In this week’s Business Review Weekly I have an article on the opportunities for policy-makers to use new technologies to solve social problems. It is reproduced over the fold.
Business Review Weekly, 15th August 2007
Every time my eTag beeps (and that is several times a day), I marvel at the wonder of it. Here is a convenient means of having me pay for the roads I am using. But consider how under-utilised the whole system is.
What if, instead of me paying a toll just for freeways, I was to pay a toll for every road that I used? What if it was based on the inconvenience my travel caused others – such as when I commute at peak times? And what if I could use my eTag on public transport and get credits for using that? All these possibilities were raised by Stephen King and myself in our book, Finishing the Job (MUP, 2004). It just demonstrates the potential for technological innovation to solve public policy problems; in this case, ones of traffic congestion and environmental harm.
But there are other policy areas yet to be touched by existing technologies. At the moment, the Australian Competition and Consumer Commission is conducting an inquiry in petrol prices. One of the major concerns is the persistent cycle in prices. Prices plummet on Tuesdays with savvy consumers lining up for a deal and then rise up before the weekend. Sure, the cycle rewards the shrewd and penalises the naive. But, in many respects, it would be better if the cycle didn’t exist; or at the very least, that no one had to worry too much about it.
In the US, retail petrol data has been linked in to Google Maps to allow consumers to check out different prices before setting out from home or by looking it up on the mobile phones (e.g., at gasbuddy.com). Put it in in-car GPS systems and the costs of searching for bargains fades away. Retailers will know this and will need to be as price competitive as possible.
We could provide the same service in Australia. The price information is already required in Western Australia and it could easily be extended throughout the country. And it is not costly to collect. It is already done by private companies who sell the information to petrol stations but not consumers. By getting the information to consumers cheaply, the nature of the market would change. More would become savvy and petrol stations would not find it as worthwhile to cycle prices as they do now.
Thinking further afield, consider the problem of gambling. The Productivity Commission estimates that the social costs of gambling are in the billions and that controlling them would be well worth any cost of revenue and taxes. But how do you do it? It is very hard to monitor individual gambling habits and choices. But what if information technology can assist here?
Around the world various solutions are being trialled. Smart cards can be used to put pre-set spending limits on gamblers. However, research in Nova Scotia Canada has show that this is only good in so far as gamblers can’t just get another card.
Alternatively, a simple USB key with a finger print sensor can register gamblers and send the information back to a centralised system. They can then monitor behaviour and put in various steps to stop people from getting carried away. For example, individuals could set daily or weekly spending limits. Exceed this and the system knows and puts a block on the individual concerned. Such innovations would be well worth trialling in the lead up to the Victorian government’s poker machine tender.
Innovations in public policy and technological ones go hand in hand. We don’t need to think of every solution as being too hard just because it was that way in the past. And the governments that get there first will see the productivity and social benefits can claim the leadership mantle.
Joshua Gans is Professor of Management (Information Economics) at the Melbourne Business School. He maintains a blog on these issues at economics.com.au.