Guest Post: BorisG – Wisdom of quiet diplomacy

As a deal on the Iran’s nuclear program and sanctions emerged earlier this year, it was obvious that all the countries of the region apart from Iran’s client states are concerned about this deal. Yet while Israel was very vocal about its opposition to the deal, Saudi Arabia and Turkey chose to keep quiet. They probably calculated that their vocal opposition won’t change Obama’s determination, and will show unwarranted alignment with Israel.

Does this mean that Israel’s tactic was wrong and that Netanyahu had put emotion ahead of reason? Not necessarily, for Israel has a very different audience in the West, and particularly in the US, than, say, the Saudis. The issue of Netanyahu’s tactic in this case is complicated and controversial, and is outside the scope of this post.

More recently Netanyahu showed that he is fully capable of exercising restraint and patience when required. When Russia started its intervention in defence of the Assad regime, the West and Turkey loudly protested that Russia is hitting the wrong guys. Arguably Israel too has very good reasons to be very concerned about Russian intervention, for it is bound to strengthen their main local enemy – Hezbollah, which is closely aligned with Assad. Israel has no friends among diverse forces in Syria but has demonstrated on many occasions that indeed Hezbollah and its backers Assad and the Iranians are their number one enemy. Yet Israel chose to keep quiet about the Russian intervention.

The thinking is probably similar to the Saudi thinking on the Iran deal. Israel’s protestations will not change Putin’s mind and can only damage relations with Russia. So it is wiser to keep quiet and maybe even get some reward for this. On the eve of the Russian intervention Netanyahu flew to Moscow to discuss coordination, aimed to avoid any accidental clash between Russian and Israeli aircraft. I would even speculate that maybe they extracted an understanding that the the Russians will not help Assad/Hezbollah in the vicinity of the Israeli territory.

Last week an Israeli official was asked if Israel would hypothetically intercept a Russian jet that crossed into its air space, the official said: “Our policy is that we do not attack or down anything that is Russian. Russia is not an enemy,…”

Posted in Guest Post | 60 Comments

The solipsism and narcissism of the inner city lefty

Welcome to Leichhardt in inner city Sydney.  Represented by Leichhardt Mayor and Labor representative Darcy Byrne.  In the NSW Parliament, represented by former Greens Leichhardt Mayor, Jamie Parker.

According to ATO statistics, in financial year 2013, the average salary of a Leichhardt resident was $76,091 and the average charitable donation was $531.  These numbers compare to $56,530 and $611 for respectively for NSW in general.  2011 census data shows median household weekly income of $2,234, near double the Australian median household income.

Let’s just say Leichhardt is no struggle street.  Full of professionals and public servants.  You know, your standard inner city left electorate.

Yet despite their relative affluence (you would rather be a resident of Leichhardt than many, many, many other areas of Australia), they don’t seem satisfied.

In today’s edition of Green Left Weekly, sometimes know, as the Sydney Morning Herald, the highly important issue of after school child-care for affluent, usually dual income, families is the key issue.

No.  The residents of Leichhardt can’t work things out for themselves.  No.  They can’t collectivise, organise and set up their own community after school service.  If there is a problem that is what government is for.  And if government does not currently provide a solution, lets regulate, legislate and expand the role of government some more.  Oh, and if there aren’t the resources, let’s take them from someone else.

Local Mayor Darcy Byrne, who has previously claimed that after school child care is a Constitutional responsibility of the states (yes, Constitutional) is again blaming the state government and demanding government organise after school care services for his residents.  Does anyone else smell a platform for another local mayor to run for state parliament?  If yes, let’s hope he reads the Constitution before his run.

My favourite, is the claim by Byrne that this is a gender issue – “Cr Byrne said the shortage (of after school child care) had become a gender issue with hundreds of local women are being prevented from returning to work because of the critical shortage of after-school care”.  If a conservative politician had the hide to claim childcare was a woman’s issue, then world war 3.

Are after school care issues for low income families or access to education a concern for Byrne’s constituents?  Perhaps.  But not until they get theirs.

It is reflective of the inherent laziness and selfishness of the inner city greenie – every problem can be solved by someone else, with someone else’s time and money.  The key is that they get their’s and they don’t have do anything more than demand it.  The solution to every ill must regulation, government and where possible, a coloured ribbon.

Here is the article.

Posted in Uncategorized | 26 Comments

Guest Post: J-Man – Is a GST increase with compensation worthwhile?

 Most here have argued that an increase in either the rate or base of the GST is not good tax reform if low income households need to be compensated. The argument seems to be that a budget neutral package with an increase to the GST, compensation to low income earners and offsetting personal income tax cuts would necessarily increase the level of taxes and spending. This, of course, is true and may present a political economy reason for not increasing the GST. However, it does not necessarily mean there is more redistribution.

