for humans to overplay the role of individuals, and underplay the role of circumstances. On the field, sports broadcasters love to speak about players who are ‘on a roll’, when they’re merely observing Lady Luck. In business, chief executives who govern during a boom tend to be overpaid, because their company is just surfing the wave like everyone else. And in politics, observers love to tell stories that focus on the role of players, rather than events.

A few facts. When the early-1990s global downturn hit, sitting Prime Ministers in Australia and the United Kingdom were both dumped by their own party-room. During the period 1992-1995, six of Australia’s eight states and territories ousted their government.  But in the early-2000s, state elections almost invariably saw the incumbent returned. Even when John Howard had clearly passed his use-by date, the booming world economy meant that his party room could not bring it upon themselves to wield the axe. In the words of British Prime Minister Harold Macmillan, the greatest challenge for a political leader are ‘Events, my dear boy, events.’

For commentators, the temptation to focus on personalities over larger forces is understandable. Tolstoy may have mounted a convincing case for historicism, and against the ‘great man’ view of history. But when you’re trying to sell a story for the daily news rather than a 1,225 page novel, why not boil things down to a human scale?

The trouble with an individual-based approach is that you can miss the wood for the trees. It is true that Julia Gillard, Malcolm Turnbull and Kevin Rudd are deeply fascinating individuals. But the big stories are less about personalities than grander structural narratives.

When it comes to the media, George Megalogenis neatly captures the zeitgeist. He writes of the phenomenon that ‘turns journalist into player’, as ‘commentators… find themselves reheating the one insight across half a dozen forums’. The cost, he points out, is ‘the hours that instant punditry takes away from the day job – time that used to be spent nagging sources, listening to debates and reading documents’ (p.15).

Note that when Megalogenis dissects how the media has changed, he doesn’t focus on individuals. Rightly, he doesn’t attempt to argue that journalism has changed because of the way that particular journalists choose to do their job. Media transformation is about structures and technologies, not the personal styles of Paul Kelly and Laurie Oakes.

Yet when it comes to interpreting modern politics, Megalogenis casts aside his big picture view and turns to a focus on the players. To his credit, he acknowledges the role played by powerful anti-reform forces in the campaign against Mining Tax Mark I. But in the end, Megalogenis cannot resist laying the blame at the feet of an individual. The same goes for his discussion of climate change.

I’ll admit that writing about the tectonic forces that shape modern politics it is harder than spinning a yarn about the witty barbs exchanged during Question Time. But without that kind of context, there’s a risk that reportage devolves into a kind of reality TV show.

Take economic reform, where Megalogenis acknowledges that Labor already has form. Under Curtin, we put in place uniform personal income taxation and laid the foundations for a post-war full employment policy. Under Whitlam, Labor implemented universal health insurance and began lowering Australia’s tariff walls. The Hawke government floated the dollar and negotiated the Accord. And Keating’s government introduced the superannuation guarantee and enterprise bargaining.

Yet Megalogenis fails to recognise that the Rudd and Gillard governments have been engaged in an economic reform agenda that is at least as ambitious. Investing in roads, rail and ports, building the National Broadband Network. Reforming the education sector with more information, greater choice, and a set of incentives that will help students learn more. And switching to activity-based funding for hospitals to bring about structural reforms.

What distinguishes the Gillard government from the Hawke and Keating governments that came before us is not reform ambition, but the difficulty of conducting a sustained national conversation through a media that seems to be perpetually suffering from attention deficit disorder, and amidst the din of an opposition that seems to have adopted the US Republican playbook without changing a page. (Listening to Tony Abbott’s raucous bawling on the last day of parliament in 2010, I half-expected him to caw across the chamber ‘How’s that hopey-changey thing working out for you?’) Like all governments, ours has made mistakes, but the big story is about the economic circumstances and the media environment, not the reforming zeal of particular individuals.

If Megalogenis wants to help economic reform succeed in Australia, I have two suggestions as to how he might achieve it.

