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The 2021 Nobel Prize in Economics was awarded last month to three economists for their work on what are called natural experiments: the real-world equivalent of a laboratory experiment.

Economist Andrew Charlton reflected on the great value of such natural experiments when he spoke at the National Press Club in Canberra last week.

He reflected on what we had learnt about economics as the COVID-19 pandemic became a once-in-a-lifetime natural experiment "that taught us a lot about economics in Australia, and particularly about poverty in Australia".

"We did things in the pandemic that we would never ordinarily do," he said. "And the consequences of those decisions enabled us to learn things that we would never ordinarily learn."

At the end of another profoundly depressing week in the theatre of Australian politics — in which our Prime Minister once again demonstrated that he didn't seem to have learned the value of just telling the truth upfront and instead got himself into a world of pain of having to repeatedly correct the record in parliament — it is worth reflecting on some of those real-world lessons, and what they should be prompting our political leaders to contemplate.

One of the major lessons Charlton says we learned from this once-in-a-lifetime natural experiment was about unemployment benefits.

He pointed out the long-running debate between those who note the benefits are not enough to live on — and thus force those relying on them to live in poverty — and those who argue that you can't lift the rate because the unemployed may fritter the money away and be less inclined to work.

Imagine if we could have a natural experiment, Charlton said, that suddenly allowed us, overnight, to have a big increase in the unemployment benefit and observe the consequences.

And this is precisely what happened when unemployment benefits were doubled with the coronavirus supplement.

Some of the research Charlton's firm, Accenture, has been doing during the pandemic has been to track — with permission — the spending of more than 250,000 Australians from their bank accounts, which enabled them to "observe the actual spending of people who received extra money".

"The data is clear," he reported, "of the extra $550 a fortnight — the Coronavirus Supplement — the largest amount, $85, was spent on household bills, electricity, phone, water; $70 of that extra money was spent on food; around $60 was spent on clothing and household goods; around $175 was saved or used to pay down debt."

"What we saw is that for the people who received that extra money, it was life-changing. Hundreds of thousands of people were lifted out of poverty.

"They didn't spend that money on frivolous or discretionary items. They didn't withdraw from the labour market. They spent it well on their families and bills.

"And they spent it quickly, which made it a good stimulus that's supported the economy."

So what have we done with the lessons such a once-in-a-lifetime experiment gave us? We turned our backs on it.

As soon as it was humanly possible, the government halved the unemployment benefit rate again, citing the need for fiscal discipline and arguing governments could not continue to provide support indefinitely.

We couldn't afford the $20 billion cost of this support, even as evidence emerged that we had squandered an amount variously estimated as the same, or twice that much, in JobKeeper wage subsidies paid to companies which, it turned out, didn't need it or used it to pay for other things like bonuses to chief executives.

There have, of course, been lots of other lessons about what governments do — badly and well — from the pandemic.

But Charlton's example of what we can learn from doubling the unemployment benefit is just one that raises the question of just how strange it is that the Morrison Government's whole political strategy, at the moment, is based on dissing what governments have done.

Sure, the Prime Minister's rhetoric about Australians having had a gutful of governments in their lives is designed to exploit anger about state-imposed social restrictions.

But at a time when the government could be taking credit for the things it did which helped people stave off financial catastrophe, it is consigning all of that to history.

We did all of that and it was great, the argument goes, but now it is time to withdraw.

It might have an appeal to a particular group of voters. But it is hard not to think it ignores the bigger lessons we have learned over the past two years, and that, just maybe, we should be applying them, beyond the realm of the political 'grab'.

Things like recognising the importance of our health and hospital system; parents coming to truly, truly value the contributions of our teachers and child care systems, to name just a few.

Read more:

https://www.abc.net.au/news/2021-11-27/covid-once-in-a-lifetime-experiment-jobkeeper-wages-economy/100654538

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