Catallaxy Files

Has Kevin Rudd assured himself of a place in history as the worst PM on record?

A. Who are the other contenders? Whitlam, Gorton, McMahon.

You could even consider Sir Robert Menzies on the basis of one outrageous decision, to recruit boys to fight in Vietnam, which gutted the long-term prospects of the party.

B. Let us compile a list of the no  brainers, cynical gestures and abuses of power that he has committed.

1. Writing a speech that attempted to criticise F A Hayek but revealed that he and/or his advisors did not understand Hayek. Read the rest of this entry »

Radio National just just broadcast the first of the 2009 BBC Reith Lectures by Michael Sandell. Sound and transcripts can be obtained via Here.

Sandel has a famous lecture course on Justice at Harvard University. He is a communitarian who has made a career out of finding fault with various kinds of liberalism on the grounds that they are based on ”atomistic indivivdualism” which fails to take account of the social context. I am not aware of any liberal thinker whose case is damaged by his criticism.

The theme of the series is A New Citizenship and the first lecture is on “Markets and morals“.  It is soft and predictable stuff, based on the assumption that the last 30 years saw the dominance of “market fundamentalism” and deregulation. He claims that it is time to rethink the function of markets, not just to re-regulate but to open up a public debate on a “new citizenship”.

He seems to have a problem with for-profit schools, hospitals and security services. He has got a point about using cash incentives to get kids to read books.

But the fundamental point that he overlooks is that markets are things that happen whenever people buy, sell and swap stuff. They are not over-arching, inhuman entities that are somehow or other imposed on us. Markets are us!

As to the morality and the kind of incentives required to get better results, the keys to  the problems with markets in recent times are the monetary policy of the US Fed Reserve Bank, excessive volumes of regulation, inept regulators (and raters) and the perverse incentives generated by Big Government including the expectation of a buyout of stricken banks.

Ross Fitzgerald is bemoaning the rise of Christianity in public life in the Australian, while Chris Berg was bemoaning public spending on sports in the Age yesterday.
The bulk of Fitzgerald’s complaint relates to World Youth day

When Catholic World Youth Day descended on that state in July last year, many taxpayers resented being forced to pay $20 million in security charges for the event and $40m for the use of Randwick racecourse. The reason that atheists, agnostics, Jews, Muslims, Hindus, Anglicans and even a few Catholics were being forced to go along with this was essentially because then premier Morris Iemma and many of his fellow committed Catholics in the NSW ALP Right were born into that religion. They didn’t want a confrontation with Catholic Archbishop of Sydney George Pell over a cheaper location.

But what does Berg say?

NOTHING excites state politicians more than having their government host major sporting events. Over the past decade, the Victorian Government has increased its self-imposed ”cap” on subsidising major events from $35 million a year to more than $80 million. Why bother calling it a ”cap” at all?

This mega event mania is not limited to the states: Australia’s bid for the 2018 or 2022 soccer World Cup is at $45.6 million. The bid now has its own special Commonwealth taskforce.

Roman politicians knew the most effective way to keep their citizens relaxed and quiet: lots of bread, lots of circuses. The Australian wheat industry has been almost completely deregulated over the past few years. So governments have doubled the circus money.

But politicians don’t like to admit they just buy our love. Instead they give lavish economic reasons why we need to subsidise mega events to the hilt: think of the tourism! The ”eyes of the world”! The eleventy-thousand jobs!

So why pick on religion? It is all ‘mega-events’. World Youth day, APEC, the Grand Prix, Olympics, World Cup, you-name-it, it is all an imposition on the taxpayers and residents of Australia.

The rest of Fitzgerald’s article is just nonsense. The PM goes to church, the Chief of Police is a Baptist, and so on. Like we care. On the issue of taxpayer dollars being wasted on mega-events we can all agree but I suspect we’ve come some way since the Federal constitution banned a religious test for holding public office. That you have to be an atheist or infidel to hold public office is just as offensive as having to be a member in good standing of the Church of England.

Peter Garrett has made a claim, reported in the Australian, that looks a bit suspect.

The Treasury modelling found that in 2013, the average price impact of the Carbon Pollution Reduction Scheme on food bills will be around $68 a year — less than 1 per cent of household food bills.

I suspect the ‘Treasury modelling‘ is more quoted than read. Alternativily the full Treasury modelling is not in the public domain. I can’t find a stat in the publicly available modelling that suggests such a small price increase for food. Quite the contrary. In the Treasury reference case we find this assumption (emphasis added)

Agriculture is expected to grow more slowly, at around 1.9 per cent per year to 2050, largely reflecting land constraints. Agriculture’s share of real GDP is projected to decline from around 3.2 per cent in 2005, to 2.5 per cent by 2050. However, increased world demand for agricultural products, and supply-side constraint, such as land availability, is expected to drive strong prices for agricultural commodities, and agriculture’s share of nominal GDP is expected to increase to just over 5 per cent by 2050.

