Senior roles across government, business and academia in Australia have left Professor Peter Shergold with deep insight on how to deliver reform and on what makes people tick. Here, he tells Lucille Halloran about his experiences and the increasing significance of behavioral economics across the public service.
A career spanning more than four decades has left Professor Peter Shergold equally at home in a university lecture hall, company boardroom or ministerial meeting. His roles — too numerous to list in full here — have included serving as Australia’s most senior public servant between 2003 and 2008, as Chancellor of the University of Western Sydney and on a wide range of private, public and community sector boards. As CVs go, it’s one with few equals.
And yet it emerges that government service was hardly a lifelong calling. “I was quite happy as an academic,” he admits. Having moved to Australia from his native England in 1972, he took up a role as a lecturer at the University of New South Wales, becoming head of the university’s economic history department in 1985. Two years on, however, his direction of travel was altered by a phone call from the government.
“I was asked by the Prime Minister to set up a new organization called the Office of Multicultural Affairs, which would be located within the Prime Minister’s Department,” recalls Shergold. “I thought it would be an interesting opportunity for a couple of years but when I was in the Australian Public Service, I discovered that, for all the problems and challenges, I much preferred being directly involved in the making of public policy, rather than merely commenting on it. I ended up staying 20 years. Being on the inside admittedly places limits on what you can and can’t say publicly, but you are able to
be there influencing policy decisions in the key discussions, which is impossible if you’re on the outside. I became, according to the Australian Financial Review, the nation’s most covertly powerful person! So, for me, it was a very good trade-off.”
A question of risk
Looking back, Shergold is firm in his belief that senior public servants in Australia do not lack for personal qualities — “they are extraordinarily good and talented people who have made a decision that they want to work in the national interest and that’s incredibly positive.” However, he goes on to say that often they are limited by a cultural inertia that works against doing things differently. “The difficulty with working for government is that, in my view, there is a greater level of risk aversion.”
Looking back, Shergold is firm in his belief that senior public servants in Australia do not lack for personal qualities — “they are extraordinarily good and talented people who have made a decsion that they want to work in the national interest and that’s incredibly positive.” However, he goes on to say that often they are limited by a cultural inertia that works against doing things differently. “The difficulty with working for government is that, in my view, there is a greater level of risk aversion.”
Asked why this is the case, Shergold points out that there are significant limits on policymakers and politicians, unlike their counterparts in the private sector. “If you are in government, you always have a ‘shadow board’ in the form of the opposition party,” he says. “You operate within an environment of fierce political contest and consequently you are cautious about what criticisms opposition parties can pursue in the public arena. That’s different from the private sector. Nevertheless, government needs to be persuaded that if it keeps on doing what it always did, then it will keep on getting the same results that it always got. Public innovation can be achieved but there is a level of political risk aversion and bureaucratic sclerosis that has to be overcome.”
Times are changing
For Shergold, the delivery of good government often comes down to understanding the behavioral impact and the behavioral frictions inherent in any policymaking environment. If they do so, reforms are more likely to occur. “What’s happening now is that whilst governments are risk averse, they also face such extraordinary financial challenges that they are being forced, with support from the public service to be more creative,” he says. “Levels of trust in democratic governments are decreasing. Citizen expectations are not being realized. Costs are increasing faster than revenues. In providing the necessary safety net of the welfare state, we have ended up creating ‘an age of entitlement’ and middle-class subsidy.”
Cracking this conundrum is not easy, he believes, but the application of behavioral economics is pivotal in helping get past this impasse. “There is an increasing resentment by citizens against unnecessary state interference in their private behavior,” he says. “We know the reasons for intervention — there are huge public costs as a result of their lifestyle decisions — but, nevertheless, there is pushback against perceived over-regulation in areas like taking exercise, eating healthier or reducing gambling, smoking or unsafe sex. Governments are now being forced to realize that they can’t keep on relying on tax or regulation to create more pro-social behavior. That’s where a good public servant can help work with government so that they can find new ways of doing things, using the power of peer group influence to nudge citizens towards desired government goals.”
In Australia, state governments are very often leading the way, largely, says Shergold, because of the federal structure of government. “It’s the same reason state governments have been at the forefront of commissioning government services,” he recalls. “In Australia, so much of program delivery is conducted at the state government level. So it’s not surprising that is where there I see greater interest in how behavioral psychology and economics can be applied.”
Some words of advice
Shergold’s current primary role is as Chancellor of the University of Western Sydney, a position he has held since 2011, and he is keen to stress that academics can have a positive role in helping policymakers move forward in the application of behavioral economics and insights. “I think the key danger to overcome is to ensure that public servants don’t view the commissioning of government delivery, citizen-directed services and behavioral economics as separate elements of reform,” he says. “We have to create a persuasive narrative about how they link together. For example, in Australia we are moving toward encouraging recipients of aged and disability care to design and manage the services they need. You cannot possibly do that effectively if you don’t understand how individuals make decisions — and that requires guidance and assistance from academics who have been studying these subjects for years.”
After retiring from the Australian Public Service in February 2008, Shergold became the first head of the Centre for Social Impact, a joint collaboration between the business schools of the University of New South Wales, Melbourne Business School, Swinburne University of Technology and the University of Western Australia. Whilst he is a frequent commentator on therelationship between governments and not-for-profit organizations, new forms of social entrepreneurship and impact investing, it is also clear that public service remains hugely important to him.
His advice to the public servants of today and tomorrow is to be flexible. “By all means plan your career but understand that the challenge is to be flexible enough to seize unexpected opportunities when they occur. There is inevitably a great deal of serendipity. I moved around a lot, from indigenous affairs to employment and from education to industrial relations. The chances never seem to occur at a convenient time — there is always something you’d like to finish personally or in terms of your career — so my advice is to do whatever job you are doing as well as you can, and when new opportunities arise, be willing to grab them with both hands.”
This feature was first published in the August edition of EY's Citizen Today magazine
