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Weekend reflections

January 6th, 2006

Weekend Reflections is on again. Please comment on any topic of interest (civilised discussion and no coarse language, please). Feel free to put in contributions more lengthy than for the Monday Message Board or standard comments.

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  1. January 6th, 2006 at 16:46 | #1

    Reflections…

    1) Thanks for link.

    2) This lefty, for one, hopes that Sharon gets better. That has to be the most ill-fated peace process….

    3) Try the Wine Society’s McLaren Vale Shiraz, $11 a bottle, worth 3 times that.

  2. January 6th, 2006 at 20:51 | #2

    Well, how about getting readers’ views (and even JQ’s) on this piece by Michael Costello?

  3. brian
    January 6th, 2006 at 23:14 | #3

    If as seems likely ,Sharon,the man who was in a major way rfesponsible for the terrible massacres in Beirut in 1982,dies in the next few days I hope we are spared the sort of tearful performance from the media,that we saw after Packer died. I say good ridance to a butcher and war criminal. …though I would warn the Devil,if such a being exists,to take great care of Hell ,or Sharon will have settlements over half the West Bank of Hell,before the Devil knows he’s there !

  4. still working it out
    January 6th, 2006 at 23:59 | #4

    I think we largely agree that a Carbon Tax is one the best ways to tackle greenhouse gas emissions but there are problems. The Left worry it will be inequitable and the Right object to taxes and bigger government on principle.

    I am proposing what I call a Direct Transfer Carbon Tax as a solution.

    Basically it is a normal Carbon Tax with the revenue directed differently. The revenue collected by the Carbon Tax would bypass government altogether and go directly into the bank account of each person in the country with each person getting an equal share. The Carbon Tax revenue would go around in a circle, avoiding ending up in government hands altogether. The heavy carbon consumers would end up paying a more in Carbon Taxes than they get back from the system while the efficient carbon users would get a bit more than they put in. On an overall basis, the Australian taxpayper would not have an increase in the rate of taxation at all.

    This is seperate to Kyoto and would operate entirely within one country. Its aim would simply be to reduce greenhouse gas production by actualising the costs of dumping carbon into the atmosphere with the minimum of disruption and distortion to the economy.

    The advantages are numerous. Politically it would be far easier to convince the Australian public to accept. It would also be much easier to raise the Carbon Tax rate if necessary and make it high enough to actually reduce emissions.

    From an macro-economic viewpoint it is stimulus neutral as it is guaranteed to not increase or decrease the percent of GDP collected in tax, so it can be introduced without regard to the buisiness cycle. Adjustments to the rate will be macro-economically neutral as well.

    For the left, it is a tax that automatically limits its impact on the poor without the need for costly and awkward redistributions. For the right, it is a market based solution to GW with no increase in the size of government or real rate of taxation.

    It is philosophically attractive too. If you think of the atmosphere as belonging equally to everybody, then an argument can be made that dumping carbon into the atmosphere is a violation of everyone’s property rights. It is only fair that we be compensated for this. I am pretty sure that even a (reasonable) libertarian (who had accepted GW) could be convinced of the logic of this.

    Apologies for the long post and bringing up GW again after the last thread, and if this not a new idea. I googled around but could not find anything on it already so hopefully it is something original and perhaps useful.

  5. Ernestine Gross
    January 7th, 2006 at 00:36 | #5

    Still Working It Out,

    This is the way to go. In principle your suggestion is consistent with theoretical models of ‘non-dictatorial resource allocation systems’. These models take as the basic unit of analysis the individual. I believe this aspect of ‘libertarianism’ should not be given up.

    The open question is the pricing. But there are several approaches in existence and one can always try to develop a better method.

    Regards
    Ernestine

  6. still working it out
    January 7th, 2006 at 01:08 | #6

    Thank you Enestine

    I had thought about the pricing. I think there is a good solution to that by using something similar to the way the Reserve Bank controls inflation. Here’s how it might work.

    1) The Carbon Tax Rate should be variable and reviewed every quarter or so, like interest rates.

    2) The rate of the Carbon Tax should be set by a “Carbon Board” similar to the Reserve Bank Board. Since changes to the rate should not have a great impact to anything besides carbon consumption there is no reason for it to be set by the government and it would avoid the rate becoming politicised.

    3) The rate should be set with only one determining factor. Keeping Australia’s Carbon output at a publicly agreed target. If we are producing too much Carbon, the rate can be raised. If we are easily making our Carbon targets, the rate can be lowered. This is analogous to Central Bank inflation targeting, but it should be a lot simpler as there are only two factors to balance. The Carbon Tax Rate and the Total Carbon Output.

