Efficient vs Effective

by Kent Aitken

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Government is constantly advised towards greater efficiency. I think we need to become far more conscious of the word "efficient."

Efficiency is the hallmark of the industrial era and modern capitalism. It is the great boon of the division and specialization of labour, of economies of scale, and its pursuit has done wonders for our standards of living. Efficiency is the only reasonable approach in a world of finite resources, and in the era of knowledge work, we must largely discard it to actually achieve it.

Largely. If we can spend a few extra minutes finding a better way to do something more efficiently, such that we save more in the long run than we invested in the improvement, we should. For example, making an extra phone call and finding a place that will print ads for 10 cents per page, rather than 12. Or taking time to learn a faster way of designing the ad layout. XKCD conveniently mapped that cost/benefit analysis for us:

However, it's impossible to run the entire ad campaign efficiently (regardless of research suggesting that the efficacy of online ad campaigns is still frequently a mystery). Because the entire campaign is driven by actions taken long before it starts, before we start poring over data from A/B testing. Can we run it effectively? Yes. But the knowledge of the people running it, the relationships between them, the mentor that encouraged the copywriter to stay in their job? We can't capture that complex system well enough to navigate it efficiently.

A colleague can efficiently, at 60 wpm, type us an email warning us of a major problem coming down the pike. But it might not be efficient in the context of their mandate, and we certainly didn't worry about efficiency building the relationship with that person. Coffee meetings aren't, at the individual level, very efficient.

But at the organizational level, coffee might be the killer app. Even 12-person lunch tables are more effective for software developers than 4-person ones, in that they lead to less compatibility issues in the code.

Even the potential of the digital era to feed us the information we're looking for algorithmically is increasingly driven by human relationships: what the people we interact with are reading, who are we following, and who can we trust to act as amplifiers and filters.

ConocoPhillips reports that they've saved $100 million by encouraging employees to help each other solve problems. At the macro level, it's clearly "efficient". At the individual level, hardly.

We can't take an efficient approach to knowledge work. It's too complex. Instead, we have to trust ourselves and rationally apply macro-level knowledge, such as that collaboration works for organizations. Even when it's hard to see how it serves the pressing needs of the individuals within the system.

The factory-driven logic of efficiency may still apply to tasks and processes, but even there the logic is messier than you'd think. What if a theoretically less efficient system gets more use because it better matches the culture of a community? Or because it has buy-in, having been developed locally?

Digital interactions with government are an easy efficiency win. Filling out health care paperwork online is a far cheaper, quicker transaction for both parties, but what if the visit to the office creates the opportunity to discuss an emerging health concern? Expensive in-person contact with health care professionals is often worth it, in keeping people from needing even more expensive hospital stays later. In a few years we may be working on how to strategically get people through government doors at key intervals to bolster a digital by default strategy.

Knowledge work is a relational game, and we need to tread the language of efficiency cautiously. When combined with inevitable oversimplification and incentives designed for parts, not wholes, efficiency just isn't effective.

Impossible Conversations: Review of Mark Blyth's Austerity: The History of a Dangerous Idea

by Kent Aitken

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John Kenney wrote to me this morning, having read these reviews, saying that in retrospect it seems strange that our discussion barely lead back to our day-to-day reality in public service. In retrospect, I agree. It seems that there would have been a really interesting discussion about the role of institutions in massive policy debates like this, but Blyth kept it high-level, and so did we. The question John and I hit on that may be ripe for future exploration, though, is the impact of austerity on public administration. And it's a question that came up during another book club as well: is it pressure or slack that enables innovation? At the austerity scale of policy, it may be that budget pressures ensure effective controls on spending, which may work well for a largely transactional government. But if the move to a relational state and cross-sectoral collaboration is the future, that lever could have the opposite effect. But that's a question for a future book club - perhaps for when we read The Entrepreneurial State: Debunking Public vs. Private Sector Myths.

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Nick Charney

When we first sat down to discuss the book I admitted I hated it. By the end of our discussion I gave it a 7 out of 10 stars. The sheer act of discussing the book stirred a couple of lessons from its dog eared pages that I had forgotten. The most important of which was never give up your printing press, the upside of fiscal unions will never outweigh the flexibility of being in control of your own currency. If you are interested in the nuts and bolts of the idea and application of austerity this book is a tough slog, but ultimately worth the read.

