In the room where it happened

How Bryce Wilkinson steered the hiring of the Ministry for Regulation's chief economist

Bryce Wilkinson’s involvement at key phases of the recruitment and final interview process guaranteed the Ministry for Regulation would hire a candidate who was ideologically aligned with his views.

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On 15 January 2025, the newly-established Ministry for Regulation announced on its website that it had completed the application process and had appointed a chief economist. The successful candidate was Kevin Counsell, a Wellington economist who had previously served as the director of NERA Economic consulting, a firm that has according to their statement “Since 1961… provided unparalleled guidance on the most important market, legal, and regulatory questions of the day.” He also served as the President of the Law and Economics Association of New Zealand (LEANZ). They state their purpose as “LEANZ is an organisation dedicated to the advancement in New Zealand of the understanding of law and economics” with a goal to “promote the integration of economic principles into legal frameworks.”

Counsell said of his new role

I've undertaken economic analysis of New Zealand's regulatory systems throughout my career, so it was fantastic to see the Ministry for Regulation set up with a goal of improving the quality and functioning of those systems. I'm passionate about providing rigorous conceptual and empirical economic analysis and am excited to help bring this through in the Ministry's work.

In her article in the The Post which summarized the contents of an Official Information Act request now in the public arena, Andrea Vance indicated that the interview process for the chief economist was heavily influenced by Bryce Wilkinson, a longtime associate of the NZ Initiative. Her article summarized his involvement in the recruitment process, including how Wilkinson rewrote the job description in the recruitment advertisement, suggested that the search be broadened to an international pool of applicants, suggested posting on specific websites, blogs, and made sure the advertisement was posted “on Marginal Revolution, a prominent libertarian economics blog”, wrote interview questions, looked over applicant CVs, and participated in the interviews of the final candidates.

Given Wilkinson played such a prominent role in the recruitment and interview process, the question remains as to the specific nature of his influence. It is perhaps not a surprise that, given his prominent role in drafting and lobbying for a Regulatory Standards Bill and advocating for deregulation over the years, he would have been tapped by Seymour’s new ministry to assist in this process. An analysis of the OIA documents indicates, however, that his involvement was not merely to ensure quality of candidates and appropriate knowledge and experience. Indeed, he steered the recruitment and interview process in such a way that it would guarantee the final hire would be someone who shared his ideological distaste for government regulation.

Recruiting fellow travelers

A chief economist who subscribed to these views would be an invaluable asset in helping Wilkinson craft and steer the Ministry for Regulation in the direction he had been advocating for the past several decades through the NZ Initiative. His involvement in the recruitment and interview process appears geared to explicitly eliminate anyone who would be opposed to his economic and regulatory views, instead putting in place a chief economist who would view regulation and the regulatory state with the antipathy he does and be sympathetic to a deregulatory agenda.

From the very beginning of his involvement in the recruitment process, this seems to be the goal. He suggests revising the recruitment ad at length to focus on “the legal aspect—the law and economics aspect” stating that “Regulation is about the law. The economics of regulation is about a deep understanding of the drivers of the supply and demand for regulation.”

His detailed suggestions for revision of the job ad, comprising some five pages, state in part

The appointee needs to know how the common law fits into the regulatory picture… The appointee needs to have a feel for the relative comparative advantage of common law processes versus statute law and associated subordinate government regulations. The appointee needs to have a grasp of what a sound and principled regulatory system would look like. That should mean familiarity with the international constitutional literature as it relates to government laws and regulations…

In New Zealand my sense of it is that law faculties embody more of a combination of hostility and indifference to law and economics. They may see it as an ideological hardline “university of Chicago” thing. Many do not engage with it.

Here Wilkinson indicates that his approach to regulation, comprising an economic analysis of law and legal process that views regulation as being driven by supply and demand from public and private interests, is viewed with hostility or indifference by many in New Zealand, being considered too ideological or a “university of Chicago” thing, a reference to the prominent school of economics that gave birth to much of the rightwing economic theory of the neoliberal era. In other words, right from the beginning Wilkinson acknowledges that his positions on regulation and law and economics are not mainstream and are viewed as suspect by the majority of scholars in New Zealand, and so suggests broadening the search to recruit economists in line with his views.

The job ad went live around 19 September and on that day the Chief Executive of the Ministry for Regulation, Gráinne Moss, sent Wilkinson an email thanking him for his help with the ad and asking him to share it with his networks. He wrote to Moss on 25 September and gave her instructions on how to list the job opening in “the world’s biggest economic association”, the US Association of Economists.

Steering the final interview

Wilkinson was overseas for the month of October. On 4 November, he received an email from Moss detailing the current stage of the hiring process (61 applicants whittled down to a longlisting of 12 and then a shortlisting of 4) and asking Wilkinson to be on the panel that interviewed the four finalist applicants. This panel was to consist of three individuals, Moss, Wilkinson, and Andrew Royle, the MfR’s Deputy Chief Executive of Policy. Moss notes “I am sure you will have some questions that you will want to be part of the interview so it would be good to know those.”