    4) This target level should be deduced through public debate and then set down in legislation for many years in advance and not changed unless the system is clearly not working. This will give everyone a lot of time to learn how Carbon Production responds to changes in the Carbon Tax Rate and get the system working smoothly. This would be difficult with a moving target.

  7. still working it out
    January 7th, 2006 at 01:09 | #7

    Sorry sorry sorry. That should be
    “Thank you Ernestine”

  8. January 7th, 2006 at 10:54 | #8

    Macklins comments about the dependence of universities on foreign students is half right.

    Right in that dependence on this revenue stream is not limitless (endless). Wrong in that she seems to suggest that by default it is a bad thing!

    If interested we wrote a little more on uor blog

  9. Ian Gould
    January 7th, 2006 at 14:05 | #9

    >I think we largely agree that a Carbon Tax is one the best ways to tackle greenhouse gas emissions but there are problems.

    Actually we aren’t.

    I believe emission permits are a preferable solution.

  10. Ian Gould
    January 7th, 2006 at 14:10 | #10

    I just listened to an interesting article from Dutch public radio a local police authority there is seeking permission to take DNA samples from all suicides.

    By doing so, they’ve already solved at least one murder.

    Sampling the dead obviously removes many of the standard human rights issues and this approach has the potential to solve many unsolved crimes and could also release many people unjustly imprisoned.

    (More problematically, a partial DNA match from a dead individual might indicate that another (living) member of that person’s family was guilty.)

    On balance I think the idea has merit – and I’m even inclined to question whether it should be restricted to suicides – why not routinely sample all people after death?

  11. orang
    January 7th, 2006 at 17:04 | #11

    P.M.Lawrence Says:

    “Well, how about getting readers’ views (and even JQ’s) on this piece by Michael Costello?”
    and article:

    ” Michael Costello: Done like a dinner on free trade deal

    January 06, 2006

    TO laugh or to cry? That is the question. Do you laugh at the increasingly ludicrous attempts by defenders of the US-Australia Free Trade Agreement to explain away the results of the FTA’s operation since it came into effect on January 1 last year? They demonstrate that, as forecast, the FTA is a winner for the US and a dud for Australia. Or do you cry for fear that those same defenders will fail the most basic test of human intelligence by refusing to learn from mistakes irrespective of the empirical evidence?”

    So what were our Masters of the Economy Howard and Costello ” doing spruiking the deal in the 1st place ?

    If I was a conspiracy theorist…..

  12. Terje Petersen
    January 7th, 2006 at 22:57 | #12

    I doubt that anybody would describe Noel Pearson as a libertarian. However when I read the following article I shudder physically with admiration for the man.

    http://www.leadershipvictoria.org/speeches/speech_pearson2003.htm

    His articulate description of the problems with the welfare state are truely superb.

  13. January 8th, 2006 at 11:50 | #13

    I shudder physically with mirth whenever I hear someone introduce themselves as “a functional member of society”.

  14. Mike Pepperday
    January 8th, 2006 at 14:26 | #14

    SWIO
    Your carbon tax idea is fascinating.
    Before I get carried away rubbing my hands together, have you any estimate of the amount of money involved?
    Would the Carbon Board try to maximise its income or would it minimise carbon emissions? Or are they (somehow, Laffer-like) the same thing?

    It reminds me a bit of a suggestion for guaranteed minimum income I read once. The idea was that the country had a certain worth so every citizen would inherit one share in Australia upon coming of age. The share would have a known dollar value (don’t recall how since there was to be no market in them) and investments (in private enterprises) were administered by an independent board which would pay dividends.

  15. January 8th, 2006 at 18:16 | #15

    I’m not having a go but Noel Pearson seems to me to be the diametrical opposite of a libertarian. Every policy position he advocates goes beyond current orthodxy in circumscribing freedom for those on welfare.

  16. Terje Petersen
    January 8th, 2006 at 19:18 | #16

    Mark,

    I agree with Noel Pearson in so far as he describes welfare and welfare services as displacing personal responsibility and solutions steming from the family and community. I have no experience with aboriginal communities but it rings true with my own encounters with the effects of welfare and welfare services.

    I have no problem with circumscribing freedom for those on welfare in so far as welfare may include mutual obligation. However I do object to government policies (eg minimum wage) that make welfare necessary and welfare dependence unavoidable for some.

    I have no in principle problem with welfare being paid direct to the landlord for rent and the rest issued in food and or travel coupons. I don’t think anybody has a fundamental human right that entitles them to spend taxpayers money on booze.

    Regards,
    Terje.