First, call your colleagues out on their inconsistencies. When News Ltd tabloids recently embarked upon a campaign against foreign investment (under headlines such as ‘Chinese buying up our farms’, ‘It’s time to stop selling off the farm’, and ‘It’s time to save our farms from foreign investors’), did anyone stop to question the hypocrisy of foreign-owned newspapers campaigning against foreign ownership?

Second, drop the polls, and report only betting market odds. We now have a large body of economic research (including some of my own work on Australia, co-authored with Justin Wolfers), that clearly proves betting markets are more accurate than polls at predicting the final outcomes. But more importantly, betting markets are also more stable. With response rates so low they don’t dare publish them, asking a pollster who is going to win the next election is as useful as asking a manic depressive how he feels today. By contrast, betting odds are as dull as a suburban solicitor. Consequently, a newspaper that reported only betting odds would find ‘who’s going to win’ stories relegated to the inside pages – freeing up precious front pages for issues of substance.

That said, while I think that Megalogenis has overplayed the role of personalities in Australian politics, I share his optimistic view about our nation’s current circumstances. As he points out, ‘Australians elect Labor governments to change things.’ (p.4). The Gillard government fits proudly in that long Labor legacy.

Andrew Leigh is the federal member for Fraser in the ACT. Prior to entering politics, he was a professor of economics at the Australian National University. Andrew’s latest book is Disconnected (UNSW Press, 2010).

In his reply, George doesn't take all my advice, but it sounds like he'll meet me part way. He promises not to discuss a poll number in 2011 - a pledge that Annabel Crabbe has apparently also made. Kudos to both journalists; may more of your colleagues join you.
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Roll Up, Roll Up

I spoke in parliament this week about the Royal Canberra Show.
Royal Canberra Show
2 March 2011

Last weekend I took the family to the territory’s one and only Royal Canberra Show. The show puts on display the best produce and livestock that the ACT and surrounding areas have on offer. Bolstered by the best growing season many producers ever seen, there was a diverse showcase of farm animals and agricultural and horticultural produce. As a boy who attended an agricultural high school, I greatly enjoyed watching the working dogs, seeing the cattle classing and checking out the fresh produce. We also witnessed the V6 HiLux team crash two utes in front of us, prompting my four-year-old to turn to me and say, ‘Daddy, was that meant to happen?’

The 134,000 people who attended were no doubt drawn by the furious show competition that can only be associated with a good agricultural event like the Royal Canberra Show. Congratulations should be afforded to winners like Hannah Power and her bull Recharge, who took home the senior champion ribbon; the Howe family with their stockhorse O’Brien’s Flauntette, who won Champion Australian Stock Horse Working Horse; Dan Dwyer, with his tablet and butternut pumpkins; and DE Thomas with the dog Maryheather Wolfman, who took out first in Australian Bred Working Dog Class.

The success of the Canberra Show tells me two things worth celebrating: Canberrans are proud of their city’s country roots; and the growing regions that surround Canberra—the Monaro, Upper Lachlan, Palerang and Yass Valley—are going strong.
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Expanding Opportunity

I spoke in parliament this week about school funding.
Schools Assistance Amendment (Financial Assistance) Bill 2011
3 March 2011

Education is the best anti-poverty vaccine we have yet invented. It provides the foundations from which Australians can build a life of their choosing. Education lights a spark which can see a child from Cape York not just go on to university and become a leader in her community but also become Young Australian of the Year, as Tania Major did a couple of years ago. A great education means that a child from Ilfracombe can become the first female member of the Queensland bar and our first female Governor-General. This great building, this national parliament, is a showcase of the opportunities which education provides to children from all corners of the nation. So many members of the House acknowledged in their first speeches that they would not be here today were it not for a great education. I remember hearing time after time those stories of where a particular teacher or a certain educational opportunity had made the difference in someone’s life.

Providing a great education is not just good social policy; it is good economic policy as well. Raising the human capital of our workforce is the most promising way of increasing Australia’s productivity, which has been sluggish over the last decade or so. By boosting the quantity of education we will help our labour force deal with future changes in the economic structure. A great education means that children will be more resilient when, as workers, they face changes in the kinds of jobs they are expected to do. Improving the quality of education ensures that Australian children learn more from each given year at school, at VET or at university. The importance of education means that we in this place have a responsibility to ensure that our schools get the resources that they need to do the job that we know it is important for them to do.

