James Paterson at the National Reform Summit

I don’t know. These young libertarians confronting lefties with facts. No wonder the AFR suggested that young James was a rude invitee.

Posted in Taxation | 45 Comments

Nathan Rosenberg 1927 – 2015

Nathan Rosenberg passed away during the week. Most readers wouldn’t recognise the name but he was a huge figure in innovation economics.

Joshua Gans:

If Rosenberg was known for one thing, it was to bring economics, real economics, into the study of the history of technological change. To be sure, Marx was not unaware of how capitalism promoted technology and Schumpeter certainty saw competition and technological change being intimately linked. But it was Rosenberg who identified where, in the thinking of so many, circa 1970, they had failed to appreciate the endogeneity of technological change. And not just the innovations that lead to new apps but instead right to the heart of science itself.

Rosenberg pointed out the fallacy that so many social scientists engaged in when taking technological change as some sort of black box or a divine process not unlike manna falling from heaven. In the 1960s, when Rosenberg was starting his career, there was no greater demonstration of this than they way economists were thinking about economic growth. To be sure, they knew growth was a function of how technology combined natural inputs (like labor and land) with invested inputs (like capital and later human capital), but they kept the relationship as a black box. Unlike so many historians, Rosenberg observed the behaviour of his economics colleagues and called them out. How could it be that, in a world where it took effort and resources to generated new innovations in the great labs of firms and universities, that growth itself could not impact on that process? What was, say, a machine tool or telecommunications network if not the embodiment of that fact. It was as endogenous a process as one could imagine. The issue was how to deal with it.

Peter Boettke:

When I was in graduate school, Rosenberg and Birdzell published their popular study, How the West Grew Rich (1986). The book had a profound impact on me both for its presentation of alternative hypotheses, and its interpretation of the historical facts. It is through this work that my interests shifted from primarily the battle between socialism and liberalism, to the broader questions of economic history and development. This work wasn’t representative of Rosenberg’s technical contributions to economic change, but it was a masterpiece of putting all the pieces together into a bigger picture. The upshot, to paraphrase McCloskey — Smith 1, Marx 0.

Posted in Economics and economy | Leave a comment

Tom Woods talking to me about Say’s Law

This is a podcast of me talking to Tom Woods about Say’s Law. A radio voice I do not have but you can get the point. I think of Say’s Law as the single most important economic issue of our time, because if we don’t finally work it out that Keynes got it completely wrong, we are going to create for ourselves a permanently lower standard of living and a widening underclass of the unemployed and under-employed. You cannot make an economy grow from the demand side. It is so rare to find someone who understands the point, making this an almost unique and quite exceptional place from which you can discover what the issues are and why they matter. Most of it is found in great detail in my Say’s Law and the Keynesian Revolution but there are some things I have discovered since, many of which are found in the Liberty Fund discussion on the Economics of John Stuart Mill for which I wrote the lead article. But the podcast gives a summary of everything that matters, which can only happen when the person asking the questions understands the issues himself.

My endless thanks to Tom Woods for doing this podcast and for recognising the importance of Say’s Law.

Posted in Classical Economics, Economics and economy | 4 Comments

The hapless, feckless Victorian Libs

download (1)It’s all very well that I rave on about the emergence of Victoriastan under the Andrews Government, but we should not forget how pathetic and ineffective the Victorian Libs are (and were).

I was reminded of this just this weekend when there was an announcement of the evidence-free introduction of compulsory smoke-free dining – I guess private homes are exempt at this stage – by the Labor government’s health minister , Jill Hennessy (she was the only who handed over the bags of gold to the ambos).

Thinking that the Libs might stand up for another unjustified and costly intrusion on the rights of smokers (smoking is still a legal activity) and to highlight the run-away nanny state, I was hoping for a strong response from the shadow health minister, Mary Wooldridge (picture above).

But, alas, all she could say is it was our idea and why can’t the government doing it faster. Sigh.  Very big sigh.

