ESTABLISHING THE ANALYTICAL FRAMEWORK

by ALAN RANDALL*

When one sits down with a blank sheet of paper and the assigned title, “Establishing the Analytical Framework”, words do not come immediately. Why? Because the appropriate analytical framework “depends . . .”. Depends on what? Most everyone would agree that it depends on the problem: in our context, on the particular kind of resource use conflict. Mainstream economics has a fairly complete set of concepts, theories and analytical tools that it might bring to bear on resource use conflicts, but surely the particular concepts and tools that are emphasised and the manner in which they are pieced together to provide an analysis will depend on the nature of the problem.

The concepts and theories of mainstream resource economics include essentially the whole corpus of microeconomics and welfare economics leavened with some understanding of the nature of resource use issues and the process in which resource use conflicts get settled. Essential concepts and theories include:

the principle of opportunity cost. There is no free lunch, because for any path taken there is perhaps a multitude of roads not taken. The cost of lunch is always the net value of whatever else might have been produced with the resources that went into lunch. (There is, of course, sometimes the lunch that someone else pays for, but that is another story.): the famous marginal conditions that tell us just how much extra effort should be expended by a producer who wants to maximise profits or a society that seeks to maximise net benefits: the demandsupply equilibrium and its accompanying incentives that tend to bring production and consumption into balance: investment theory, which shows how consumption, saving and investment are brought into balance over the long haul: and asset pricing theory which demonstrates the usefulness of markets in durable assets in stabilising resource extraction and conservation: the concept of general equilibrium and the theorem that ideal markets generate an efficient general equilibrium; a fully embroidered theory of market failure, in which public goods, resources with poorly specified property rights, congestible goods-that is, phenomena that seem to pervade the natural resource issues-cause inefficiency and cry out for some kind of corrective policy;

~ ~~ ~~ ~~~

” The Ohio State University.

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the Pareto-improvement-a change that makes some better-off while making no one worse-off-and the suggestion that it is hard to argue against changes like that; the link between the Pareto-improvement and voluntary exchange, which suggests a focus on property rights as promoting not only efficiency but also a particular concept of welfare: the potential Pareto-improvement-a change that leaves some losers, but the gainers profit so handsomely that they could afford to compensate the losers; really it boils down to little more than that the total gains exceed the total losses-that serves as the basic idea behind the benefit cost criterion: the theory of welfare change measurement-how to measure benefits, costs, standard of living and cost of living-that has been elaborated in recent years: measures of income distribution which, I might note parenthetically, leave many mainstream economists uneasy, presumably because measuring it might imply trying to do something about it; and even a view of the fundamental political question-how should the issues that involve us all be decided, especially in the rather common case when we don't all agree-that rather strongly denies the possibility of a general policy rule. In addition to these concepts and theories, mainstream resource

economics has several sets of fairly sophisticated analytical tools: econometric methods for estimating demand and (perhaps less frequently) supply relationships, where markets are active and where they are not: benefit cost analysis, applied to market commodities and non-market amenities, and including values that derive from use, from options that reduce uncertainty about future use, and from the simple existence of unusual environments and ecological associations: and optimisation methods, including linear programming and its various specialised adaptations to handle risk, lumpy inputs, etc, and dynamic programming and optimal control modelling for intertemporal optimisation. The analytical framework of mainstream resource economics draws on

these concepts, theories and tools. But, as I was saying, the particular framework used depends on the particular resource problem. Some examples might help.

For the soil erosion problem, economists might debate whether there is a market failure and, if there is one, where it is. Some may argue that there are fundamental failures in the market for topsoil, and also in the market for clean water [which is relevant when soil sediments pollute streams). In the US, there seems to be an emerging consensus that the market for topsoil depth is actually just fine, and that a farmer will be encouraged to conserve

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topsoil because it enhances the value of his farmland asset. On the other hand, there is fairly general agreement that existing markets do little to bring farmers face to face with the demand for clean water. Mainstream resource economists see administered prices and modified property institutions as the preferred approaches to market failure. Most have an ingrained preference for one or the other approach, but most also recognise that circumstances often influence the choice among the favoured approaches, or between them and direct regulation. If administered prices or direct regulation are to be invoked, as would likely be the case when dealing with off-farm water quality impacts, benefit cost analysis would be performed and the marginal conditions would be invoked to suggest how high should be the prices or how stringent the regulations.

