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The living and the dead: government’s arteries and capillaries have lost symbiosis

By Nicholas Gruen - posted Thursday, 20 April 2017

Announceables, rebranding, and the prestige of policy theory over delivery - the 'arteries' of government, driven by status rewards of social and economic importance, have come to dominate the 'capillaries' in a way that threatens the health of both.

This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. - Adam Smith, 1759

Arteries and capillaries

In a book that's very interesting and impressive, even if it doesn't quite rise to its own high opinion of its authors, Adrian Bejan and Peder Zane focus on 'vascularisation' or the 'dendritic' - tree-like - structures from which so much of our world is built. From trunks grow many branches on each of which grow twigs, then down to leaves whereapon the same structures grow within each leaf. This is very common. With this post already having adverted to four such systems - the two illustrated in the graphic above, trees and the circulatory system.


In this essay I outline the many respects in which human culture embodies a similar architecture and some of the implications thereof. The head quote above by the founder of modern social psychology and economics, Adam Smith, is intended to set the tone, with my argument being this: In thrall to the status rewards of social and economic importance, the 'arteries' of human culture have come to dominate the capillaries in such a way that ultimately degrades the health of both - for they are organically interdependent - and the health of the larger organism of which they are a part.

Human culture at different scales

Political structures must have a hierarchy if the object of politics is to solve the e pluribus unum problem - to fashion a singular policy for the community to pursue despite the diversity within it. Something similar can be said of all organisations. An organisation is unitary - capable of pursuing some singular goal. In this sense it is governed as a state is.

But there are also hierarchies in our organisation of knowledge. First, there is the distinction between theory and practice. In science and social science, there's theory and there's empirical work. In the professions like engineering, law or medicine, you learn a systematic body of knowledge at uni and 'apply' it in the workplace. In government we have policy and delivery. In organisations there's policy-cum-strategy and there's execution or delivery.

In the case of governments, whether they're of nations or of organisations, the unitary nature of these entities' 'will' is embodied at the top of the hierarchy (or, to change the metaphor, the organisation's 'centre'). The policy, the strategy is unitary - singular. However it may be executed in multiple sites, possibly in different ways. This hierarchy is similar within professional and scientific knowledge between theory and practice. Theory may not be unitary, but it 'scales' against practice - it is general whereas practice is particular.

This is also true of the status the activity enjoys. Just as those at the centre of organisations win the status rewards, so 'theory' is closer to the centre or the 'commanding heights' of a discipline than practical or empirical work. Nobel Prizes tend to be awarded for 'theoretical' advances, or for knowledge with 'scales'.

Scale, power and prestige within the bureaucracy

If you're a public servant, go into policy because delivery is both lowly and hazardous. Though delivery can be a worthwhile aspect of a developing professional CV, the road to the top is generally via policy. So that's where the most able and ambitious people go. Gary Sturgess has written eloquently about the deprecation of the 'view from the street', and the problem is pervasive.


I've cited regulation review as a classic case. Doing regulation well requires attention to how things are working right down to the micro-detail. But the micro-detail is invisible to those in the gods. It's even relatively low status within economic agencies though it may trump actual experience out in the field in programs. And so, for thirty years we've had lame, top-down regulation review policies that don't work. The first decade of 'minimum effective regulation' announced by the Hawke government in 1986 involved announcements every few years of the need for government agencies to do regulatory impact analysis. From memory, after the best part of a decade there was widespread total non-compliance and only about 14% of those analyses that were done were assessed as adequate. Since then formal compliance has risen, but the quality of regulation has not and there's little evidence that regulatory impact analysis achieves anything and quite a lot of evidence of its dysfunction.

In 2016, the NSW Audit Office produced a devastating report. Keep in mind that its comments were about reducing red tape, which is the one part of the reg review agenda that's relatively straightforward and sensible - that is, built on reasonable rough estimations of compliance costs and relatively simple strategies to reduce them. Here are some highlights:

Overall legislative regulatory burden increased, despite the numeric test being met

Over the life of the 'one-on, two-off' initiative, the Department of Premier and Cabinet (DPC) reported that overall net legislative regulatory burden increased by $16.1 million. Changes to the Public Health Regulation 2012 ($14 million), Fair Trading Regulation 2012 ($5.3 million) and the Tattoo Parlours Act 2012 ($0.5 million) drove this increase and the added regulatory burden from these changes was not significantly offset by reduced burden in other areas.

The numeric test was met with 237 instruments repealed and 54 introduced - an overall ratio of roughly four repeals for every new instrument. However, most of these repeals related to redundant legislation with little or no regulatory burden.

Legislative complexity increased

The 'one-on, two-off' initiative did not reduce legislative complexity, as the stock of legislative regulation increased. The number of pages of legislation - a proxy indicator for statute complexity - increased over the life of the policy by 1.4 per cent per year on average. By comparison, over the preceding ten years, the number of pages of legislation had decreased by 1.1 per cent per year on average.

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About the Author

Dr Nicholas Gruen is CEO of Lateral Economics and Chairman of Peach Refund Mortgage Broker. He is working on a book entitled Reimagining Economic Reform.

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