Priorities for the Japanese Economy in 2016 (January 2016)

Creating a Virtuous Cycle of Interaction between Academic Research and Policymaking

KONDO Keisuke
Fellow, RIETI

Numerous policy challenges in Japan that need to be discussed remain in 2016, including regional revitalization, the rapid population aging, women's empowerment, the comprehensive reforms of social security and tax, reduced consumption tax rates, and acceptance of immigrants. While the public's expectations for the government to deal with these tasks are mounting, we should not blindly entrust the latter to draw up appropriate policies. Policymakers themselves must also provide a higher level of transparency on their process of formulating policies. The concept of "evidence-based policy" provides a very valuable implication on how to improve policy accountability between policymakers and the public. Here, let me emphasize that academia has significant social responsibility as their research results are widely used as evidence for policy formulation. This article discusses in detail the importance of mutually connecting academic research and policies as a way of creating a better society.

Spreading research based on "academic social responsibility"

I have proposed that the concept of "academic social responsibility" be spread widely among researchers and research institutions (Kondo, 2015). Let me stress that my suggestion is not based solely on the fact that the majority of research activities are publicly funded. I believe it is necessary to remind ourselves that research activities are part of our social activities, and thus, we need to conduct socially-responsible research activities. Thanks to social support, we can continue our research activities. Each researcher should make a voluntary commitment to conduct responsible research activities, which will, in turn, contribute to building social trust in academia and making long-term advancement in academic research. It is important to maintain the perspective of carrying research over from the past into the future.

There are various types of socially-responsible research activities. This article will focus on researchers' involvement in policymaking from the perspective of social science. Japanese researchers tend to avoid activities associated with policymaking for fear of compromising the time spent on research. However, judging from my personal experiences, albeit limited, I can assure that getting involved in any type of policymaking would not necessarily hinder research activities. Writing a paper and having it published in an academic journal is the starting point, and not the end. By becoming actively aware of how research results can be utilized in actual policy making process, disseminating results to society, and engaging in in-depth discussion with policymakers, researchers can gain valuable experiences. These experiences will further deepen their own research questions. In other words, the experiences will enhance the quality of their work.

I believe society as a whole should generate the virtuous cycle of interaction between academic research and policymaking. It is important to create a natural flow of researchers voluntarily initiating action toward society, and gaining insight from this to further advance their own research. Just as corporate social responsibility activities are building a virtuous cycle of interaction in the world of business, each researcher should embrace a new approach and mechanism to facilitate transition into a similar cycle in the world of academia.

From policies to academic research, and from academic research to policies

One of the difficulties in policymaking is achieving two contradicting policy goals at the same time. I believe this is a crucial perspective in connecting academic research with actual policies. Different perspectives apply when working from policymaking to empirical research and vice versa. The latter requires a broader multidisciplinary insight.

The effects of specific policies are actively verified in empirical research to discuss whether a policy has generated the expected effects. The main focus is on identifying the causality of policy effects, which require rigorous verification. If analysis results show robustness confirming a policy's effectiveness, the finding can be used as evidence in applying a similar policy to other regions or countries. However, it must be pointed out that a fresh perspective is required in the process of feeding the results of empirical research into policymaking.

When debate moves from empirical research to actual policymaking, the focus must be on not only whether a policy has the intended effects, but also what influence it may have on other areas. It is impossible for a policy not to have any impact on other behaviors. Even if a policy brings its intended effects, it could cause a new problem in an unintended area via a completely different mechanism. When a policy for achieving a specific goal is hindering the achievement of another policy's goal, careful debates must take place in the process of policymaking.

Let's examine the example of agglomeration economy and economic growth, as illustrated in the Figure. As shown with the red lines, empirical research indicates that an agglomeration economy has the significant effect of increasing productivity. An agglomeration economy played a key role in Japan's rapid economic growth phase, and is used as policy evidence in promoting the concept of a "compact city" amid today's dwindling population. Aside from boosting productivity, agglomeration exerts a range of impacts on society, e.g., the increasing congestion in commuting and the increase in housing/land prices. From the viewpoint of countering the nation's low fertility rate, these factors could discourage fertility directly or even indirectly in that higher wages could increase the opportunity cost of having children. As such, if a growth strategy is in a trade-off with the countermeasures to low fertility rate, there must be policy discussions to achieve both of the goals simultaneously while maintaining the mutual balance of the two policies.

Figure: Productivity Benefits from Agglomeration Economy and Other Possible Transmission Mechanisms
Figure: Productivity Benefits from Agglomeration Economy and Other Possible Transmission Mechanisms
Note: Compiled by the author. The route of agglomeration economy boosting productivity and wages is shown in red.

In the process of linking empirical research with government policies, it is important to foresee possible effects even though they are not clearly visible, and it is necessary to have one's own expertise and broader multidisciplinary perspectives at the same time. In the debate on issues such as the application of reduced consumption tax rates and the acceptance of immigrants, it is necessary to examine whether each policy could fulfill the intended objective and also explore comprehensively what other impacts the policy might deliver.

Human resource development that connects between academic research and policies: Cool heads but warm hearts

Many people desire to build a better society. Yet, such passion alone cannot bring about a better society as a whole. What is needed is the ability to think calmly and logically. Nevertheless, those with a calm and clear mind might not be able to bring overall social improvement unless they have compassion and empathy. Professor Alfred Marshall once spoke of the need for "cool heads but warm hearts" (Marshall, 1885, p. 57), highlighting the importance of having both at the same time.

In pioneering Japan's future, we must build a new mechanism of positive interaction, in which the advancement of academic research creates a better society, which, in turn, supports further academic advancement. To this end, the key challenge is to foster and develop human resources with balanced capability in academic research and policymaking. Academic institutions and frontline policymakers must strive to build an even closer relationship of mutual cooperation going forward.

December 25, 2015
  • Kondo, Keisuke (2015). "Regional Revitalization and Japan's Future" RIETI Column (posted on the RIETI website on December 3, 2015).
  • Marshall, Alfred (1885). The Present Position of Economics: An inaugural lecture given in the Senate House at Cambridge London: Macmillan.

January 12, 2016

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