Economics and finance, Environment & energy, Government and governance, Health | The World

9 February 2017

At a time of major policy and political upheaval in the US and elsewhere around the world, Kathleen Segerson argues the need for transparent and clear decision-making processes to deliver better policy outcomes.

“Criticising is easy; coming up with a better alternative is hard work.” How true this is, not only in our individual lives but in the public policy arena as well. We clearly see this playing out now in the US as the newly-empowered Republican majority and president wrestle with what to do with the Affordable Care Act (ACA), aka “Obamacare”.

For the last six years, Republicans have sought to repeal the ACA and President Trump repeatedly pledged during his campaign to “repeal and replace” the law. However, the cry for repeal has not yet produced a consensus, even among Republicans, about an alternative. They have yet to agree on what they want; they just know what they don’t want, namely, the ACA.

But having the ACA was never the goal of healthcare reform. The goal was what it was trying to accomplish.

And as suggestions for repealing and replacing the ACA have started to take shape, the call for retaining the prohibition of pricing based on pre-existing condition but eliminating the mandate that requires individuals to buy insurance (and the subsidies that help make that affordable for people on low incomes) demonstrates another key component of good decision-making – recognising and identifying trade-offs. Sometimes you cannot have one thing without the other – that is, you can’t have your cake and eat it too.

The example of the ACA is not unique. The same issues and challenges arise in many public policy debates, including those related to environmental protection and natural resource management, such as the debates over reducing greenhouse gas emissions and improving water quality. For example, another pillar of the Trump agenda is a rollback of environmental regulation and an increase in coal production and use, which is viewed as critical to job creation, with little if any mention of the trade-offs involved. Most importantly, these trade-offs have large negative implications for the quality of our air and water, and the global fight against climate change.

More on this: The Trump Presidency is a fork in the road for climate action

Another related example is the Paris Climate Agreement, and recent threats by President Trump to pull out of the Agreement. Of course, the Agreement itself has an explicit goal: to limit the rise in global temperature to 2 degrees Celsius over pre-industrial levels. Presumably, the countries that joined the agreement agreed with the goal. Given this, do US threats to pull out of the agreement signal a disagreement with the goal, an unwillingness to contribute to the agreed upon goal, or a different assessment of the trade-offs involved in meeting the goal? The answer is not clear.

What can be done to ensure that public policy decisions avoid some of the issues highlighted by the examples above? One key prerequisite is to have an open, transparent, and deliberative decision-making process that clearly (and honestly) identifies and articulates both the goals that motivate action and the trade-offs involved in any particular policy approach to meeting those goals. Such a process would require four inter-related steps.

The first step is a clear identification and articulation of the goals and objectives. That is, what is the problem and what are we trying to accomplish through collective (public) action? These goals would first and foremost be qualitative, such as to limit the increase in global temperature. Once the associated trade-offs are assessed, a more quantitative goal measuring the extent of the desired change can be specified. Of course, different groups will come to the table with different goals, but clearly identifying and articulating those differences will facilitate the required compromise.

Second, there needs to be a clear delineation of alternative means for meeting the identified goals, as well as the different paths by which we might get to the desired end.

The third step needed is an assessment of the trade-offs that we would or might have to make under the different available options. For example, an appraisal of what would we be gaining versus what would we be losing or giving up. This is partly about the benefits and costs associated with each alternative, but it is also about how those benefits and costs are distributed, for example, across different groups, communities, regions and generations. Trade-offs in the distribution, more for one as against less for another, can be as (and possibly more) important than the aggregate impacts.

The final step is an assessment of the trade-offs that we, as individuals and societies, are willing to make. How do we weigh the impacts of policy choices across different domains, such as goods and services (for example, jobs vs. environmental protection), communities, regions and generations?

Social science, particularly economics, can play a key role in each of these steps. It provides information about what to expect under “business as usual” scenarios, as well as an understanding of the economic and behavioural drivers (related to issues such as land use, population growth, education, innovation) that determine alternative pathways. It also helps in assessing the appropriate stringency of policy goals and in identifying behavioural and other anticipated, as well as unanticipated, responses to different policy approaches that affect the potential trade-offs.

Economics also provides information to decision-makers about the trade-offs individuals indicate they are willing to make (as reflected in their choices). Through these channels, economics and social science research can be critical inputs into an open, transparent, and deliberative decision-making process that, in the end, leads to better policy outcomes.

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