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Red Tape and Social Impact

 

Summary

Red tape (i.e. regulatory burden) reduction has been a focus for governments in recent years. However, the focus has been on the private commercial sector and has largely ignored other sectors. In this post I will discuss the red tape imposed on social service organisations. The red tape has implications beyond increasing costs for social service organisations. At worst, it could provide perverse incentives for social service organisations to focus on process and outputs rather than producing and measuring genuine social impact.

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The Magic of Public-Private Partnerships: Really?

Last week I was visited by election campaigners who wanted to sell me on the merits of their party for the upcoming Victorian election. I may be strange, but I actually was happy to be visited by door-knockers so I could ask them some questions. The Victorian election has been fought on competing infrastructure projects but there didn’t seem to be clear details on how the projects would be funded. Being fiscally responsible, I wanted to know how these projects would be funded. So I asked the door-knockers the question. And the answer I got was: “through the magic of PPPs [public-private partnerships].”

I was quite frankly stunned that someone in our digital world still believes in magic! And in such a brutal arena as politics, it was great to see that innocence wasn’t dead. Then the implications hit me: what kind of magic are we talking about here? White or black magic? Then you get into finer categories such as illusionism, sorcery and necromancy. If it was necromancy, this would have major implications for workplace relations. Would the government use zombies to build the infrastructure? There will be huge cost savings from using the undead. But you need to feed zombies brains which may pose a public safety issue to live humans. Furthermore, the building unions probably wouldn’t be happy that their members’ jobs will be stolen by zombies. I can see why the issue of infrastructure financing is hard to explain to voters.

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Study of Incentives wins the 2014 Nobel Prize in Economics

I was so excited to find out this morning that Jean Tirole won the 2014 Nobel Prize in Economics. When I think of Prof. Tirole, I usually think of him together with his long-time collaborator, Jean-Jacques Laffont, who unfortunately passed away in 2004. Together, Tirole and Laffont wrote some insightful economic analysis that has heavily influenced my thinking on economics and, judging from the tributes (e.g. here from Justin Wolfers), many other economists. So, my excitement was tinged with a bit of sadness that Prof. Laffont did not see this day when the hard work of him and Prof. Tirole was recognised as worthy of the Nobel Prize. There work, applied game theory, principal-agent theory, asymmetric information and contract theory to how markets in the real world work. They did this by understanding the incentives between buyers and sellers in these markets instead of assuming that all markets were perfectly competitive. And, importantly they also looked at if it was feasible if government could intervene in markets that were imperfect. Tirole and Laffont have definitely influenced many regulators and policy-makers, and I’m glad Prof. Tirole won the Nobel Prize now because I think some of his and Laffont’s insights bear repeating. (more…)

Government as Risk Manager: Should We be More Worried?

The Productivity Commission (PC) recently released a draft inquiry report into ‘Natural Disaster Funding Arrangements’ in Australia. For those that don’t know, the Productivity Commission is an Australian Government independent agency that provides advice on economic reform. To my knowledge, I’m not sure if other national governments have a similar agency. The only one that comes close is the OECD, but that is a multilateral agency. The PC has a strong reputation of furnishing ‘frank and fearless’ advice to successive Australian Governments. So it is with some interest that I read this report. I have worked on the role of government in managing risk, so I was interested to learn the PC’s perspective on natural disaster risk management. (more…)