Beer ads and pol­i­tics have some things in com­mon

In his sixth es­say on the Greek macroe­con­omy, in­de­pen­dent econ­o­mist Bob Traa pon­ders the ques­tion: What is good pol­icy mak­ing?

Kathimerini English - - Focus - BY BOB TRAA *

ANAL­Y­SIS The Miller Brew­ing Com­pany is a beer brew­ing com­pany head­quar­tered in Mil­wau­kee, Wis­con­sin, USA. Hav­ing noted that a cer­tain quan­tity of beer drink­ing can lead to weight gain, among other side ef­fects, in 1987, this com­pany launched a com­mer­cial with the slo­gan “Tastes Great, Less Fill­ing.”

The com­mer­cial re­ferred to a new beer that the com­pany had man­u­fac­tured which it called “Miller Lite.” At first, I thought that this was a mis­print from the word “light” as op­posed to “heavy” and in­di­cat­ing that some­thing has less weight. This con­nected clev­erly with the no­tion that weight gain from beer drink­ing was to be avoided if pos­si­ble. The mar­ket­ing team at Miller had in­vented a new word, and the no­tion of “lite” in­stead of “light” has caught on big since then.

Var­i­ous dic­tio­nar­ies now de­scribe the word “lite” as com­pared with “light” by say­ing that lite is an in­for­mal vari­ant of light, usu­ally used as an ad­verb mean­ing “con­tain­ing less of an in­gre­di­ent,” or “be­ing less com­plex.” I sup­pose this refers prin­ci­pally to calo­ries. The Mer­riam Web­ster Dic­tio­nary de­scribes the word as “di­min­ished or lack­ing in sub­stance or se­ri­ous­ness.”

Mar­ket­ing for a beer com­pany is all about sell­ing more beer, in­clud­ing ac­cept­ing some side ef­fects. Be­ing in pol­i­tics is all about sell­ing a view and get­ting elected, also of­ten with some side ef­fects. As­tound­ingly, beer com­mer­cials and pol­i­tics thus have some things in com­mon. Over the years, I have seen very good politi­cians who take their in­cred­i­bly dif­fi­cult job very se­ri­ously, bend their thought to the pub­lic good (it is not a pri­vate in­ter­est) and com­mu­ni­cate well with the pub­lic about what they aim to achieve and hon­estly ex­plain what the chal­lenges are. But, un­for­tu­nately, I have also seen tragic cases of politi­cians who are firm ad­her­ents of the Miller Lite Prin­ci­ple. They treat pol­icy mak­ing as an ef­fort to sniff out what you would like to hear, then echo back to you ex­plicit or sub­lim­i­nal mes­sages that they know you would like to hear (some­times even with­out nec­es­sar­ily be­liev­ing any of this them­selves), and then ask for your vote, pro­ceed­ing sub­se­quently to talk about pol­icy in Par­lia­ment all day with great eru­di­tion with­out say­ing any­thing or com­mit­ting to any­thing, as though pol­icy mak­ing is all about “Tastes Great, Less Fill­ing.” I also had a dream once (a night­mare) where politi­cians started to talk so fast that my ears could not keep up. I thought of the mas­ters of this art as the “Miller Lite Politi­cians.”

This brings us to the im­por­tant ques­tion of what “good pol­icy mak­ing” is all about. Can we de­fine this con­cept? If we can’t, then we should not pre­tend that there is good or bad pol­icy mak­ing. It would all be­come a crap­shoot and we will see what hap­pens fur­ther down the line. I hope that the reader will al­low me to spend a few words in this “Note for Dis­cus­sion” think­ing out loud what good pol­icy mak­ing may be all about. I will stick my neck out and give you some thoughts, but read­ers may have their own ver­sion and surely can im­prove on my ideas.

First of all, let us nar­row the ter­rain to “eco­nomic pol­icy mak­ing” be­cause that is where I have some ex­pe­ri­ence. This brings us to the min­is­ter of fi­nance and the gover­nor of the cen­tral bank in any coun­try as the key play­ers. There are of course other min­is­ters who do a vi­tal job, par­tic­u­larly in jus­tice and law, for­eign re­la­tions and oth­ers, and they, too, surely need to think hard what “good pol­icy mak­ing” is all about. But I will re­strict my­self here to think­ing about gov­ern­ing the econ­omy in the field of pub­lic ser­vice. We can ex­plore a few char­ac­ter­is­tics that I be­lieve might help to im­prove pub­lic pol­icy mak­ing. 1. There need to be some aspi­ra­tional tar­gets.

If you want to get some­where, you need to know where you would like to go, oth­er­wise it is very dif­fi­cult to know whether you have ar­rived, and you may just be go­ing around in cir­cles with­out ever get­ting there. “Clar­ity of pur­pose” is an­other way to de­scribe this. Pol­icy mak­ers who have dif­fi­cul­ties ex­plain­ing in co­her­ent and trans­par­ent terms, and even quite in­tu­itive terms, where they would like to take the coun­try or what the key ob­jec­tives for the gov­ern­ment are, may be con­fused them­selves and might not make the most ef­fec­tive lead­ers.