For the salinity problems in soils, the picture would be complicated further, because the water table tends to be non-exclusive. For many farmers, the water table height is influenced by their own actions but also by what others in the locality are doing. The mainstream economists’ instinct would run toward establishing effective property rights or some kinds of administered incentives that would serve the same purpose; but regulatory approaches and public subsidies for preferred practices would not be ruled out.

For the conflicts over forests and wildlands, where choices must be made between commercial uses (for example, timber and mineral extraction) and preservation, mainstream economists would probably start out with a benefit cost analysis to identify the efficient pattern of land use. The analysis would not be a simple matter, since non-market benefits, very long-term effects, and poorly understood ecological relationships would be involved. Economists may well disagree about some rather important details of the analysis. When the best use of the land has been identified, there still remains the question of how to implement that solution. This issue becomes very complex when, as might often be the case, some kind of multiple use (that is, coexistence of quite different uses) is the desired outcome. Property rights, regulations and administered prices, taxes and subsidies are the devices that would be suggested; but which ones, at what levels and in what combinations, are difficult questions for which armchair answers are seldom sufficient. While some conservationists might seek prohibitions of commercial uses in large areas of wildlands, mainstream economists would gravitate toward multiple uses with accommodations at the margin. In some rather special cases, the economists and conservationists might agree that exclusive dedication to wildlands uses under public ownership is best.

Alternative paradigms in economics The appropriate analytical framework depends on much more than what

the resource use problem is. It has become quite fashionable to poke fun at the propensity of economists to disagree with each other. To explain why they keep on disagreeing about important issues, it is not good enough to observe that “economics is not an exact science”, I’ve read enough philosophy of science to know that the “exact sciences” are not exact sciences either.

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Rather, the real world is unmanageably complex, and any system of knowledge (any paradigm, if you will excuse the jargon) must decide what matters and concentrate on trying to understand the things that matter. But, economic systems are so complex and so closely connected with equally complex environmental and socio-political systems that there can be honest and persistent differences of opinion about what matters, that is, what aspects of the system to focus upon.

There are three or perhaps four paradigms among resource economists, and each has its own implications for choosing an analytical framework. First, in terms of numbers, there are the mainstream types. They are basically neoclassical, which means they are impressed with the marginal conditions, supplyldemand equilibrium, general equilibrium, and at least some parts of the welfare economics apparatus, and they are generally comfortable with the methods of econometrics, benefit cost analysis, and optimisation. Nevertheless, as my introductory remarks suggest, there is a division among the mainstream, as some whom I would call the rational planners tend to see things in terms of market failure and call upon government to intervene with benefit cost analyses, administered prices, taxes, subsidies and regulations to set things right. Others, following that I call the public choice model, tend to see government as prone to failures on a scale at least as grand as the market. So, they tend to seek solutions in terms of well-specified property rights and incentives. Government, of course, is needed to specify those rights and incentives but, having done so, does not need to be continually active in adjusting things.

The institutionalists take a quite different perspective. While they have mastered most of the concepts, theories, and tools of mainstream economics, they tend to find them less important than do the mainstreamers. They are more holistic thinkers, more concerned with the importance for economics of its interrelationships with the whole social, cultural, political and legal system, and less impressed with the power of simple economic-theoretic abstraction.

There are also some libertarian resource economists. They depart from mainstream theory in that they insist on the subjectivity of costs and benefits, that is, that costs and benefits can be known only to the immediate actors and not to third-party observers. This, of course, implies that mainstream benefit cost analysis and optimisation procedures are logically impossible. So, the libertarians are viscerally opposed to anything that smacks of planning, while strongly favouring well-specified property rights and other institutions under which individual initiative might flourish.

