NEGATIVE IMPACT
The clearest negative productivity impact comes from a reduction in the level of human services which reduces investment in human capital – the education and health of the current and future workforce.
Big spending programmes with eligibility requirements usually require big bureaucracies to deliver them. Assessing eligibility, especially if there is regular reassessment, is resource intensive. Given the tech interests of the emerging DOGE team, they will no doubt be looking for artificial intelligence-type solutions.
Before they do, they should consider Australia’s Robodebt experience, subject to a 2023 Royal Commission.
This demonstrated the very high cost – both to individuals mistakenly charged with debt and the public purse as they sought compensation – of the assumptions that there was widespread non-compliance with the rules and that an automated solution putting the onus of proof onto the programme recipient would deliver large savings.
Experienced public servants raised concerns, but these were ignored. Putting fear into the bureaucracy is not a way to encourage their productivity. The value of empowering workers to identify problems and propose solutions, rather than impose solutions dreamed up by consultants, has been shown to be a far more productive approach.
Deregulation is a commonly offered solution to improving productivity. Again, this needs to be considered case by case as a lot of regulation is about reducing the costs that a business’ activities impose on the environment, its workers, and consumers (what are known as negative externalities).
Regulatory bureaucracies can become captured by their industries, meaning that they are ineffective in reducing these costs.
