Acting in the public interest – a framework for analysis - ICAEW

One way of dealing with a position in which there is a loss to one set of people in order tobenefit another, would be to arrange offsetting payments, for example a lump sum to offset lossof future benefits. Another way would be to settle for an alternative outcome where everyone isat least no worse off even if it is, in some terms, theoretically sub optimal to another outcome.This is position C in Panel 8.4. A third way is to conclude that the interests of the section beingbenefited are more important, in this respect at least, than those of the disadvantaged section.An example of this is welfare payments to the poor, funded by taxation on incomes of thosebetter off. This involves weighting of interests.Whatever method is used, this is likely to be a key consideration in assessment by others as towhether the action really is intended to be in the public interest or is more of a smokescreen,having been subject to undue influence. Transparency is particularly important here. This is notto say that the process of the decision should take precedent over the outcome: while there maybe pragmatic issues that result in a less than optimal outcome, that substandard outcome can hardlybe justified as being in the public interest if it is caused by prioritising appearance over all else.Given the tendency to concentrate on expressed interest (discussed above) use of public votingand or generally supported custom and law can be safer options. 1988.3 Practical ways forwardMeasurement is theoretically simple, but in practice sensible numbers are difficulty to come by.Weighting is possible and indeed has to be done. However, it is fraught with difficulty. How,therefore, do those advocating public interest positions actually determine whose interests areto be considered and how to deal with conflicts?One option is to determine that there is a ‘win–win’ situation: everyone is better off or at leastsome are better off and no-one is harmed. As noted in the discussion in Panel 8.4 on Paretoefficiency, this can arrive at a quite different solution to one in which there are winners and losers.Given the wide divergence of opinions and circumstances, there is seldom an agreed view thatthere has been a win-win anyway, or even if it is, that the allocation of ‘win’ is fair and reasonable.However, divergent views can be taken advantage of to achieve this: if there are differentexpectations as to what will happen, it may be possible to construct an arrangement where allparties think they will win, 199 for example fixing upper and lower limits on a price (a cap andcollar arrangement), where the parties both regard the pricing as in their interests, due todifferent expectations as to volume.Where there are positive and negative attributes to be considered, as is usually the case withsocial decision making, impact analysis is a useful means of assessing the net effect. It alsoassists in demonstrating the decision taken.One suggestion made, as a means of combining the best parts of all approaches, is the use of‘informed intuition’. 200 This, in essence, takes aspects of the Bazerman approach – assess theproblem, consider the goals and their importance, consider what actions would facilitate whatgoals – and then make an intuitive judgement, monitoring your emotional reaction to differentoptions. It can also be applied the other way around – as noted above it is difficult to switchoff intuition, so the rational calculation process can be used to act as a logic check on whatintuition has suggested in the first place.This approach is perhaps of more value to individuals than regulators or other accountableorganisations although even in the latter it indicates that ‘gut feel’ can be valuable if it can bejustified as not being subverted by inappropriate influences.8.4 Chapter summaryThe advocate of a public interest action needs to apply, and be seen to be apply, judgementto information gathered about individual wants, needs and other constraints to wants. Theremay be a series of measurement issues to overcome, including: quantification; interaction;weighting; and how to maximise the end result when there may be several acceptable solutions.A logical approach is needed to determine what outcome would be in the public interest, or in thecase of multiple positive outcomes, most in the public interest. A decision based on a rationalbasis of calculation will assist transparency but is easier said than done. Use of informed intuitionand impact analysis may be relevant, although this will at least partially depend on the natureof the advocate.198Deskins, ‘On the Nature of the Public Interest’.199Brandenburger and Nalebuff, ‘The Right Game: Use Game Theory to Shape Strategy’.200Thagard, How to Make Decisions: Coherence, Emotion and Practical Inference.Aggregation and decision59