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FUEL WATCH: EVIDENCE‐BASED‐POLICY OR POLICY‐BASED‐EVIDENCE?
Author(s) -
HARDING DON
Publication year - 2008
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/j.1759-3441.2008.tb01046.x
Subject(s) - scrutiny , economics , robustness (evolution) , treasury , policy analysis , evidence based policy , public policy , underpinning , government (linguistics) , public economics , econometric analysis , econometric model , macroeconomics , econometrics , political science , public administration , law , engineering , medicine , biochemistry , chemistry , civil engineering , alternative medicine , linguistics , philosophy , pathology , gene , economic growth
Experience from the United Kingdom and the United States suggests that expert evidence is often reshaped and repackaged by governments so that it supports existing policy rather than informing policy decisions. The Australian Government based its decision to introduce FuelWatch on evidence in the form of econometric work by the ACCC. This paper asks two questions about that decision. First, was the policy shaped by the econometric evidence or was the Government's presentation of the evidence shaped by the pre‐determined policy? Second, is the econometric evidence sufficiently robust as to support the FuelWatch policy? I find that some of the facts suggest that evidence was reshaped and repackaged to support the FuelWatch policy. I also find that the ACCC analysis was not robust. Specifically, they studied the nominal retail margin when economic theory suggests that analysis should focus on the real retail margin to producers. Using data digitized from a graph in the ACCC Report I redo the econometric analysis and find that the evidence no longer unambiguously supports the FuelWatch policy. The ACCC claim that their analysis is robust because it has been subject to scrutiny within the ACCC and by Treasury but such claims of robustness cannot be verified because they refuse to release the data for public scrutiny. Publication of data and analysis underpinning government decisions and independent review of econometric work provides a more credible evidence base for future policy decisions.