CEBRA’s economics expertise is key to creating a framework for developing incentive-compatible biosecurity regulation.
The premise of 21C is that while the development of biosecurity interventions relies on deep technical knowledge of the relevant threat, Australia’s risk of exposure to many pests and diseases is in part determined by the actions of individuals and organisations involved in import supply chains—ie. by human behaviour. Since each intervention establishes rules, rights, obligations, and processes that are, essentially, creating incentives for particular behaviours to occur, the human-behaviour aspects of each intervention must be given due attention for interventions to be efficient and effective.
The objective of this project is to draw attention to the importance of systematically considering incentives when designing and implementing biosecurity interventions. The project aims to equip departmental staff with the skills to pinpoint incentive issues in existing/planned interventions and determine strategies for their correction, ultimately supporting more efficient management of pathway risk.
There are two key outputs of the project. The first is a tool for checking and refining incentives in interventions—the Incentive Diagnostic Tool. The tool has been tested on several pathways, including biofouling, where problems associated with incentives were detected. The second is a case study that demonstrates how ‘incentive-compatibility’ can be designed into a biosecurity system based on modern risk management principles. The latter applies the combined skills of actuaries, market design economists and departmental experts in marine biosecurity. The mechanism provides a way forward for efficient and effective management of biofouling risks more generally.
Use of the tool and development of the biofouling case study generated significant new insights into how to fund the biosecurity system sustainably, efficiently and fairly and how to engineer incentive structures needed to encourage risk-creators to truthfully reveal information needed by the biosecurity authority to manage risk. It involves the application of actuarial methods to price biosecurity risk, as well as incorporating incentive and market design theory. This method fundamentally improves the way biosecurity could be managed in the economy.
CEBRA Project Leader: Susie Hester