McKibbin's World: we should support only sensible government intervention

Warwick McKibbinn now an occasional columnist for the AFR, has established himself as the ‘sensible’ technocrat economist acceptable to many sides of politics. He has campaigned for a pure form of carbon tax that the execrable Grattan Institute once promoted before concluding, in a paper, which also gets an op ed in the AFR today, that even a very high carbon price would not bring about the renewables nirvana they promote – for Grattan the reasons are some mumbo-jumbo about failure of ‘first mover’ advantages. 
 But back to McKibbin.  In his first AFR column (sub. required) he says:

The crisis inEurope ….  has come to a head because of large-scale, macro-economic mismanagement, but this was a result of a wide series of policy errors over time which have merely been exposed by a sudden unexpected shock.

 So far so good.  And he adds

Some of these mistakes include: too much government focus on redistributing wealth rather than generating wealth; a focus on large-scale intervention to meet environmental goals set by the emergence of the green parties rather than serious assessment of the costs and benefits of policies; wasteful industry support through massive subsidies that badly distorted markets over many years; the idea that governments drive the economy and create jobs rather than the idea that governments provide the conditions through markets and transparent regulations that enable the private sector to create jobs; a reliance on Keynesian economics that led governments to create an enormous overhang of government debt generated by spending on activities that did not generate sufficient return to service that debt; and labour market rigidities preventing real wage flexibility when an economic shock occurs.

Nobody, other than the government shills, can argue with this.  
But then we come to his solutions.  He says,

Governments and the private sector need to work together, rather than sequentially.

Opps.  Sounds a bit Gordon Brownish! He continues,

It is clear that there is a role for government in redistribution and regulating markets and providing funds for research and development. The extreme Right is wrong to focus on unfettered markets and the extreme Left is wrong to dismiss markets and leave everything to government. The best policy will balance the potential benefits of markets with good government regulation.

So he is positioned as the wise man arguing for sensible government intervention not the rapacious type that others less talented than himself would favour.  Just to prove his free market credentials he pontificates against support for the car industry which has, he argues, been based on inadequate analysis.  Then he rounds it all off by arguing,

Decisions will be made by politicians, but they need to be based on clear evidence using the input of experts to debate the issues, and using hard data to focus on reality rather than dreams.

Nowadays he may argue that the massive evidence (including his own) marshaled by Treasury, Garnaut and other ostensible unbiased parties that was used to support the carbon tax and mining tax does not meet the bill.   Undoubtedly he is seeking an enlarged role for the Productivity Commission, everybody’s favoured government analytical body, but perhaps he alone is the only expert capable of delivering.

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19 Responses to McKibbin's World: we should support only sensible government intervention

  1. Chris M

    Yet another redistributive regulator. They seem as numerous as bugs on the Hay plains, and just as useful.

  2. Rabz

    “The best policy will balance the potential benefits of markets with good government regulation.”

    More turd way bulltish.
    Spare me.

  3. Pingback: Catching Europe’s ills? « Harry Clarke

  4. Entropy

    I guess it depends on your definition of good market regulation. I must admit I am more comfortable with mcKibbon’s position on many things than some people here. The government should be facilitator of efficient markets, but also ensure people aren’t left destitute. I think all too often free marketeers of the more rapid variety sometimes forget that necessary shifts in capital and labour don’t happen at the stroke of s pen or the push of a button. Labour in particular, is very sticky.

  5. Myrddin Seren

    Okay – maybe everyone else has seen this one already.
    But it is hard to top this as a counterpoint to a discussion on the capacity of government to remain ‘sensible’:
    THe Indian Finance Minister “…and other Indian ministers tried to terminate Britain’s aid to their booming country last year – but relented after the British begged them to keep taking the money, The Sunday Telegraph can reveal.”
    Seriously – you can’t make this stuff up. If they did this on “Yes Prime Minister” you would say it is too far fetched. A country running huge deficits and borrowing billions of pounds every week forcing development aid down the throat of a recepient who doesn’t want it !!
    Oh – and the reaction from the custodians of the tax payers’ hard earned and borrowed ? :
    “DFID declined to comment on why it had asked the Indian government to continue with a programme it wanted to end. “

  6. Romanoz

    “The best policy will balance the potential benefits of markets with good government regulation.”
    I think he had China in mind!

