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Economics References Committee
Personal choice and community impacts

GREEN, Dr Kesten Charles, Private capacity

RABL, Mr Philip, Private capacity


CHAIR: Welcome. Thank you for appearing before the committee today. I invite both of you to make a brief opening statement, if you wish to do so.

Mr Rabl : I have just a few slightly random comments to make, firstly on rights. If we were to have a conversation starting from the premise that I have rights, it would be a very different conversation than if we started from the premise that we have equal rights. Secondly, on equality—picking the equality point out of that—I acknowledge that some commentators say that the notion of equality is close to meaningless, and they give the example of welfare: either all Australians should be on welfare or no Australian should be on welfare. I can give an example of my own: either all Australians should be senators or no Australian should be a senator. That form of equality may take a numerical equality one or two steps too far. It would be ridiculous to suggest that everybody should be equal in all circumstances.

To me—and I have made this point fairly clearly in the submission, I hope—the importance of the notion of equality is that it opens a window into inequalities in our society. We have moral, social and political obligations to understand the implications of those inequalities and to do something to address those we consider to be unacceptable. For that, I acknowledge Cherminsky, which is reference 2 in my submission. On freedom: the equal right of people to be free, in my view and others, is a natural right. A person with the capacity to make a decision has the right, as the birth right, to make that decision and to act on it, subject to some constraints. I will summarise those back to saying 'you cannot cause harm'. If people are free as a birth right to decide then discussions about regulations must focus and understand the circumstances in which it is okay to constrain a person for making one of those decisions they otherwise would have made. On freedom, I acknowledge HLA Hart, who is reference 1 in my submission whom I have drawn on quite directly.

On fairness, being equally free entails being equally obliged to be fair to others, and that is a common-good argument. So regulations need to get the balance right in managing the trade-offs between freedom and fairness, or sometimes between freedom and freedom and maybe sometimes between fairness and fairness.

Finally, two comments that come a little from left field. What I have in my submission actually goes quite beyond the terms of reference of the committee. On Aboriginal recognition, there is a debate at the moment about putting some clauses in the Constitution beyond the recognition ones that do something substantive, and there is big debate about whether that is a good idea or a bad idea. I want to put on the table that a constitutional guarantee of equality along the lines that I have suggested will resolve that debate. It does not introduce any new rights. It does not introduce Indigenous specific rights. It is not even a bill of rights. What it does do, though, is provide a framework for working towards the elimination of inequalities. In that particular case, it would be Indigenous specific inequalities. Finally, on section 18C of the Racial Discrimination Act—and the debate has died down on that—I am suggesting also that either option 1 or option 2 in my submission would resolve the debate about that act.

I am grateful for this opportunity to put these thoughts before you and I am very intrigued to know how you are going to react to them.

CHAIR: Thank you.

Dr Green : Thank you for this opportunity to testify to the committee. I would like to propose the reasonable doubt test as a way of reining in the proliferation of regulation. I will start with a general statement that regulation harms the general welfare. The general welfare is greater—

Senator DASTYARI: That is quite big statement, Dr Green.

Dr Green : It is a bold statement, it is. And I am going to support it.

CHAIR: He was invited for a reason.

Senator DASTYARI: He is not holding back!

Dr Green : The general welfare is greatest in 'the simple and obvious system of natural liberty'—from Adam Smith. Adam Smith describes that this prevails. Who can really know better what is best for us than we do ourselves? Attempts to regulate people's choices violate microeconomic principles—derived from experimental evidence, natural experiments and logic. Some of these experiments and some of this work is my own. Cumulative knowledge on the effects of regulation is summarised in the iron law of regulation, which can be worded, 'There is no form of market failure however egregious that is not eventually made worse by the political interventions intended to fix it.' So this is another very strong statement and some people seem to regard this as being a little extreme. Is it possible that there are exceptions to the iron law of regulation—or, in other words, under what conditions might regulation improve the general welfare?

