Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Caution needed with opt-out schemes

Eugenie Joseph

27 July 2018 | Ideas@TheCentre

The raging controversy around the automatic creation of e-health records for Australians is a lesson for governments on the need for caution in using opt-out schemes.

Rightly or wrongly, the public has serious concerns about privacy, digital security and the risk of their personal health information being misused.

But this raises broader questions about the ethics of opt-out schemes. Are they ever justified?

Such schemes can undermine the autonomy of individuals and their ability to make truly free choices. They also create a penalty for those who do not want to sign up, by forcing them to take active steps to opt out.

But opt-out schemes are tempting for governments to use, because they can be more efficient and result in higher take-up. Governments also justify opt-out schemes as a type of positive nudge — that is, they can encourage people to make the ‘right’ decision.

Conversely, if a scheme is opt-in, governments must actively convince people to sign up — usually through costly marketing and public awareness campaigns. And there is no guarantee of success.

In the case of our e-health record system; it was introduced in 2012 as an opt-in scheme but failed to generate significant uptake. Hence, a government review recommended a change to an opt-out system.

And given the cost of creating the system has reportedly exceeded $1 billion, it is understandable why the government needs a high uptake.

But uptake should not be the only consideration. Individual autonomy, privacy and perceptions of risk are important ethical issues.

The debate around organ donation is a good example of the ethical debate about opt-out schemes.

In Australia, there has been a long-running debate on making organ donation an opt-out decision, where drivers would be automatically registered as organ donors.

But ultimately, this proposal has never gone very far, due to ethical concerns about the nature of personal consent.

Generally, there are good reasons why governments avoid the use of opt-out schemes — especially where they infringe on very personal decisions or carry significant downside risk.

But if Canberra believes an opt-out is justified, it must make a compelling case to the public.

Otherwise, the government will lose public trust — as the current e-health debacle has so effectively proven.

Straw bans and straw men

Monica Wilkie

27 July 2018 | Ideas@TheCentre

Decisions should be made with the best available evidence. From our elected representatives to faceless bureaucrats, to corporations — whose political leanings are increasingly effecting our lives — even if we don’t like the decisions, we like to believe they are utilising the best research. Unfortunately, this is often not the case.

Let’s take the recent war on straws. Pubs, clubs and cafes are ridding themselves of the plastic drinking apparatus in the name of environmentalism. But where did this sudden concern with straws come from?

The straw ban began in America. Celebrities once again decided to tell the average Joe what they were doing wrong, and slick TV ads and hashtags were produced to enlighten us on the dangers of straws.

The main talking point for the anti-straw activists was that 500 million straws were being used in the US every day, an eye-wateringly high number.

But how did they come to this figure? It turns out the source was the science project of then nine-year-old Milo Cress. Cress called a handful of straw manufacturers and asked how many straws they produced; and the 500 million figure was born.

Without wishing to criticise young Milo’s initiative, this is hardly scientific.

Estimates from more rigorous studies puts US straw usage at between 170 and 390 million per day. It’s difficult to get accurate figures about Australia’s straw usage because even ‘The Last Straw’ campaign — which advocates  for the reduction of straws here — uses the 500 million a day figure and does not have any specific domestic figures.

A few hundred million straws may seem like a lot. However, according to a study published in Science (2015) Australia’s plastic wastage accounts for less than 0.08% of ocean-based plastic pollution. The effect Australia can have on ocean pollution is infinitesimal. But we will again feel the negative impacts of an environmental campaign based on feelings over facts.

I guess that’s what happens when you leave the kids in charge.

Monica Wilkie is External Relations  Manager at The Centre for Independent Studies.

Cut government share of the economy

Gene Tunny

27 July 2018 | Ideas@TheCentre

Australian taxpayers are struggling to carry the burden of ever expanding government spending.

Prior to the Whitlam government of 1972-75, total Commonwealth, state and territory government spending in Australia was around 25% of GDP. In the four decades since the Whitlam government, it has been around 35%.

There is no question it would be good for the economy and taxpayers to reduce this burden.

The CIS has previously set a realistic target of reducing government spending to 30% of GDP, as part of its TARGET30 campaign. A new economic research paper presented at the recent 2018 Conference of Economists provides fresh support for this objective.

In The Optimal Size of Government in Australia, Makin, Pearce and Ratnasiri estimated the optimal size of government in Australia is around 31%. This represents the level that maximises economic growth.

The statistical analysis revealed that — all else equal — when the government share increases, real GNI growth falls. Higher government spending can crowd out private sector investment, adversely affecting future economic growth prospects. And it needs to be funded by higher taxes, which also reduce growth prospects through discouraging work effort and investment.

The analysis confirms the importance of monitoring the size of government and keeping it under control, ideally reducing it over time. This will not be easy. The fastest growing, and most expensive government programs are often the most popular. Health, education, pension, and childcare are prime contenders here.

Future spending growth is also likely to threaten budgets. For example, the National Disability Insurance Scheme is predicted to cost in excess of $20 billion a year and is already subject to billion dollar cost blowouts.

It will be challenging to reduce government’s share of the economy, but the economic evidence suggests it would be highly desirable to do so.

Gene Tunny is an economist and policy expert, and the founder of consultancy Adept Economics.