The Gillard government, having recognised this, has invested a record amount in school building infrastructure. The great school modernisation program, Building the Education Revolution, has given schools great buildings which allow them to do extraordinary things in the educational space. I have to confess that I was a sceptic about the BER program. When it was introduced, I was not in parliament and did not have children at school, so I had not visited any of these schools. But one of the great things you get to do as a local member is to go out to your local schools to talk with the parents, the teachers, the children and the principal about how these new school buildings have made a difference to the work they have done. I have seen with my own eyes so many examples of how the BER program has transformed the quality of education in Australia. Yesterday morning that I was out with the Prime Minister and the Minister for School Education, Early Childhood and Youth, Mr Garrett, at Turner School. It was my second visit to the school, because I had been there to open their new school library. Principal Ms Jan Day, the teachers, the children and the parents are as excited by their new school library now as they were last year when the library was opened.

Mr Tudge interjecting—

Mr Champion interjecting—

The SPEAKER —I would just indicate that the member is talking about school students being excited, not members of this House. Perhaps we could settle down with the interjections and let the member make his point.

Dr LEIGH —They are still as excited by this new school library as they were last year. I am sure the member for Aston would himself be very excited if he had the opportunity to visit it, an invitation which I formally extend to him today. The community got involved in that school library. There is a mural on the outside of the school library which was put together by Kirsty Verook, one of the local parents. She is a mosaic artist, and she worked with the schoolchildren. She asked them what designs they would like to have on the outside of their library, and she then put their ideas into a mosaic which I was pleased to show to the Prime Minister and Minister Garrett when we visited yesterday morning. Turner School’s is not a lone story. Across Fraser I have seen the impact the BER has had on our community.

At Black Mountain special school, a school for students with intellectual disability, the BER project was the building of a new school hall. I know that many in this chamber think that a hall is just a hall, but for students at Black Mountain the new hall means that for the first time students in a wheelchair can attend the same assemblies as able-bodied students; the school can now fit all of those students into the same hall. The school used to have a stage which was so steep that, when students in wheelchairs got an award, they had to receive it down on the floor in front of the stage. But now, with a well-designed stage, it is possible for the first time for a student in a wheelchair, when they receive an award, to go up and shake the hand of the principal and receive the award in the same place as every other child. This affords them the simple dignity that a great school experience provides.

I had the pleasure of opening new school facilities in Florey Primary School, which has seen renovations to its hall and also the introduction of science labs. That is particularly appropriate given that the school is named after Sir Howard Florey, the great Australian who invented penicillin—possibly one of the greatest Australians of all time. At Amaroo School, new classrooms with innovative learning spaces have been constructed. Students can learn in their traditional classroom or have lessons with their entire peer group. The dividing walls between the classrooms can be taken down and improve the quality of the teaching experience. Team teaching is now possible at Amaroo School thanks to the Building the Education Revolution program. When I was in school—as may have been the case when you were in school, Mr Deputy Speaker Adams—we just had blackboards. We then moved to the age of whiteboards. Now, in Canberra, whiteboards are being replaced by innovative SMART Boards. These are just some of the examples that Prime Minister and the Labor government have brought about through our commitment to high-quality education.

The Schools Assistance Amendment (Financial Assistance) Bill 2011 builds upon the Gillard government’s commitment to ensuring certainty of investment in all Australian schools. The government’s review of funding for schooling is a once-in-a-generation chance to build a community consensus around the education needs of our nation. It will enable us to further the aspiration that every Australian child should have the opportunity to get a great education. By amending the Schools Assistance Act 2008, the Australian government will be able to continue to provide recurrent and capital funding to non-government schools while the review is conducted. That will provide certainty to Catholic and independent schools to enable them to continue to give their students a good education. This bill will also enable the government to continue to work with school communities, parents and families in the non-government school sector to build on the partnerships that are so critical to improving outcomes for Australian primary and secondary students. This is just one part of our broader education agenda.