In my submission in the second paragraph on page 2, I list 10 necessary conditions for a regulation to be successful. I believe they are reasonable conditions. They are conditions that reasonable people would expect a regulation to meet. I will not go through them in detail, but I will look at the first one of those which relates to one of my previous points—that is, for a regulation to be successful it is necessary to know stakeholders’ endowments, relationships and preferences. I think the committee has been hearing quite a bit about preferences and how people's preferences are different. How can a central planner really know these things about everyone, about all the people involved? This is what economist FA Hayek referred to as 'the knowledge problem'.

A belief that the central planning can nevertheless be successful has been referred to as 'the chess pieces fallacy', which comes from a statement, again, by Adam Smith, who talked about clever people who imagine that they can organise a great society to their will, in the way that one would organise the pieces on a chessboard. More succinctly, it is referred to by Hayek, again, as 'the fatal conceit'.

Do regulations meet the conditions? Do we know about any regulations that do meet the 10 conditions for successful regulation? Well, we have done our own research; others have done research on individual regulations and experiments on regulation. I have asked my colleagues and I have asked widely for someone to put up a regulation that has been demonstrably successful relative to the doing nothing option. So far, we have not managed to identify a single regulation that meets a single one of the 10 conditions.

I am going to suggest a possible solution to the proliferation of harmful regulation. The key point is that the onus should be on the sponsors of the regulation to prove beyond reasonable doubt that each regulation has or will increase the general welfare. Given the body of economic theory and knowledge that we have accumulated over the years, the presumption should be on the innocence of the free organisation of society. A possible first step that somewhat goes towards the way of achieving this, in a way that is perhaps less controversial, is to revoke orphaned regulations, regulations that do not have a sponsor who is willing to step up and defend it with evidence, particularly ones that are not being enforced on a consistent basis. I am sure there must be many that meet that criteria.

What does it mean to prove beyond reasonable doubt? For a new regulation, we are talking about predicting. We are talking about forecasting the effect of the regulation relative to doing nothing. So it is necessary to use evidence-based forecasting methods, and I have provided a pattern of mine on that as part of an appendix to my submission. Also, clearly, it is necessary if any regulation should pass this test and be on the books, it is important that there are regular cost-benefit evaluations of existing regulations. Circumstances change, after all. So even for believers in regulation, you would have to recognise that conditions do change. It is not that easy. We talk about regulatory impact statements and so on. I heard the earlier speaker referring to those. It is clearly very easy to get past those, so it is important to use evidence-based methods. I am pointing in the direction of the forecasting work.

We should start, given the presumption that freedom is innocent, by not regulating when there is uncertainty about the situation. When even experts are not really sure about the true nature of what is going on and the problem that might possibly need regulating, and when there are arguments among them, that should in itself be a reason for avoiding regulation. Regulating something that we do not really understand seems a rather absurd thing to do.

It is also important to ignore the opinions of experts and voters on what effects a regulation would have, because we know from decades of research and forecasting that experts making predictions about complex situations—the kinds of situations that we are talking about regulating—are no better than guessing. Of course, you have only got to get any group of experts together and they will have different predictions, so there is a common-sense test that this is so. It is also important to employ unbiased experts, working independently and using validated methods—open methods—that are open to inspection and discussion.

In summary, I would like to say that deregulation presents a great opportunity. With so many regulations restricting people's choices, there has never been a better opportunity to increase the welfare of Australians as is now presented by the policy alternative of thoroughgoing deregulation.

CHAIR: Thank you, Dr Green. I am going draw on your submissions and in particular, to start off with, the helmet laws. Mr Rabl, I understand you were involved in the development of the mandatory helmet laws, and they followed the Kempsey bus crash of 1989. Would you be able to describe that process for the benefit of the committee, please?

Mr Rabl : I was involved in a limited way. At the time, I was working in the Department of the Prime Minister and Cabinet, and I had the policy responsibility for areas that just happened to cover health and other matters.

CHAIR: This was the New South Wales government?

Mr Rabl : It was the federal government. At the time, the Hawke government was being pressured by an orthopaedic surgeon from South Australia to create a committee, which he wanted reporting to the Prime Minister, to do something about road trauma. He was tired of, as he said it, 'fixing up the bodies', and he would rather have been put out of work in a sense, I suppose. As a response to this, the government decided to put some money on the table for the states and ask them to do some work in the area of black-spot remediation. In return they were to sign up to 10 things, one of which was the compulsory wearing of bicycle helmets; another was the national 0.05 alcohol limit; another was the 100-kay speed limit. I do not remember what the other ones were.

