A complex world deserves simple policy

The world is complex and chaotic, and often counterintuitive. There are happy accidents. Saving the whales increases krill populations, despite baleen whales eating krill by the billions. Less happily, when Mao ordered “pest” sparrows killed to stop them eating grain, there was nothing to eat the locusts, who were far hungrier than the sparrows.  

Human behaviour is just as perverse. Making roads less orderly and predictable can lead to safer driving. Australian cigarette taxes are so high that tax revenues are falling as people turn to tax-free black-market tobacco.  

Faced with a complex world, the modern instinct is to match it with complicated, artificial systems imposed from above. In his book Seeing like a state, anthropologist James C Scott calls this utopian impulse “high modernism”.  

This ideology is not just misguided; it can be homicidal. Famine has followed governments and institutions, forcing apparently efficient monocropping and centralisation onto the messy, diverse plots of peasant farmers.  

Australia has had less disastrous, but still wasteful and controlling, high modernist experiments. In the Ord River dam scheme, billions of dollars were spent irrigating a region ill-suited to it. Canberra was built on geometric lines, and the National Capital Authority keeps the city from evolving in line with the complex, messy needs of those for those who call it home.  

Ironically, simple policies can be better suited to real-world complexity. Consider the Albanese Government’s “three hours of free electricity”. It is genius in its simplicity.  

We all need electricity, but consuming it efficiently is usually complicated. Other solutions to the solar bulge in the middle of the day include “load shifting”, “time-dependent pricing”, “anti-correlated” energy sources and “dispatchable” generation. All good ideas for government and industry. But few Australians have the time, expertise or mental energy to understand or take advantage of them.  

By contrast, you can understand free electricity, plan your life around it and form an opinion on it. You may not know your standard rate for electricity or whether that’s a good deal, but you know whether it’s free. 

The behavioural changes free electricity provokes will be complex. Some people will buy home batteries to soak up the free electricity; some will run air conditioning harder in the free period or use that time to charge electric vehicles; some will enjoy the discount without doing anything to maximise it. The tool’s simplicity helps it slot into our complicated lives.  

A complicated scheme is hard to measure and test. Australia’s Petroleum Resource Rent Tax (PRRT) is a tax on “commercial recovery of petroleum”, prior to processing, after capital expenses are deducted, accounting for uplift rates.  

Complicated – and a failure. Australia is one of the world’s largest gas exporters at a time of high gas prices, yet the PRRT raises little revenue.  

The PRRT addresses the controlled complexity of the economics textbook, like inflation, depreciation and super profits. But the PRRT has no answers to avoidance and resistance. It is unfit for the complexity of politics.   

A simpler 25% tax on gas exports, as proposed by the Australian Council of Trade Unions, the Australia Institute and now many others, would be more effective. It is not just simple to explain to voters, but simple to apply to companies. And if there is a flaw in its design, it will become apparent quickly – unlike the PRRT, where the promised windfall has been just around the corner for decades.  

High modernist schemes often abstract away the human element.  

Several jurisdictions have legislated a utopian package of caps on political donations and taxpayer funding for political parties with the supposed objective of getting money out of politics. And if no politician changed behaviour, if no lobby group tried new strategies and if no donor looked for workarounds, their efforts would probably succeed.  

But in the real world, donation caps and taxpayer funding combine to concentrate financial power and give the major parties an unfair advantage over minor parties and independents. 

Victoria is a testing ground. The High Court found their mess of political finance laws so interwoven – so complicated – that it could not cleanly excise a single unconstitutional loophole. Instead, they struck out all of the state’s political finance laws.  

If Victoria remains without donation laws, will that make the upcoming election in November simpler or more complex? The answer is both. The law will be simpler, but the election more complex. It will certainly be messier. The earlier laws were the agricultural equivalent of monocropping, pushing political parties and candidates towards the same narrow set of fundraising models and campaign strategies.   

By trying to match the complexity of the real world, complicated schemes impose a new reality, instead of responding to the one that exists. A simple policy is not necessarily simplistic. Sometimes, it is the only rational response to a complex and uncertain world.