Are governments driven by a search for better solutions, or do they apply existing solutions to new problems?
At a Harvard talk last week French Finance Minister Pierre Moscovici was questioned aggressively by a Chinese official. The claim by the Chinese economist was that France can never become competitive because of its addiction to holidays and short working weeks. And as Moscovici tried to corner the questioner with the higher productivity of French workers, someone else took the relay baton for bashing French economic policy. Part of the audience reacted approvingly, as often happens in US public debates when France is being criticized.
The point here is not so much who is right or wrong about the French economy. More interesting is the reaction of some people in a highly educated crowd, which was informed by emotions and preconceived ideas about France more than by an analysis of data and reality.
Not only do we use preconceived ideas to judge the performance of other countries. Decision-makers and organizations also apply existing solutions to new challenges. Leadership based on routine is much easier than finding new solutions.
So what about policy indicators? Can they not help decision-makers understand that certain solutions do not work, or that new policies are needed? The problem is that indicators only matter if people care about what is being measured. Policy indicators often serve to confirm an existing order because those who rule choose which indicators matter. There were many signs before the financial crisis that showed the end game to accumulating more debt, both for American mortgage-holders and Greek taxpayers. Now that the crisis has erupted those indicators have suddenly become meaningful for everyone.
Before the crisis the same indicators existed, but without anyone in power giving meaning to them. Existing policies continued to be applied without being a match to the problem. A good question to ask when you look at a solution that is being defended is “who benefits exactly from continuing a certain policy”.