  7. wreckage

    This would be a huge step up from government throwing wads of cash in random directions. His statement is great politics; read one way, it fits with my view of where government should be; read another it fits with OWS ratbaggery.
    My biggest problem is the use of the word “experts”. In most industries, the experts are the people with skin in the game. Is the government going to listen to them?

  8. Simon

    I thought currency was a government intervention in the free market economy of bartering, rules of trade too. The way some of you go on you’d think piracy was legitimate enterprise all the better for a lack of government regulation and tax free too. Even you diehards must admit that governments provide a stable platform for sustainable economic growth that markets utilise extensively to enrich those that wish to speculate. Surely those using this service must contribute to it’s continuation and upkeep, we’re only arguing about how much. Afterall no part of the economy is completely insulated from any other. Governments, whether democratic or otherwise, arise from wealth and ownership and they are inseperable from it.

  9. The truly spectacular policy failures in this country happen at the political level. This is precisely where the incentives are worst for a capable individual to build a career arguing for good policy.
    I’m not sure how much credit should be given to McKibbin for arguing that governments should only adopt good policy. He’s missing the point and the bigger picture. Our institutional arrangements make it too easy for bad people to make bad decisions.
    That the ALP has degenerated into an economically illiterate rabble is a disaster and means the Opposition will be less effective than otherwise when they achieve government.

  10. JC

    Harry chimes in . Thinks it impossible for Australia to ever suffer the hardship of a sharp recession as a result of wonderful efficiencies being created by the carbon and mining taxes.
    Criticizes Catallaxy, making it hard to now distinguish between himself and Homer seeing Homer is using a diction app.

  11. Combet just put out a presser claiming that “Opposition climate action spokesperson Greg Hunt is trying to frighten workers by claiming that a carbon price will cut real wages”.
    Combet will get away with it as well, in spite of Treasury’s modelling demonstrating Greg Hunt’s claim is true.

  12. .

    What I admire about Harry is his ability to selectively apply his razor sharp skills as a competent economics Professor.

  13. jtfsoon

    McKibbin is more a force for good than ill and I don’t see what’s wrong with his statement that any rational economist would disagree with other than that it’s a motherhood statement. The only people who would take issue with the gist of it are anarcho-capitalists which presumably Alan isn’t since in some respect he is even more interventionist than McKibbin in supporting bans on parallel imports. Presumably there are some regulations which Alan favours and he does so because he thinks the benefits exceed the costs. It’s better that these are stated explicitly as the reasons and argument is on that basis than that regulation is supported because of the ‘vibes’ which is McKibbin’s point

  14. .

    What about bureaucratic empire building Jason? How do you stop that happening short of non intervention?

  15. Tom Valentine

    McKibbin’s article is sound and balanced.There will always be some government intervention.The important thing is that it should be rigorously evaluated(and not formulated over a barbeque table on a Sunday afternoon).
    It is good to see that McKibbin will write regularly for the AFR which seems to be going in a sensible direction.Nevertheless,I would prefer him to be on the RBA Board.

  16. JC

    I agree Tom, Warwick is a good guy you are explaining that reality is not a libertarian paradise (although it should be). However Warwick’s course would be getting us there more so than the zombidom we’re putting up with now.
    And he should be immediately repappointed to the RBA board and Heather (I’ll say and do anything you want) Wipeout gets booted to make way for superior intellect.

  17. PSC

    The only people who would take issue with the gist of it are anarcho-capitalists which presumably Alan isn’t since in some respect he is even more interventionist than McKibbin in supporting bans on parallel imports.

    Is this true? I vaguely remember a wad of IPA papers about freeing up parallel imports on books, and I’d somehow got it into my head Alan was the author.

  18. wreckage

    There will always be some government intervention.The important thing is that it should be rigorously evaluated

    Absolutely. How much of a reform would it be if government programs had to lay out concrete goals, present those goals to the electorate in a transparent fashion, and then make measurable progress towards those goals or be automatically axed?

  19. Alan Moran

    The issue of parallel imports addressed by a couple of posts is one off property rights not regulation. The author/inventor has created property which she may sell to whoever she wishes at whatever price she wishes.
    To demand that there can be non contract covering re-sale of the rights is expropriation. Some discussion of my position is here.

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