I don’t mean to leave the impression that economists of these different persuasions agree about nothing at all. In fact, they share many of the theories and tools of economics. But, they do disagree about some theories and tools, and about what is truly important for economic understanding and for good economic policy. Furthermore, I believe there is little reason to expect we will ever prove some of them right and others wrong about the things they disagree upon. Given that reality is more complex than any

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paradigm, paradigms can have quite different emphases and policy implications without ever generating the kind of precise contradictions that would prove one right and the others wrong.

It might be useful to consider how the alternative paradigms might approach two particular natural resource issues.

“Common property” resources “Common property” resources is a term used to identify a wide variety

of situations in which property rights are incompletely specified andlor poorly enforced, so that in at least some circumstances and with respect to some aspects of resource use, free-for-all prevails. Examples may include uncontrolled pollution into the open air or water-bodies, open-access grazing or mineral exploration, ocean fisheries, etc.

The neoclassical approach to “common property” problems is simple and direct. Asserting “everybody’s property is nobody’s property”, the neo- classical economist (N) equates common property with open access and quickly establishes the analytical result that investment in the maintenance and conservation of resources subject to such arrangements will tend toward zero. In effect, the common property economy collapses. The prescribed solution depends on whether N is of the rational planning or public choice persuasions. Either way, N will seek to impose the marginal conditions for efficiency. If a rational planner, N may be attracted to administered prices, taxes, subsidies or direct regulation. If a public choice type, N will likely assume that the introduction and enforcement of private property institutions with respect to the resource will lead inevitably to its efficient allocation. If management for sustained use into the indefinite future is efficient, private property arrangements will guarantee that result. If it is not efficient, so be it. Nevertheless, N will recognise that private property institutions do not always work-sometimes, for example, the costs of exclusion are too high-and N may be willing to put the question of private property or administered solutions to a benefit cost test.

The institutionalists (I) will resist the false dichotomy of private property or free-for-all and observe that, in this and other cultures, there exists a wide variety of institutions (between these extremes) that seem to be reasonably effective, stable, and well adapted to their particular cultures. I is unlikely to be swayed by presumptions in favour of private property institutions or the efficiency criterion and is likely to seek workable arrangements within the domain of true common-property institutions.

The libertarian (L) will agree with the public choice-N on the desirability of a private property solution. But L will insist that the private property solution is non-negotiable, and will deny the validity of a benefit cost test to choose among institutional possibilities.

Pollution control Several mainstream resource economists have publicly lamented along

the following lines: “There is perhaps no other proposition that has enjoyed

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more nearly unanimous support among economists in recent years than that the fundamental instrument of pollution control policy should be the taxation of discharges at their source. Nevertheless, the policy process has completely and persistently ignored this recommendation”.

It is true that neoclassical resource economists, especially those from the rational planning wing, have long promoted pollution control through taxes or charges on emissions and effluents. The logic that underlies this suggestion is roughly as follows. The laws of thermodynamics ensure that an economy that provides a rich array of goods and services for its citizens also generates polluting wastes. Pollution imposes costs by reducing the level of environmental amenities and confronting people with expenses for avoidance or mitigation of damage. On the other side of the fence, it is costly for polluters to reduce their emissions and effluents. Further, everyone to some extent is both a polluter and a receptor. Given these premises, it seems appropriate to seek a solution that would minimise the total social costs of pollution. If a public agency imposed on effluents and emissions a charge or tax, calculated to be approximately equal to the marginal damage costs from pollution, pollution would be reduced to the socially optimal level. Of course, some positive level of pollution would remain, but that only reflects the realities imposed by the laws of thermodynamics and the human demand for goods and services.

General use of pollution taxes would have several additional salutary results. The total social costs of pollution control would be minimised as each polluter exercised the freedom to implement the cost-minimising combination of control practices, and the bulk of the pollution-control effort would be undertaken by those for whom pollution control is relatively low cost. Further, polluters would have a strong and continuing incentive to discover and implement cost-reducing innovations in pollution control.

