Politics and Analysis

If there's anything I learned in two years of grad school, it's that between politics and analysis, you need both if you want to make a good decision. So I felt like I was back in grad school finishing up a homework assignment when I made the following reply to a recent comment on my blog:

Our firm (www.econsult.com) does a lot of studies that try to help make this case for governments. For example, comparing the upfront tax subsidies for a proposed development with the ongoing spike up in tax revenues as a result of the new activity it represents, to see if the jurisdiction is better off making the investment and reaping the benefit or not making the investment in the first place.

But we recognize that there is more to a decision than just NPV. On the one hand, a project could have a negative NPV but generate other, intangible benefits (environmental, aesthetic, equity, civic pride) that make it worth spending the money. On the other hand, a project could have a positive NPV but the opportunity cost it represents is too great to green-light (the jurisdiction is maxed out on debt, or other projects have even higher potential NPVs and we can't do all of them at once).

Nevertheless, as you noted, decisions are often just as much about politics as analysis. Which isn't necessarily a bad thing: analysis has its limits, as we understand that our projections are merely guesses, while the political process, if done well, can be an effective way to balance many interests when making a decision. Selfishly, we want governments and the private actors that intersect with them to hire us to add numbers to the mix; but we get that decisions can't be boiled down to just numbers.

The best case scenario is to not pit politics against analysis, but to honor the role of both in making a decision. After all, we're talking about public dollars and public space. We wouldn't want some eggheads to crunch out a number that is the end all and be all of the discussion; nor would we want to make a decision without exploring its likely NPV consequences.

The fact is, politics and analysis are inextricably intertwined in modern America. There is no such thing as pure, unadulterated analysis, since everything is political. And of course we all know that politics has become its own science, now that candidates enlist PhD's to help them with their polling and their campaign strategies.

So it's not so much a serial thing - I figure out what's politically feasible and then bend the analysis to match that, or I do the analysis, and then figure out how to politically sell the result - as much as it is a parallel thing - I need the best of both to make the best decision. Each year, a class of Felsonians enter the world understanding this; here's hoping their influence is felt on elected officials, consultants and lobbyists, and constituencies.
Post a Comment