The government needs to make the moral case
Updated
While budget policy recommendations such
as the Medicare copayment might be justified by by dry economic
evidence, the Coalition must also convince the public they are justified
in a moral sense. Maxine Montaigne writes.
It is now more than three months since the Abbott government released its first budget.as the Medicare copayment might be justified by by dry economic
evidence, the Coalition must also convince the public they are justified
in a moral sense. Maxine Montaigne writes.
Amid the subsequent wrangling over controversial measures such as the
A$7 GP co-payment and re-indexing the fuel excise, most commentators
seem to agree on at least one thing: the Australian people are just not buying it.
Selling
economic policy is a difficult job, even for the party that has
historically been considered best at managing the economy - although
this too might be changing.
Part of the reason for this difficulty is that when faced with an
economic policy agenda, the public must be persuaded on two fronts. They
must believe the policy is justified by evidence, but they must also
agree it is justified in the moral sense.
These two sides of the
economic policy coin are generally termed "positive" and "normative".
Positive economics refers to economic statements or theories that are
"value-free" or objective. For example, "GDP grew by four per cent last
year" or "inflation is directly proportional to the money supply" are
"positive" economic statements. These statements are not necessarily
true, but they can be debated in an objective way, using evidence and
theory to test their validity.
Normative economics, in contrast,
relies on subjective beliefs about what economic policy should try to
achieve - for instance, keeping unemployment low or economic growth
high.
Whether or not you think economists should have opinions
about morality, it is obvious that policymakers must take into account
both the positive and the normative aspects of a debate. Politicians
then must convince the public that their policy is the right thing to do
(normative) and that it will work (positive).
The Australian
public is just as unlikely to support an economic policy that is morally
justifiable but impossible to achieve - a 100 per cent employment rate,
for example - as one that is valid from a strictly economic view but
unpalatable ethically. Witness the public rejection of Howard's WorkChoices, for instance.
Since
the budget, the government has failed to convincingly address both
sides of the economic debate in a coherent way. As a result its message
has been weak and confused.
As details of the specific policies
have been revealed, this inconsistency has become increasingly glaring.
Last week we saw a particularly good example of this confusion from
treasurer Joe Hockey, who argued that poorer people would not be as badly hit by changes to the fuel excise.
While his comments were not technically incorrect,
Hockey's real mistake was insisting that the change would not be
regressive, for which there is a fairly standard economic definition. By
invoking the Australian Bureau of Statistics data, he had hoped to win
the "positive" debate and prove the changes were fair from an economic
point of view - even if the average Australian did not see it that way.
But in the end, Hockey was left looking worse off in both his understanding of taxation and the lives of poorer Australians. He apologised for the comments days later.
Education minister Christopher Pyne has had similar trouble convincing
crossbenchers and the public of the merits of university fee
deregulation, including changes to loan repayments. Pyne's defence of
this policy rests on what he argues is an obvious economic truth: that a
deregulated market will always lead to higher efficiency, while
increased competition keeps prices low.
Pyne has also made a
normative case for the proposed changes, arguing that the average
Australian taxpayer should not be made to pay for the education of a
select few who go on to earn higher incomes.
However, when confronted with
the fact that the changes to fee indexation would disproportionately
hurt women and lower-income earners, Pyne refused to debate these
objective (positive) facts. He thus lost control of the message and the
debate.
While most Australians (and politicians) might think of
economics as a fairly unemotional topic, making a convincing case for
economic policy reform requires both the dry objectivity of "positive"
economics and the moral - even emotional - world of "normative"
economics.
A good policy message will contain the right balance of
these two things. An argument based only on data and theory will never
win over the public. One based only on emotion without hard evidence is
little more than "truthiness".
If
the government wants to win back voters' trust on the economy and get
its budget through, in whole or in part, this is a lesson for which our
leaders might want to revisit those old, worn textbooks from their
student days.
This article was originally published on The Conversation. Read the original article here.
Maxine
Montaigne received a Master of Economics from the Australian National
University and is now working towards a PhD in the History of Economic
Thought at the London School of Economics. View her full profile here.
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