 To see why this is so, imagine an economy with a low income earner, medium income earner and high income earner. For simplicity we will imagine going from a tax system with no GST to one with, which is broadly the same as an increase to an existing GST. The low income earner pays no income tax, but the other two do. A GST is introduced so that after income taxes are cut, the GST and income tax collected from the medium and high income earners is the same amount as the total tax under the old regime. In a simple analysis, the medium and high income earners are no worse off. The low income earner is now paying GST. However, the GST revenue raised from low income earners is returned to them as compensation. In this situation, no one is worse off,  but tax has increased, as has government spending. Note that there is no redistribution. The after tax-and-transfer position of all three people is the same.

Q: So, if there is no difference, why do it?
A: Savings!

People save out of after tax earnings. A reduction in personal income tax rates increases the amount of money that can be saved. If the increase in savings is greater than the increased spend on consumption (due to the imposition of the GST) then investment is likely to be higher. This is likely to have a material impact on the growth rate of the economy. This analysis does not consider the incentive effects of lower average taxes on income, which would ultimately have a positive impact on economic growth.

An important point to make is that targeting the compensation would be difficult, just as it would be to match reductions in income tax to increases in GST for millions of individuals. The reality is there will be winners and losers. This should not necessarily detract from an analysis of the net benefits (or costs) of a move to increase the GST.

Posted in Guest Post | 20 Comments

How Green Energy Really Works

From the pages of Zero Hedge …..

See the whole article here, but a picture tells a thousand words.


Posted in Uncategorized | 15 Comments

Guest Post: Geoff Derrick – Malcolm goes to Paris

An advance copy of Malcolm Turnbull’s speech to the Paris COP 21 conference.

Check against delivery.


Delegates, I bring you good news from Sydney, Australia .  Without the need for any computer models, but relying on observational data collected from at least the time of our penal settlement in 1788, I report to you the excellent news that we have observed, as follows:-

1. No change in the trends of monthly maximum and minimum temperatures for a period of 227 years, from 1788 to 2014, and this is reluctantly supported by Messrs Karoly and Gergis, two of our leading alarmists .




2. No significant sea level rise in the harbour for the past 120 years, and what little there has been is about the height of a matchbox over a century.


 3. And finally, along the northern beaches of Sydney, there has been no suggestion of any sea level rise there for the past 140 years.


Ladies and Gentlemen—please raise your glasses and toast the real heroes of our time—those who call themselves “Climate Skeptics”. May they flourish for a long time to come, as being proponents of real observation-based science, in stark contrast to the model-driven world of most of you here.   With their optimism and integrity, they provide a welcome contrast to the view of bleak ruination of our planet proposed by so many of you here today.

Posted in Guest Post | 69 Comments

And seven days later it has indeed all become last week’s news

From the distant past: C’mon, seven days from now it will all be last week’s news, “it” of course being the mass migration to and ISIS attacks in the heart of Europe. And so it has turned out, even as back to Paris we go. This time for the climate summit, where everyone can take their brave and transgressive positions on the greatest non-issue in history. The headline today at Drudge:


Good to know they are taking these issues seriously. Therefore, from The Wall Street Journal we have Matt Ridley and Benny Peiser with Your Complete Guide To The Paris Climate Summit. Here’s how it starts which only shows you once again how obsessive some people are about things that don’t matter:

In February President Obama said, a little carelessly, that climate change is a greater threat than terrorism. Next week he will be in Paris, a city terrorized yet again by mass murderers, for a summit with other world leaders on climate change, not terrorism. What precisely makes these world leaders so convinced that climate change is a more urgent and massive threat than the incessant rampages of Islamist violence?

It cannot be what is happening to world temperatures, because they have gone up only very slowly, less than half as fast as the scientific consensus predicted in 1990 when the global-warming scare began in earnest. Even with this year’s El Niño-boosted warmth threatening to break records, the world is barely half a degree Celsius (0.9 degrees Fahrenheit) warmer than it was about 35 years ago. Also, it is increasingly clear that the planet was significantly warmer than today several times during the past 10,000 years.

Whatever the temperatures were, are and will be, the planet is officially warming and we must act now to prevent catastrophe fifty years from now or maybe it’s a hundred. It warms the heart finally to see political leaders taking a longer-term perspective, not chaining themselves to the immediate moment and the election cycle, as they can almost inevitably be expected to do virtually the whole of the time.