Email from Moss to Wilkinson, 11 November 2024

Wilkinson sent his first draft of questions to Ruth Greening, the recruitment specialist for MfR on 14 November. The questions read as follows

• From your understanding of the literature on the economic theory of regulation, what do you consider to be its key insights for New Zealand concerning the supply and demand for government regulation?

• The concept of “market failure” is a very common motivation for government regulation, but what was Harold Demsetz’s “nirvana fallacy” critique of the market failure concept, and how do you think about that critique?

• What do you understand to be the differences between the fields of “law and economics” and the “economics of the law” and which field do you think is the more important for regulatory analysis?

• New Zealand’s Resource Management Act 1991 is widely regarded as having failed from both environmental and development perspectives. What lessons for the design of regulation do you think should be drawn from this failure?

• Putting this all together, what do you see as major causes of the unsatisfactory state of regulation in New Zealand that has motivated the creation of this new Ministry and where do you see its focus should be in reviewing the stock of regulations in order to generate the maximum benefits for New Zealanders?

Moss emailed Wilkinson back the next day “Thanks for these questions they look great. I think we should leave the RMA question out… [redacted]. Andrew and I will ask a question or two on ability to deliver and lead people.” Based on these exchanges, it appears that the majority of the interview questions would be dictated by Wilkinson and he was to be the only economist on the interview panel.

Wilkinson was not satisfied with his initial set of questions. Later that day, he sent an email to Moss: “Reflecting further on those questions, here is a suggested replacement set:”

• In New Zealand, "market failure, is a widely-accepted motivation for government regulation. But what was Harold Demsetz's "nirvana fallacy" criticism of the "market failure" justification and how do you think about his critique?

Possible follow-up question. What do you understand is meant by the Comparative Institutional Approach to regulatory analysis?

• What is your perception of the extent of dubious quality government regulation in New Zealand and/or Australia, and what insights from the economic theory of regulation or from the law and economics literature do you draw about its causes?

• Given what you have said about the deep causes of the problem that has motivated the creation of the new Ministry and the inevitable resistance to change and to better quality regulatory analysis, do you see the Chief Economist as having a pivotal role in setting a much higher standard for analysing regulatory quality in the public service and if so, what qualities do you see it as necessary for that person to have given that many agencies and their ministers can be expected to resist greater scrutiny and rigour?

Follow-up question: Do you have the personal resilience and fortitude to stick by a high standard rather than to see it compromised? How would you sustain constructive working relations with resisting government agencies?

• What criteria would you use to identify the laws and regulations that the Minister or[sic] Regulation should focus on if his concern is to make a real difference to New Zealanders' well-being overall - through higher material living standards from productivity growth and better housing, a healthier environment, greater security in their person and property and better quality public infrastructure and services.

An ideological test

These questions may seem to quiz standard economic knowledge, especially to those unfamiliar with economics. Furthermore, the difference between these two sets of questions might not seem major. The second set seems to be a bit tidier and focused with some more emphasis on the role of the chief economist and not just on quizzing understanding of various economic ideas and theories.

But when we consider the default position on regulation held by Wilkinson—that government regulation constitutes an infringement on property and must therefore be extensively justified and subject to compensation—we can see how these questions are carefully worded and positioned to test the ideological alignment of the candidates with Wilkinson’s position.

The first question and its follow-up have to do with the "nirvana fallacy". This is an argument based on a 1969 paper by economist Harold Demsetz, then of the University of Chicago. Demsetz argues that when policy economists prescribe a government regulation to correct for a harmful effect of some “market failure” they are committing the “nirvana fallacy” which is to compare some ideal outcome with the current “real” outcome and to find the real outcome wanting. The comparison, he insists, must be between two real options, not one real and one idealised option. This is the comparative institutional approach.

This logic makes sense intuitively and from a public policy perspective. After all, who would disagree that policy should take into account the impacts of two or more real scenarios rather than compare one real with one imagined? But when we consider the neoclassical foundation that Demsetz and other free-market economists are positioning this argument on, it becomes clear that this is just another way to argue for the primacy of the free market and to demonize government regulation.

Indeed, the nirvana fallacy has been used overwhelmingly to argue against any type of regulation on the basis that even though the market isn’t perfect, it functions better without government regulation. This is because neoclassical economic theory suggests that individual economic actors, behaving of their own accord and in line with their own self interest according to the laws of supply and demand, will be able to allocate resources and information more efficiently without the distortions to the market introduced by government regulation. If left to its own devices, the market will reach equilibrium between supply and demand, delivering beneficial outcomes for everyone. This assumption of the supremacy of the market leads to a political scenario where all government regulation must be explicitly and gratuitously justified, while market failures and the harms they produce are viewed as the next best thing to a perfect system.