As an ex­am­ple, we talked in the pre­vi­ous notes about po­ten­tial real GDP growth, and specif­i­cally la­bor pro­duc­tiv­ity as the cru­cial con­cept to lift the stan­dard of well-be­ing in the coun­try. I fur­ther took the de­lib­er­ate step to pro­pose an aspi­ra­tional tar­get for la­bor pro­duc­tiv­ity growth, namely to in­crease it to 1.5 per­cent a year on av­er­age over an ex­tended pe­riod of time. And here comes the splen­did and so clar­i­fy­ing corol­lary from such a tar­get if clearly stated by the min­is­ter: What are the struc­tural re­forms and other pol­icy steps that the gov­ern­ment is go­ing to pur­sue, and over what time pe­riod, to achieve this goal? Other ex­cel­lent aspi­ra­tional goals, in my view, are: What is the sus­tain­able pub­lic sec­tor bal­ance tar­get that the gov­ern­ment pro­poses, and what is its de­sired path to­ward this tar­get? Again, the corol­lary sug­gests it­self: How are you go­ing to do this? What does this im­ply for the av­er­age cit­i­zen? What does this mean for the debt, or bet­ter still, the pub­lic sec­tor net worth?

The bot­tom line is that the gov­ern­ment needs to have some very clear an­chors for pol­icy and clearly own them. These an­chors need to re­flect and be tested against the pref­er­ences of the pop­u­la­tion in the po­lit­i­cal dis­course. Gov­ern­ments should not be shy to ex­er­cise lead­er­ship, and man­age this process. 2. Eco­nomic pol­icy needs to be data based.

The aspi­ra­tional tar­gets need to be mea­sured and mon­i­tored in a con­sis­tent way. The def­i­ni­tion of mea­sure­ment can­not be changed in or­der to meet the tar­get (you will be sur­prised how of­ten I have seen this, with the pub­lic be­ing un­aware). The tar­gets can­not be so com­pli­cated that only a model can spit them out; in­stead they should be rel­a­tively sim­ple to un­der­stand and mon­i­tor. Some­times a bet­ter tech­nol­ogy comes along, or an in­no­va­tion of some type, that truly war­rants a mod­i­fi­ca­tion or an up­date of a tar­get. Also, ev­ery­body makes mis­takes, even the very best some­times slip. This is not a prob­lem. Not dis­cussing this and not mak­ing some cor­rec­tions is ac­tu­ally the true prob­lem. In short, while tar­gets should not be ad­justed willy-nilly, there are (in­fre­quent) oc­ca­sions that the min­is­ter as leader of the eco­nomic team needs to make some ad­just­ment, and this should then be very clearly dis­cussed and ex­plained to the pub­lic. Also, given how im­por­tant they are, don’t set too many aspi­ra­tional tar­gets, be­cause then the sys­tem may be­come overi­den­ti­fied and is not in­ter­nally con­sis­tent. It is much more dif­fi­cult to hit very many tar­gets at once, than pick your care­ful pri­or­i­ties and fo­cus on those. This does not mean that other ob­jec­tives are not im­por­tant; it means that ob­jec­tives need to be dealt with in care­ful se­quence to keep things tractable and re­tain clar­ity with the pub­lic. 3. Ex­plain what you are do­ing.

Com­mu­ni­ca­tion is ev­ery­thing. Good com­mu­ni­ca­tion can­not be faked. If the pub­lic does not trust its lead­ers or is afraid of the gov­ern­ment ap­pa­ra­tus, or the po­lit­i­cal sys­tem more gen­er­ally, be­cause they are afraid of ret­ri­bu­tion if they con­fess to hav­ing dif­fer­ent ideas, then you have a big prob­lem. Also, sup­press as much as pos­si­ble the no­tion that what gov­ern­ments do is “con­fi­den­tial.” No, gov­ern­ments are not sub­stan­tially in the con­fi­den­tial busi­ness, they are in the pub­lic busi­ness (ex­cep­tions in­clude is­sues of se­cu­rity and to avoid in­ter­fer­ing with mar­kets). Gov­ern­ment is not a pri­vate en­tity and should not work for a pri­vate en­tity – the gov­ern­ment’s task is to fos­ter the pub­lic good and noth­ing else. Deep and open dis­cus­sions about what the “pub­lic good” ac­tu­ally is and how you can rec­og­nize it, would be an ex­cel­lent use of time. Ask your­self: Do we trust the gov­ern­ment? Are we con­fi­dent that the gov­ern­ment will be our best rep­re­sen­ta­tive in manag­ing these dif­fi­cult times? Is the gov­ern­ment cred­i­ble? If you have doubts about any of this, com­mu­ni­ca­tion is amiss some­where (and maybe for good but un­for­tu­nate rea­sons; who is hid­ing what?). 4. Ask the pub­lic.