  17. January 8th, 2006 at 19:47 | #17

    Well, Terje, I tend to regard the welfare system as ineffective and often counter-productive in practice as well, but in large part because it’s driven by almost pointless sticks rather than carrots (and the carrots offered are often past their use by date). If we’re talking incentives to work, then serious attention to the welfare/tax nexus would be a good start. And the pointless and overly bureaucratic surveillance of job seekers and the many compulsory things that employment services providers make people do which have no relationship to skills formation but rather to some subjective “job readiness” are a huge waste of taxpayers’ money. The presumption that welfare recipients spend all their money on booze and ciggies is part of the same sort of mindset that insists that they account for their time minutely to government authorities.

    Most people who are on the dole get jobs within 3 months. They could reasonably be left alone to get on with it. But instead we get massively intrusive and expensive and practically pointless stuff – turning up for multiple interviews with Centrelink and employment service providers, filling out dole diaries, etc.

    People who are less employable are often so for good reason, but a largely threat based regime is probably not the way to get them into work.

    I’m mostly talking about the general non-Indigenous community here, and I recognise that Pearson is right in saying that Indigenous communities have particular issues to confront.

  18. Terje Petersen
    January 8th, 2006 at 20:15 | #18

    I agree that reform of the welfare/tax nexus would be a good start. I think it is the most pressing economic reform at the moment.

    I was not presuming that welfare recipients spend all much of their welfare money on booze. I just don’t think that their freedom to do so is sacred in the way that libertarians might regard property rights or free speech as being sacred. I think it would in general be a waste of time to police whether welfare money is being spent on booze, however I don’t think that there is a general right to have welfare money for booze.

    It is tragic that some people who want a job need to wait three months. If that is because they are being overly selective then they should not be on welfare but rather they should be living on savings.

    I know people who state that they hated being on welfare due to the pain associated with the Centrelink and the rest of the system. That pain seems to be a significant motivator to avoid the welfare option in future. I don’t have a problem with that as such except in so far as unemployment is a product of government in the first instance. Governments usually uses pain to implement there policies. I find taxation painful but I still have to deal with it.

    I must also admit that I am more tolerant of anti-libertarian type policies (eg alcohol prohibition) when they are implemented at the level of local government rather than central government.

  19. January 8th, 2006 at 23:13 | #19

    Terje, you’re still emphasising the stick and ignoring the (lackof) carrot. That’s a pragmatic criticism, not a criticism of what you are after – it just won’t get there by squeezing the pips.

    The obsolescence of the carrot comes in things like refusing to offer IT training in new areas but only in proven ones (which are precisely the niches that have already been filled, and/or are about to become obsolete in their turn). In a world economy that needs constant re-invention, offering only things that worked earlier is betting on the last race, not the next one – even though it is 100% accurate that they can’t pick the winner among the new stuff that’s out there. (Of course, this is one reason why government mediated training is futile anyway, but leave that aside – we see that the carrots are stale.)

    As for denying people the flexibility of spending what they get, on the one hand that reduces their personal initiative and self responsibility, and on the other there’s George Orwell’s much more libertarian-spirited objection, when he shot down people who complained that dole money got spent on fish and chips and tobacco etc. rather than on approved healthy foods – he pointed out that they (he had been one) had little enough common dignity left and that it was churlish to seek to deprive them even of that.

  20. still working it out
    January 9th, 2006 at 07:53 | #20

    Mike Pepperday,

    I am afraid I do not have any numbers, but I will try and figure out some basics. Its just an idea at this point.

    The goal of the Carbon Board would be to match the Carbon Tax Rate with the Total Carbon Emissions Target. Carbon Emissions would have some sort elasticty to the tax rate, so its all about finding the right point on the curve. I presume a fair bit of research would have to go into working out the exact shape of this curve. The curve would also shift over time as we are able to produce the same amount of energy while producing less carbon.

    Another way you could do it is to get rid of formal Carbon Targets altogether and instead have the Carbon Board’s goal be to generate a constant amount of Total Carbon Tax Revenue. As the amount of Carbon produced went down due to technology improvements the Carbon Board would have to keep raising the Carbon Tax Rate to keep Total Carbon Tax Revenue constant. The tax rate and thus the incentives to switch over to less carbon intensive methods would keep going up over time but the total burden would remain constant. This would be a system with ever increasing incentives to reduce carbon emissions.

  21. January 9th, 2006 at 09:17 | #21

    re: Carbon Tax, so what then of the NZ experience of dumping their own Carbon Tax policy – see: http://weekbyweek7.blogspot.com/2005/12/nz-dumping-carbon-tax-overboard.html

  22. Terje
    January 9th, 2006 at 09:33 | #22

    Terje, you’re still emphasising the stick and ignoring the (lackof) carrot. That’s a pragmatic criticism, not a criticism of what you are after – it just won’t get there by squeezing the pips.

