The science behind policy making
Historically, governments have relied heavily on economic principles to guide policy-making and improve our societies. But are these interventions evidence based, and do they consider all of the knock-on consequences? James Tytko caught up with Ludovico Carrino, professor of Public Economics at the University of Trieste…
Ludovico - So public policies, many times intervene in order to push people to do things or force people to do things that they wouldn't do otherwise because the government thinks that this is good for them. And basically we study what is the impact of this government's interventions beyond what the government wants to do. For example, yesterday at Trieste Next, we discussed a pension reform in the UK that pushed women in the UK to work longer with the increase in the state pension age. The first result of this, the desired outcome of the government, was to increase their employment rate, they work more. But we have studied how this affects the health of these women around the age of 60. Their mental health actually worsens a lot depending on the job that they do. If they do heavy jobs, working more years because of their reform could be very detrimental.
James - What started out as a policy to boost the economy, to boost GDP ends up, in the long run, costing more because of health costs?
Ludovico - I am prudent to say things on the long run in this case because this happened in 2010. So we need to understand what happens. But for some groups in the population, working longer clearly increases the conflicts between family and work time. Working in heavy jobs might be detrimental. So this kind of outcome must be considered by policy makers when they evaluate their policies. There are also good examples, for example, giving the free bus pass in the UK to old people, actually, not just induced them to use the public bus, but also had a causal effect, positive effect on their mental health and cognition. So we try to broaden the traditional perspective of policy evaluation going beyond the direct and anticipated outcome, looking at indirect unanticipated outcomes.
James - I want to go back to something you were saying about building a causal link instead of just a correlational link.
Ludovico - One of the main important areas of research for me right now is long-term care policies. So social care in the UK, but typically our city calls it long-term care. And we are trying to focus on a crucial research question, which is we are spending some money on long-term care. Many people want to cut it, for example, and give more public provided formal care. Many people argue families should do it. Not just the government. So we want to measure somehow whether long-term care, public care, is effective? Do people who receive care feel better somehow? Now, if you just interview a lot of people, like you can do with micro data, you can know their health, their mental health, and also whether they use care or not. If you do this comparison, let's look at whether people who receive care have better or worse health than people who do not receive care. Well, you will always find that people who receive care are worse off than people who do not receive care. Now, this is the correlation, but can you conclude that they are worse off because they receive care? So this is the causal link. Of course, you can't, I hope it's clear they receive care because they are worse off. They are worse off therefore they receive care and you just observe this. So you need more sophisticated econometrics to actually capture, identify as we say, the causal link. By the way, we try to do it. We hope we are doing it right, and we find that receiving care is actually beneficial for health, when you look at the causal element.
James - The role of science in government, in policy making has never been as prominent as it has been over the past two years. I'm wondering, I see this growth in science as a tool that policy makers use. We're now used to scientific press briefings on TV and things like that. Has that helped your field of research gain a bit more prominence?
Ludovico - The last years with the covid pandemic surely made people, and people in government, realize that we need a broader perspective in looking at our choices. Now, think about people that started working from home and then never went back to work because there was something invisible, but very valuable for them in changing their work environment. Yes, I think that's helping us.
James - We've discussed a couple of examples so far. Is there anything else particularly that you thought you mentioned that you're excited about working on or that you're looking into?
Ludovico - Yesterday, for example, we discussed the impact of urban regeneration policies on mental health with an example from Italy. The city of Torino has been through important urban regeneration policies in the 2000's. And this had an effect on the prescription for antidepressants, reducing them. So a positive effect. Then another example, which I think is very important, we now have estimated the causal effect of working conditions on mental health of workers. Working conditions, meaning can you choose the schedule of your work? Do you work during weekends or at nights? How heavy is your job? How much can you apply your skills in your job? And it's very difficult to check with empirical sophisticated econometrics, whether this affects mental health. In a recent research with two Italian colleagues, we looked at the UK and found that women at the early stage of their career, but also at the mature stage of their careers, really react to changes in working conditions much more than men. And this is something I really want to work on because this connects with a lot of dimensions of people in their lives. In your life, you do a lot of things and the nature of your job might affect the other aspects of your life. But not only of your life, also of your parents, your children, your grandchildren. So there are intergenerational effects. When you have a problem, it's not just yours. It's your partner's problem, your parents, your children, grandchildren. And the opposite, when you benefit from something, there are many spillovers, what economists call externalities.