The Power of Ideas

Last week a great Victorian, Dr John Paterson, passed away.

John was one of those often vilified public servants-cum-economists who helped make Australia's miracle economy, in whose praise by the OECD now sings and of whose benefits well all now enjoy.

John worked in the back blocks of reform, which is at the state level on water, health and infrastructure.  He was not one of the new bred of "policrats" who now dominate the halls of power.  He was a true public servant.  He worked constructively for Labor and Coalition Governments;  gave advice on basis of the public interest rather than on political merits;  and earned his rank by force of intellect and competence rather than mateship or ideological allegiances.

John's seminal contribution was to reform of water policy.  His ideas were simple.  He argued that people treat best what they pay for and therefore they should pay according to the amount of water they use.  He argued that building dams imposes costs -- economic and environmental -- and therefore construction of dams should be postponed where water savings measures were cost-effective.  He argued that people need rights over future use in order to invest in water saving capital or shift to higher valued uses, thus secure water rights are an essential feature of water policy.

These ideas may have been simple but they were a revolution in Newcastle were John first introduced them.  Despite concerted resistance, through force of intellect, dedication and organisation skill, John's simple ideas gain force.  Water consumption per capita in the Hunter Valley Water is now the lowest in the country.  And the principles he pioneered there are now in general use around Australia.

In the early 1980s John returned to Victoria as Director-General of Water Resources.  He again introduced his simple ideas along with cutting over 300 separate water boards in the State to a manageable handful.  Here the culture of dam building was deeply entrenched as was the belief that water should not be priced.  Again, despite the resistance, John's ideas gained hold.  Not only have no dams been necessary in Victoria over the last twenty years, but Victoria has far and away the best water rights system in the country, rights that are the foundation of greater rural prosperity in this state.

In late 1989, John shifted to community services.  Under the Kennett Government he became Secretary of the Department of Health and Community Services.  He oversaw the "case mix" system of funding, a form of market provision that directs funding for individual types of treatment to the most efficient hospitals.  This too was adopted elsewhere and continues to revolutionise health care around the country.  He also shifted hospitals-beds to the suburbs (where patients live) and started exposing the incoherent mess that is health funding.  John also contributed to reform of the ineffective and inefficient ambulance services.  While the information system put in place by a private contractor was not perfect it was far superior to what it replaced and has saved many lives.

John's central contribution was to drive reforms that not only saved money and resources but delivered better service to the public.  This is the essence of a now vibrant economy.

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