    PML,

    I agree that the carrot is important. The tax system plus welfare withdrawal rules mean that the carrot is eaten up mostly by these distortions and as such its not much of a carrot. I agree that this problem is the most important barrier and needs to be addressed ASAP.

    I am not trying to emphasis the stick. I am just stating that the stick is a legitament part of the process. Welfare should not be regarded as a right.

    Given that the government has notional senate control and a budget large enough to allow an easy kick at tax/welfare reform they should be dealing with these issues now.

    Family tax benefits ensure that my own EMTR is 80%. Which is obscene. I have a personal appreciation regarding the lack of carrot.

    Regards,
    Terje.

  23. January 9th, 2006 at 12:24 | #23

    Three months is not an excessive amount of time in which to find a job, Terje, for many people. And not everyone has savings to live on – in any case if you do, you can’t get the dole – if you have more than $3000 in liquid assets you don’t qualify immediately. It’s eminently possible for people to get casual or part time work during those three works while still doing a proper job search and this reduces the benefits paid (which also acts as a disincintive of course). And the $220 a week people get has to be set alongside the $4000 that job network providers get from the Gov’t even when (as in the majority of cases for people who find work quickly) they don’t lift a finger to help the person.

    More discussion of it here.

    Also, what PML said.

    A public servant could spend most of his/her discretionary income on booze and ciggies and fatty food. This would no doubt mean that they would have more sickies, be more likely to suffer stress, and be a less productive employee. As a taxpayer, am I entitled to complain that they’re doing this with “my” money? Of course not! It’s a free society, and you have to let people make their own choices and their own mistakes.

  24. Ernestine Gross
    January 9th, 2006 at 14:04 | #24

    Welfare:

    After the HIH fiasco, which followed a string of other corporate fiascos, I find the discussion about what the unemployed are allowed or not allowed to do by ‘tax payers’ exceedingly pitiful.

    If the proportion of unemployment benefit that is spent on acohol and cigarettes is considered ‘unreasonable’ then the obvious solution is to reduce the tax on the these items.

    Have the learned moralists on the subject considered that many of the unemployment benefit recipients have contributed to the welfare funds in the form of income tax payments, GST payments and very high taxes on cigarettes?

    May I suggest that a welfare system is nothing but a form of an insurance system – spreading risk among a large pool is efficient (the exact argument is too long to present here. The interested reader is referred to Duffie, 1998 or later editions).

    It is of course particularly embarrassing if private insurance is advocated by some even though any thinking person realises that private insurance is not very reliable since private insurance companies can go bust in a big way.

    May I suggest that not having to draw on the unemployment insurance facility may bestow the same benefits to an individual as those bestowed to an individual who does not have to draw on fire insurance for a house.

  25. Terje Petersen
    January 9th, 2006 at 14:56 | #25

    A public servant could spend most of his/her discretionary income on booze and ciggies and fatty food. This would no doubt mean that they would have more sickies, be more likely to suffer stress, and be a less productive employee. As a taxpayer, am I entitled to complain that they’re doing this with “my� money?

    Of course you can complain.

    I don’t grudge people their smokes and beer. However if the government decides to provide welfare in the form of food vouchers instead of cash then they are not violating some fundamental human right.

    If the proportion of unemployment benefit that is spent on acohol and cigarettes is considered ‘unreasonable’ then the obvious solution is to reduce the tax on the these items.

    A zero sum game in terms of welfare receipients as you are no doubt aware. Although I have no specific concern if they want to lower the tax on beer.

    May I suggest that a welfare system is nothing but a form of an insurance system – spreading risk among a large pool is efficient

    There are similarities but also important differences. For instance insurance schemes are typically a voluntary affair.

    A good case could be made in my view for allowing people to draw unemployment benefits from their superannuation fund. Although that is also not the same as insurance.

  26. stoptherubbish
    January 9th, 2006 at 14:57 | #26

    Insurance against unemployment is a necessity in a system where ‘full employment’ is a theoretical and practical impossibility. The social resentment exhibited by those like Terje is a problem not just for those forced to seek unemployment benefit, but is fast becoming a threat to democracy itself. The constant demonising of that part of the citizenry who require support/assistance, as though they somehow stretch the bounds of civilisation by asking to be kept alive, is a major reason in my opinion for moving to establish a general insurance fund (similar to superannuation) from which people may draw in the event they are unemployed. Constant schemes devised to circumscribe the personal freedoms and dignity of those who are supported on a princly $240 per week, of the kind advocated by Terje will eventually rebound on the rest of the population, and are fast becoming a recipe for intervention into people’s lives unimaginable outside stalinist russia or facist germany. What is it about being unemployed and requiring support that makes people like Terje and his ilk believe they are entitled to interfere in, and order about, every aspect of that person’s life and existence? It is personal fascism of a major kind, which ever way you cut it. Personal dignity and rights do not, in a democracy, depend on whether you are unemployed or not-they are supposed to inhere in the nature of being a human being. You Terje, are a threat to my rights as much as you are a threat to the rights and dignity of the unemployed-and no, before you ask, I have never been unemployed in my life.