The Napthine government also announced a policy ahead of the state election – but lost office to Labor in November – while the City of Melbourne has imposed some restrictions throughout the CBD.

Sunday’s announcement will be the first time the Andrews government has fully committed to outdoor smoking bans by putting a timeline on the policy and revealing the penalties that will apply: on-the-spot fines of $152, with a maximum penalty of $758.

However, Opposition health spokeswoman Mary Wooldridge questioned why Labor was taking so long to act.

“Daniel Andrews has been drifting on this issue for over nine months and still fails to release the full details,” she said.

The Libs or the Coalition in Victoria is truly pathetic:

  • They got voted into office and then behaved as if they were frozen in aspic;
  • No one has any idea what they stand for;
  • They did nothing about appointments, rolling over Labor appointees and appointing some of their enemies to important positions;
  • They capitulated on fracking, surrundering to a few red necked Nats in Gippsland notwithstanding commissioning a sound report from Peter Reith;
  • They finally came up with THE NEXT BIG THING  - the East West Link without ever explaining the benefits and then came up with a loony idea of building an uneconomic rail line to the airport;
  • They followed the idea of leasing the Port of Melbourne from Labor and looked stupid;
  • They appointed a state director who ran off with all the loot because there were no governance or accountability checks in place (good luck with raising more donations);
  • They allow failed, old men way too much power in the party.
Posted in Uncategorized | 95 Comments

Welcome to Victoriastan

downloadToday we have the joy of the tram drivers walking off the job for 4 hours; of course, the disruption lasts more than 4 hours, but what the heck.  The union wants a pay rise of 18 per cent over three years, plus various other benefits (like payment for home electricity bills to recharge mobile phones!).  The fact that overall wages are now growing at around 2 per cent per annum is neither here nor there for our hard-worked tram drivers.

It looks as though next week, the train drivers will heading towards the grass.

Not surprisingly, the CFMEU-led government has been moving heaven and earth to avert these strikes lest the good citizens discover the truth that the state is being run by a pack of thuggish unionists.

But you have to give it to Dan the Man Andrews and his comrades, they really know how to get on with the job, to punish their enemies and install their mates in well-paid positions.

Seconds after they had been sworn in:

  • The government construction code was abolished;
  • The move on laws (unionists and their mates blockading businesses)were rescinded;
  • Right-of-entry for union officials was made easier;
  • The East-West Link contract was cancelled and Victorian taxpayers have paid in excess of $600 million for nothing (real figure will forever be fudged);
  • All the members of the water boards were sacked
  • The board of Ambulance Victoria was shown the door and an egregiously generous settlement was made with the ambos who had (illegally) defaced public property and refused to deal with the Coalition government, knowing all along that they would be generously rewarded for their political support;
  • The Victorian Efficiency and Competition Commission was abolished and all the workers were sacked, notwithstanding the entreaties of former Labor premiers, Bracks and Brumby (they are both out in the cold; sensible advice is not welcomed by the Andrews government);
  • The board of VLine was sacked.

I am sure there is much, much more but it is really too depressing to follow.  And needless to say,  Pravda on the Yarra either does not report these stories or reports them in glowing terms.

The Andrews government’s actions make Madam Russia look like a shrinking violet by comparison.  (Note decision to call new hospital after Madam Russia.)

And then we had this unsurprising admission from possibly one of the better ministers, the Treasurer, Tim Pallas, telling us that all that stuff he said about not increasing debt and being a fiscally conservative government (gosh, I think we have heard that before), forget it.

Evidently, Victoria needs to build more stuff which has not been subject to a cost-benefit test, but rather the hoovering-up-votes-in-a-particular-part-of-the-state test.  Evidently, low debt is so last season and because interest rates are low (temporarily) we should be building more overpriced boondoggles with CFMEU workers.

And we need to borrow more to pay for the never ending provision of services provided by unionised workers.

The fact that the principal has to be paid back by future taxation or user charges doesn’t seem to occur to these gormless politicians – or does it?

