Inertia, Infrastructure and Public Policy

My policy solutions would be so great if it wasn't for pesky physical reality.

In policy discussions, there is sometimes an unstated assumption that the government is, at least domestically, more or less all-powerful. Where there are constraints, these are political, or perhaps constraints on the government’s ability to deliver something ambitious or complex. What is frequently missed out is that inertia and physical infrastructure are often significant constraints on what the government can or cannot do. This combines with political time horizons to be one of the main blockers to effective government. The best route out I can think of is to introduce more experimentation and variation into government policy.

When approaching a policy problem, one piece of common advice is to try and rethink things from first principles. Start with your objective, such as providing the best education to children, and try to design the best way to perform that, within certain constraints such as the financing available. At its crudest, this is an encouragement to ‘think outside the box’.

Generally, I’d be very supportive of this kind of thinking. I like to think elements of my previous blog posts have been along these lines, trying to work through the question of “how should civil service policymaking be managed” from first principles. The problems from this sort of thinking come when trying to apply that thinking to the world in its current state, and looking at the transition from where we are now to the wonderful vision. Rather unpleasantly, the decisions made years ago can heavily restrict what we want to do now. Whilst most policy thinkers are aware of this, it is rarely commented on explicitly in policy discussions.

Let’s look at some examples:

• Think that 30-pupil classes aren’t the right way to do education? Well good luck changing it, because every school in the country is physically structured around classes this big.

• Want to shift public R&D spending away from the top ~10 universities, or into certain fields of study? Too bad there are billions of pounds of equipment and buildings already located in these universities, as well as often whole ecosystems of business spinouts and science parks around them.¹

• Want to decarbonise heating? Good news, we have amongst the least energy efficient homes in Europe.

These examples are all about the physically existing world. But they’re also exacerbated by powerful social forces of inertia that aren’t strictly about political opposition. Straight politics would be teachers unions complaining if you mess with education models or the Russell Group complaining if you mess with R&D funding. Social inertia is the fact that teachers know how to teach a class of 30 from the front, and the scientific peer review system reinforces in-group promotion by circles of scientists. It’s that parents might be wary of sending their kids to an experimental school and 18-year-olds aren’t going to stop ruthlessly competing for top university spots. It’s that generations of builders and engineers have been implicitly taught to ignore energy efficiency.

What I’ve called social inertia at least feels like it should be possible to overcome. There’s nothing inherent in it that should stop us moving towards a different, hopefully better, world. If everyone just agreed at the same time to make a concerted effort to change, we’d overcome it. In practice, getting people to change is incredibly hard, sometimes harder than changing the physical world.  But if you put in enough will, or just coerce people into changing by setting regulations, it can happen. Sometimes it can happen incredibly quickly, like acceptance of same-sex marriage.

Physical infrastructure on the other hand is just inherently hard to overcome. There are 24,000 schools in England, a number DfE officials refer to as “a lot”. Rebuilding them all at a conservative cost estimate of £5million each would cost £120billion, a number Treasury officials refer to as “a lot”. Doing this work would take at least a generation and a small army of construction workers. You’d have to be pretty confident you were right in your new schooling model.

Because changes like this can take a generation, the incentives for ministers and civil servants to undertake them are pretty weak. Setting up such a long process requires thinking generations out. With civil servants and ministers changing posts every few years, why would they want to spend that time setting up something they’ll never see through? 

One result is often that policy ends up as a tacked-on programme to existing arrangements. Instead of the slow, hard work of reforming the system, just slap on something new that the government can control much easier. Messing with existing structures is not only long, but also forces you to deal with social inertia and entrenched interests. Infrastructure policy in particular gets affected by this. Communications has partially escaped it because the technology has kept progressing, but energy, water and transport have suffered from short-term fixes. But I think it affects policy areas wider than just infrastructure policy, hence the education examples throughout this post.

The private sector also faces this problem and it has a pretty effective way of overcoming it - competition. Imagine you’re Debenhams and you’ve got billions of pounds worth of expensive but increasingly useless high-street property. You’re going to struggle to shift yourself out of that, not just because of the physical stores that can’t be used for much else than high-street retail, but also because of the supply chains and IT infrastructure and everything else holding your business together. So along come ASOS and SHEIN with their innovative new business models based around all-capital-letters brand names and they wipe the floor with you. You either rapidly adapt your business model to keep up with newcomers and competitors, or you fall by the wayside and end up in talks with Mike Ashley.

Competition means that there are multiple different models working at the same time. One of the weaknesses of the UK government is its uniformity. There are reasons for this - people hate it when there are postcode lotteries and standardisation can create a rising tide of quality. Plus there may be reasons why competition is impractical, such as a town only needing one hospital. However, it also tends to stifle experimentation and innovation. It also risks reducing people’s engagement with improving government services. If all schools are mostly the same because of DfE policy, you have little reason to think hard about what you want from your local school. You just accept that ‘this is how schools work’ and only complain if the management is actively incompetent.

Competition also encourages ‘creative destruction’. Ineffective companies like Debenhams just shut down. It doesn’t keep creaking on through endless transformation programmes and independent commissioners reports. Nor at the macro level are the public forced to buy their clothes forever at high-street department stores when something better comes along. Department stores are considered a great Victorian retail invention, and are beginning to be consigned to history along with the Victorians. This process has taken decades, and is a long way from finished. Our education system is similarly built on a Victorian model that almost everyone seems to agree is probably imperfect, but we can’t really escape from. There’s no mechanism for ending an outdated model in a managed decline.

The public sector doesn’t really have a mechanism to copy these effects. To continue the schooling example, academisation and free schools have tried to bring competition to schooling, but they don’t actually achieve that. This is due to a mixture of government policy (especially funding) and parental demand. In business, start-ups are often loss-making during their development and growth stages. The equivalent in government would be funding experimental schools that are ‘loss-making’, perhaps in the sense that they have more funding per pupil due to being below capacity. Over time their reputation could grow, attracting more parents and hopefully new models of schooling that produce better outcomes at lower cost than the current model. Of course, the concern with this is that some models could produce worse outcomes and we’d be experimenting on children. I think in practice, requiring these new models to go through some sort of expert assurance before opening could reduce the risk of entrepreneurial cowboys opening a terrible school.

Different policy areas would require different approaches to experimentation. The model above for education is roughly competitive, as parents exercise choice over school places. Choice may be less likely in healthcare, which operates at much larger component sizes (an NHS trust is much bigger than a school). Here there would need to be more bespoke arrangements involving a broad range of local actors coming together to innovate on the service model. Areas focused on regulation rather than service delivery, such as energy, would require some sort of supercharged regulatory sandbox approach, although it may simply be too hard in these areas. I’d like to at least see these sorts of solutions proposed and explored as part of the standard policymaking toolkit.

My proposal for greater experimentation is a solution that partially leans into the dynamic I described of ‘tacked-on’ policies, albeit with a slightly different focus. Rather than adding new national policies on top of old ones, it involves setting up policies or services that encourage existing provision or policies to be exercised in different ways. Ministers and civil servants still get to work on something new and exciting, but with the end goal of creating something that could one day replace the current model, rather than adding to it. It might even be more fun, because you get to play with more flexibility and more parameters at once, creating a whole new model for a particular system and trying it out. Government would be better with more experimentation and differentiation in policy and service provision. Or else we risk becoming a Debenhams government; less House of Cards and more House of Fraser.

1. This was the example that prompted this post. I have followed R&D policy for a while, and have very rarely seen people pointing out that this is a powerful constraint on government policy in this area. Yet it is immediately obvious after thinking about it in any depth, and well understood in government.