We are also investing over $64 billion in school education over four years—almost double that of the previous government. We are making more information about our schools available than ever before, through the My School website. As my wife, Gweneth—who I am pleased to acknowledge is here in the chamber today—and I went about choosing a school for our four-year-old we found the information on the My School website absolutely invaluable. My School 2.0, which will be launched tomorrow, will for the first time provide parents and the community with information about the resources that schools have and the changes in student performance over time. I have to say that I am deeply disappointed that the Liberal Party is going to oppose this information being made available to Australian parents—that the Liberal Party supports keeping the blinds down on this critical information.

The Labor government is implementing an Australian curriculum for the first time, working in partnership with states and territories to make sure our students get a great education no matter where they live. I have to say to the member for Sturt that students in my electorate are learning from the national curriculum today. Classes are being taught in ACT schools based on the national curriculum. So, despite what the Liberal Party may say about the national curriculum—and despite what the member for Sturt said before the election when he said that, if you did not like it, the coalition would ‘scrap it and start again’—the national curriculum is a success and it is being taught in schools just a few kilometres from this building.

Labor is supporting students in low-socioeconomic school communities, and improving literacy and numeracy, through a $2½ billion investment in national partnerships. Those national partnerships are investing in over 2,000 schools across the country. They are not just government schools—though many of the low-socioeconomic status communities are served by government schools. Some of them are independent schools and some are Catholic schools. For us in the Labor Party these debates between the government and the non-government sector are very much a thing of the past. We are investing to ensure a quality education for all students, focusing on making sure that every school is a great school.

We have recognised that having high-quality teachers in every classroom is absolutely critical. That is why we are implementing national professional standards for teachers and principals. That is why we are investing in rewarding great teachers and attracting new people to the profession through Teach for Australia and Teach Next. We are empowering principals to manage their schools in a way that best suits their local needs and we are providing rewards for school improvement.

We are investing in infrastructure in schools through, as I have already noted, the Building the Education Revolution program, trades training centres and the digital education revolution—making sure that students have access to modern facilities and equipment to ensure they are prepared for work and life in the 21st century. The National Broadband Network will be another part of this—making sure that e-education provides all students in Australia with a great education.

But great education is not just about dollars. Sometimes when we talk about school buildings and the huge injection of funding—a historic injection of funding—into Australian schools, we can miss the fact that great education is really about a teacher making a connection with a student. It is nothing more complicated than that. Many of us in this chamber will remember a great teacher who made a difference to our lives. For me it was probably Judith Anderson, my high school English teacher, who showed a devotion to the great works, whether it was Browning, Shakespeare or Donne, and provided us with an opportunity to learn outside school hours. She was willing to be there for a group of us who wanted to practise plays. She showed through everything that she did at the front of the classroom her love of education.

But a teacher’s job is not a simple job. I would like to quote from one of my favourite books on education: Teacher Man by Frank McCourt—the great writer of Angela’s Ashes, who sadly passed away recently. He wrote in Teacher Man:

"In the high school classroom you are a drill sergeant, a rabbi, a shoulder to cry on, a disciplinarian, a singer, a low-level scholar, a clerk, a referee, a clown, a counsellor, a dress-code enforcer, a conductor, an apologist, a philosopher, a collaborator, a tap dancer, a politician, a therapist, a fool, a traffic cop, a priest, a mother-father-brother-sister-uncle-aunt, a bookkeeper, a critic, a psychologist, the last straw."

In closing I would like to pay tribute to Australia’s teachers, who each and every day do extraordinary work in improving the lives of Australia’s children. I commend the bill to the House.
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Better Health Care

I spoke in Parliament this week about the government's health reform agenda.
Health Insurance Amendment (Compliance) Bill 2010
2 March 2011

Medicare is a central component of Australia’s universal healthcare system. It is a system that provides affordable treatment for Australians by the dedicated health professionals in our public health system. Introduced in 1975 by the Whitlam government, Medibank—as it was then—allowed for the subsidisation of medical treatment in public hospitals that has made health care more accessible and affordable and has added to the quality of the lives of Australians over the last 35 years. I want to place on record the role played in creating Medibank by Dick Klugman, member for Prospect from 1969 to 1990, who passed away just recently, on 21 February. In 1984, Medibank was renamed Medicare by the Hawke government, who returned it to the original model to reflect the great traditions of equity, fairness and dignity for all Australians—which are characterised by us in the Labor Party. The Health Insurance Amendment (Compliance) Bill 2010 adds to the history of responsible Labor governments by balancing the public interests of confidentiality and privacy with ensuring that public funds are spent appropriately and responsibly.