The issue about wearing bike helmets—I am not saying there was not discussion that led it to be put on the table to be part of those 10 items—came about not in its own right but as part of a much wider package. In fact, it was not in this room but in a committee room round the corner where the state transport ministers met—it is in my submission; I think the date was just before Christmas in 1989—to discuss the 10-point package and decide whether they would sign up to the $120-odd million that was on the table, and they failed to agree on a single item. It is just the way the world is when it comes to Commonwealth-state relations, I am afraid.

One of the people in that room was Bruce Baird, the Minister for Transport in New South Wales. That very night, two buses ran headlong into each other up in northern New South Wales and killed 35 people. The very next time I saw Bruce Baird was on television. There he was, up there at that crash site, and interviewed too was the Queensland Minister for Transport. They were shocked, obviously.

I do not know what happened, because the carriage of this was done largely through the Department of Transport, not through the Prime Minister's department. But fairly quickly after that, all states signed up to the package. It was prompted, obviously, by that bus crash, not necessarily by the cogency of the arguments that were in the package.

CHAIR: Your submission discusses the regulation's potential impacts on freedom, fairness and truth. Of those three, which do you think was given the most attention when this issue was under consideration and which was given the least?

Mr Rabl : I am not sure that I know the answer to that.

CHAIR: You are allowed to speculate.

Mr Rabl : I would hope that fairness would have been very high on the list of those. But, to me, the rock-bottom part which should drive the decision making in these areas is actually freedom. But I say in the submission that if we take the point that people are equally free as a birthright then everything else flows from that. That implies being obliged to be equally fair to each other, as I have said, and truthful. It has to be driven by the truth. Some of the evidence we have been hearing from Dr Green and others is talking about the evidence. Well, the evidence has to be the truth. If we are not being driven by truthful evidence then we are not going to get to a good understanding of the impacts on freedom and fairness.

CHAIR: What you are suggesting is that the Kempsey bus crash induced—I think you are inferring this—an emotional response, which led to acceptance of this regulation which had previously been resisted by the states. Is that right?

Mr Rabl : That is right.

Senator DASTYARI: Mr Rabl—why is that a bad thing?

Mr Rabl : I am not saying that it is a bad thing, no. I am absolutely not saying that.

Senator DASTYARI: I just want to draw a more recent comparison: the situation in Syria, perhaps best visualised through the image of the young boy—unfortunately, I do not remember his name—which resulted in a worldwide response. It was an emotional response that resulted in the taking of more refugees—a real kind of movement. Are they not natural responses? I think they are positive responses, when people react to situations.

Mr Rabl : Yes. It is really sad that sometimes it takes something like a bus crash to get agreement about some things. But whether that is the reason or not, hopefully what underpins the decision is still a rational process of thinking about things. To me, if they do not involve understanding the implications in terms of freedom and fairness then they are not going to get to everything they should get to.

There may well be other things, but the rock-bottom things that matter in a society which is equal is the freedom to make decisions and choices for oneself subject to being fair to everybody else, who have exactly the same rights to freedom.

CHAIR: It sounds to me that while there is nothing wrong with what you are saying, and Senator Dastyari has asked, 'What's wrong with that?' it sounds like what you are talking about is a moral panic. We see many moral panics and they are used notoriously by governments to introduce regulations that, up until that point, they have had some difficulty gaining acceptance for.

Perhaps Dr Green might like to join the discussion at this point, in view of the iron law of regulation that he referred to. How does Mr Rabl's account of the introduction of mandatory helmets conform to that model?

Dr Green : Mandatory helmets. Well, where was the evidence? I would suggest that, as Mr Rabl himself suggests, there was a lack of evidence that there was a net benefit for this. The study clearly had not been done. It was an emotional response. Emotional responses are not a rational way to make policy choices.

To come back to my key point, given the presumption of innocence, of freedom, and the lack of evidence that regulations work, rushing to regulate here is, as always, a mistake. Could not the private sector and private individuals have responded to these—and we are talking about the bus crash—in their own way? The bus companies themselves, the parents of the children, the individual schools were all free to respond to that situation according to local information they had, local conditions, in a way where they were assessing the costs and benefits to individual people involved.

