How the Productivity Commission undermines scientific literacy in policy

By Geoffrey Edwards

Tuesday February 12, 2019

Governments need all the instruments at their disposal to protect the nation’s watercourses from damage by farmers. Regulation is a necessary element of the toolkit to protect the property rights of the rest of the community.

The absence of a scientific foundation in the Productivity Commission reports explains why the Australian government itself seems impervious to scientific warnings about the impending rolling collapse of our natural systems.

If ever evidence were needed that the Productivity Commission is a three-trick pony – competition good, public ownership bad, regulation bad – it is on plain display in its 2016 report Regulation of Australian Agriculture.

The commission’s report preceded the more recent nadir of calamities, but the release of the Australian government’s response on January 18, 2019 gives it currency on the public policy agenda and justifies a critique.

The report misunderstands its subject, lacks a robust conceptual framework, has been built up by inadequate process, is replete with broad generalisations that are impractical to implement and lacks scientific literacy. This last defect is ultimately the most grave. The Commission’s entrenched lack of familiarity with the vast body of scientific warnings about the deteriorating state of Australia’s natural resources is fatal to its pretensions as an independent policy advisor. The other defects are also serious. Let’s consider them in turn.

Simplicity of ownership overlooked

To conclude that it is overdue to send this pony to the knackers, it is unnecessary to read beyond the very first recommendation: “Land management objectives should be implemented directly through land use regulation, rather than through pastoral lease conditions.” This sweeping generalisation stands squarely in the commission’s long tradition of misunderstanding the nature and strength of tenure allocation.

The power to allocate Crown land as leasehold derives from the state’s prior ownership. This partial transfer of the state’s property interest is inherently voluntary: the lease is a contract between two willing parties; and generally speaking, just as with commercial leases, the conditions cannot be changed unilaterally within its term. One would expect a body that perennially enthuses about the virtues of market instruments to celebrate leasehold with its certainty, transparency, enforceability and tradeability.

On the other hand, the power to regulate conduct, sometimes called the police power, derives from a government’s sovereign authority to legislate on behalf of its people. Regulation is inherently coercive and superimposed without consent upon whatever title the landholder possesses. The report’s undifferentiated definition of regulation – “any laws…that influence or control the way people and businesses behave” – is inadequate as a logical foundation for a report examining land use policy.

In setting conditions of occupation within Crown leases, the state withholds some privileges, to achieve some public interest objective. By regulation, the state withdraws privileges that the tenure holder otherwise would have enjoyed.

True to form, there is a conspicuous internal contradiction between the commission’s professed desire to minimise regulation and its preference for regulation over ownership. Ownership of an asset allows the owner to exercise line command, which at its core entails the positive capacity to get things done. Landholders are sovereign within the terms of their title, so subsequent regulation generally acts negatively to restrict their discretion, not to empower them. Line command is direct, regulation is indirect and commonly burdened with appeal rights.

The simplicity of ownership is starkly demonstrated by contemplating the disaster that telecommunications has become. Dismissive of the power of line command, the government in 1997 commenced privatisation of Telstra, convincing itself that it could achieve its community service purposes by regulation (and subsidy). There followed ten years of confrontation, grounded in the intrinsic incompatibility between the interests of shareholders and the public interest, before a new government determined that third-party regulation of a private company wasn’t ever going to deliver a modern broadband network, and re-established line command by creating a brand-new corporation to do just that.

Conceptual foundation shallow

“Applied to the Murray Darling system, ‘highest value use’ would mean cotton farms along its length, until all extractable water and groundwater had been sucked out.”

It’s not surprising that the commission produces uni-dimensional reports. Its formula here for identifying regulations that may impose an unwarranted burden is simply to meld stakeholder input with “first principles (economic) analysis”. This is a significant admission. Are there no insights to be gained from philosophy, history, Indigenous culture, science or sociology? This is a formula for dismissing nuance, for glossing over the current jurisdiction-specific statutory canvas, and even for ignoring the critiques of textbook economic analysis available within the economics disciplines.

The economistic blinkers are exposed in the false assertion that “The overriding objective of land use policy is to facilitate the efficient use of land”, with efficient defined as “highest value”. No, emphatically it’s not. The overriding objective of land use policy is to protect the public interest. This has both market and thoroughly non-market elements. Highest does not equate to “best” or to “sustainable”. Applied to the Murray Darling system, “highest value use” would mean cotton farms along its length, until all extractable water and groundwater had been sucked out.

Due process absent

The commission’s report quotes cases of cumbersome regulation that are easy to ridicule. It took a cotton farmer six weeks to negotiate with multiple agencies to gain permission to top up a wetland with environmental water. A blueberry farmer had to apply under Commonwealth legislation to clear five plants on 1.2 ha even though a state permit was not required.

Quoting disgruntled applicants without a counterbalancing explanation from the authorities creates a misleading impression of incompetence and obstructionism. The inquiry’s process lacks street level insight of the root cause of pettifogging regulatory procedures, which is commonly chronic underfunding of the agencies concerned.

Regulation is often the last resort of a public authority and the only one available when it is denied funding to implement more cooperative measures such as stewardship incentives, field days and landcare grants. Regulation from a remote capital city may be all that a department can afford after its district offices have been closed and farm advisors made redundant in the name of budget discipline. Enforcement is the poor cousin of regulation and underfunded enforcement creates injustices between applicants and gives all regulation a bad name.

The report doesn’t acknowledge that regulation is introduced for a purpose deemed by the sovereign authority to be warranted. The commission is not necessarily in a position to know the forces that motivated a government in at the time. It also doesn’t concede that perhaps the scientists and lawyers who frame and implement environmental regulation just might know more about environmental protection than the landholders whose primary field of expertise is production, or the commission itself, whose primary field of expertise is basic economics.

Replete with puffery

“If this is the best that the Productivity Commission can produce, after 20 years of experience, then it serves no useful public purpose.”

The commission’s report is replete with self-proving waffle like “Government intervention to promote native vegetation and biodiversity conservation…is justified where the benefits to the Australian community exceed the costs”. Even the phrase “Government intervention” is a misnomer. What is the point of a recommendation that state governments “consistently consider environmental, economic and social factors” when crafting new environmental regulation? This is no advance on the 1992 National Strategy for Ecologically Sustainable Development.

Given that land use regulation is within the jurisdiction of the states, it is not surprising that the report falls back to generalities rather than tackle the complexities of each state’s different suite of statutes and policies.

The residual impression is that the compilers have used a simplistic and formulaic economic framework in attempting to cobble together something coherent from unreconciled disparate opinions put forward by the submitters. If this is the best that the Productivity Commission can produce, after 20 years of experience, then it serves no useful public purpose.

Scientific literacy absent

The lack of a scientific, and especially, an ecological perspective in the substantive report is pervasive and fatal to its legitimacy. The Productivity Commission is often described as the primary national policy advisory entity outside line departments. The absence of a scientific foundation in its reports perhaps explains why the Australian government itself seems impervious to scientific warnings about the impending rolling collapse of the natural systems on which agriculture and indeed the entire economy depends.

This, not excessive regulation, is the true burden on our economy.

Top image: Governments need all the instruments at their disposal to protect the nation’s watercourses from damage by farmers.

Dr Geoffrey Edwards is Adjunct Professor in the Centre for Government and Public Policy, Griffith University.

This article was amended after initial publication to remove unintentional ambiguity in a reference to the government’s response. The original sentence ‘Any modern report about agriculture that does not mention climate change is worthless.’ was not referring to the Productivity Commission’s report.

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