As part of the governments responsible economic management policy agenda, the Health Insurance Amendment (Compliance) Bill 2010 proposes to amend the Health Insurance Act 1973 to implement the increased Medicare compliance audits initiative announced in the 2008-09 budget. With expenditure on the Medicare benefits scheme over $15 billion in 2009-10, it has grown by more than $1 billion per annum over the last three years. This bill will put in place a system of compliance audits—checks that make sure that the services that are delivered meet Medicare item requirements. We are doing this in order to ensure that taxpayers’ money is spent appropriately, as taxpayers, I am sure, would wish to be the case.

Presently, medical practitioners are not required to produce documentation during a compliance audit conducted by Medicare Australia, and Medicare Australia does not have the authority to require compliance with the request. As a result, around 20 per cent of practitioners either do not respond or else refuse to cooperate with an audit request. This bill addresses that problem.

The bill enables the Chief Executive Officer of Medicare Australia to give notice of the production of documents to a practitioner to substantiate a Medicare benefit paid for a service. To address concerns of due process raised by key stakeholders in the process, the government has put in place four safeguards. Before a notice to produce documents can be issued, the CEO must first have a reasonable concern that the Medicare benefit paid for a service may exceed the amount that should have been paid. This means that Medicare Australia cannot conduct random compliance audits under the provisions of this bill. Secondly, the CEO must take advice from a medical practitioner employed by Medicare Australia on the kinds of documents a practitioner may need to provide in order to substantiate that kind of benefit. Thirdly, the CEO must take reasonable steps to consult with a relevant professional body about the types of documents required to substantiate a benefit before commencing a compliance audit; and, fourthly, the practitioner must be given a reasonable opportunity to respond to a written request to voluntarily provide relevant documents.

As a result, this bill does not add to the workload and record-keeping requirements of already busy practitioners. Provisions for the protection of sensitive information ensure that only information relevant to the purpose of substantiating benefits is produced. No clinical or private details will be required unless they pertain to the substantiation of the benefit payment.

Medicare Australia is also working with the Australian Medical Association and other stakeholders to develop guidelines for practitioners on the kinds of information that may be used to substantiate particular services or groups of services. In accordance with this bill, practitioners must be given 28 days in which to seek an internal review of an audit decision before a debt notice is issued. During this time a practitioner may provide additional material to the CEO to substantiate a Medicare benefit.

The Health Insurance Amendment (Compliance) Bill 2010 will provide savings of around $148 million over four years, and it is expected that the provisions contained in the bill will generate further savings of at least $132 million during this time. Protecting the integrity of Medicare and enhancing Medicare Australia’s current audit program is a crucial element in ensuring that the Australian people know their public funds are spent appropriately and responsibly in the provision of the health services they rely on. The Gillard government is committed to responsible economic management and delivering the world-class services that Australians are entitled to expect—all this in the great traditions of the Labor Party, the originators of Medicare. I commend this bill to the House.
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Peter Gomes

Former Harvard Minister Peter Gomes has passed away, aged just 68. A thundering voice for tolerance and thoughtfulness, his books and sermons will be greatly missed. A New York Times obituary discusses parts of his career, but somehow doesn't capture his sense of humour. I remember sitting in his Easter Sermon (2003, I think), when he said:
Ladies and gentlemen, I have some good news and some bad news.

The good news is that this church has all the money it needs to do its good works throughout the community - to look after the vulnerable, and to strengthen our congregation.

The bad news is that most of that money currently resides in your pockets.

The collection plates will now circulate.
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What I'm Reading

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Canberrans Nominate Black Spots

Canberrans have responded strongly to Federal Member for Fraser Andrew Leigh’s call to ‘dob in a Black Spot’. Since nominations were called two weeks ago, 21 intersections or corners have been nominated as potentially dangerous locations.

