Catallaxy Files

Someone, actually Leonard Read, wrote an essay called “I, Pencil”  to illustrate the network of impersonal, voluntary exchanges that result in the production of a simple human artefact through the agency of the market system. Peter Klein noted that many students these days have not seen a simple wooden pencil and he was pleased to promote an alternative – “I, Beer”.

As you would expect, to make the thing easier for the dumbest generation ever, the Beer version is much shorter.

Kevin Rudd February 5, 2010

We’ve got to be very careful about industrial relations systems which enables people, incrementally, to be exploited

Matthew Spencer February 5, 2010

It doesn’t cater for kids like me who want to do 1.5 hours after school to get a little bit of money and get a taste for work.

(HT: Heath)

Ronald Coase will turn 100 this year on 29 December. This video clip is a couple of months old. His mind appears to be sharp, it is clear that the infirmity of age has caught up with him.

The Ronald Coase Institute is here.
(HT: Peter Boettke)

According to a report in the Australian, the OECD has expressed serious concerns over the $43 billion national broadband network because of the lack of a comprehensive cost-benefit analysis. For a government that has consistently stressed the importance of boosting Australia’s productivity growth that is damning.

As Treasury Secretary Dr Ken Henry said on 3 September 2009:

To start with, like all government spending, there is a need to ensure that any activity is cost effective. Government spending that does not pass an appropriately defined cost-benefit test necessarily detracts from Australia’s wellbeing. That is, when taxpayer funds are not put to their best use, Australia’s wellbeing is not as high as it otherwise could be. It is important, therefore, that policy-advisers are able to access quality evidence and use robust frameworks to assist governments to judge the relative merits of alternative policies.

It is time for the Government to admit its mistake, and withdraw from the folly that is the NBN.  There are many better uses of taxpayers’  resources than the proposed NBN – including putting the money back in the hands of the taxpayer.

The Coalition carbon pollution scheme was released a couple of days ago and has attracted a lot of media attention. Including the WSJ Asia (now with an annoying pay-wall on its op-ed page for the current day articles).

The political momentum behind cap and trade is melting away a whole lot faster than the Himalayan glaciers — so much so that Australia’s opposition leader has a big, new idea: Ditch the plan altogether and make the costs to taxpayers transparent.

… Mr. Abbott proposed Tuesday instead to set up a fund to pay companies that cut emissions and meet certain criteria, such as preserving jobs.

That’s still a plan for government to pick winners, as Prime Minister Kevin Rudd’s cap-and-trade plan would. But Mr. Abbott’s proposal has the distinct advantage of limiting and defining the cost to the taxpayer. That’s impossible to do under cap and trade, in which emitting companies buy carbon credits at fluctuating prices and then pass that cost onto consumers.

I think the Coalition plan is as much a political policy as it is an economic policy.

As an economic policy it is very much targeting the low-hanging fruit. To the extent that firms can undertake easy action to reduce their current carbon pollution but simply couldn’t be bothered doing so (for whatever reason good or bad) the government have now put a pot of money on the table to provide some incentive. How much low hanging fruit is there? I don’t know. Is there 5 percent worth – perhaps.

The important point is that this is not a scaleable policy. It could work for a small reduction in carbon pollution but I think it would stuggle to compete against alternative policies for a large carbon cap.

That is where the leaked memo to Penny Wong the Department of Climate Change (HT. LP) is a bit disingenious – the memo talks about abatement in 2020, not in the near future. The Coalition policy is very political in that respect; it is a do something now, do something small, do something transparent policy. In some sense it could even be described as being timely, temporary, and targeted. I can’t imagine this policy in this format continuing to 2020.

This a policy that can be easily modified if and when the global community decide on a common carbon scheme. By contrast the CPRS does not have that advantage. To the extent that a global scheme was inconsistent with the Australian scheme and the government chose to harmonise with the international scheme then existing, and newly created, property rights to carbon pollution would have to be extinguished and compensated. The CPRS could be a very expensive policy mistake if Australia got too far ahead of global sentiment.

The incidence of the Coalition policy is quite clearly on taxpayers while the CPRS incidence falls on those high-income households not being (over) compensated for the policy. In other words, much the same people.

All up it looks to me that rather than having financial markets trading obscure derivative instruments that nobody really understands (and we know where that ends up) the Coalition policy creates a government clearing house. I haven’t quite worked out in my own mind whether the administration costs, measurement costs and auditing costs (transaction costs in general) of running the two schemes would be very different. My instinct is that they will be much the same under each scheme.

One of the most abused terms in Australia is ‘the independent umpire’ when referring to various tribunals and commissions and the like. Any criticism of these, usually state government, bodies that have judicial powers but few checks and balances is dismissed as failing to observe or respect the ‘independent umpire’. The High Court has just ruled on a case involving NSW OHS laws.

Another difficulty in setting up specialist courts is that they tend to become overenthusiastic about vindicating the purposes for which they were set up.

High Court judge Dyson Heydon went further

A major difficulty in setting up a particular court, like the industrial court, to deal with specific categories of work, one of which is a criminal jurisdiction in relation to a very important matter like industrial safety, is that the separate court tends to lose touch with the traditions, standards and mores of the wider profession and judiciary.

I think that is exactly right. These quasi-judicial instruments should not be considered to be legitimate courts and should not be accorded the same type of respect that courts and their officers normally attract. To all intents and purposes they are part of the state bureaucracy and should be seen as such. Politicians have made use of these instruments in order to insulate themselves from criticism having responded, in many instances, to rent-seeking.

Now this is not a criticism of the indviduals who work in these institutions – afterall there is a job of work to be done. When bureaucrats behave badly we need to allocate blame to the politicians and institutional arrangements that facilitate that behaviour. As von Mises tells us,

so the government’s clerks are not responsible for the undesirable consequences of unwise laws.

In the meantime, the High Court has affirmed the rule of law – it is simply extraordinary that a body that can impose criminal liability had no appeal mechanism.