Given this rather complete and convincing argument for pollution taxes, mainstream economists are frustrated by the persistence of command-and- control pollution regulations and zerodischarge targets. Some have felt obliged to speculate about why their advice has fallen mostly upon deaf ears. Suggested reasons range from the general stupidity of non-economists and the obstinacy of environmentalists who persist in treating pollution as a moral issue to the dominance of lawyers [rather than planners) in the policy process and the peculiarities of the US Constitution that make it easier to impose finely calibrated behaviour-modifying incentives through the power of the policy than through the tax system.

Institutionalists (for example, Shabman 1984) would say that the mainstream economists have missed the point. To them, the demand for pollution control is not simply a demand for environmental services in competition with demands for a wide array of other kinds of goods and services. Rather, it is one manifestation of a sweeping evolutionary change in public morality. The morality of the Industrial Revolution, with its emphasis on output of marketable goods and services, is giving way-the institutionalists claim-to a new morality that emphasises living in harmony

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with nature. Viewed from this perspective, the unwillingness of environmentalists and much of the general public to treat pollution control as a simple exercise of the principle of equi-marginal costs is not only understandable but, also, perhaps, better adapted to the emerging public morality. The impracticability of zero-discharge goals is no reason to abandon them, it might be argued. If the emerging morality treats pollution as an unethical activity, perhaps it is good that failure to meet zerodischarge targets engenders at least a little public and private guilt.

Frankly, the libertarian response to the pollution question is mostly in the negative: they have little patience with either administered pollution taxes or zerodischarge targets and emerging environmental ethics. Two ideas congenial to libertarians-private property, and voluntary taxation to provide public goods such as clean air and water-are perhaps applicable to the pollution problem, but I have yet to see the details worked out.

Alternative models of government So, the appropriate analytical framework depends on the particulars of

the resource use conflict and on the paradigm-the perspective-of the particular economist, But, that is not all. It also depends on the operative theory of government. I construe “theory of government” broadly, to mean the theory of how those issues that are too big to decide in private negotiation get decided collectively.

The Australian experience of government differs from the US experience in a very important way. In the Anglo-Australian model, the executive and the legislature are combined, but a powerful tradition of a professional civil service emerged. A civil service dedicated to professionalism-rather than, say, to the goals of a particular political party-was entirely consistent with the rational planning or progressive model of government. And to this day, planners in government probably enjoy more influence than they do in the US. On the other hand, the US system separates the legislative and executive branches but places the most powerful elected official, the President, at the head of the executive. It is understandable that the President would seek the support of a politicised executive as he goes into battle with the legislature. So, the traditions of planning and progressivism emerged later but more tentatively in the US. Now, planning and progressivism are under attack in both countries and pluralistic institutions-in which the various interests seek direct access to the decision process, rather than trusting the planners to get it right-are on the rise.

The progressive model The progressive movement of the turn of the century sought to introduce

scientific methods and techniques into government. It reflected an age when public confidence in science and human progress was at its peak. Progressive political theories sought to define a mutual working arrangement between the sources and providers of expert knowledge and the democratic political process. Since the progressive faith in science and human progress seemed

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boundless, it is unsurprising that the progressives were concerned to, first, expand the role of experts in government, and, second, ensure that these experts functioned according to the then-prevailing notions of positivistic science.

Important tenets of progressivism included: a belief in the possibility and desirability of positivistic, or value-free, science; the idea that measurement was the mark of “good science”; a belief that policy issues could be divided into questions of social goals and values (to be resolved by democratically elected politicians) and administrative or instrumental questions that could and should be solved by experts using the latest and best scientific methods; and the ideal of professionalism, so that the loyalty of the experts could be directed always toward the integrity of their science and its methods rather than toward any particular political ideology. There was a tendency to believe, much more than anyone believes now, that “the facts” were sufficient to resolve at least a good-sized subset of policy issues, and this belief was reflected in the tendency to take important public functions “out of politics” and assign them to independent commissions of experts. While progressivism as a political theory declined after the First World War, the great expansion in the scope of federal government in the US during the New Deal and subsequently was built upon a foundation of progressive ideas.

