Catallaxy Files

KEVIN Rudd says he was alerted to potential safety problems with the government’s home insulation program as early as August 2009 and will be subjected to Opposition questioning on the matter next week.

The Prime Minister was forced to give a detailed run down of his knowledge of problems with the scheme in parliament today, conceding he received notification about compliance issues on August 14 last year.

The Australian

While I often read book reviews I don’t usually buy books on the basis of published reviews. When I do I often find that the review was better than the book. That was certainly the case when I bought Paul Cartledge’s Thermopylae: The Battle That Changed the World – it was good, but just not up the review I had read. So I’m wondering about a review of A.W. Montford’s The hockey stick illusion. It is a glowing review.

Andrew Montford’s The Hockey Stick Illusion is one of the best science books in years. It exposes in delicious detail, datum by datum, how a great scientific mistake of immense political weight was perpetrated, defended and camouflaged by a scientific establishment that should now be red with shame. It is a book about principal components, data mining and confidence intervals—subjects that have never before been made thrilling. It is the biography of a graph.

This line is simply fantastic.

I never thought I would find myself unable to put a book down because—sad, but true—I wanted to know what happened next in an r-squared calculation.

That is very sad; but if anyone is confident enough to write that they wanted to find out more about an R2 calculation, then perhaps the book is well worth reading.

Although the advent of fiat money has not rendered central banks any less capable of generating booms and busts, it has considerably complicated the possibility of fundamental reform because a fiat standard, unlike a gold or silver standard, must be monopolistically administered if it is to retain any value, and because allowing commercial banks the right to issue notes that are themselves redeemable in fiat money, whatever advantages such a policy may have, will not by itself deprive the fiat-money-issuing authority of its crisis-making capacity.
It is important that people recognize the route by which we came to the present impasse so that they might shed their essentially romantic notion of central banking and instead approach it, as Walter Bagehot once did, as a fundamentally dangerous institution—one still more in need of confinement and taming than it was in Bagehot’s own day.

George Selgin in the latest The Independent Review.

The home insulation scheme is clearly a shemozzle. Greg Combet, however, has started off on a good note.

I have spoken with a member of each of the families, and on behalf of the Government and myself as Minister, expressed my deepest regret and sympathy.

Well said.

Jacob Zuma, the South African president, has nominated former Apartheid era police spy Marthinus van Schalkwyk to replace Yvo de Boer.

Former president Thabo Mbeki used to call him ‘kortbroek’ (short pants) because he was a political lightweight.
(HT: Wattsupwiththat)

Tony Abbott is a big-government conservative in the John Howard mold. This is hardly surprising – Andrew Norton diagnosed this issue some time ago. The logic underpinning Abbott’s parental leave proposal is set out in his recent book Battlelines. I had ignored it when it first came out – the Liberals weren’t going anywhere at the time and neither was Abbott. I did read it over the summer. When Abbott talks in broad principle, I tend to find myself in agreement with him, but on specific policy proposals I disagree. Here he is, on page 102.

Pages 100 – 104 discuss ‘A fair go for working mothers’. Those Liberals MPs criticising Abbott for ‘not consulting’ haven’t read his book.

Tony Abbott’s paid parental leave proposal is very unpopular. Unpopular with big business and the government. Big business shouldn’t like the proposal because it undermines an existing comparative advantage. Many large corporations already have paid maternity schemes and they use these schemes as a drawcard when hiring labour. Any uniform national scheme becomes a subsidy for small business. The government doesn’t like it because they have been outflanked on the left.

We should remember that Australia already had a paid scheme – the baby bonus – that got means tested by the current government, so Rudd and friends only have themselves to blame. Similarly big business haven’t been paying the Coalition enough attention and, while I’m sympathetic to their position, they too have themselves to blame. This is especially the case for AIG and BCA.

One of the sillier arguments was published this morning in the Australian – either by Michael Stutchbury or David Uren. The basic argument is that a parental levy will raise Australia’s corporate tax rate to the fifth highest in the OECD. The Uren article has a nice graphic showing this.

This argument is misleading. It is true that another levy will add to the overall tax burden. But this analysis makes two assumptions that are incorrect. First it assumes that businesses only pay corporate tax and no other taxes or levies. But that isn’t true, comparing the Australian headline corporate tax rate plus parental levy to OECD headline corporate tax rates is not comparing like with like. Second, it ignores all the other taxes and levies that business already pays. A couple of years ago I worked on the IPA State Business Tax Calculator (the 2009 version online here). This project consisted of analysing the taxes paid by a standardised business in different Australian States. The bottom line is that the business tax burden is greater than the headline rate suggests.

This represents about 18 per cent of the amount of Commonwealth corporate income tax (CIT) paid (i.e. in addition to the reference business paying company tax levied by the federal government, the business pays the state government tax imposed upon it which equals approximately 18 per cent of what is paid to the federal government).

There is an excellent argument for lowering taxes on business – they are far too high. But the argument that the parental levy will push us far up the tax ladder is not correct – we are already high up on the ladder. The parental levy will add to an already high tax burden, not create that tax burden.

I have an op-ed at The Drum today, basically a longer version of the piece here on Monday. I was able to track down some public hospital data that shows increased spending in public hospitals over the Howard era.

It is understandable that the current government wants to differentiate itself from its predecessor. It is not clear that it should do so by out-spending the Howard government. Ironically Howard has a reputation of being somewhat hard-hearted; yet the empirical record is very different. Andrew Norton of the Centre for Independent Studies has shown that Howard government spending on issues such as Health and Education rose faster than under the previous Keating government. He has labelled Howard a conservative social democrat.

All governments like to think that increasing the amount of money thrown at problems will solve that problem. But, as we now know from the Rudd government stimulus package, the quality of spend can be more important than the quantity of spending. So too with health – my IPA colleague Julie Novak has shown that the number of back-office bureaucrats has been increasing, while the number of hospital beds per 1000 population has declined. In the spending we have had over the past fifteen years, the bang for buck has declined.

A German aristocrat of my acquaintance has figured out that the price he will be paid for the output of a solar panel is so high compared with the price he will pay for his input of normal electricity, that he is thinking of rigging up powerful arc lamps to shine on solar panels on his extensive roof.

(HT: Bishop Hill)