Here is the piece from P-o-Y:

Victoria is considering ramping up borrowing to pay for future infrastructure, with Treasurer Tim Pallas promising to throw out the “populist” political rule book decrying debt.

In a speech to Sydney’s McKell Institute signalling departure from past practice, Mr Pallas also said the previous government’s efforts to limit spending growth to 2.5 per cent a year led to an “unsustainable” erosion of services when compared with population growth and inflation.

Instead, Victoria will adopt a more expansionary target of 3 per cent spending growth - which is still below expected revenue growth.

Although Mr Pallas promised to maintain a buffer of budget surpluses and protect Victoria’s AAA credit rating, he said at a time of record-low interest rates it would be irresponsible not to consider increasing borrowing to boost the economy.

“I am throwing out the political play book – the populist decrying of debt – and advocating for an honest conversation about how we build that infrastructure, how we make smart choices, and how we deliver it responsibly,” he said.

The May budget predicted net debt would fall sharply from about 5.8 per cent of the economy this year to just 4.4 per cent in mid-2016 as the government booked the cash from selling the Port of Melbourne.

The government has promised to plough the proceeds from the port sale – expected to be about $6 billion – into its plan to remove 50 level crossings over two terms.

But beyond that there are lingering questions about how it will pay for other road and rail proposals, including the $11 billion Melbourne Metro rail project, which Labor has promised to start building before 2018.

“We also need to begin a serious and sensible conversation about the role of public debt in meeting our infrastructure needs,” Mr Pallas said. “If we can’t have this conversation now – with continued population pressures, with state debt trending down, with the rate of recurrent spending growth below that of revenue growth, and with the cost of borrowing at an all-time low - we never will.”

His comments follow calls by Reserve Bank governor Glenn Stevens for a carefully considered pipeline of infrastructure projects to keep the economy healthy during slow patches. Economist Saul Eslake also recently told a Senate committee the government could afford to borrow about $50 billion for infrastructure without jeopardising the AAA credit rating.

The business community has also supported the notion of using state and federal debt for productive, rigorously tested projects.

Mr Pallas said the previous Coalition state government had refused to entertain the idea of debt to fund significant infrastructure. This thinking had necessitated cuts to spending on services.

“They significantly cut spending on essential services – health, education, police, child protection – to fund these services,” Mr Pallas said.

He said the previous government’s attempts to limit spending increases to 2.5 per cent a year did not represent responsible economic management. Instead, Victoria will adopt a new target to keep spending growth at about 3 per cent a year, still less than the forecast revenue growth of 3.4 per cent.

That means future surpluses might be smaller than they otherwise would have been, which could make the already finely balanced task of keeping Victoria’s AAA credit rating even more difficult.

“I will not rely on illusory surpluses to fund infrastructure of state significance, I want all the options on the table for serious consideration and debt is one of those,” Mr Pallas said.

Posted in Uncategorized | 37 Comments

National Reform Summit: Agreeing to disagree a place to start

Today in The Australian:
“Every human benefit and enjoyment,” wrote Edmund Burke, “is founded on compromise.”

Posted in Uncategorized | 20 Comments

Wednesday Forum: August 26, 2015

Posted in Open Forum | 870 Comments

A republic of fools

What is the superlative for moronic. There is more moronic, then there’s completely moronic and there are politicians on the right side of the political spectrum who start pushing for an Australian Republic when no one else is even mentioning it. That really is the final straw. And this is how it is going to have to be.

The problem has been from the start that Tony Abbott is too much of a nice guy for the office he holds. He doesn’t want others to be in fear of him, but to like and respect him. OK, but that’s not the advice Machiavelli gave and it’s not been a really good political technique either before or since. There’s not enough mongrel. Real deep down anger at stupidity, incompetence and treachery. So let us suppose the Libs hold Canning. Nothing will work unless they hold Canning. But then if they do, it is time for a cabinet re-shuffle in which there are two pieces of deadwood in particular who need to be put on the fire.