Thus, this first question very handily signals to Wilkinson and the panel which side of Demsetz’s argument the candidate sits on, with the follow-up meant to even further steer the answers and discussion into Demsetz’s territory of hostility towards government regulation, or at the very least force the candidate to address this issue of idealised vs real regulatory solutions on neoclassical grounds.

Question two asks point blank whether the candidate thinks the regulatory environment in Australia and New Zealand is problematic, and forces them to consider their answer within the economics of regulation or law and economics frameworks. These two frameworks are deeply ideological. They consider regulation and legal decisions and frameworks solely through the lens of economics. Regulation and laws are not viewed as being beneficial to society or protecting from harms. They instead provide incentives to which rational actors respond. The goal of any legal system is therefore to maximize efficiency. Concepts like justice, equity, or social benefit do not enter the equation.

Likewise, regulation is viewed as an issue of supply and demand between the government and various special interests. Like everything else in neoclassical economic theory, regulation is a commodity traded on the market. The type and extent of regulation depends on who is able to exert political influence over the policy makers, who do not govern in the public interest, but seek instead to maximize their own political power.

With this framing, it’s easy to see how people like Wilkinson believe that inefficient regulation is a purposeful move by government to benefit some private actors (such as NGOs or environmental groups) at the expense of industry and productivity. By forcing the interview discussion onto this territory, he is forcing the candidates to take an ideological position on whether the market or government is most likely to provide efficient solutions and whether the self-evident regulatory problems in New Zealand are due to regulatory capture by environmental and other groups who advocate for social and public welfare. Putting this ideological position together with the foundational priority of private property rights, it’s easy to see how any government regulation would be viewed with suspicion.

Having established a firm understanding of the ideological and theoretical position of the candidates with the first two questions, the last two questions ask whether the candidate has the fortitude to stand for extremely unpopular approaches to regulatory economics in the face of challenges and opposition, and what areas would they recommend to the Minister for Regulation for consideration for deregulation? Basically, are they willing to uphold ideology over against expert opinion and real-world data and where should the deregulatory agenda focus first?

A foregone conclusion

Photo by Sivani Bandaru on Unsplash

It should be clear that Wilkinson’s involvement in the recruitment and interview process would have steered the entire hiring process towards a foregone conclusion: the hiring of a candidate who was largely, if not entirely aligned with his ideological hostility towards government regulation and who would advocate for a program of widescale deregulation of private industry. While some may argue that Wilkinson didn’t take part in the initial longlisting or shortlisting, his revision and crafting of the recruitment ad and his ensuring it was posted in the forums he preferred would have set in motion a process which, when combined with his control over the interview questions, would have led to this foregone conclusion.

Indeed, the ultimate hire, Kevin Counsell, appears to share many economic and ideological positions with Wilkinson. A brief scan through the articles on his Linkedin page shows a number of articles opposing the Resource Management Act, a frequent target of Wilkinson and the NZ Initiative. In addition, a 2009 paper on which he is co-author entitled Protection of Private Property Rights and Just Compensation: An Economic Analysis of the Most Fundamental Human Right Not Provided in New Zealand, written for the New Zealand Institute for the Study of Competition and Regulation, which at the time consisted of energy companies and Fonterra as members, argues for stronger protection of private property rights, including a lengthy discussion of takings and compensation. Counsell’s work was mentioned by Wilkinson in a 2014 opinion piece and he has been featured on a webinar and podcast discussion around resource and land management on NZ Initiative’s website.

The OIA information does not contain all of the detail about the recruitment and interview process, and there were obviously many factors involved in the ultimate selection. Nevertheless, it is striking and worrisome that Wilkinson was given privileged access and consulted on the most key aspects of this hiring process. Given the many other economic experts in the country, the fact that Wilkinson was given the opportunity to fundamentally shape the hiring process at these crucial stages appears to indicate a strong ideological preference within the Ministry for Regulation for the kinds of economic approaches and expertise that would mesh well with his brand of free-market economics.

Indeed, emails from Wilkinson to Counsell, Royle, and Stuart Wilson, then advisor to David Seymour, in the months after the appointment indicate Wilkinson was still actively engaged in providing his opinions and sending material he considered relevant to the proper functioning of the Ministry to key individuals, including a 2000 article from the rightwing CATO institute which he suggested would provide Counsell and Wilson “Some useful explanations… of why the concept of market failure is so problematic for anyone taking public policy seriously”. This hire therefore positioned Wilkinson with substantial opportunity and influence to encourage the Ministry for Regulation to continue the work of deregulation of private industry long advocated by him and the NZ Initiative under the guise of evidence-based, effective, and efficient regulatory policy.