I recently had the pleasure of travelling through the United States and Canada (although encountering the army of needlessly invasive US customs and TSA officials was far from pleasurable, and by no means made me feel secure).
Over a period of two weeks, I investigated the policy and institutional underpinnings separating the more economically robust sub‑national jurisdictions, such as Texas and Alberta, from the others, and the kinds of economic and fiscal reforms (if any) enacted by American states and Canadian provinces in recent decades.
I also spoke to think tanks and industry representatives in jurisdictions enjoying significant recent increases in shale oil and gas exploration and production. This included a short period of time in Bismarck, North Dakota.
While the experts I spoke to in North Dakota bullishly insisted that the shale oil boom will continue into the foreseeable future, and drive America’s future energy independence, it was clear that the boom had already generated rent-seeking processes whereby numerous interest groups contested for their share of growing royalty and other revenues flooding the state government’s coffers.
Given North Dakota’s middling ranking in North American economic freedom indexes, reflecting in part some aspects of higher taxation, paternalist regulations and government ownership across various sectors, it was also apparent that broad‑based policy reforms reducing the size and scope of government, that could benefit all sectors, were not being pursued while the political classes were busily drinking from the fountain of shale oil revenues.
Much of what I was hearing during my time in Bismarck, and to a lesser extent other places such as Colorado and British Columbia, reminded me of Australia, exemplified by its politically short‑sighted approaches to tax as much of the mining boom proceeds as practically possible, and then spend it on activities and ventures of questionable economic value.
In today’s edition of The Australian newspaper an opinion piece of mine (accessible online by subscription only) has been published serving as something of a reflection about some key findings from my time in the small, midwestern state with a population of fewer than 700,000 people. The concluding paragraph of my piece states:
As impressive as the resources boom here and abroad may presently appear, tax-and-waste fiscal responses and reform complacency both fail to position economies for broad-based improvements in international competitiveness and economic prosperity in the long run.
Its interesting how when the government spends it they are “ventures of questionable economic value”, but when the private sector spends it they are productive investments that cannot be questioned. Leaving dollars in the pockets of energy tycoons is thus always better than redistributing them to people in need or correcting market failures and/or providing public goods for the benefit of broader populace.
This ideological slant, under which certain economic assumptions have over time taken on an axiomatic quality in Julie’s mind, undermines all of Ms Novak’s writings. Alas, the same false presumptions afflict libertarians generally.
William Bragg
2 Jan 13 at 7:34 pm
“tax-and-waste”…….that is about to become part of non comrade-ic sarcastic cultural shorthand.
Spend is mostly waste when a comrade gets a leg up.
Alfonso
2 Jan 13 at 7:37 pm
You might call it interesting, I call it true. Friedman described it best when displaying the difference between spending your own money on yourself and someone elses money on someone else.
Governments tend to spend money to maximise their chance of re-election. The private sector spends money to maximise the chances of keeping it and earning a return.
I take this to be a sarcastic statement, though it is true.
There is no such thing as ‘leaving dollars in the pockets of energy tycoons’. Either the money is kept in the company that generated it (and therefore continues to contribute to production, and therefore wealth), or it is handed over to someone else for use, directly via investment or indirectly via a bank. That recipient either invests it wisely and makes a return (again, generally indicating increasing wealth) or loses their shirt.
Your idiotic marxist rant seems to presume that it would be better to extract money to stop building oil derricks and instead build more public playground equipment. While that sounds like a grand idea in terms of snipping ribbons to applause, eventually you’ll end up with lots of playgrounds but nobody to pay for them. And a society with large amounts of playgrounds but no production is a very poor society indeed.
Alas, the same assumptions underpins every muddle-brained marxist who throws around non-phrases like ‘market failure’ – the assumption that private wealth in no way contributes to public wealth unless it is forcibly extracted and handed out.
brc
2 Jan 13 at 8:14 pm
Market failure – now what do they really mean by this?
A market is one in which its participants willingly exchange goods and services at agreed exchange rates.
