FuelWatch: evidence-based-policy or policy based evidence?

Harding, Don (2008): FuelWatch: evidence-based-policy or policy based evidence? Published in: Economic Papers , Vol. 27, No. 4 (December 2008): pp. 315-328.

Abstract

Experience from the United Kingdom and the United States suggests that expert evidence is often reshaped and repackaged by governments so that it supports existing policy rather than informing policy decisions.

The Australian government based its decision to introduce FuelWatch on evidence in the form of econometric work by the ACCC. This paper asks two questions about that decision. First, was the policy shaped by the economet- ric evidence or was the government�s presentation of the evidence shaped by the pre-determined policy? Second, is the econometric evidence sufficiently robust as to support the FuelWatch policy? I find that some of the facts suggest that evidence was reshaped and repackaged to support the FuelWatch policy. I also find that the ACCC analysis was not robust. Specifically, they study the nominal retail margin when economic theory suggests that analysis should focus on the real retail margin to producers.

Using data digitized from a graph in the ACCC report I redo the econometric analysis and find that the evidence no longer unambiguously supports the FuelWatch policy.

The ACCC claim that their analysis is robust because it has been subject to scrutiny within the ACCC and by Treasury but such claims of robustness cannot be verified because they refuse to release the data for public scrutiny.

Publication of data and analysis underpinning government decisions and independent review of econometric work provides a more credible evidence base for future policy decisions.

• Item Type: MPRA Paper
• Language: English
• Keywords: FuelWatch; Evidence-based policy; Petrol pricing;Time series econometrics; Structural breaks;Hypothesis testing; HACC standard errors
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; A - General Economics and Teaching > A1 - General Economics > A11 - Role of Economics ; Role of Economists ; Market for Economists

References

ACCC 2007, Petrol Prices and Australian Consumers: Report of the ACCC inquiry into the price of unleaded petrol, 18 December 2007.

ACCC 2008, Petrol� Further Econometric Analysis Undertaken by ACCC, 29 May 2008.

Harding, D., (2008a) Submission to Senate Economics Committee Fuel-Watch inquiry, Submission number 4 to Senate Inquiry into the National FuelWatch (Empowering Consumers) Bill 2008.

Harding, D., (2008b), FoolWatch: A Case study of econometric analysis and 'evidence-based-policy-making' in the Australian Government, Attachment A to Submission number 4 to Senate Inquiry into the National FuelWatch (Empowering Consumers) Bill 2008.

Harding, D., (2008c), FoolWatch Further Discussion of Econometric Analysis Undertaken By ACCC, Attachment B to Submission number 4 to Senate Inquiry into the National FuelWatch (Empowering Consumers) Bill 2008.

Harding, D., (2008d), Supplementary evidence to the Senate Economics Committee on FuelWatch, Attachment C to ubmission number 4 to Senate Inquiry into the National FuelWatch (Empowering Consumers) Bill 2008.

Stilgoe, J., A. Irwin and K., Jones 2006, The Received Wisdom: Opening up Expert Advice, Demos.