The progressive idea of science was founded upon empiricism, value- freedom, and pragmatic instrumentalism. In this later respect, it deviated from the logical positivist ideal of science. To the logical positivists, there was an important distinction between science and planning, with the action orientation of planning and its goal-driven methodology taking planning outside the realm of science. For the progressives, their instrumentalism led them to view planning-especially rational, scientific planning-as a logical extension of science into the affairs of humankind.

In the progressive model, the expert has been variously described as neutral expert (Nelson 1987), technocrat (Blaug 1980), and humble technician (Randall 1974, 1985). Above all, the expert is a professional who is neutral among alternative conceptions of the good or, at least, able to compart- mentalise hislher mind so that the execution of science is never influenced by any conceptions of the good that the expert may hold. The decision maker, who serves as intermediary between the public and the expert, identifies the policy issues and specifies the goals of policy and the operative constraints. That is, the decision maker asks the questions and bounds the scope of the inquiry. Within these bounds, the expert performs whatever measurements and analyses her professional standards dictate and provides complete, objective and impartial information-all the facts and nothing but the facts-to the decision maker, who then decides the appropriate course of action.

This model of the relationship between experts and the public has some inbuilt restraints and protections. The decision maker is ultimately responsive to the democratic process but that, to the progressive mind, provides inadequate protection against corruption and influence peddling

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in politics. The additional protections built into the progressive model mostly take the form of moral strictures. The decision maker is morally obligated to believe and take heed of the information provided by the experts. The experts are morally obligated to maintain standards of professionalism and value-freedom and to restrict themselves to providing factual answers within a scope of inquiry laid down by the decision maker. Communication between experts and the decision maker is, in the progressive model, vertical and linear; the public is not involved in this communication. Thus it follows that moral failure on the part of expert or decision maker could well be quite damaging. Were the decision maker to ignore the best expert information, the experts are expected to suffer in silence; recourse to the forum of public opinion would be very bad form. On the other hand, since the product of the experts is provided to the decision maker without public critique, the decision maker may well be misled by incompetent or biased experts. Either way, the potential for public harm is obvious.

The loss of progressivist faith and the rise of pluralism The progressive vision was founded on a consistency among the models

of positivistic empirical science, rational and comprehensive planning, and democratic government in the public interest. The experience of the twentieth century, however, has engendered a rather general loss of faith in the attainability and even the desirability of each of these ideals.

Modern philosophy of science no longer looks kindly upon either logical positivism or instrumentalism. In an attempt to resolve the epistemological contradictions of logical positivism while reaffirming a sharp demarcation between science and non-science, Popper (1957) proposed a new definition of scientific objectivity: the freedom and responsibility of the scientists to (1) pose refutable hypotheses, (2) test them with relevant evidence and (3) report the hypotheses, the nature of the test, and the results in a manner accessible to all interested persons. ?b Popper, the scientific process consisted of positing propositions that could conceivably be wrong, attempting to refute them with empirical evidence, and inviting the scientific community and interested lay persons to second-guess the whole process through criticism and attempts at replication.

Popper’s notion of objectivity no longer forms the core of contemporary philosophy of science. There are just too many problems. Since there is no unique mapping from phenomena in the real world to the conceptual elements of scientific theories, “the evidence” is always ambiguous and “the facts” cannot speak for themselves. Any experimental or statistical test of a scientific proposition is alway indirect, and a failure of the test could logically be attributed to a failure of one of the side conditions rather than the failure of the proposition itself. And, finally, Popper‘s methodology, with its emphasis on refutation, provided an inadequate account of the growth of scientific knowledge.

Post-Popperian philosophy of science allows for competing paradigms (Kuhn 1962). and research programs (Lakatos 1978). These research

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programs may progress or degenerate as empirical testing and theory modification proceed, but empirical testing is a nibbling process. A single test is never conclusive, and scientific opinion evolves as a body of evidence is assembled. Inter-paradigm disputes may never be resolved, because each separate paradigm uses a different set of concepts and a different observation language to apprehend different facets of only partially overlapping sets of real-world phenomena. The empirical test that validates one paradigm while refuting its rival seems totally elusive.