When this system fails, then that can only mean that the participants are unable to exchange, since if there isn’t any exchange, there is no market. This only happens when government intrudes and hampers market activity.
Hence market failure is actually caused by government intervention in the market in the first place.
Hence market failure is always government caused.
Louis Hissink
2 Jan 13 at 9:02 pm
Although the current political climate is often described in terms of servicing (as in “the act of a male animal copulating with a female animal”) an ideological position the reality is that even the most ardent nanny-state-shagging politician is more interested in their position than some peurile dream of the perfect society. Unfortunately they often burden posterity with the ongoing side effects of a ephemereal political exigency.
Politicians will clamour for profoundly economically sensible policies if it will secure a few votes in the next election.
It is just that it has never been actually put to them.
Toiling Mass
2 Jan 13 at 9:14 pm
Did you mean most ardent shagging nanny-state politician or ardent nanny-state-shagging politician?
Either way Bill Shorten qualifies…
Token
2 Jan 13 at 9:27 pm
So, brc thinks that public goods = playground equipment, and louis hissink thinks that market failure = government intervention. You libertarians should stop embarressing yourselves and go and learn some economics.
William Bragg
2 Jan 13 at 9:28 pm
TSA – there’s $8 billion/yr of budget savings. Its mostly very expensive security theatre.
Chris
2 Jan 13 at 9:37 pm
We know our mainstream economics very well. We also know what mainstream economics fails to explain. We are not ignorant. We just don’t agree with what mainstream economist would have us believe.
johno
2 Jan 13 at 10:16 pm
And William Bragg is unfamiliar with being ridiculed.
Perhaps WB might point where market failure is not caused by government intervention?
brc
2 Jan 13 at 10:19 pm
Ultimately yes. If a big business fails it is usually either a) the Government is intervening too much in their business, making it hard for them to make a profit or b) the product is crap which is decided by the consumers. The reason why the private sector is not questioned so much is because, when they spend, it is usually due them developing major profits from past ventures that were successful due to consumers purchasing the products.
Andrew
2 Jan 13 at 10:32 pm
It is astounding that this has to be explained over and over again to the ideologues blinded by ignorance and stupidity.
Gab
2 Jan 13 at 10:35 pm
It’s only Wednesday and Braggs has already earnt the Leftwing Asshat Award.
Lets see why.
Braggs accuses another person in not understanding economics without realizing he himself is an economic illiterate.
Braggs, you fucking moron, if the corner store closes down, I don’t lose any money. The owner does. The government tries to pick winners and loses out like it did handing over Tim Flannery’s hot rock firm $90 million, which promptly lost it… then we the taxpayers lose out you goose.
The government is not in the business of picking winners as markets do that.
Of course it is fuckface, as those tycoons invariably re-invest the money, which creates a round robin of benefits like jobs etc.
Christ, you’re an imbecile Braggs… Another BA majoring in Art history I presume pretending he understands even the most basics of economics.
Braggs, you’ve won the lefty asshat of the week on Wednesday which has to be a record at the Cat.
JC
2 Jan 13 at 10:42 pm
And if they lose, then no skin off our back. It’s the owners problem not us taxpayers.
The site owner needs to do some serious banning here. We have asshat of the week winner- Braggs and that other loser, Greys, peddling JFK conspiracies.
Please bring back the steves twins.
JC
2 Jan 13 at 10:46 pm
How come these greenies never say that about the rich and famous Hollywood moguls and filum stars? How come they never say stuff like that about multi-millionaires like Graeme Wood or Malcolm Turnbull?
Gab
2 Jan 13 at 10:56 pm
Strawman argument.
And what is economics? When I studied it as a post grad student in mineral economics, I had some difficulty working out, as a physical scientist, where the science behind economics was. My epiphany occurred when I discovered a copy of Mises’ “Theory of Money and Credit”, 1912, in the Macquarie Uni. Library.
Louis Hissink
2 Jan 13 at 11:53 pm
Well, while I may not have Louis’s formal economic qualifications, I can easily point him, brc and JC to Wiki, which explains that “market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient. … Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point-of-view. … Market failures are often associated with information asymmetries, non-competitive markets, principal–agent problems, externalities, or public goods.”