Posted in Global warming and climate change policy, Hypocrisy of progressives | 21 Comments

Guest Post: Sanjeev Sabhlok – The elephant in the room in the Australian productivity debate: vast stores of fat in government

I attended an event yesterday which looked at options to increase productivity and innovation in Australia.

The good things first:
1) Both sides of politics in Australia seem to agree that governments should not pick winners.
2) Everyone agreed that that competition needs to be beefed up and a reform zeal of the sort experienced in Australia in the 1980s and 1990s is needed again.

However, the big elephant in the room – the level of fat in the government – was only tangentially alluded to by some of the speakers.

At drinks, one of the attendees with whom I was having a chat suggested that this is not really the big elephant that I’m making of it. He noted that the size of government has remained relatively constant in Australia as a share of GDP. But there are problems with this way of thinking.

The first problem is that government expenditure is equated as output for purposes of GDP calculations. While the rest of the economy’s output is market-tested (hence represents genuine, i.e. optimal, value), government output today is well in excess of the optimal level in practically every area of government activity. When people spend their own money it is used for things that provide the greatest value. When governments spend money it goes into things that bureaucrats like. The preferences of bureaucrats are often inefficient and biased towards their self-interest. I think I’m qualified to make such a comment based on my 33 years of experience in governments.

But there’s another issue. No business can survive if it doesn’t keep on improving its productivity. A good business tends to produce more with increasingly fewer staff. That’s the essence of productivity. But in the government, the number of staff either increases every year or at least remains constant as a proportion of the total jobs in society.

When every other industry is doing more with less, why should the government do the same with more? There needs to be a steady attrition in the total number of government employees by 1 or 2 per cent per year. There should be economies of scale (we need fewer government employees per citizen as the population of the country increases) as well as a productivity dividend from the application of technology. The size of government must reduce over time. The fact that the size of government tends to grow with a growing economy tells us that fat is being accumulated.

Finally, if a business doesn’t keep on cutting its costs and improving its output, it won’t survive in a competitive world. The government does not experience such pressure. A government usually doesn’t go bankrupt even if it reaches the peak of inefficiency compared with the private sector.

In sum, I suggest that the biggest problem Australia faces today in terms of the low productivity it has experienced in recent years is the sheer size of governments.

Cutting the number of government employees by 2 per cent per year for ten years will cut unproductive expenditure and put money back into the pockets of the people – who best know how to spend it in the most productive way. That will also create opportunities for businesses and increase incentives for innovation.

And yes, swathes of government-owned or managed industries probably need to be privatised, as well (I won’t go into details since there might be some conflict with my current policy advisory role, but I’d say that one doesn’t have to look far to find such sectors).

Of course, none of the other reforms suggested at the event (e.g. competition and regulation reforms) are redundant. These do need to be implemented. But these reforms, in isolation, will hardly make a dent into the problem of low productivity. Taking a scalpel to the vast stores of fat in the bowels of various Australian governments, when implemented along with these other reforms, will make a real difference. All governments should come to an agreement on a ten year plan to incrementally reduce the size of government.

Posted in Guest Post | 62 Comments

A textbook answer to Japan’s economic problems

Look, Malcolm might not be the worst economic manager in the world: Japanese Prime Minister Shinzo Abe to unzip $33bn on welfare. The Japanese economy has never recovered from its stimulus program of the 1990s, and despite its twenty years of failure, the addiction to public spending just keeps getting worse.

Japanese Prime Minister Shinzo Abe will increase spending on ­social programs and raise the minimum wage as he tries to jump-start the flagging economy ahead of an election next year.

Mr Abe said on Thursday the government would give cash handouts to the elderly poor, and build childcare and aged-care ­facilities to help people enter and stay in the workforce, as part of a stimulus package expected to cost at least ¥3 trillion ($33 billion).

He hopes to revive an economy that has slipped into recession for the second time in two years, heightening scepticism about whether Abenomics will succeed in generating sustainable growth.

Why should anyone be sceptical? They’re just stimulating demand, just like the textbooks say they need to do.

[My thanks to MH for sending the link.]

Posted in Classical Economics, Economics and economy | 15 Comments

Are their statistics any better than their spelling?

Simon Chapman is all atwitter:

Following the link provides us with this paper (pdf).

Conclusions: A significant decline in smoking prevalence in Australia followed the introduction of plain packaging, after adjusting for the impact of other tobacco control measures. This conclusion is in marked contrast to that off the industry-funded analysis.

Oh dear. “… off the industry-funded analysis”. That’s from the abstract on the front page.

The interesting point about this paper is that it focuses on Kaul and Wolf – but does not at all address the Davidson and De Silva paper. To the best of my knowledge Kaul and Wolf is an unpublished working paper while Davidson and De Silva is both peer-reviewed and published. I wonder why the anti-tobacco lobby is spending so much time on Kaul and Wolf and not so much time on the ABS data?