What remains of Popper in contemporary philosophy of science is the key notion of criticism. For Kuhn, the accumulation of anomalies in a long- dominant paradigm may lead to a scientific revolution. For Lakatos, the unending process of testing and amending within the research programs may lead to an accumulation of believers in one program to the detriment of another. Toulmin (1972) is quite explicit about the importance of criticism in the process by which informed persons come to believe particular theories or paradigms. He examines many of the processes by which intelligent human beings come to believe in particular proportions, and at one point argues that the judicial process, with its dialectic of direct and cross examination, may provide an appropriate model for scientific criticism. McCloskey (1983), building upon the ideas of Rorty (1979), defines the scientific process as an exercise in rhetoric, that is, the art of reasoned discourse and persuasion.

All of these developments led us away from the notion that science will provide unambiguous answers to the questions that concern humankind. The recognition that knowledgeable people may reasonably disagree on scientific questions, and that these disagreements may never be resolved unambiguously, served to lower the pedestal upon which the progressives had placed science. Meanwhile, the progressive model of public adminis- tration and democratic government experienced a similar loss of faith. The celebrated “muddling through” model of Braybrooke and Lindblom (1963) undermined several progressive tenets: the sharp separation of means (which could be resolved scientifically) and ends (which were to be chosen democratically); the myth that personalities do not matter (that is, any group of decision makers faced with the same information would arrive at the same decision); and, more generally, the notion that the planning process can ever be entirely rational and comprehensive.

At about the same time, Buchanan and Tdlock (1962) laid the ground work for a more radical departure. They saw democratic politics as the process by which individuals with fundamentally divergent interests attempted to have these interests embodied in public policy by political negotiation andor the formation of majority coalitions that would impose their agenda on minorities. The theories of government-variously called public choice theory, rent-seeking theory, and the theory of endogenous government-that grew from this beginning emphasise the pursuit of self-interest throughout the body politic. Politicians, administrators and even the experts in government, as well as the private interest groups and influential individuals, are presumed to act rationally upon self-interested motives. In these theories,

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even the professionals in government-the heroes of progressivism-are just another interest group.

The import of these theories of government is that, rather than relying on elected politicians and their expert advisors to get it right, individuals and interest group coalitions will seek access, that is, a direct voice in the process through which public issues are negotiated and adjudicated. Evidence of an increasing demand for direct participation takes a variety of forms: the dramatic increase in the scope of lobbying activities: legislation that continues to expand the rights of individuals and interest groups to press their concerns about proposed administrative rules and decisions before public hearings and in courts of law; the vastly expanded review process for administrative actions; and the increasing scope of “freedom of information” acts that allow citizens to examine ‘the processes that lead to administrative decisions and the information upon which those decisions are based. With the evolution of more participatory modes of government the underlying pluralism of society is not so much submerged-as it might be under a system of purely representative government-but is expressed directly through the participatory process.

There is a striking parallel between the modern conceptions of the scientific process and the process of policy choice. In both, propositions come to be believed and acted upon if and only if they are persuasive. Appeals to authority carry little weight, and that applies to the authority of the scientist as scientist, the authority of the expert in government as professional expert, and the authority of elected politicians as guardians of the public interest.

The analytical framework and the theory of government Does the choice of a theory of government affect the choice of an

analytical framework? Are some of the economists‘ concepts, theories and tools more appropriate under one theory of government than another?

Much of the mainstream neoclassical apparatus is well-adapted to a rational planning environment: benefit cost analysis, and optimisation methods are tools a planner could well want to use, and administered prices, taxes, subsidies and regulations are instruments that might appeal to a planner. An enlightened planner may well recognise the usefulness of well- specified property institutions. The institutionalist paradigm could also accommodate a rational planning world. Institutionalists would counsel that the planner take a broader, more holistic view of things, but they would not be inherently hostile to planning itself. The libertarians, of course, deny the possibility of an efficient plan and oppose the planning process because it is coercive to individuals.

It is less immediately obvious how the economists’ concepts, theories, end tools fit into a pluralistic, participatory policy decision process. But it is an important question, given that planning institutions are starting to wane while participatory institutions are on the rise.

