Monday, October 03, 2011

Governments and Economists

I am delighted to see this forum back in a new format; and I look forward to reading many interesting posts. In this post I share some information that I gathered recently on the contribution of economists to governments' policy-formation and departmental operations. This also follows on from a recent thread (on a post written by Gerard O'Neill), where Liam and Rob mentioned the interaction between governments and economists.

As a preliminary, it is worth noting Colm Harmon (director of the Geary Institute) has raised this topic for discussion before; twice on the Irish Economy blog, as follows: (i) Skills Deficits (ii) Norman Glass. In his first post Colm says: "What is badly needed is something like the Government Economic Service in the UK. This ensures two things - the presence of a cadre of professional economists within the sector, but also the harmonisation of the training across Departments giving a unity of approach regardless of the topic... (This) ensures that economists can move between Departments, be redeployed... very easily and that economics has a core platform within the service." In a comment on that post by Colm, Kevin suggests that a Council of Economic Advisers should be established in Ireland. What follows below is a first glance at the nature of the interaction between governments and economists in Ireland, the UK (and Scotland), the USA and Australia. I would be glad if additional information (and indeed, any insights on all of this) was provided in the comments-thread.

First off, it is worth noting that there is a "Revenue Analytics Branch" within the (Irish) Revenue Commissioners. If one downloads this paper on tobacco taxation by Keith Walsh and Padraic Reidy, you will see the explicit affiliation (of Revenue Analytics Branch) on the Pdf. A unit like this is an interesting illustration of how a Government Economic Service (GES) might take form in the various departments and service-providers under the remit of the Irish Government. Second, the closest that Ireland comes to having a Council of Economic Advisers (CEA) is the National Economic and Social Council (NESC). According to the NESC website: "The members of the Council are appointed by the Taoiseach, for a three year term. These members are representatives of business and employers’ organisations, trade unions, agricultural and farming organisations, community and voluntary organisations, and environmental organisations; as well as heads of Government departments and independent experts."

Perhaps it would be better if the economists on this council (John McHale and Edgar Morgenroth) were more numerous than two, and were given their own domain in a separate council (that could still participate in the umbrella forum now known as NESC). It is also worth noting that NESC have an analytical team; this group includes several trained economists and is responsible for the production of NESC policy documents. This group is a pre-existing resource that a new Council of Economic Advisers could avail of.

The Scottish Council of Economic Advisers is a diverse group; including private sector representation (a former chairman of Sun Microsystems), media representation (a former long-standing contributor to The Economist magazine), but also academic economists; including Frances Ruane, director of the Economic and Social Research Institute (ESRI) in Dublin. The Scottish Government also have their own version of a Government Economic Service; this is called the Scottish Government Economist Group and is managed by the Office of the Chief Economic Adviser. There are seven divisions in this group: Communities, Education, Enterprise & Energy, Rural & Environment, Health, Transport, and Justice.

Beyond this, I have tried to see if the UK has something akin to an Advisory Council, in addition to their Government Economic Service. Of course, we have heard about the Cabinet Office Behavioural Insights Team; and there is a new Office for Budget Responsibility: along the lines of Ireland's newly minted fiscal council. However, the extent of a CEA-type advisory outfit in the UK seems to be limited to the following Economic and Domestic Affairs Secretariat (EDS) within the Cabinet Office structure. This doesn't appear to have any academic input, and seems more like a service-provider than an advisory council, to me. I might be wrong though.

In fairness to the UK Government, they seem to get a lot of advisory input from the Institute for Fiscal Studies (IFS). The IFS researchers "meet regularly with policymakers across Whitehall, from the Downing Street Strategy Unit to the Department for International Development. (And they) give evidence to parliamentary select committees... brief MPs ahead of each Budget and... meet annually with the Chancellor of the Exchequer." While this sounds like more than what the ESRI do in Ireland, it is still short of a formal advisory structure.

I also tried to see what the equivalent of the GES is in the United States. There is of course the Fiscal Commission (their recently devised version of a fiscal council) and the Congressional Budget Office (CBO); the latter of which produces a whole range of outputs, including micro papers on policy topics. However, the CBO is not the provider of economic services to the U.S. Federal Government, as far as I am aware. It appears that many branches of the Federal Govt. have their own economics department; such as the Burea of Labor Statistics (although that's not purely an economics-based dept.), the Directorate for Social, Behavioural and Economic Sciences (somewhat like an econ dept. within the National Science Foundation), and the Economics and Statistics Administration, which "provides timely economic analysis, disseminates national economic indicators, and oversees the U.S. Census Bureau (Census) and the Bureau of Economic Analysis (BEA)."

There is also an economics advisory board for agriculture, an advisory committee on international economic policy, an advisory committee for the BEA (which includes a lot of recognisable academic economists), and an institute of education sciences. In addition, there is the Office of Management and Budget (a part of the Treasury), whose "mission is to assist the President in overseeing the preparation of the federal budget and to supervise its administration in Executive Branch agencies. In helping to formulate the President's spending plans, the OMB evaluates the effectiveness of agency programs, policies, and procedures, assesses competing funding demands among agencies, and sets funding priorities." The OMB is where Cass Sunstein (co-author of Nudge) works, as the Administrator of the Office of Information and Regulatory Affairs.

This all seems very disparate (in the USA structure), though that is perhaps to be expected given the massive scale of the federal bureaucracy. One thing at least is that the OMB and the Council of Economic Advisers (CEA) are both part of the Executive Office of the President; so that seems like the avenue along which those groups are co-ordinated. It's also worth noting that there is an "Economic Recovery Advisory Board", wholly separate to the CEA. This could be an interesting suggestion for the Irish case, if there was no appetite for a council of economic advisers to be present on a permanent basis in Ireland.

Lastly, it's worth noting that the Australian Productivity Commission (APC) is an unusual mix of research alongside an advisory function. It seems to me that it combines the research-role of the IFS with the advisory capacity of the (North American) CEA; but without the service-provision of the (UK) GES. Colm may correct me here if I am wrong, because I know he has been over to visit the APC. Whether there is added value in such a set-up (the APC approach) is another issue again; the UK could emulate the Australian approach somewhat by giving the IFS an explicit advisory role. Finally, I'm not sure whether the Australians have some form of a GES; but from a very quick investigation, it appears that they do not.


Liam Delaney said...

Good stuff Martin. Will make a few more suggestions later. One thing I have in my head for a later post, reflecting a broad theme of what I would like the blog to develop, is how psychology and behavioural economics is or should be influencing what happens in these places and the role in shaping debates.

Martin Ryan said...

Thanks Liam. With respect to your comment, it is noteworthy that Cass Sunstein is in the OMB; and that Alan Krueger was recently appointed as the new chair of the CEA. As well as researching education and unemployment, Krueger has done work on public perceptions of economic policy, subjective well-being, terrorism, and the personality traits of workers in the labour market.

Businessweek: Krueger's Lessons for Obama

Gerard O'Neill said...

A fascinating review Martin - thanks for that.

One thought: our government's efforts to streamline policy making (e.g.: the integration of Forfas into the Dept. of Enterprise provides an opportunity to 'economics-up' current policy making practice.

No guarantee of course that they will. But now might be a good time to start knocking on Department doors as they start to implement serious changes about the way policy is developed, implemented and reviewed.