The CMD is working with the Centre of Excellence for Biosecurity Risk Analysis (CEBRA) and the Monash Experimental Research Insights Team (MERIT) to pilot the use of designed incentives in Australia’s biosecurity system. This project aims to create incentives within the biosecurity system, to improve the cost-effectiveness of inspection regimes, without adversely affecting the likelihood of contaminated consignments entering the country.
Many governments seek to reduce the burden of regulation by cutting unnecessary and outdated regulations. There is scope to improve the cost-effectiveness of regulation by introducing designed incentive structures into regulatory rules and processes, so that the actions of the regulated entity align more closely with the objectives of the regulator.
This project complements CEBRA’s existing risk-based regime by applying the theory of incentives and regulation (developed by Tirole – Nobel Prize 2014) and inspection game theory. These ideas can be applied to many other areas of regulation across the economy.
A decentralized approach to biosecurity risk management
The CMD has commenced a more fundamental analysis of Australia’s biosecurity system with the Centre of Excellence for Biosecurity Risk Analysis and the Centre for Actuarial Studies at the University of Melbourne. Stage 1 of this policy project is investigating the economic case for a more decentralized biosecurity risk management mechanism implemented through actuarially priced biosecurity insurance premiums. If successful, it is anticipated that the project could advance to a field pilot in which behavioral changes would be measured in response to changes in information and incentive settings.