Review of percapita’s version of behavioural economics applied to the Australian training market

1. Valuing the Future: Policymaking for the Long Term Conference debrief

2. Five key messages: Government is good Markets are too Markets need to be “designed” to achieve long-term public benefit There’s a range of tools governments can use… But there’s not a lot of money Either/Or

3. What does that mean for us? We’re expensive (for government) But we’re also effective (in short- and long-term) Persistent concern about perceived market dominance But wariness of ABC-type risks (thanks Eddie Groves) And still not a lot of money

4. Status quo Reform Lots of public $ Lots of public $ & private $ Usual tools New tools Stable Disruptive

5. The red pill is “market design” “…how government can set the ‘rules of the game’ in provision of key services, aligning policy goals with profitable behaviour and stimulating investment in areas of as diverse as health, education, energy, climate change and employment.” percapita

6. Market Design - tools Assumes we’re not all rational benefit maximisers (we might even be easily led…) Default setting eg. organ donation Framing eg. Queensland water Self contracting eg. gambling, Ocsober, Febfast Social norms eg. drinking, speeding, obesity campaigns

7. Default setting – organ donation

9. Believed businesses were major users

10. Suffering restriction fatigue

11. Taught how to read meter

12. Provided water saving technologies

13. Published comparative performance

14. Major media campaign

16. incentives (positive and negative) to overcome barriers

18. offers subsidies, discounts prices, rewards achievement

19. directs some resources to social & economic objectives

20. regulates some participationDoes government need to own some providers? Does it matter that it does?

21. Does ownership matter? percapita argues ownership matters because governments focus on supply, not demand “There is an almost inevitable loss of the natural patterns of demand in a system which begins with a fixed supply and makes this available to individuals, when compared to a demand-driven system which begins with supporting demand from individuals, and encourages suppliers to respond to that over time.” Seems overstated … plus where’s the evidence?

22. A digression “Commonwealth government’s approach to policy is inductive and based on ideas. State and territory governments’ approach to policy is deductive and based on facts and practical realities.” Andrew Barr ACT Minister for Education and Training

23. A clash of ideas with facts?

25. Interventions involve combinations of information, incentives and regulation

26. percapita argue government ownership distorts the VET market

27. But current arrangements meet public and private expectations

28. Both approaches cohere with “market design” approach

29. Ours (complex) is just different from theirs (simple)