While later we read (emphasis added)

The inclusion of agriculture from 2015 would produce a further increase in the price of many food products. This inclusion also is likely to have a disproportionate effect on lower-income households, as these households spend a higher proportion of their income on food products.

As it turns out the government has now excluded agriculture from the CPRS, so that ‘further’ increase no longer applies. Yet as best I can see the Treasury modelling hasn’t told us what the initial price increase will be.

Re-creating the intellectual cafe culture in Balmain. Thinking and drinking in congenial company. Join the Facebook group to be informed of future events.

Andrew Norton on religion and politics.

Even among religious believers, 80% agree with the proposition that religion and politics should be separate. But religion appeared more popular when the 2007 Australian Survey of Social Attitudes asked about whether politicians should follow Christian values in making decisions. Even among those with no religion, 10% thought politicians should follow Christian values, along with nearly 40% of people with a religion.

Andrew Bolt is on holiday.

Climate links from Michael Warby.

Nicholas Gruen on optimism, pessimism and recessions.

Individuals who grow up during recessions also tend to support more government redistribution, but they have less confidence in public institutions. On the whole, the authors find, orientations formed during difficult economic times can help to determine the economic system, institutional outcomes, and the role of the government across countries, although this study focused on the United States.

Tim Blair on silly email addresses, carbon certificates, why we can’t afford tax cuts.

[youtube=http://www.youtube.com/watch?v=7rx2g2Crjm8&hl=en_US&fs=1&]

The long awaited Henry Review has been delivered to Treasurer Wayne Swan. The government will publish the review sometime in the new year. The opposition, however, are unhappy about that.

The Federal Opposition says the Government will not get bipartisan support to make changes to Australia’s tax system if it delays the public release of the Henry tax review.

It is a bit silly to promise bipartisan support for a review that is yet to be released for public comment. But it seems that is exactly what was promised.

Members of the five-person Henry tax review panel have become concerned for the fate of their review since Mr Abbott replaced Malcolm Turnbull as Opposition Leader.

Mr Turnbull had long flagged his interest in comprehensive tax reform and the committee had expected he would understand that this process would involve tax increases in some areas to pay for cuts elsewhere. However, there is concern that Mr Abbott will attack all tax increases.

The opposition should make very clear that any increases in existing taxes, and any new taxes, will be opposed. The government must be held to their election promise that ‘this sort of reckless spending must stop’. Similarly, the reckless taxation must stop. Malcolm Turnbull’s interest is tax reform is problematic. In his budget reply speech, he proposed an increase in cigarette excise and the Ergas Review has never been released.

I have linked to this before, but it is very hard to go beyond the arguments in Brennan and Buchanan’s The Power to Tax (see especially chapter three).

The danger of allowing government access to revenue-raising instruments that generate budgets in excess of those necessary for financing some roughly efficient levels of public goods and services has been central to our model. We should, however, recognize that constitutional tax constraints might, through time, prove to be overly restrictive. In this case, postconstitutional pressures will surely arise for escape through constitutional-style adjustments designed to widen the bases and to allow for more flexible rate structures, to move generally from specificity to comprehensiveness. Empirically, it will always be difficult to distinguish between genuine constituency demands for a relaxation of such constraints and the ever-present demands of the revenue-seeking politicians-bureaucrats. For the latter group, and for their spokesmen, efforts will tend to be directed toward widening bases, toward increasing the number of sources upon which taxes may be imposed. “Tax-reform” advocacy on the part of the “bureaucratic establishment” will tend to be centered on “tax-base erosion.” Indeed, one indirect test of the empirical validity of our model of the political process lies in the observed lack of reformist concern about relative rates of tax within tax-law limits that currently exist.

In the discussion of proposed tax-base changes, the attitudes of the traditional normative tax theorist and the members of the taxpaying public differ more sharply than anywhere else. Our analysis is helpful in “explaining” the attitudes of the taxpayers. For example, they are likely to react negatively and emphatically to proposals to move toward taxation on the basis of full income, as, for example, by including the imputed rental values of owned residences in the base for personal income tax. The normative tax theorist, who advocates such inclusion from reasoning based on equi-yield comparisons, responds to taxpayers by arguing that overall rates of tax may be lowered simultaneously with the widening of the base. But the taxpayers may be implicitly, but correctly, rejecting the equal yield postulate, in their predictions that any widening of the tax base must open up further taxing possibilities for a revenue-seeking government.

I found a great tax quote yesterday ‘An economy breathes through its tax loopholes’.

Our Prime Minister has returned from Copenhagen, triumphant in having performed his role as Friend of the Chair at COP15 to almost universal acclaim.