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As participatory institutions become more important, the influence of economic thinking starts to hinge more on the capacity of economists to influence and convince individuals and interest groups than on their capacity to serve the planners. That does not mean that an effective appeal must always be to the self-interest of specific individuals and groups-the public choice theorists have underestimated the importance of ideology-and self- interest is not always opposed to public interest.

Economic theories and analytical tools addressed to efficiency-for example, benefit cost analysis and optimisation methods applied at the societal level-have a particular problem in the pluralistic environment. Efficiency, economic growth, etc, are pure public goods. Individuals and interest groups seek gains to themselves and, in the extreme, may be indifferent as to whether these gains come from additional value of total product or from transfers. Efficiency arguments have little appeal to this instinct.

Nevertheless, even the most self-interested people realise that the potential for personal gains is limited by the effectiveness of others in seeking transfers to themselves. In the absence of an immediate and powerful opportunity for gains through transfers, people would support institutions designed to ensure that the game is positive-sum. So, it is rational for self- interested individuals and groups to support, for example, an established institution to routinely produce benefit cost studies and other analyses of the collective efficiency and equity characteristics of proposed actions, even while they reserve the right to do all they can to undermine the credibility of any analysis that casts doubt on projects that would benefit them at the expense of others. In the pluralistic model of government, there will be an important place for benefit cost analysis and related efforts (as there will be, for expert analyses of many kinds). But the experts and analysts will be exposed to a diverse and critical public and their influence will depend on their capacity to convince enough members of their audience, rather than on their authority as experts.

In addition to analyses of the projected efficiency and equity of proposals, economics offers advice about institutions and incentives to produce the desired results. To the extent that implementation of institutional change requires the assent of high level commissions, new legislation, etc, economists have been accustomed to the need to make their cast to a broader body politic. They are prepared, to some degree, to deal with the pluralistic, participatory policy environment that is emerging.

Nevertheless, there will be frustrations for the economists. One facet of the pluralistic process is the public unwillingness to leave things to the experts. Rather, the public seeks access to the decision process directly. The public is better informed than ever before, and the communication media carry a greater diversity and quality of information than ever before. These things, it seems, encourage pluralism and provide a basis for the hope that it will work in the best interests of society. Nevertheless, people in general have become better educated and better informed without becoming wiser.

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People (whether expert or lay), unable to cope with the amount of information (and, for that matter, noise) in circulation, may simply edit-out much of it. One suspects that single-issue politics is one human adaptation to the overwhelming complexity of the policy agenda and the obligation that the participatory process imposes to be concerned and informed about everything.

Just how detailed an explanation is desirable or necessary if economists are to have effective access to the policy process? Numerous arguments have been used to suggest that simple data and less rigorous analyses are more appropriate in public fora, given the observation that government officials, who are uneasy about using empirical analyses which they cannot under- stand or validate themselves, frequently dismiss such analyses (Nelson 1987). In a study by Allen (1977), the economists interviewed repeatedly emphasised that their greatest influence came from a few simple economic ideas rather than elaborate technical models. Also contributing to the plea for simplicity is the well documented research on human problem solving (Cyert and March 1963; Newel1 and Simon 1972), which shows that individuals and organisa- tions, on the basis of past experience, develop a set of decision rules to reduce the amount of time required to find a solution-another manifestation of adaptation to information overload mentioned above. Nevertheless economic information is vital to implementing a given decision rule, as well as to the inevitable evolution of these decision rules and to the recognition of important problems which might otherwise be overlooked.

The observation that toplevel officials in government, commerce, and the public interest organisations typically invoke simple decision rules that ignore much of the rich detail the economists can provide is in itself not definitive. In a well-structured decision process, the simplified information that reaches the top-levels will have been carefully examined by experts and critics with access to the sort of detail that the top-level people do not use. Indeed, the processes of convincing our colleagues and convincing the public-at-large are only partially separable. Rigorous analysis is prerequisite to having anything convincing to say to either group; succinct, easy to understand explanations of models and data are dependent upon, not a short- cut around, such analysis.

