PADU: The Myth of Data-Driven Policy Decisions
MONAY, 15 January 2024: The Malaysian Government recently launched the Central Database Hub (PADU), an effort led by the Economics Ministry to bring together information held by various ministries and government agencies into one, allowing the government a clearer picture of its 33.5 million population. Launched with great enthusiasm, PADU aims to allow the government to dive deeper beyond its citizen’s gross income in determining where help and subsidies should be directed.
Immediately after the official announcement, PADU project was welcomed with two criticisms which represent the core of any criticism linked to the most recent information technology innovations: cyber security and data protection. While a security breach has been immediately identified, rising concerns are emerging with the utilization of data themselves.
“While these two issues are of primary concern, with regard in particular to the protection of individuals’ privacy, they still miss the central point, the original sin of a project such as PADU”, Dr Carmelo Ferlito, CEO of the Center for Market Education (CME), commented. “The real issue – Dr Ferlito explained – lies in believing that data per se can inform policy making”.
CME suggests that, while data are important for informed decision making, they do not represent the totality of what is necessary when making policy decisions. Let us take the example of targeted subsidies, which seem to be, in this particular moment, the core target for the PADU implementation. Policy makers will decide that targeted subsidies are destined to those households earning below a certain threshold and PADU can indeed be the right tool to have a better identification (always temporary and ex-post) of who the potential beneficiaries are. However, what data cannot tell is which is the right threshold: a qualitative decision is – and will always be – necessary, and it cannot be dictated by data. Rather, it depends on the vision of policy makers, who are not super humans with super knowledge, but fallible human beings, equipped with beliefs and biases.
An additional example: economists trained in certain traditions believe that an increase in the rate of saving is good for the economy and will bring about higher and better growth; policy making should thus incentivize it. Other economists, instead, argue that a higher rate of saving will reduce growth and employment. Very little is objective in economics: facts and data are always, and inevitably, read with interpretative lenses.
The Center for Market Education wishes therefore to stress that there is no amount of data which will allow for objective and value-free policy decisions: data-driven policy decisions remain very much affected by subjective value judgements (dictated by political targets).
“This is not good or bad, but a matter of fact, which must bring us to two main conclusions: policy is an art more than a science and, as such, it requires a great dose of humility”, Dr Ferlito explained.
This is just the natural consequence of the realization that the economy is a complex, living and emergent organism. The starting point to deal with it should be the astonished realization that, without central planning and interferences, but with the right institutional framework, economic coordination does happen at a great extent. Policy decisions, often based on a pretence of absolute (and data-driven) knowledge, happen to be, in many cases, the reason behind the lack of coordination (in many cases, then, what we label market failures are indeed policy failures).
The art of addressing eventual economic imperfections, thus, should be based on the observation of the conditions that make the economy naturally work, rather than the forced application of policy makers’ visions, targets and dreams.
About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia, and Jakarta, Indonesia.
As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces.
In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities.
Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions. Visit https://marketedu.me/.