So, brc, market failure has NOTHING to do with government intervention – it is a feature of the nature of certain markets.
And note, JC, that individual self-interest is not sufficient for markets not to exhibit market failure in economic terms as firms may well spend their own money in the pursuit of profits, but whether that is good for society overall depends on whether, for instance, the things they sell have externals or supplied monopolistically etc etc.
Here endeth the lesson – though, given the intelligence and knowledge of most of the libertarians here, no doubt more tuition in basic economics will be required.
William Bragg
3 Jan 13 at 1:01 am
Bragg you fucking idiot, I/we all know what the definition of da market failure is. You don’t need redundantly send us to wiki.
You dishonest turd, bragg. The comment I responded to (yours) wasn’t about da market failure, so nice little twist and turn. Lying imbecile. It was the other stupidity you brought up, which gave you the lefty asshat of the week award.
Another commenter responded eloquently to your da market failure schtick and he basically destroyed you.
Nice reiteration of wiki in your last comment though, pretending you understand the topic.
There are countless discussions at the Cat about da market failure, which would help you understand why it’s a leftwing crock of shit. You’re better off reading up through that before you discuss it again.
You knucklehead.
JC
3 Jan 13 at 1:27 am
Bragger…nice trolling ..Happy New Year.
Well, while I may not have Louis’s formal economic qualifications, I can easily point him, brc and JC to Wiki,
Should be Louis’ but still.
Yes, yes and yes. All of these things are well known known problems with the market. And the market tends to sort them out over time. In an open and vigorous market like the ASX it happens over a day. In a slower market like my Corner Shop it happens over 6 months.
You have a problem with that?
DaveF
3 Jan 13 at 1:27 am
Novak,
Off topic, but there is a mistake in your recent article in the Canberra Times. You claimed:
It was the previous Labour government that increased the top tax rate to 50 per cent. Cameron lowered it to 45 per cent.
Adrian
3 Jan 13 at 7:27 am
Just have to love the absolute evisceration William Bragg has received on this thread. The arrogant ignorance of someone who pushes an utter failure of an ideology (that resulted in millions upon millions of deaths) then accusing people who support what works of ‘knowing nothing about economics’ is all too common amongst idiot leftists these days.
Great to see one get utterly ripped apart. So much so that they have to weakly save face by bringing up the strawman of a ‘market failure’.
Go back to your hole troll, you just got owned.
MattR
3 Jan 13 at 7:41 am
Oh yes there are Julie.
1. the political classes are recruited from a narrow gene pool
2. the bureaucracy is staffed by people for whom mediocrity is a life goal
3. the bureaucracy always attempts to make its life easier by rationalizing society into categories and groups. Policies are inevitably assessed with respect to these pre-existing viewpoints, andwill never succeed as sooner or later votes are counted on this basis (by the political class).
4. the rate of flow of revenue enables the wider spread of these attitudes by rewarding those who adopt/bless them.
And when failure arrives, why bother with excuses at all ? Just deny the failure.
Keith
3 Jan 13 at 7:55 am
As I said before, this is the mainstream version of market failure, but, so what! Mainstream economics has failed to come to grips with government failure when dealing with its so-called market failures.
Mainstream economics uses ‘efficiency’ as a criteria to judge outcomes. Real world markets are not always ‘efficient’, but either are any of the actions proposed by mainstream economics that are suppose to address market failure.
Government actions to address these so-called market failures generate bigger problems than the problems they were designed to fix.
For example. Government provision of services such as health and education that have some positive externalities requires displacing market provision with central planning. Central planning is an inferior way of delivering services than market delivery. Central planning is rife with information asymmetries and principal–agent problems that are not part of market delivery.
When mainstream economist lift their game and take these problems seriously, then I will start listening to them about the need for government action to address their so-called market failures.
johno
3 Jan 13 at 9:09 am
I’m glad that you agree with me, Johno, that market failure is a feature of markets, not government intervention as brc incorrectly stated. Just as I agree that market failure needs to be compared against the risk of government failure when considering whether government intervention is warranted. Contrary to your diatribe against mainstream economics, however, that is a standard part – indeed, the wiki article on market failure I quoted from goes on in the very next sentence to discuss that point.
