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December 07, 2011

Are PFM Reforms Always Worth It?

An Interview with Allen Schick

Posted by Carla Sateriale

If PFM were a rock band, Allen Schick, Professor of Public Policy at Maryland State University, would be its lead singer. It is hard to overestimate the influence Allen Schick has had on the field of public financial management, and on the many that have enjoyed his always entertaining lectures. Rather than resting on his laurels he presented this week the keynote address of the ICGFM (International Consortium for Government Financial Management) Winter Conference held at the IMF in Washington, D.C. Carla Sateriale, Research Assistant in the IMF’s Fiscal Affairs Department spoke with Prof. Schick on his favorite topic……    

Ms. Sateriale: Professor, what is PFM really all about?

Prof. Schick: For me, PFM is a way of organizing and thinking about reforms that would otherwise be unrelated. It’s a way of connecting a lot of dots: accounting, auditing, budgeting, financial planning, fiscal risk analysis, and fiscal rules, to name a few.  It’s easy to see each of them in isolation, but PFM ties them together and allows you to see them in a more holistic way. 

Do you think there are quintessential skills a PFM professional needs to have?

Ideally a PFM professional would have two main skill sets. The first skill set is relevant to the accounting, information systems, and auditing aspects—these deal with generating, compiling and interpreting the core data of PFM.  The other skill set deals with the analytical side of PFM. However, individuals typically come to it from one side or the other. There tend to be different perspectives in the PFM community among those who come to it from economics versus those who come to it from accounting and related fields.

Given that PFM is so interdisciplinary, do you think academia gives sufficient attention to it? There are only a small number of academic programs devoted to it.

I wouldn’t say there is no interest in PFM in universities, but it is certainly not well defined in academia. I think academia does not pay much attention to it because the students and faculty interested in it gravitate toward business schools, rather than schools of public policy. Business schools offer courses in financial management, financial accounting, and cost accounting. One doesn’t get to see these courses in public policy schools. So PFM gets overlooked in academia simply through natural selection of interests.

Furthermore, the economics profession as a whole is not interested in PFM. It uses the data from accounting systems and audits, but is not interested in those systems per se. It is interested in policy analysis—which is the stock and trade of public policy schools and economics departments. The processes by which policies are formulated and implemented are of less interest to the economic profession.

Personally, how did you get involved in the PFM field?

It was entirely an accident. During the 1950s, when I was a graduate student at Yale, I was a student of Professor Charles Edward Lindblom. He was fascinated by the problem of how society collectively makes rational decisions. As we know, economics deals with rationality of individual choice, but he wanted to apply the axioms of rational choice to collective decisions. This was a popular issue at the time, as Arrow’s work had just been published. The year I took Lindblom’s course, he focused on budget systems—not because he was interested in budgeting per se, but because he was intrigued by the function of budgeting as the most formal effort to make collective rational decisions. Budgeting was society’s way of solving Arrow’s problem.

So I grabbed onto the subject of budgeting while I was a graduate student, and subsequently got seduced into PFM.  

Hypothetically, if you could have a PFM conversation with any leader or policy maker today, living or dead, who would you talk to and what would you say?

The man I’d want to speak to was not a political leader, but an academic leader. He’s not living anymore, but was a great academic in our field—Aaron Wildavsky. If you hear the concept of incrementalism associated with budgeting, that was him. He was generally skeptical of most reforms, so we used to debate frequently. Since he’s been dead for a while, we can’t disagree anymore. I’d like to pick up some discussions with him again.

If you could contribute one major change to the PFM field, what would you change?

I think that there is a powerful inhibition in the PFM community not to discuss certain things—how reforms truly work, how successful they are, or whether they make a difference. And the reason is that almost every PFM innovation appears rational on its face. You can’t argue against having more information. You can’t argue against taking risks into account. You can’t argue about not being indifferent to future implications of current decisions. You can’t argue against proper allocation and accounting for cost. As a consequence, we rarely have a frank discussion about when reforms do work and when they don’t work.

There is not enough attention in the PFM community to failure. Failure is a better teacher than success! If I could see one change in the PFM community, I’d like to see a more open and forthright conversation regarding success and failure in PFM innovation.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.


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In many DMCs, the Accounting skills (down-stream skills) level is average whereas the analytical skills (up-stream) is much to be desired. Without a strong up-stream skills, the PFM program shall continue to struggle.

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