 Andrew Leigh, Chair of the ACT Black Spots Consultative Panel, said the response highlighted that importance of road safety to Canberrans.

“By working with the community we can ensure this program continues to make our roads safer,” said Andrew Leigh.

“Canberrans drive their local streets every day, and the number of nominations shows the interest we take in road safety.

“The nominations will now be assessed to ensure they meet the criteria set out by the Federal Black Spots Program before being considered by the panel.

“The federal Black Spots program sets a high bar. To receive funding, a project must have community benefits that are at least twice the cost of construction,” concluded Andrew Leigh.

Since 2007 the Federal Labor Government has allocated over $4.6 million to over 34 black spots across the ACT.

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Me and Mitch Fifield on Sky 28 Feb 2011

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Carbon Pricing

My AFR op-ed today is on carbon pricing, and the Liberals' volte-face on market mechanisms.
Liberate the True Liberals, Australian Financial Review, 1 March 2011

In 1989, when US President George HW Bush proposed the use of market-based mechanisms to deal with acid rain, electricity generators warned that costs would skyrocket. Today, the program is universally regarded as a success, achieving its emissions targets at around one-third of the projected costs.

Why are market-based mechanisms so much cheaper at cutting pollution? In the case of acid rain, researchers found that firms used a variety of approaches to reduce emissions. Some retrofitted emissions control equipment. A number switched to cleaner fuels. Others retired their dirtiest generators. Because each firm took the lowest-cost approach to abatement, the social cost was minimised.

For environmental economists, this result merely reaffirmed theoretical work going back to Arthur Pigou in the 1930s and Ronald Coase in the 1960s. By the time Coalition climate change spokesman Greg Hunt won a prize for his 1990 university thesis on ‘A tax to make the polluter pay’, the economic theory was widely recognised. Hunt pointed out that ‘An attraction of a pollution tax regime is that it produces a strong incentive for firms to engage in research and development’. For consumers, ‘goods which do not generate [pollution] in their production will become relatively cheaper and therefore more attractive’.

Discussing the politics surrounding pollution taxes, Hunt argued out that ‘a pollution tax is both desirable, and, in some form, is inevitable’, but acknowledged ‘even if some of the Liberal’s [sic] constituents do respond negatively, a pollution tax does need to be introduced to properly serve the public interest’.

The purpose of quoting Hunt’s thesis is not to play some form of ‘gotcha’ game, but because it represents the view that most small-L liberals have held for decades. The UK Conservatives are proud champions of their nation’s emissions trading scheme. As recently as 2007, the Liberal Party of Australia’s election platform promised: ‘To reduce domestic emissions at least economic cost, we will establish a world-class domestic emissions trading scheme in Australia (planned to commence in 2011).’

To provide certainty, the Gillard Government proposes to start with a carbon price (in which the market determines the quantity of pollution), before transitioning to a fully flexible emissions trading scheme (in which the market determines the carbon price). Both have the advantage that they allow millions of households and businesses to find the most cost-effective way to reduce carbon pollution. For the first time, it also becomes profitable for entrepreneurs to find ways to reduce carbon emissions.

Because the arguments for harnessing markets to cut carbon pollution are essentially the arguments for free markets themselves, the opposition to emissions trading has historically come mostly from the left of the political spectrum. Yet today, we have the odd spectacle of a supposedly market-friendly party advocating a climate change policy that looks awfully like command-and-control. If you think that we can cut smoking rates more effectively by subsidising celery sticks than by taxing cigarettes, you’ll love Tony Abbott’s Direct Action plan. On one estimate, the only way the Coalition can meet its own emissions target is by spending many billions buying permits from other nations.

Among many in the Coalition, a commitment to markets is frighteningly fragile. Sitting in House of Representatives these days, I sometimes feel as though I’ve passed into a parallel universe in which Labor is the only true defender of free market economics. In recent months, Coalition MPs Michael McCormack, Ken O’Dowd and Karen Andrews have called for protectionism for agriculture, fishing and surfboards respectively. George Christensen believes income taxes – one of the government’s most efficient sources of revenue – should be abolished.