The problem that most Libertarians have, however, is that their ideological blinkers do not allow them to see market failures as being significant or to accept that there are instances where government failure is smaller than market failure. And, of course, there is also the problem of the basic economic illiteracy of many Libertarians, as reflected for example on the comments of brc and Louis above. (JC also has literacy problems, of course, but these are of a more general nature.)
William Bragg
3 Jan 13 at 9:57 am
Braggs
Amuse us. Give us a couple of examples o da market failure.
Go!
JC
3 Jan 13 at 10:25 am
1) air pollution from factory smokestacks
2) deaths and injuries to third parties from guns
3) your brain, JC, which any behavioural economist would immediately identify as exhibiting significant cognitive limitations.
Amused now?
William Bragg
3 Jan 13 at 10:47 am
These are externalities, excluding the lame attempt at insulting JC, which is a wit failure.
Note your wiki (lol) reference talks about failure ‘where things can be improved upon from a societal point of view’ – in other words, where governments get involved to force their own chosen outcome. Which usually end sup with far worse outpcomes due to unintended consequences caused by making decisions without market feedback.
But that’s not what you opened the thread with. You stated that profits should be redistributed away from oil tycoons to fix market failures. A statement which has been shown to be nonsense. I you wanted to talk about externalities, then why not say so? Why dress it up in the income redistributing clothes of the idiot Marxist?
brc
3 Jan 13 at 11:02 am
Bragg
What are the ‘market failures’ in health and education that require taxpayers to pay around three quarters of the money spent on providing them and to largely displace the superior delivery mechanism of markets with the inferior mechanism of central planning?
There are some positive spillover benefits with health and education, but please provide evidence that these benefits justify the damage done by government provision.
johno
3 Jan 13 at 11:54 am
Really? Explain how this externality has a higher cost than he provision of the goods and services produced. Note all firms produce externalities Braggs, you dummy. Even an accountants or doctors office.
Cost them.
Externality is an extremely complex thing to cost out and you of all people don’t have neither the expertise nor the brain power to do so.
Note the term trade offs in economics.
Always with you.
JC
3 Jan 13 at 12:13 pm
Your ‘challenge’ regarding example 1, JC, is just more evidence of the example 3. That is, it is immaterial whether an externality is less than, equal to or more than the cost than he provision of the relevant goods and services. What matters is the size of the externality versus the cost of correcting it.
You would have realised this were you to understand some fairly fundamental economics. Its thus no surprise that in shooting your mouth off you also shot yourself in the foot again.
William Bragg
3 Jan 13 at 12:47 pm
Once again we have a marxian idiot coming along thinking they can make a point, and as their underwhelming talking points are shredded, they continue to fall back to each lesser position, until finally they will just revert to ‘well, yeah, you’re all just mean and not as smart as me’.
Ultimately we have seen this here with WB who has fallen back from redistribution to market failure to externalities, and then finally to insults about the rest of us ‘not understanding economics’. Sure, we understand economics. We even understand the marxist rubbish you think passes for economic thought. We especially understand how fools like yourself following the blind alleys of marxism have created the most appalling piles of bodies the world has ever seen. And without the tireless public service of people to try and educate lazy moochers who think ‘redistribution’ is the solution to all problems, another outbreak of some life-endangering socialist following would only be years away.
See, you think we’re just arguing against internet trolls, but what we’re really doing is a public service to stop dimwitted fools before they manage to write their own Mein Kampf and waste a couple of million people who don’t agree with them.
brc
3 Jan 13 at 2:00 pm
Bragg
If you believe this, then please demonstrate that the size of the health and education externality in Australia justifies the cost of correcting it.
I’ve tried and the evidance is not there. Much of the money spent by government on the provision of health and education can not be justified as a correction to the so-called market failure.
Over to you.
johno
3 Jan 13 at 3:31 pm