Mr Rabl : I am not saying there was no evidence to support those 10 items in that package. The cabinet submission involved came from the transport portfolio and I am sure that the federal office of road safety, which did it, had evidence. I know there was a lot of discussion in the community about that and other issues, so I am not saying there was no evidence; I am saying that the decision was taken in a different context.

CHAIR: That is why I was drawing your attention to your submission about the potential impacts on freedom, fairness and truth. Given that we would all like freedom, fairness and truth to be top of mind in introducing regulations, to what extent were they abandoned in the context of a moral panic prompted by the Kempsey bus crash?

Mr Rabl : I am going to say something and, again, you might think I am too theoretical. I say this often when I am talking to people about things: purpose is logically prior to action. Just because an action is done, does not mean it was non-rational, let alone irrational. After four decades in the government, I can assure you that we very often used to retrofit purpose into actions, but you can do it. There is no doubt with that that particular decision, whether it was right or wrong, and I am not making any judgement call one way or the other on that—the purpose is there. Like I say, you may have to go back and retrofit the purpose, but the purpose is there, otherwise it would be totally irrational and comments that others have made would be absolutely right.

Dr Green : Can I make a point from one of my papers where there is an example of efforts to increase road safety by regulating particular vehicle characteristics, speeds and so on. The findings from that were that the safety gains, the gains and lives, that were expected from implementing these safety policies were nowhere near as great as expected. They were vanishingly small because drivers adjusted their behaviour for the fact that they had antilock brakes and airbags and took more risks in their driving.

CHAIR: Dr Green, you discussed both market failure and government failure in your submission. While you accept the existence of market failure, you point out that even when markets fail, government failure is often worse, or may exacerbate the market failure. Can you outline why this is the case?

Dr Green : The iron law of regulation suggests it is always the case that the government failure will be greater. The concept of market failure and the various forms of that are just that. They are concepts of failure relative to an ideal towards a perhaps unachievable ideal. It is a whole different question to say there has been a failure in the market and that this has not been perfect to saying that it is possible for a well-intentioned and very clever central planner to step in and actually make that situation better over the long term.

A lot of the evidence I have presented is summarised in my attached paper on mandatory disclaimers, and the opening sections for that are that the government failure is greater than the market failure over the long term, and in all cases where we have looked at that. Why is that? If you go back to the economics of motivations and think about what the motivations of sellers are. Sellers want to make a profit—everyone is after their surplus, both sellers and buyers—and in order to make a profit over the long term, sellers have got to look after their buyers. They have got to look after their buyers' interests. They want their buyers to come back. They want their buyers to tell everyone, 'Isn't this a wonderful product or service.' The last thing they want to do is harm their buyers.

In the case of buyers, buyers are looking for the best deal for them, the thing that gives them the most pleasure. For some people, that might be cigarettes, but there we are—who am I to judge? They are looking to maximise their welfare, and they are looking for the best deals. Of course, people are not naive; they expect sellers to indulge in puffery about their products. That relationship between buyers and sellers is undermined when a regulator comes along and buyers then think: 'The regulator has looked at this; therefore, it must be safe. It is out there, so it must be acceptable.' So caution goes to the wind. The old economic principle of caveat emptor, buyer beware, goes out the window, ironically, in response to things like compulsory warning labels on goods and services.

Senator DASTYARI: To begin with, Dr Green, I think your body of work is incredibly impressive, and I am not going to be doing fair justice to your body of work by summarising and having a debate with you in 10 or 15 minutes, so I put that on the record. Also, it is my opinion that these kinds of debates are not devoid of ideology. As much as we try to talk about a lot of this coming from a fact-based approach, there is certainly an ideological element in different views that stems into this. An overarching view about defining freedom and defining liberty, which are much bigger debates than we are going to have in the next 10 minutes, are perhaps what helps frame a lot of these debates, and where I suspect your views and my views diverge from one another comes from that.