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George Wenzel

Like many others, I found this book a tough go - it accomplishes what it sets out to do and provides a wide-ranging history of austerity measures across the globe, showing how the idea is politically motivated but not economically viable. Unfortunately, the book doesn't delve into Canada as an example in any way - I expected to see some discussion of Paul Martin and the 1990s cuts to appear, but they did not. Also challenging was the lack of a suggested alternative. The book made clear that austerity measures don’t work to build up an economy, particularly if multiple countries are pursuing the same strategy at the same time. It did not make any compelling arguments for an alternative economic strategy.

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Kent Aitken

Austerity wasn’t what I was expecting, but as an Economics student it was a useful walk back through the history of economic schools of thought, and provided more level-headed insight than any short-form article could. From a public administration perspective, it illuminated the difficulty in regulating and governing incredibly complex systems. And the exploration of how ill-suited risk models are to rare/high-impact events was fascinating to me - I actually thought this book contained the best explanation of the Black Swan idea I’ve read.

From a book club perspective? Probably the least animated discussion we've had, as it was much harder to connect to our day-to-day experiences. I’m looking forward to another Ethics of Dissent raucous debate.

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Nelly Leonidis

What I liked about the book:

• Exactly what the title and tagline suggest: a history review of recent economic theory and application.
• The author looked for an easier way to communicate some fundamentally complex economic theories, and stayed away from the use of jargon.
• There were several moments of wit and humour that lightened the read for me.
• The author didn't shy away from dispelling some of the widely-held notions about the originality or importance of some earlier economic theories (Smith and Schumpeter in particular).
• I really liked the easy breakdown of the collapse of the U.S. economy in 2008. I think that chapter could be extremely easy to read and understand by anyone without an economics background to answer the “why” of the recent financial problems that took place specifically in the U.S. and some parts of Europe.
• I enjoy the personal tone and anecdotes the author shared in the book. It made the read a lot more interesting given the dry subject matter.

What I disliked about the book:

• It heightened the promise of some vast explanation of what we could do that would replace the practice of defaulting to austerity when budgets are in deficit. The book provided one line, in the last two pages, about the proposed way to deal with deficits. The way the book was written made me think there was going to be a counter-theory or at least practical next steps. Even though it did deliver on the “history” part, I still think the author had more to say but refrained from doing so.
• The book didn't take into account more examples of different economic structures (China, Latin America, Former Soviet Union), which could’ve been interesting as a comparison against the Western method of dealing with deficits.

Overall, I found the book rather easy to read, especially the parts with historic references and arguments about the validity of theories. I did give the book a 6/10, mainly because I felt like the author could have really gone one extra chapter and provided current workable ideas on how to deal with the deficit. I’m not asking for solutions, but I wanted to see easy counter-arguments to austerity that could be tested or at least discussed. 

Disclaimer: I have a small background in economics, and this book was by far one of the easiest reads on the topic I've come across. 

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Yuan

The book will be more useful to some readers than others. Those who have little or no economics background will find the content easy to follow and informative; those who took econ in university may not find much new material. There is some content that should be on the ‘must know’ list of public servants who work in policy (note: I say ‘must know’ and not ‘must enjoy reading’) - namely the earlier chapters explaining what exactly happened leading up to and during the financial crisis and how the US and the EU differed. 

Overall, though, I enjoyed the book but found it unbalanced. Most of the content was devoted to explaining the pitfalls of austerity, and almost no time was given to presenting a workable alternative. Until the author presents (in depth) a policy alternative proven to work better, he will fail to convince policymakers not to go the austerity route.

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John Kenney

Blyth dives deep into the economic and political origins of austerity as an idea, explores a number of economic booms and busts over time, and resurfaces with a cogent case of a policy often executed based on philosophical leanings and selective readings rather than its actual effectiveness to stimulate economic growth.

Like George, I was left wondering how Blyth would view the Canadian case in the 1990s. Was it an example of prudent restraint in the name of sound fiscal management or dangerous austerity of dubious effect? 

Economic liberalism’s age-old preoccupation with what Blyth refers to as the “can’t live with it, can’t live without it, don’t want to pay for it” problem of the state persists. Where we land in that debate will very likely shape our outlook on open government and the entrepreneurial state.