[GSDI Legal Econ] [Fwd: Re: Re Book - GI Value Pricing Production and Consumption]

[Roger Longhorn]

I publish below John Cook's comment on the term 'cost recovery' in 
response to a different list discussion we were having, in which I noted 
that the term 'cost recovery' should perhaps be dropped in favour of 
something more akin to 'funding' (as proposed by another GSDI L&SE list 
member a couple of weeks ago).

John has since joined the list.

Regards

Roger

-------- Original Message --------
Subject: 	Re: Re Book - GI Value Pricing Production and Consumption
Date: 	Thu, 3 Apr 2008 09:41:47 +1000
From: 	John.Cook at treasury.qld.gov.au
To: 	ral at alum.mit.edu
CC: 	Anne Fitzgerald <am.fitzgerald at qut.edu.au>, Baden Appleyard 
<baden.appleyard at qut.edu.au>, Brian Fitzgerald 
<bf.fitzgerald at qut.edu.au>, michael blakemore 
<blakemoremjb at hotmail.com>, Christopher Corbin <corbinceh at ntlworld.com>, 
"Neale.Hooper at treasury.qld.gov.au" <Neale.Hooper at treasury.qld.gov.au>, 
"tim.barker at treasury.qld.gov.au" <tim.barker at treasury.qld.gov.au>



I agree that 'cost recovery' can be a misleading term. However, it does
identify a government activity. A 2001 Australian Productivity Commission
report entitled Cost recovery by Governmentagencies described 'cost
recovery' as 'a system of fees and specific purpose taxes used by
government agencies to recoup some or all of the costs of particular
government activities' (at p.iii). Perhaps we do have some idea of what we
mean when we speak of 'cost recovery'. As economist Joan Robinson pointed
out - 'I cannot define an elephant but I know one when I see one'.

I see 'cost recovery' in the context of an initial public funding of an
activity and an attempt to redistribute the costs in subsequent
transactions. Generally, the idea of a 'user-pays' principle is simple and
therefore attractive; but it begs the practical questions of who are the
users, to whom should the payments be made, how much should be paid and who
should bear the costs of trying to effect these transactions. In situations
where many people are both producers and users of information, the costs of
trying to estimate who owes what to whom is simply too difficult. This
helps to explain why price signalling to regulate information exchanges is
simply abandoned in numerous instances - public and private bureaucracies
and the wide-spread incidences for data-sharing in the practice of science,
for example. This is not 'market failure' but an example where markets have
no chance of succeeding from the outset.

I suspect that some so-called 'cost recovery' policies may achieve a
widening rather than a narrowing of income distribution to produce a
situation which, if explained, might be seen to increase costs and reduce
efficiency while also producing outcomes that could be seen as unfair.

There may well be instances where public resources are channelled to
benefit people who are already well-off and where economic spin-off and
flow-on effects to the rest of the community may be negligible. I suspect
that registration of proprietary interests will often fit these criteria.
Here a first option is to charge on the input side in registering an
applicant's particulars. A second option is to charge on the outputs of
information from the register. A third option is to charge on both input
and output activities.


Regards,

Dr. John S. Cook
Office of Economic and Statistical Research, Queensland Treasury
33 Charlotte Street, Brisbane
Phone: (07) 3405-0331