The process of making national investment decisions

The assessment process – use voters not economists to assess the benefits?

  • Who should assess the long term benefits from large infrastructure investments such as HS2 or major new flood defences?  We typically compare projected costs with benefits discounted from decades or centuries ahead. Few deny economists should be involved in the comparison process, but are economists the best people to assess the basic economy of the distant future, and hence the benefits created by this investment? The job tends to be left to economists by default, but are they really the best experts at guessing the economy even twenty years out, let alone eighty years ahead? Surely economists are no better than any other arbitrary group? Who better than taxpayers and voters? There is a growing body of evidence that says on difficult big issues large numbers of people make better decisions than small groups of so-called experts.
  • For example voters could be asked to assess the benefits of a proposed investment by asking them to reflect on the benefits of past investments and to compare the benefits of the proposed new investment with this earlier precedent. For instance an infrastructure investment similar to, say, CrossRail across London could be compared to various rough estimates of London’s GDP and voters informed that for given predicted costs of £Xm London’s GDP would have to rise by Y% pa for the investment to earn a 6% return on public sector investment (or whatever the Treasury’s required rate is). The investment decision is then simple:
    1. Do you wish to vote for or against this issue simply on principle? If yes go to Vote Now.
    2. If no, and you wish to consider the issue on a more practical basis, do you think this investment will increase London’s GDP over the next fifty years by Y%pa? If yes you may want to vote in favour, if no you may want to vote against.

Government or hired economists would play a role in collating academic studies of possibly relevant economic history into reports to inform voters’ opinions, including, in this example, say, ex-post analyses of the true social effectiveness of past investments in the London Underground. The difference with the current system is that the economists would translate past studies into everyday English and then pose the question in such a way that the average voter can make a well-informed choice. In such a major decision the key value judgments is “Do you think the discounted expected benefits exceed the anticipated costs?”, which is, of course, a subjective question, and one to which there is no ex-ante right answer. But in open societies we tend to believe that large numbers of well-informed voters ought to get this sort of question right more often than a few economists or top politicians, who think they know more about the long term future economy. And even if experience were to show that voters don’t get it any more right than the elite, it is the voters’ money, so surely they have a moral right to spend it as they wish for the benefit of future generations (or not)? 

The voting process – online voting and online referendums on major decisions?

  • In the 21st century is there a better way of making major policy decisions than pencilling X on a scrap of paper for one party or another, when that vote is also to decide who will run the country for the next five years? Should the public be consulted more directly and quickly? Obviously yes: the web connects us to our bank accounts, which for most voters are far more important and confidential than our views on running the country. So, given that we will be benefiting from transport enhancements like CrossRail and HS2 forever – and paying for them for decades to come – shouldn’t we be consulted directly on these major decisions costing tens of billions? Or even make the final decision as a country, independently of our decision on who should be the ruling party? Retaining or modernising nuclear weapons, at a cost of tens of billions? Indeed the UK Referendum on EU membership and the Scottish Referendum should have been done using secure online voting. Young people cannot understand why paper, pencils and ballot counts are still used, when there is an obviously far quicker and more reliable way to do it, and when they stay in touch with their more important (to most people) and personal bank accounts hourly via their phones. Then the political parties would have the simple task of implementing our decisions and running the country day-to-day. Wouldn’t this version of ‘democracy’ be far better suited to the third millennium than paper ballots for Parliamentary representatives, who, as Edmund Burke said,  if they are both good and honest, will vote according to their consciences, but otherwise will vote as the party machine requires?
  • For an example of a major infrastructure initiative suitable for this treatment read http://professionaleconomics.net/shop/alternative-hs2-plan-b/

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