I have seen oc­ca­sions where the pub­lic would call a min­istry with ques­tions on a cer­tain is­sue, and the min­istry did not an­swer the phone. This is not con­fi­dence en­hanc­ing; it de­stroys trust. The po­lit­i­cal sys­tem ex­ists to serve the pub­lic, the pub­lic does not ex­ist to serve the politi­cians. Also, in this cat­e­gory: Pub­lish data in sim­ple, easy to un­der­stand ta­bles. I once saw a gov­ern­ment pub­lish some fis­cal num­bers that were a bit sen­si­tive. Within two weeks there was a re­sponse from af­fected groups that this table must be in­cor­rect as it con­tained in­ac­cu­rate data – the prob­lem was un­der­es­ti­mated, and the pub­lic re­ac­tion con­vinced the gov­ern­ment that this was a valu­able ob­ser­va­tion. In short, there are so many peo­ple among the pub­lic who know about cer­tain top­ics, that con­tact with them is highly valu­able as a test whether the gov­ern­ment has the right in­for­ma­tion. Ask the pub­lic and wel­come its in­put. It is hard work, but it pays off in the long run. 5. Be care­ful with ex­pec­ta­tions – stay mod­est.

Over­promis­ing is a clas­sic in pol­i­tics. It has a very se­ri­ous prob­lem. And that is that the cost of er­rors is not sym­met­ric. What do I mean by that? I have seen gov­ern­ments who promised that they could solve prob­lems quickly, the econ­omy would grow fast, and jobs would re­turn in no time. Also, since, some­how, they con­vinced them­selves of their own rhetoric, it was deemed right to start a new bor­row­ing binge to sup­port or even to push this mirac­u­lous re­cov­ery. Worse still, some of the pub­lic be­lieved it also and started their own gen­er­ous fi­nan­cial schemes. This strat­egy of push­ing ex­pec­ta­tions (to get elected) of­ten ends in tears, some years later. These tears are al­most never the politi­cians’. Imag­ine now the op­po­site sit­u­a­tion; a politi­cian coun­sels cau­tion and care­fully guides the econ­omy back to health with sen­si­ble trans­par­ent ob­jec­tives that are aspi­ra­tional but still re­al­is­tic, and com­mu­ni­cates well with the pub­lic why it is worth try­ing these poli­cies, even though there are no guar­an­tees. In the first in­stance, pol­i­tics over­promised and a cri­sis fol­lowed. In the sec­ond case, cau­tion pre­vailed and there may be some room for sur­prises on the up­side. If you have an up­side sur­prise, you can cel­e­brate and feel more con­fi­dent. Thus, the cost to so­ci­ety of these two er­rors is not sym­met­ric – hubris gen­er­ates catas­tro­phes; mod­esty gen­er­ates trust. Which one do you pre­fer? 6. Aim for the long run and good bal­ance.

Good poli­cies are bal­anced and sus­tain­able, far beyond the gov­ern­ment’s term, which re­quires care­ful in­sti­tu­tion build­ing. Poor poli­cies suc­cumb to con­flict. Good bal­ance and a long-run view show that the broad in­ter­est of the pub­lic is at stake. Short-ter­mism and poli­cies for spe­cial in­ter­ests are pri­vate pol­icy, not pub­lic pol­icy, and they re­quire pri­vate money, not pub­lic money.

So, in my view, we have six qual­i­ties that con­trib­ute to good pub­lic pol­icy mak­ing: Set a few clear aspi­ra­tional mea­sur­able tar­gets; use data to mon­i­tor progress and don’t fudge the data; ex­plain what the plan is; in­vite the pub­lic to par­tic­i­pate; stay mod­est; think of the long run and keep things in bal­ance. I have great ad­mi­ra­tion for politi­cians who take this se­ri­ously and try to ad­here to prin­ci­ples. Their job is very dif­fi­cult, af­ter all: The re­spon­si­bil­i­ties are enor­mous, the pres­sures are nerve-wrack­ing, re­al­ity is com­plex and con­fus­ing, so one has to have good an­chors not to drift away into obliv­ion. Al­ways keep the form in mind of what is “the right thing to do” and learn from mis­takes – that is how coun­tries ad­vance and cre­ate well-bal­anced and hu­mane so­ci­eties.

Some read­ers may have dif­fer­ent ex­pe­ri­ences. * Bob Traa is an in­de­pen­dent econ­o­mist. This is the sixth in a se­ries of ar­ti­cles by him for Kathimerini ti­tled “Notes for Dis­cus­sion – Es­says on the Greek Macroe­con­omy.”

‘Good com­mu­ni­ca­tion can­not be faked,’ says Bob Traa. If the pub­lic does not trust its lead­ers or is afraid of the gov­ern­ment ap­pa­ra­tus, then you have a big prob­lem.

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