Posted in Hypocrisy of progressives, Take Nanny down | 29 Comments

The Climate Caper. Crony science leads to crony capitalism.

In New Orleans at the annual conference of the Society for the Development of Austrian Economics I enjoyed some excellent conversations including a session with Richard Ebeling (an admirer of Steve Kates) swapping Bill Hutt stories and an encounter with Bill Butos and Thomas Mcquade who have been working on climate science. This paper contains a mass of information on the number of dollars devoted to climate science and the innumerable channels that contribute to it, a great many of them driven directly out of the office of the President of the United States.

Our overall conclusion is that a confluence of scientific uncertainty, political opportunism, and ideological predisposition in an area of scientific study of phenomena of great practical interest has fomented an artificial boom in that scientific discipline. The boom is driven and sustained by the actions of Big Players—the IPCC and various government entities—in funding the boom and singularly in promoting only one among a number of plausible hypotheses describing the relevant phenomena.

A key feature of the US scene is the Global Change Research Act of 1990 which established institutional structures operating out of the White House to develop and oversee the implementation of the National Global Change Research Plan and created the U.S. Global Change Research Program (USGCRP) to coordinate executive departments’ and agencies’ climate-change research activities. The USGCRP drives the research components of thirteen participating government agencies, each of which independently designates funds in accordance with the program’s objectives.

The departments and agencies whose activities compose the bulk of such funding include independent agencies such as the National Aeronautics and Space Administration (NASA), the National Science Foundation (NSF), the Environmental Protection Agency (EPA),
the U.S. Agency for International Development, and the quasi-official Smithsonian Institute as well as executive departments such as Agriculture, Commerce (National Oceanic and Atmospheric Administration [NOAA], National Institute of Standards
and Technology), Energy (DOE), Interior (DOI, the U.S. Geological Survey and conservation initiatives), State, and Treasury.

As of 2014, the coordination of climate-change-related activities resides largely in the president’s Office of Science and Technology Policy, which houses several separate offices, including Environment and Energy, Polar Sciences, Ocean Sciences, Clean Energy and Materials R&D, Climate Adaptation and Ecosystems, National Climate Assessment, and others. The Office of the President also maintains the National Science and Technology Council, which oversees the Committee on Environment, Natural Resources, and Sustainability and its Subcommittee on Climate Change
Research. The subcommittee is charged with the responsibility of planning and coordinating with the interagency USGCRP. Also, the Office of Energy and Climate Change Policy is housed within the president’s Domestic Policy Council. Although Congress authorizes executive-branch budgets, the priorities these departments and agencies follow are set by the White House.
As expressed in various agency and executive-branch strategic plans, these efforts have been recently organized around four components: (1) climate-change research and education, (2) emissions reduction through “clean” energy technologies and investments, (3) adaptation to climate change, and (4) international climate-change leadership.

The impact of government funding on scientific research is a matter not only of the amounts but also of the concentration of research monies arising from a single source and brought to bear on particular kinds of scientific research. Government is that
single source and has Big Player effects because it has access to a deep pool of taxpayer (and, indeed, borrowed and created) funds as well as regulatory and enforcement powers that necessarily place it on a different footing from other players and institutions.

Crony Capitalism

Section 1705 of the American Recovery and Reinvestment Act of 2009 authorized the DOE to provide taxpayer loan guarantees and direct-investment subsidies for the development of green technologies.56 As the program wound down in 2014, $16 billion had been allocated to twenty-seven firms. As Christine Lakatos (2014) has reported in detail, the majority of the firms had officers or investors with close ties to political insiders at the federal and state levels, campaign bundlers, donors, and DOE agency officials. Of these firms, several have declared bankruptcy, accounting for $3 billion in taxpayer losses,57 and several others that Victor Nava and Julian Morris (2013) list as “troubled recipients” account for another $3.5 billion.58 Of the eighteen firms that were not listed as “troubled,” fourteen, representing $11.3 billion in loan guarantees, had not completed their projects as of the end of 2013, and only four firms with loan guarantees of $352.6 million had completed projects. In summary, of the $16 billion in DOE loan guarantees, about $15.6 billion represent bankrupt, troubled, or incomplete taxpayer investments as of 2013.

Even if we assume that most of the loan guarantees in the “incomplete” category pan out, the taxpayer losses of perhaps $6.5 billion on a $16 billion “investment” are arguably unacceptable. What accounts for this flouting of conservative stewardship?

Posted in Global warming and climate change policy, Rafe, Shut it down. Fire them all. | 31 Comments