Wednesday, August 18, 2010

The Shadow Public Service

Tyler Cowen asks: Why does anyone pay for macro-economic forecasts when they are typically wrong and in the public domain? The answer is simple. Forward planning requires some assumption about the future. One comment notes that you wouldn’t plan a military exercise without checking the weather forecast, no matter how inaccurate.

But more fundamentally, the reason for paying for such advice is due to the need to appear objective. Whether objectivity involves accuracy is a secondary concern.

Governments face this problem regularly. To avoid accusations of political influence they engage an army of external consultants to provide trivial advice that can easily be determined by internal staff. This army is the Shadow Public Service.

Oddly, critics fail to note that external advice that does not support a government position will be filtered anyway. Like a barrister in a criminal trial, they won’t ask questions they don’t already know the answer to.

I regularly deal with private economics consulting firms and can’t help but wonder how big an industry is supported by the farcical drive for an illusion of objectivity by government. I have personally engaged millions of dollars of work from private economics consulting firms for the sole purpose of having a basis for a predetermined decision that appears independent.

The final irony of it all is that the best qualified people tend to leave government departments to take on the same role as a consultant, but at five times the cost. And, of course, governments have a habit of filling vacant positions whether they are required or not.  Either recruit the staff you need to provide proper advice, or get rid of them and draw upon the resources sitting in private firms.  Don't waste money on a shadow public service unless they provide a real contribution beyond the objectivity illusion.

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