Finally, a discipline that focuses solely on its immediate value in the policy process will rapidly exhaust its capital (its stock of knowledge and methods) and hence its capacity for evolution. Science proceeds by means of well- worn theories, assumptions and problem solving techniques; but also by the critical process that ultimately rebels against theories and methods that fail too often. The vitality of any discipline is measured by shifts in its scientific frontier that are almost always the result of the frustrating task of detailed analysis, whereupon, coming up against yet another anomaly, it is finally possible to take that intuitive leap-to stick one's neck out-to recognise some new option previously overlooked. A paradigm that is preoccupied with simplification and the lowest-common-denominator modes of discourse-even in the service of such an admirable goal as policy

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relevance-will eventually exhaust its capacity for progressive research program shifts.

Conclusion I have argued that the analytical framework depends on what kind of

resource use conflict is at issue and on the particular economic paradigm. Different ways of thinking about economic issues lead inevitably to different analytical emphases, disputes about some of the foundations as well as the details of economics itself, and different policy prescriptions. How economists operate-what they produce and how they communicate it in order to contribute to policy formulation-depends on the operative conception of the policy process itself.

Let me conclude with a few opinions on these matters. These are opinions, not scientific laws, but at least I have arrived at these opinions carefully rather than casually.

First, we should be open-minded and eclectic when it comes to identifying resource conflicts worthy of analysis. Here, the need is to move beyond the issues that economists have traditionally found interesting and into the issues, for example, wildlands preservation, that are now moving to the forefront. Economics has much to say about these questions, from identifying the efficient land use to developing institutions to resolve conflicts and implement incentives for sustainable solutions. One particular development that is overdue in Australia is the systematic application of methods for estimating environmental benefits. A benefit cost analysis that gives the raw materials, the ecosystem support and the environmental amenities uses of wildlands their proper place is essential if economists are to do what they do best-clarify the trade-offs.

Second, it is a fact of life that different economic paradigms lead to different analyses and different policy prescriptions. Further, while refining of ideas and testing against the evidence may lead to progress in some paradigms, decline of others, and emergence of new or modified paradigms, it is unlikely that economists will ever converge on a single paradigm. So economists do not (and probably never will) speak with one voice. I find this quite healthy, and I think a pluralistic society has mechanisms to handle a diversity of information. It means, of course, that no particular group of economists can win them all. The other economists and the many partici- pants in the policy process who are not economists will see to that.

Third, it seems that Australia is thoroughly in step with a world-wide movement toward more direct citizen participation in the policy process. The role of the economic analyst under the progressive or rational planning model of government is in some ways more secure and sheltered. The economist is more a backroom figure than a public one. But the in-house expert role has its frustrations when, for example, the decision maker steadfastly refuses to ask what the economist considers the right questions or to implement the policies implied by the economic analysis. At times like

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that, in-house economists have been known to wish that direct appeals to the public were kosher.

In the participatory policy environment, the influence of the economists on projects, policies and institutions depends on their power to persuade. The argument-and I use the term broadly to include concepts and evidence-must be sound, otherwise it will soon be dismantled by other specialists and intelligent lay persons. One cannot hold the public if one loses the opinion leaders. The argument must be framed in terms with appeal beyond technical economics, because economists don’t usually decide public issues; they just get in their two cents worth. It helps if at least some economists take the trouble to really understand where spokespersons for other disciplines and other viewpoints are coming from. Often this under- standing may lead the economists to change their minds about some important things; always, it helps them to focus the argument so as to truly engage the other sides. Too often the various disciplines and the spokespersons for various issues merely talk past one another. Careful framing of arguments helps to correct this rather counterproductive aspect of the participatory policy process. Frankly, we need some good economists who are also damn good philosophers.

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Kuhn, T.S. (1962), The Structure of Scientific Revolutions, Chicago, IL: University of Chicago

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McCloskey, D.N. (1983), “The rhetoric of economics”, Journal of Economic Literature. 21:481-517. Nelson, R.H. (1987). “The economics profession and the making of public policy”, Journal of

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