I have fundamental disagreement with your overall conclusion and thesis that efforts to regulate Australia's activities, no matter how well-intentioned, are directly reducing our welfare. I want to take you to task on what the three bits of evidence that we had this morning were, and perhaps where your evidence goes somewhere different to where that evidence went. It seemed to be the views of those earlier today—and again, I am summarising a lot of body of work in a very brief period—that where there are externalities caused, they should try to be internalised as much as possible to try to reduce the overall impact of addressing specific issues.

I want to use the example of the lockouts, because I think that is an easy example to use, where there is an incident of violence at the nightclub district of Sydney, and how we want best address that. Is it a policing issue? Is it a behavioural issue amongst young people? Is that a better way of addressing it, or is locking out the entire place the best way of addressing it?

I get the sense from your body of work—and, again, I do not want to do it injustice—that you seem to go a step beyond that and actually question the entire point of regulation itself, and that you have a stronger view than those that were expressed earlier. Is that a fair assessment?

Dr Green : Yes, that is a fair summary.

Senator DASTYARI: I worry that you are going back to centuries-old economic theory to justify some of that. I would argue that the practical implications of regulation in this country have been incredibly effective. Is that something that you would not agree with?

Dr Green : I would not agree with that, no.

Senator DASTYARI: Where do you think it has worked? Why don't we start with what we agree on before we move to what we disagree on?

Dr Green : As I said in my statement, I am not aware of any situation or regulation where I have seen evidence that the regulation has resulted in increasing the total welfare relative to having done nothing. I am not aware of any evidence that that has ever happened.

Senator DASTYARI: Sir, I certainly do not believe you are advocating and I do not want to put words into your mouth but effectively what you are saying is—the only conclusion I could draw is—that you would remove all regulation if none of it has worked. Where do you draw the line? You do not seem to draw a line.

Dr Green : I do not draw the line; you are right. As I said, it is the evidence—and economic theory has good reasons for this. We are not talking about laws like, 'Thou shalt not kill,' and so on that have been around forever, where everyone knows it is wrong. We are talking about situations where someone has made some judgement, 'Gosh, if we implement this regulation the situation is going to be better,' in order to achieve some particular outcome. There is no evidence that I am aware of for that, and I have been looking.

Senator DASTYARI: Dr Green, I will just to run through a couple of examples with you. I assume you would not support plain packaging, but would you support taxing cigarettes?

Dr Green : You are coming back to the externalities-type argument.

Senator DASTYARI: I am trying to get a practical example. From a policy-making perspective, what would be the practical implementation of what you are saying in terms of regulation? They are quite revolutionary suggestions.

CHAIR: Ultrarevolutionary!

CHAIR: Oh come on, Comrade Leyhonhjelm!

Dr Green : I am not quite sure how to argue that. I will just answer it in the same way: what is the evidence that regulating the tobacco market increases total welfare relative to not regulating it?

Senator DASTYARI: The evidence would be its impact. There are people out there who are experts on this; I am not. We had one of them earlier today.

Dr Green : Shall I give a couple of examples from my mandated disclaimer paper?

Senator DASTYARI: Yes, please do.

Dr Green : Attempts to regulate the tobacco market by banning the advertising of benefits of tobacco—and when we are talking about 'benefits' and tobacco we are talking about relative health benefits: milder, less nicotine and so on. When being able to advertise those benefits was banned in the US the consumption of nicotine and high-tar cigarettes went up, and when the ban was reversed people tended not to advertise these cigarettes.

Senator DASTYARI: Now all advertising of this is banned.

Dr Green : Yes, that is right. My old grandad took me on his knee when I was four or five—cough, cough, splutter, splutter. He smelt of old rolled tobacco, and he made me promise him never to smoke. He died at 67 from heart failure.

Senator DASTYARI: Which I would argue is not a good outcome.

Dr Green : But then, who am I to make that assessment for other people?

I cannot make the assessment as to how much pleasure he got along the way. I do not know the answer to that.

Senator DASTYARI: Dr Green, we disagree on so much. I do not know where to start with that statement.

CHAIR: That is because you are a senator. You know better than other people.

