Prime Minister Malcolm Turnbull has appointed a new head at the Department of Prime Minister and Cabinet. The job is the most senior in the public service, and he has chosen Martin Parkinson, an economist, to fill it.
Parkinson drips economic credibility. He studied economics in his undergraduate degree at Adelaide University, in his masters degree at ANU, and finally in his PhD at Princeton under former chair of the US Federal Reserve Ben Bernanke. Then he got stuck into economic policy, including being adviser to the treasurer in the ’90s and working at the International Monetary Fund.
Parkinson has also worked in policy areas other than Treasury. He spent several years heading the climate change department. At that time, of course, the chief policy goal was to introduce a market solution: a price for carbon.
By the time I arrived at Treasury in 2005, Parkinson was head of the Macroeconomic Group. Everyone knew he was second-in-command and heir apparent to Ken Henry. He seemed to this junior policy analyst very sharp — frighteningly so. The man’s smarts cannot be questioned, and I do not wish to try.
I do, however, wish to question the wisdom of putting an economist at the apex of the whole Commonwealth public service.
There are many ways in which economics can shape a person’s world view — not all of them bad. I think economics is awesome; it helps us understand the world and make it better.
No other social science has predictive models that work like models of markets and prices. Few other social sciences can point to the application of their theories and describe how they improved the lives of billions.
But economics is not perfect. It doesn’t understand everything and, more importantly, it doesn’t try. While the former can be resolved over time as the discipline is refined, the latter fact will remain.
Sometimes economists forget economics doesn’t solve everything. To a man with a hammer, everything looks like a nail.
The problem is economics can be such a versatile hammer, able to whack so many different kinds of nails. Anybody who has read Freakonomics (the book, the blog, now a movie) knows how far the dismal science can be stretched, and how fun it can be to do so.
Economics tends to reify its subject matter. Reification is the way the human mind treats abstract concepts as concrete.
It can be tough for economists to remember a market is just an abstract concept, or that GDP is only an accounting term.
Sometimes, for example, we raise GDP in a way that seems short-sighted or unhelpful. Like if foreign-owned companies dig up resources using very little labour, then export them and pay no tax. Or if economic output expands in a way that hurts a non-economic entity, like a forest or reef.
This might be because reification of economic concepts — consumers, workers, output, the labour market — makes them seem weighty and can leave other policy goals looking less important.
Of course, Parkinson will strive for a balanced approach. He will have access to the insights of all the sociologists, historians, social workers, public health experts and educators that populate the APS. But a a lifetime’s work as an economist propelled him to the top, so he will likely trust the insights of economics most instinctively.
Parkinson’s top competitor as advice-broker is the head of Treasury, John Fraser, who was a Treasury official before he became an investment banker. Fraser returned to Treasury in January this year. The main person sifting their advice will be Malcolm Turnbull, himself a former investment banker.
Parkinson, by virtue of the types of topics he has spent his life studying, is likely to consider tax a far more pressing issue for Australia than school curricula, for example. He is likely to have many more ideas about how to reform trade policy than domestic violence policy.
Detailed policymaking can get technical and be guided by evidence, but prioritising issues is always subjective. It is in the subjective parts of the process that biases exert themselves most fully.
So with economic brains at the top of Australia’s bureaucracy, we can expect more policy work on economic issues. Given the zero-sum nature of a government’s attention, other issues could drop to the side.
That’ll be great for me; as an economist, I will have lots to write about. But is it ideal for Australia?