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This week’s One Question comes from Harry Clarke:

‘How relevant are motives in assessing the public policy stance of a politician or commentator?’

My answer: so long as we know the motive, it doesn’t matter much. But if we don’t know the motive, competition becomes important.

The question is an interesting one but really has two parts. First, if one were listening to a commentator, would one be better off if the commentator had a interest or bias in their motive or was completely independent? Second, is it important that we know the motives of the commentator when evaluating their opinions?

To answer both we need to consider the reactions of those listening in. People do not listen to politicians or commentators in a vacuum. They adjust depending upon what they know. For instance, these days the management team at Telstra is completely upfront about their motivations. In the broadband debate, they say upfront that they care about their shareholders and that their shareholders want the highest return on their investment possible. So they are going to resist things that create competition. In this regard, it is fairly easy to deal with their comments. You know that they are going to push for government policies that maximise shareholder return and they are going to put forward an argument that those policies will trigger or harm their incentives to invest; whether they actually do so or not. Hence, when they claim that there is insufficient return to investing in fibre to the node infrastructure and that they will only do it with a subsidy or protection of competition, one can be skeptical and infer that that may not be the case. Put simply, the information coming from Telstra is not useful.

Although when information not in their interests comes from them, we can accord much more weight to it. For instance, I have noted before that Telstra-Clear in NZ has put forward evidence that regulation improves broadband and telecommunications investment. Now that information was based on their position there as an entrant rather than as an incumbent but, given the clear implications for Telstra in Australia, one should accord more weight to that information both in Australia and New Zealand.

This illustrates an important case: when we now someone’s bias, it is best to be skeptical about their opinions and weigh them accordingly. But, generally, in this situation, the end result is that the commentator is having no impact (as we rarely see information put forward that clearly harms their position). They don’t even add noise to the world. They are irrelevant to the debate. In this respect, the fact that they have a motive, means they do not add to the information of those they are trying to persuade. It would be better if they didn’t have a motive.

Now the above example allowed the commentator to proffer whatever opinion they wanted without constraint. But what if the commentator was not allowed to blatantly lie. Suppose that if they made a claim, it could be verified, but that they would selectively omit information and not get in trouble. Then things change quite a bit. In a classical article (RAND Journal of Economics, 1986), Paul Milgrom and John Roberts demonstrated that, in this situation, it is still best to “assume the worst” about a commentator and that they have omitted information that would be useful. They will select their own stance or position based on that skepticism. What is more is that, in this situation, commentators will know that, unless they are told everything, individuals will take a stance against both their own interests (had they had full information) and the interests of the commentators. Given this, the commentator should reveal all they know.

Now this is a nice result: it suggests that sophisticated listeners can always induce revelation of necessary information. And it may apply well in some economic settings. For instance, if you are trying to buy a car and the seller can’t give you the full service record, then you will assume that the results of those services are bad and discount what you want to pay accordingly. Faced with getting a lower price, the seller is better off revealing that information.

But it is also the case that we know that it is somewhat nice in theory but not as relevant in practice. Information is concealed. And it is most likely concealed because some individuals at least are unsophisticated and won’t be skeptical in evaluating opinions.

It is at this point that we need to turn to another mechanism to help us: competition. This is the mechanism that our adversarial system in the Courts uses. It knows that it deals with parties with different motivations but accepts that and asks each to make a case. Milgrom and Roberts showed that this competition can help both the sophisticated and the unsophisticated in reaching better positions and stances when listening to advice. It relies on a situation where, should individuals be heading towards a stance that it is different from that which they would reach had they had full information, then it is in someone’s interest to give them that information. Now if information proferred could be a blatant falsehood, this breaks down. But if it can be verified, competition can work.

What this means is that there are two strategies that can be employed to reach positions based on opinions that might be biased. First, skepticism plays a dual role of being a sensible response but also driving interested commentators to reveal more information. Second, diversity of motives allows competition to weed out information even when individuals are not skeptical. In that situation, we don’t need to know as much upfront about a commentator’s motives.

All of this suggests some interesting implications for public policy. First or all, on the issue of media ownership bias, it shouldn’t worry us too much if the owner is transparent in their interests. This is a characteristic that appears present for our own moguls. But on issues where their interests are alligned, then competition in the media becomes important.

Second, our Courts impose a rule that experts — economic, medical or otherwise — must give independent advice. This is always interesting given that those experts are being paid by an interested party. But my own experience as an economic expert in Court is that this leads to some somewhat amusing games in the witness box. For example, in a recent case, I was asked whether I had a bias towards competition. I said that, as an economist, that I did have such a bias. Then came a set of arguments that I might be violating the independence criteria by bring such biases to the Court. I had to explain that my bias was the result of years of study and that I still approach any case on its merits and just because I was in favour of competition this time around did not mean that I could not base that on proper economic assessment of the evidence. For this reason, it can be quite funny how bias and our perspectives on them can influence such processes. This has caused many to wonder whether requires for independence are really a waste of time and whether judges should look at the reputation of experts in evaluating their current positions. However, that is an issue to be explored at a different time. (By the way, ultimately, I don’t really mind the requirement of independence as that is what I strive to be in these matters).

Third, the main areas where a politician may have an interest that is non-transparent and difficult to take into account, would be a financial one. It is there that we need disclosure rules and these days these seem to be extended to commentators too. Someone ironically, we are blessed at the moment in our environmental debate to have a Minister and Shadow Minister who are independently wealthy and so it could be inferred have little financial interest in the outcomes of that debate. That (a) both makes purer the reason each has ended up a politician and (b) makes it more likely that each will put forward positions independent of current or future financial gain. There is something to be said for the ‘second career’ politician here.

Other responses:

• Harry Clarke’s original post on this issue. He argues that just because some has a poor motive for putting in a policy does not mean that we have to conclude the policy is bad. My take: prior to it being put in place, we have a right to degrade its prospects if the politician has a poor motive. Indeed, Harry also struggles with his own conclusion when it comes to oil funded, global warming denialists. My view would be that these folks should be pretty much ignored.
• Harry Clarke’s new post slams me for engaging in a “motives fallacy.” He argues that my discounting of Telstra’s views doesn’t mean that they are wrong. Harry misreads me. I didn’t say that they were wrong I just said that if they are the only one’s now talking, I’m not listening. And, yes, Harry I think people will lie if it is in their interest to do so (I thought most economists thought that). That doesn’t mean what interested parties say is always a lie. You commit that fallacy. What it means is that we can’t tell whether they are lying or not. Find me someone without a special interest who says the same thing and I will assess that truthiness of that more favourably. You need to apply equilibrium thinking here. The point of Milgrom and Roberts is that when we treat interested party’s views with skepticism it generates conditions from which the truth might emerge. So I agree that a statement by an interested party does not mean it is automatically wrong and the reverse true, just that you cannot often get information — true or otherwise — from those parties. You need a better information source.
• Robert Merkel suggests that people vote for the motives and that is how democracy perhaps should work.
• Tim Dunlop appears to agree with me that knowing someone’s motives can cause us to adjust our assessment of claims they make.
• Kim at Larvatus Prodeo is worried that the question itself ascribes too much rationality to the political debate.
• Andrew Bartlett shows his diplomatic colours and thinks that motives neither prove or disprove the legitimacy of a stance (me: of course) but they do impact on the credibility of promises (me: good point).
• Ken Parish isn’t enamoured with politicians, full stop.
• Tigtog takes a historical approach to all of this.

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