One of the essential lessons from first year economics is that the best way of addressing a negative externality is to put a price on it. But getting the design right will be critical. For households, we need to craft an appropriate assistance package. For businesses, it will be vital to ensure that emissions-intensive trade exposed industries can remain competitive. And for energy generators, it will be important to provide certainty as they go about transforming themselves into cleaner producers.

As it deals with these issues, the Multi-Party Climate Change Committee could doubtless benefit from the ideas and experience of many in the Coalition – if only they were allowed to participate. Let’s hope Mr Abbott takes the chance to constrain his conservatives and liberate his liberals.

Andrew Leigh is the federal member for Fraser.
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Randomised Trials Motion

I moved a motion today on randomised trials:
DR LEIGH: To move—That this house:

(1) reaffirms this Government’s commitment to evidence-based policy making;

(2) notes that:

(a) the Productivity Commission has highlighted the importance of rigorous evaluation in assessing the impact of social, educational, employment and economic programs; and

(b) randomised policy trials are increasingly being used as an evaluation tool in developed and developing nations; and

(3) supports measures to increase the quality of evaluations, and calls on the Government to consider whether randomised policy trials may be implemented to evaluate future Government policies.

Here's what I had to say:
Evidence-Based Policy – Private Members’ Motion
28 February 2011

No government has been more committed to evidence-based policy than ours. In areas from water reform to climate change, from foreign aid to schools reform, activity-based health funding to fiscal stimulus, Labor has drawn on the best knowledge of experts in the field. What drives those of us on this side of the House is not a love of particular programs, but a hope that our time in public life will help leave Australia more prosperous and more tolerant, with a cleaner environment and jobs for the future.

To achieve these goals, we need to keep finding better ways to evaluate our policies. As a former economics professor, I can assure the house that this is particularly hard in the case of social policies. Unlike scientific experiments, evaluations of social policies are particularly tricky. We don’t always get the right answer from simple before/after evaluations, nor from comparisons of those who opted in with those who opted out.

A great advantage of randomised trials is that participants are allocated to the treatment or control group by the toss of a coin. The beauty of randomisation is that, with a sufficiently large sample, the two groups are very likely to be identical, both on observable characteristics and on unobservable characteristics. The only difference between the treatment and control groups is the intervention itself. So if we observe statistically significant differences between the two groups, we can be sure that they are due to the treatment and not to some other confounding factor.

In Australia, our farmers have used randomised evaluations for over a century, and our medical researchers have used randomised evaluations for over half a century. Yet social policy random evaluations are much rarer.

One exception is the New South Wales Drug Court trial, conducted in 1999–2000. Offenders were referred to the Drug Court from local or district courts, underwent a detoxification program and were then dealt with by the Drug Court instead of a traditional judicial process. At the time it was established, the number of places in detoxification was limited, so participants in the evaluation were randomly assigned either to the treatment group or the control group. They were then matched to court records in order to compare reoffending rates over the next year or more. The evaluation found that the Drug Court was effective in reducing the rate of recidivism, and that while it was more expensive than the traditional judicial process, it more than paid for itself.

In the case of the Drug Court, many of us probably had an expectation that the policy would reduce crime. But high-quality evaluations do not always produce the expected result. Staying for a moment with criminal justice interventions, take the example of ‘Scared Straight’, a program in which delinquent youth visit jails to be taught by prison staff and prisoners about life behind bars. The idea of the program — originally inspired by the 1978 Academy Award winning documentary of the same name — is to use exposure to prison to frighten young people away from a life of crime. In the 1980s and 1990s, several US states adopted Scared Straight programs.

Low-quality evaluations of Scared Straight, which simply compared participants with a non-random control group, had concluded in the past that such programs worked, reducing crime by up to 50 percent. Yet, after a while, some US states began carrying out rigorous randomised evaluations of Scared Straight. The startling finding was that Scared Straight actually increased crime, perhaps because youths discovered jail was actually not as bad as they had thought. It was not until policy makers moved from second-rate evidence to first-rate evidence that they learned the program was harming the very people it was intended to help.