Senator DASTYARI: No, I am not pretending to know better. I am going to surprise you, Senator Leyonhjelm, and let you know that there are actually a lot of things I do not know. I do not purport to have thought about this. I do believe, Dr Green, that you come at this from a very, very different ideological perspective, and I respect that. I think that is probably a lot closer to the ideological perspective that Senator Leyonhjelm comes to a lot of these things from. By the way, I think what is important about this inquiry is that a lot of these debates are not really had. For those people who have a very different view to you towards regulation, I think we should have to justify this stuff publicly from time to time. I do not think that that is a bad social outcome.

I would argue on the cigarette example, though, that the healthcare costs, the social costs and the costs associated with those who are impacted by smoking—especially things like smoking in closed environments, passive smoking and all of these things—have been greatly reduced by heavy regulation of the cigarette market. That is something I think you disagree with. I am using that as a practical example.

Dr Green : Yes, I do, partly for the reason I suggested before. I cannot assess what welfare gains individuals who smoke get out of it. I do not think anyone can, apart from the individual. Also, we are in an uncertain, changing, complex world and the state of knowledge on most things is not very good. My understanding of the current state of knowledge is that the passive smoking argument is not being shown to hold up. But I can—

Senator DASTYARI: I will give you another one: the pool fence agreement.

Dr Green : Can I give another example?

Senator DASTYARI: Yes, do.

Dr Green : Coffee. I give this example in my paper as well. A study came out saying that coffee causes massive increases in pancreatic cancer risk. Of course, warnings went out from health authorities and all the rest of it: 'stay away'. There was another study on birth defects and warnings went out from the health authorities. I do not know whether it got to the point of regulation—I am not sure—but that would have been the next step, other than warnings, wouldn't it? The pancreatic cancer study was actually reversed by the same researchers a few years later when they tried to replicate their own study. Subsequent studies have shown health benefits from drinking coffee. Similar things have happened with wine.

Senator DASTYARI: The point is that sometimes people get it wrong and you make policy and regulation based on wrong information. I would argue that what you are saying there is completely right. You should reverse decisions if they are made on faulty data, and of course from time to time data does and will change. That is a matter of fact. To take it to its logical extreme, Dr Green, is it your view that the entire public health advocacy industry should be defunded from government? It is not the role of government to be funding this?

Dr Green : Of course it should be, yes.

Senator DASTYARI: You say 'of course' like I agree with you. I do not. I could not disagree with you more.

Dr Green : If they have a good case then we are all free, intelligent citizens and we can assess the case, just the same as smokers can assess the case. Please, tell us about the evidence that you have and we as individuals can make that choice, taking account of our own welfare trade-off. If I particularly like cigarettes or I particularly like coffee, I may well be prepared to carry on even though a new study has come out, but that would be my choice.

ACTING CHAIR ( Senator Dastyari ): Dr Green, this is a really fascinating conversation, so I think we could do this for hours. What about asymmetry of information? One of the arguments that were presented this morning by the Public Health Association was that you have this unfair playing field when it comes to the provision of information. The fast-food, unhealthy food argument says that, since there is a huge market out there trying to push people towards unhealthy food options for commercial reasons, we should be presenting an alternative view and presenting as much as possible the equivalent opposite information, and that the role of regulation, in one form or another, is to do one of two things: to limit the amount of information from the corporate side about fast food or to run awareness campaigns about healthy eating. We should be doing both things to try to combat that. I want to take you to another of the arguments, which is about how you deal with the asymmetry of information.

Dr Green : It is another market failure argument, isn't it? It is a version of market failure. In the introductory section of my paper Evidence on the effects of mandatory disclaimers in advertising, which I have attached, there is a reference to a study done by economist Clifford Winston, who looked at information provisions that were put in on the basis of those arguments, and his evidence that they did not help.

ACTING CHAIR: But in some cases, Dr Green, public awareness campaigns can and do work.

Dr Green : It is one thing having researchers and experts making statements. It is another thing if it is done under the aegis of the government, which lends it an authority which rather intrudes on people's decision making.

ACTING CHAIR: What about campaigns like 'Wear your seatbelts', 'Don't speed' and this and that?

Dr Green : Can we go back to the food ones? I provided all the examples that we could find where there is experimental evidence on the effect of warning labels related to food. The findings are that where meals were advertised as being low calorie or low fat people tended to consume more calories because they thought, 'Gosh, I've been so good—I can now have the dessert.'

