It is an important topic, but the Institute of Economic Affairs landing page that you link to is pretty lame.
Emphasizing “Evidence” gives one a hefty shove towards evidence that is quick and easy to gather.
QUICK The IEA say
A disregard for substitution effects.
but the actual problem is that substitution takes time. If you want to gather evidence about substitution effects you have to be patient. “Evidence based policy making” is biased towards fast-evidence, to accommodate the urgency of policy making. So of course substitution effects get under-estimated.
EASY Computing correlations is easy, tracing causality is hard. Worse, you can hardly hope to unravel the network of causal connections in a real world problem without making some theoretical commitments. An emphasis on “Evidence” leaves you relying on the hope that correlation does imply causality because you can get evidence for correlations. Causality? Not very practical. Then you get kicked in the teeth by Goodhart’s Law
The IEA say
Calculating the external costs of harmful activities.
which is true, but hardly the worst of the problems. Ideally one would estimate the benefits of an economic policy based on adding the consumer surplus and the producer surplus. But this is too hard. Instead one tots up the market prices of things. This leads to GDP, which is a notoriously crap measure of welfare. But if you insist on “evidence” you are going to end up throwing out theoretical considerations of consumer and producer surplus in favor of GDP.
This submission is getting down voted. You might what to blog about the topic and try again with a link to your blog post. It shouldn’t be too hard to provide a substantial improvement on the IEA landing page.
It is an important topic, but the Institute of Economic Affairs landing page that you link to is pretty lame.
Emphasizing “Evidence” gives one a hefty shove towards evidence that is quick and easy to gather.
QUICK The IEA say
but the actual problem is that substitution takes time. If you want to gather evidence about substitution effects you have to be patient. “Evidence based policy making” is biased towards fast-evidence, to accommodate the urgency of policy making. So of course substitution effects get under-estimated.
EASY Computing correlations is easy, tracing causality is hard. Worse, you can hardly hope to unravel the network of causal connections in a real world problem without making some theoretical commitments. An emphasis on “Evidence” leaves you relying on the hope that correlation does imply causality because you can get evidence for correlations. Causality? Not very practical. Then you get kicked in the teeth by Goodhart’s Law
The IEA say
which is true, but hardly the worst of the problems. Ideally one would estimate the benefits of an economic policy based on adding the consumer surplus and the producer surplus. But this is too hard. Instead one tots up the market prices of things. This leads to GDP, which is a notoriously crap measure of welfare. But if you insist on “evidence” you are going to end up throwing out theoretical considerations of consumer and producer surplus in favor of GDP.
This submission is getting down voted. You might what to blog about the topic and try again with a link to your blog post. It shouldn’t be too hard to provide a substantial improvement on the IEA landing page.