Former Australian of the Year Professor Tim Flannery said: ”I think that our Prime Minister has played an outstanding role,”. “..he’s been working very hard for the last few months … and he’s just been fantastic all the way, he just shines at it … he’s been really important through these meetings.”
The Prime Minister himself said ” eleventh hour negotiations over the text by world leaders including himself, Barack Obama, Gordon Brown and Nicholas Sarkozy, had saved the summit from “catastrophic collapse”.”

Admittedly, the Conference achieved nothing much of substance but we know that the Prime Minister will have done his duty with distinction. Without him it would probably have achieved nothing at all.

Soon it will be Christmas and a grateful nation will be pressing him to take time off to rest and recharge. He will most likely spend the time at Kirribilli House in Sydney. The Prime Minister and his family will watch the New Year’s Eve fireworks from the lawn. But, exhausted from labours though he will be, he needs only three hours sleep a night and we can be sure his brain will be busy.

Last year, the product of the Prime Minister’s holiday was an 8,000 word essay in The Monthly. It declared the last 30 years of economic reform in Australia a failure, a fact acknowledged and hailed by many, perhaps most, of the academic economists in the country. They are now at their keyboards writing books describing and specifying the new rules and structures we will need to carry out the Prime Minister’s general prescription.

So what’s next? What wise ideas will he pass on to us in the New Year?

Remember when the Keating government produced a series of policy pronouncements called things like “Working Nation” and “Creative Nation”? My guess is that the Prime Minister might be motivated to add to these with “Good Nation”: a plan to make our country Good, in fact to become the Goodest nation in the world. He will have been inspired by the feeling he got in Copenhagen when a grateful meeting greeted his arrival with a standing ovation: “You are the only one who can rescue this” they cried.

In this context, Good means Moral Goodness with all the Good characteristics and behaviours: generosity, kindness, gratefulness, willingness to pay higher taxes and an unwillingness to complain about government and politicians.

Canada used to wear the laurel as the Good Nation (Toronto used to be known as “Toronto the good” ) providing peacekeepers for any problem anywhere in the world, offering asylum to all those young men not wishing to go to Vietnam and, most of all, for not being the USA. But it has lost any claim to Goodness. Its plans to exploit tar sands are so Bad that it was necessary recently for George Monbiot to break his lifetime pledge to fly no more so he could go to Canada to tell them how Bad they are becoming.

So there is a vacancy and I suspect our Prime Minister is hatching a plan to raise Australia up to occupy it.
He might begin with something resembling the 2020 Summit: to get the best minds to go to Canberra to look wise and play with flip charts. The problem with the 2020 Summit was that its output was a list of things for the Government to do and, as it as clear to all that there was little chance of the Government doing any of them, there was just a slight credibility problem.

The Good Nation conference should produce a list of things for us to do, or more likely, for us to be required to do. Perhaps it will be an occasion to use the Nudge theory becoming fashionable in behavioural economics. As I understand it, the theory allows us complete freedom to make our own choices but makes it extremely uncomfortable to do other than what the government wants us to do. I can see many uses of that in Australia. A voluntary 20% tax surcharge that anyone can avoid by taking out an ad in the newspaper declaring that he or she does not care about the sick, the poor and the underpaid politicians.

There might be something like the Peace Corps, sending Good young Australians overseas to teach foreigners how to be Good. Not unhealthy places like Africa but China and Japan and Singapore. They might now even be welcome in Canada.

An expensive publicity campaign will be necessary, using a snappy strapline like “Be Good, it feels better”. Little TV vignettes showing ordinary Australian families being Good. Bus sides, street banners, website popups, skywriting – the complete media package.

When we think about it, it is rather exciting. Much better than winning gold medals at the Olympics so most of the money now going to sport (something the Prime Minister has never really enjoyed) can go to the newly established Institute of Goodness.

One final thought: it will be useful for us all to have something setting out the Rules of Goodness. Just in case we forget. Not, of course, a fridge magnet – that’s been done. So perhaps a little book that we can carry all the time. With a red cover.

Thanks to a heads up from Jason in the comments, a feed to The Stump for links to tributes to Yegor Gaidar (yes, I know, Yegor who?)

Russia’s transition to capitalism was a painful one – given the state of its economy, it could hardly have been otherwise – and Gaidar got most of the blame. As the Times says, he was “widely considered to be the begetter of unconstrained market forces and anarchic society of inequality and corruption”.

It’s impossible to understand the appeal of Vadimir Putin’s benevolent authoritarianism without appreciating the traumatic effect of the 1990s experience. Both politically and economically, Putin has reaped the rewards of Gaidar’s reforms, and he appropriately paid tribute to him, calling his death a “heavy loss for Russia.” President Dmitry Medvedev also praised Gaidar as “an outstanding economist and statesman.”