Uncertainty the core of policy design

August 05, 2015

Professor Warwick McKibben notes the importance of flexibility and uncertainty in approaching future challenges.

Australia’s politicians should give up the idea of trying to design national policies based on inflexible and failure-prone future forecasts.

“Uncertainty and risk management should be at the core of national policy design,” says Australian National University economist and public policy research fellow, Professor Warwick McKibbin.

“A lot of policies in Australia are designed on the assumption that we can know the future, that it’s predictable. And when that inevitably turns out not to be the case, these policies collapse into chaos amid accusations of mismanagement and broken political promises.”

Professor McKibbin, who is also a non-resident Senior Fellow at the Brookings Institution think-tank in Washington DC, is one of the opening speakers at the Cooperative Research Centres Association’s annual conference at Parliament House in Canberra on 26 May.

The CRC conference is celebrating 25 years of science impact and achievement by the national research program. Federal industry and science minister Ian Macfarlane and Professor McKibbin will be part of an opening session that will present policy perspectives on what the next 25 years may hold for Australian science and innovation.

Professor McKibbin says the failure of Australia’s carbon pricing mechanism, and current uncertainties surrounding the renewable energy industry, should provide valuable lessons for future policy design.

“Climate policy should be designed to better manage risk by creating a flexible framework that balances expected environmental benefits against economic costs over time,” he says.

“It should be policy that encourages innovations, like alternative energy technologies, that will reduce emissions, but it shouldn’t claim to use science to set inflexible and precise targets for emission reduction at a point in time.

“Science should form the basis of a climate or carbon pricing policy, but the policy goals shouldn’t be tied to specific outcomes that claim to be the result of scientific calculations. That’s setting policy up to fail, and it will fail because it doesn’t allow for uncertainty and change.”

Professor McKibbin says a “stable and credible” policy environment is needed to shape Australia’s future in what will be a major global area of innovation.

“There are many ways to price carbon, and Australia needs to look at ways that will balance competing interests both at a national and global level,” he says.

“The best way to do that is plan for change and uncertainty instead of trying to lock down policy into prescriptive detail.”

The CRC program was created in 1990 to bring scientists and industries together to work on some of the biggest challenges facing Australia.

These have included better bushfire science, manufacturing, digital technology, biosecurity, sustainable farming, water management and mental health issues underpinning the unacceptably high suicide rate among young people.

“The CRCs are an Australian success story. They were designed to create research impact, and their 25 year record of achievement speaks for itself,” says CRC Association chief executive Dr Tony Peacock.

Details of the conference program can be found at http://australia2040.com.au/

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