Another example was labelling of fats and oils on salad dressings. The salad dressing one is a fascinating case, where the salad dressing manufacturers, being good sellers, wanting to give people what they wanted, knew that at least some people were concerned about fat and oil in their diet, and so they provided a low-fat, low-oil salad dressing and they advertised that. But then the regulator said, 'We know better than this, because we want to impose a mandatory labelling system that itemises all the ingredients and gives the proportion of fats.' The consumption of fatty salad dressing went up as a result of that.

ACTING CHAIR: From your perspective, Dr Green, doesn't that counter the argument? I am not quite following. You have lost me at this point, because the argument I thought you were making was that heavy-handed regulation fails when it is trying to restrict outcomes. But I am not sure why you would be opposed to the idea of providing consumers with more information and allowing them the freedom to use that information how they will. The point I am making is, if the consumer is provided with the information and they choose to make the decision to consume more, there would be some who would argue, I would assume, that that is very reasonable, in that the information is now there and you are not infringing on individual liberty because people can still make the choice. Yes, there may be a small burden on producers to provide that information, but that addresses the asymmetry of information problem.

Dr Green : That was our premise when we started the research on the mandatory disclaimers paper that I have given you, but we could find no evidence that any mandatory labelling had ever improved the outcome. As it happened, a couple of other researchers who I cite subsequently published a book. They were looking at a similar area at the same time and came to the same conclusion looking at a vast body of studies and different regulations on labelling. So, although we were surprised, in retrospect we should not have been, for the kind of reasons that we have outlined: a basic economic understanding of the motivations of sellers and buyers. Yes, sellers are very motivated to provide good information about their product. If a public health researcher gets into the media with a study with a particular finding and consumers become concerned about fats and oils then sellers are the ones who are most motivated to respond to that in a rational way, not imposing it on everyone but offering options for people who are concerned about it.

I go back to the question of knowledge and how much the regulator knows. I have lost track of it, but there is a lovely video clip probably from the sixties where there was a congressional hearing in the US on food. The expert on food at the time was saying, 'Senator, we really do not know enough to make any kind of strong statements about what food is good and what isn't.' The Senator said, 'You experts have got the luxury of saying, "We don't know," but we senators have got to do something about it.' That was the birth of the food pyramid that is now widely pooh-poohed because it is so strongly based on sugar—carbohydrate. It is now unfashionable on the basis of more recent research.

ACTING CHAIR: As much as I want to get into the paleo debate with you right now, I'm very conscious of time! Senator Lindgren.

Senator LINDGREN: I believe this question may be for you, Mr Rabl, but please forgive me if I am wrong. Can you please tell me at what point you believe people are born equal in both circumstance and ability? Since we understand that people are not equal, how do we know all will respond with good reason and intent?

Mr Rabl : We are clearly not born equal in terms of ability. In fact, I think something that is behind your question is that there are many commentators out there who think the notion of equality can be shown to be fairly meaningless. I pull my thinking back to the context of public policy and in particular to the regulation side of things that is before this committee and say that a starting point other than that people are equal in terms of their dignity, their rights, their freedoms and their obligations would be a very difficult starting point to take. It is because of that equality in those terms—and I do well understand that translating that into something like a constitutional guarantee has got massive difficulties. It does not mean it is wrong; it is just problematic to turn into practice.

I will go back to the very first thing I said. If we are to have a discussion starting from the premise that I have rights, it will be a very different discussion than if we talk about how we have equal rights. Some of the problems I have had with things I have heard in this room earlier morning is that they seem to me to be based much more on the premise that I have rights than that we have equal rights. If you do not go to the equality starting point, I just do not know where you get to understanding how decisions to regulate or not regulate are going to impact on other people—because they do.

Senator LINDGREN: Dr Green, I have to agree with a lot of Senator Dastyari's sentiments Do you think it is right to ignore the consequences that others have to deal with, particularly like heart attacks caused by smoking and diabetes caused by sugar? I tend to think a lot of the stuff you have been talking about is quite hypothetical and not necessarily realistic.

Dr Green : A lot of the studies I am talking about are based on natural experiments and investigating the effects of actual regulations before and after, so it is not theoretical at all. They are attempts to regulate consumption of things that some people regard as undesirable.