It may actually be the case that at some time in the past I have said something positive about Hockey’s management of the economy. It’s possible. But let us sum up. Joe has never from the moment he kept Martin Parkinson at Treasury and then onwards got a thing right. Even Wayne Swan could talk about getting the deficit down. Parkinson probably even had the same people write his speeches as the ones that wrote Wayne’s. Kind of a private joke. Same empty lines. Same lack of action. Same vacuous ideas. You had your chance and it’s time to go.

And then of course there is Dr Proctologist, here shown discussing the latest examination of his favourite client. malcolm and scott This is the man who was to lead us into the digital age, missing in action on every front unless he can find some way to sandbag the Prime Minister. His two responsibilities: the ABC and the NBN. That is, the two largest single-issue failures of this government. You wouldn’t trust him.

There must just be something about wanting a republic that makes politicians into idiots. There was an identity thing, perhaps, but Australia is a quite distinct place on the globe. We know who we are and we are quite good at being us. The only reason you might want a republic would be because it would make the country more governable, more responsive to our political wishes. But that is not what it would do. And in fact, watching Obama ruin the United States, you would never want a republican system if you had an ounce of common sense. Cabinet governments work. If you want to make our political system work better, you should be thinking about how to reduce the power of the Senate, like not allowing it to reject money bills more than once. The Senate has power without responsibility, the worst of all forms of political abuse. Who Jackie Lambie represents exactly is an unknown. That’s what you ought to be fixing, but no, these morons go for changing the superficial that will make us worse off, rather than doing something more difficult that would actually do us some good.

Posted in Australian Story, Federal Politics | 84 Comments

Obama has no idea what rent seeking is so Charles Koch has to tell him

Here is something Obama will never understand, which he has in common with quite a lot of others:

It’s not going to help the country to be subsidizing uneconomical forms of energy — whether you call them ‘green,’ ‘renewable’ or whatever. In that case, the cure is worse than the disease. And there is a big debate on whether you have a real disease or something that’s not that serious. I recognize there is a big debate about that. But whatever it is, the cure is to do things in the marketplace, and to let individuals and companies innovate, to come up with alternatives that will deal with whatever the problem may be in an economical way so we don’t squander resources on uneconomic approaches.”

The man speaking was Charles Koch – one of the two infamous Koch Brothers – after he had been personally attacked by the President:

Obama said of those who try to thwart policies intended to boost clean energy: “That’s not the American way. That’s not progress. That’s not innovation. That’s rent seeking, and trying to protect old ways of doing business and standing in the way of the future.”

Obama continued: “I mean, think about this. Ordinarily, these are groups that tout themselves as champions of the free market. If you start talking to them about providing health care for folks who don’t have health insurance, they’re going crazy: ‘This is socialism, this is going to destroy America.’ But in this situation, they’re trying to undermine competition in the marketplace, and choke off consumer choice, and threaten an industry that’s churning out new jobs at a fast pace.”

To which the reply was:

“I don’t know whether he knows what that phrase means, but ‘rent seeking,’ of course, is, in economic terms, getting the government to rig the system in your favor. And that’s exactly what these so-called ‘renewable energy’ proponents are doing.”

Actually he does know that Obama doesn’t know. There are, in fact, a lot of things Obama doesn’t know to go along with all the things he does know that aren’t true.

Posted in American politics, Classical Economics | 12 Comments

15 seconds of fame

My neighbour does Meals on Wheels and she was involved in a program on A Current Affair. She called in desperation a few weeks ago when her husband refused to appear at the door in front of the TV cameras to act the part of an old person.

So with five minutes notice I got to enjoy my 15 seconds of fame which I am told appears on A Current Affair at 7.30 this evening.

It took several takes but the end product will probably pass by in the twinkling of an eye, so be alert if you want to catch a glimpse of your humble blogger.

Depending on the angle you might only see my hand reach out, but I did my best and gave them a pathetically grateful smile and told them it was my favourite (beef with cauliflower cheese).

Posted in Gratuitous Advertising, Rafe | 34 Comments