Being surprised by policy findings is perfectly healthy. Indeed, we should be deeply suspicious of anyone who claims that they know what works based only on theory or small-scale observation. As economist John Maynard Keynes once put it when asked why he had changed his position on monetary policy during the Great Depression: ‘When the facts change, I change my mind. What do you do, sir?’

One common argument made against randomised trials is that they are unethical. Critics say: when you have a program that you think is effective, how can you toss a coin to decide who receives it? The simplest answer to this is that the reason we are doing the trial is precisely because we do not know whether the program works. The great benefit of a randomised trial is that it gives us solid evidence on effectiveness, and allows us to shift resources from less effective to more effective social programs.

We should not lightly dismiss ethical concerns about randomised trials, but they are often overplayed. Medical researchers, having used randomised trials for several decades longer than social scientists, have now grown relatively comfortable with the ethics of randomised trials. Certain medical protocols could be adapted in social policy, such as the principle that a trial should be stopped early if there is clear evidence of harm, or the common practice of testing new drugs against the best available alternative.

One example, again from New South Wales, helps to illustrate this. Since 2005, an NRMA CareFlight team, led by Alan Garner, has been running the Head Injury Retrieval Trial (HIRT), which aims to answer two important questions: Are victims of serious head injuries more likely to recover if we can get a trauma physician onto the scene instead of a paramedic? And can society justify the extra expense of sending out a physician, or would the money be better spent in other parts of the health system?

To answer these questions, Garner’s team is running a randomised trial. In effect, when a Sydney 000 operator receives a report of a serious head injury, a coin is tossed. Heads, you get an ambulance and a paramedic. Tails, you get a helicopter and a trauma physician. Once 500 head injury patients have gone through the study, the experiment will cease and the results will be analysed.

When writing a newspaper article about the trial, I spoke with Alan Garner, who told me that, although he has spent over a decade working on it, even he does not know what to expect from the results ‘We think this will work’, he told me in a phone conversation, ‘but so far, we’ve only got data from cohort studies.’ Indeed, he even said, ‘Like any medical intervention, there is even a possibility that sending a doctor will make things worse. I don’t think that’s the case, but [until HIRT ends] I don’t have good evidence either way.’

What is striking about Garner is his willingness to run a rigorous randomised trial, and listen to the evidence. Underlying HIRT is a passionate desire to help head injury patients, a firm commitment to the data and a modesty about the extent of our current knowledge. High-quality evaluations help drive out dogma. As US judge Learned Hand famously said, ‘The spirit of liberty is the spirit which is not too sure that it is right’.

Naturally, randomised trials have their limitations. Not all questions are amenable to randomisation. Like the kinds of pilot programs that we run all the time, randomised trials do not necessarily tell us how the program will work when it is scaled up, and they’re not very good at measuring spillover and displacement effects.

Because of these limitations, it is unlikely that we would ever want 100 per cent of government evaluations to be randomised trials. Most likely, the marginal benefit of each new randomised trial is a little lower than that of the previous one. At some point, it is indeed theoretically possible that we could end up doing more randomised trials than is socially optimal.

However, this is unlikely to ever occur, at least in my lifetime. My best estimate is that less than 1 per cent of all government evaluations are randomised trials (excluding health and traffic evaluations, the proportion is probably less than 0.1 per cent). Another way to put this is that, to a first approximation, Australia currently does no randomised policy trials. Governments throughout Australia could safely embark on a massive expansion of randomised policy trials in Australia before we come close to the point where the costs exceed the benefits.

Finally, one way that we might expand randomised policy trials is to learn from the US, where federal legislation sometimes sets aside funding for states to conduct randomised evaluations. The Second Chance Act for rehabilitating prisoners, the No Child Left Behind school reform law, and legislation to improve child development via home visits are just some of the US laws in which the federal government explicitly puts aside a portion of program funds for states to run random assignment evaluations.

What we need in Australian policy today is not more ideologues, convinced that their prescriptions are the answer, but modest reformers willing to try new solutions, and discover whether they actually deliver results.

Update, 14/3: Thanks to Ross Gittins for a generous mention in his column.
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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.