A friend of mine spent a large part of her adult life as a corporate wife—essentially in the background, helping out the kids and her husband. She is now in her 60s and out climbing the highest mountains in the world. I do not know the statistics on this, but I suspect the risk of dying from that is probably higher than the risk of dying from cancer. It seems like a crazy kind of thing to me, but I cannot judge the welfare benefit of that to her, can I? That is really her judgement. The costs of that clearly, in some sense, fall on other people too if she has to be rescued or her body recovered from somewhere remote. If the family is not paying for it, someone will, I suppose.

In the case of health outcomes, it is not an externality in the economic sense, because the government has created the situation by its own actions. Without the government's provision of public health, the health outcome would be completely private. In other words, the smoker or the person having a lot of sugar or whatever would be paying their own health insurance, and they are the ones whose lives are affected.

Senator LINDGREN: That brings me back to my point. As I talked about with Mr Rabl before, not everyone is equal. Not everyone has the same type of income. Some are from low-socioeconomic areas and do not necessarily have the ability to pay for private health insurance. For me a lot of what you were saying is going against what the experts are saying. I am going to rebut what you had to say here about their statements. They do not make statements without detailed research and data analysis. If they do sometimes find that the data is not necessarily correct, they learn from new data that comes along and then change policies according to that new data and statistics. When you look at, for example, the rate of injuries if a cyclist falls under a truck with a helmet on, of course they are most likely going to die; however, if they fall and hit their head with a helmet on, they are most likely going to survive that without any serious head injuries. Some regulations actually do save lives, and I do not understand how you believe that would not occur.

Dr Green : I am not aware of the evidence that cycle helmets are saving lives relative to—

Senator LINDGREN: No, I did not saving lives. Even with a helmet on you can still get hit by a truck and die. What I said was that, if you hit your head—not get hit by a truck—with a helmet on, you will most likely survive without serious head injuries. You would have other injuries for sure, but you would not have a serious head injury. That is a proven statistic. The emergency doctors will tell you that. Brain surgeons will tell you that. Police and ambulance officers will tell you that.

Dr Green : What I suggest in my proposal is that, if someone is advocating a particular regulation, we should expect to see the proof in terms of evidence based forecasts of all the costs and benefits.

Senator LINDGREN: I think you would have to walk into a brain injury ward a the Princess Alexandra in Brisbane, for example, to know that helmets save lives.

Dr Green : That is one of the potential benefits that you would look at, but also—and I am sure others who are more interested in cycling have raised the point—cycle helmets seem to have put people off cycling. As a result of that, people do not get as much exercise as they might, perhaps. I do not know. There are all kinds of effects that regulation could have. Not having looked at that one in particular, I do not know the answer, but my presumption would be that—

Senator LINDGREN: This is a personal point of view.

Dr Green : Coming back to your point about saving brain injuries, if it is so clear that it is a benefit, then why do we need to regulate it?

Senator LINDGREN: Regulation is good to a point. In fact, it reduces a lot of injuries and it reduces a lot of other things. Without it, we would have hospital systems, certainly, full to the brink with a lot of other injuries. If we did not advise the public about smoking and its consequences, then we would have cancer wards filled with people who are smokers. There are statistics, Dr Green, and I do not think they are arguable.

Dr Green : This is effectively saying that people are stupid, isn't it? They cannot make their own assessment. You are saying that, if we did not tell people they have to wear a cycle helmet if they are cycling, then they would not look at the kind of evidence that you have described and wear their cycle helmet.

ACTING CHAIR: I think that is an unfair assertion. I do not think that was the point the senator was making. I know you did not imply that the senator was implying that people were stupid; you were looking at a theoretical framework. I think the point being made was that there are external social problems that are mitigated through the effective use of regulation. You have a different view to that. I am not sure we are going to resolve that.

Senator LINDGREN: No, absolutely not. It might be time to go to lunch!

ACTING CHAIR: There is a big ideological gulf between where we are and where you are. It has been very interesting to hear your views. Dr Green and Mr Rabl, thank you so much for being with us today. They were certainly very interesting presentations and it was a very interesting session.

Proceedings suspended from 12:32 to 13:16