  27. Ernestine Gross
    January 9th, 2006 at 14:58 | #27

    Still Working It Out,

    I agree with you that a lot more research is required. Are you familiar with the literature on ‘state contingent valuation’? There is also an emerging literature on ‘internalisation of externalities’.

    What about imported goods?

  28. Terje Petersen
    January 9th, 2006 at 15:36 | #28

    The social resentment exhibited by those like Terje is a problem not just for those forced to seek unemployment benefit, but is fast becoming a threat to democracy itself.

    I get welfare myself. Its called family tax benefit. I used to get Austudy when I was a student. Once in my life I even got unemployment benefits, however the lady at the department of social security had told me how to lie on the form and it was basically faudulent so I felt bad and cancelled it after the first payment. I have relatives that live on welfare and have done for many years. I also volunteered once to help out at a soup kitchen (its a real eye opener).

    I have not expressed any resentment towards welfare receipients. However I do have a view about the welfare system and my view is not that different to Noel Pearsons.

    The constant demonising of that part of the citizenry who require support/assistance, as though they somehow stretch the bounds of civilisation by asking to be kept alive, is a major reason in my opinion for moving to establish a general insurance fund (similar to superannuation) from which people may draw in the event they are unemployed.

    Which is what I said. I said we could restructure superannuation so that it is a more general safety net. That would be an improvement.

    Constant schemes devised to circumscribe the personal freedoms and dignity of those who are supported on a princly $240 per week, of the kind advocated by Terje will eventually rebound on the rest of the population, and are fast becoming a recipe for intervention into people’s lives unimaginable outside stalinist russia or facist germany.

    All I said was that in areas where there is a major substance abuse crisis (eg Cape York) it is hardly unreasonable for government to attach strings to welfare. To extrapolate that to facism seems a little extreme.

    I know somebody that ligitamently makes about $40,000 per annum in welfare and lives in a house provided by the government. That is tax free income. They also earn cash income on the side (which is illegal if undeclared). I love them dearly but I think the system is very sick.

    What is it about being unemployed and requiring support that makes people like Terje and his ilk believe they are entitled to interfere in, and order about, every aspect of that person’s life and existence?

    What right does somebody have to make me pay taxes, regulate which trees in my garden I can cut down, what substances I can smoke in my home, or the way in which I choose to die.

    I am all for reducing interference in peoples lives. However when somebody gives you a handout they have a basic right to set conditions. If you violate the conditions then they can withdraw the handout. If you go to a soup kitchen and you are drunk and abusive and spit at everybody then they will place conditions on you. The conditional nature of charity is nothing new.

    Personal dignity and rights do not, in a democracy, depend on whether you are unemployed or not-they are supposed to inhere in the nature of being a human being.

    On the whole I think that Noel Pearson is working to increase dignity in the Cape York. There is little dignity in sniffing petrol all day.

    You Terje, are a threat to my rights as much as you are a threat to the rights and dignity of the unemployed-and no, before you ask, I have never been unemployed in my life.

    You stoptherubbish should stop the rubbish. You off the planet with your wild accusations. I am one voter with an opinion. Which rights to you imagine I threaten?

    Regards,
    Terje.

  29. Crispin Bennett
    January 9th, 2006 at 15:46 | #29

    Terje,

    when somebody gives you a handout they have a basic right to set conditions.

    Maybe true. But is welfare really a handout? I see it more as compensation for the institution of property having removed our natural right to seek food and shelter by our own hand. I am not permitted to try my ability to defeat my neighbour in open competition for land and food resources, as the State has overwheming power over both of us. So the State has a duty to give me basic necessities, without condition.

    Perhaps. Or maybe I’m just having a politically whacky day.

    I have used welfare (though not in Australia), and wouldn’t feel the slightest compunction in doing so again in the future. I haven’t yet met a human being I didn’t think entitled to food and housing, regardless of their willingness or ability to ‘work’.

  30. Terje Petersen
    January 9th, 2006 at 15:54 | #30

    Perhaps government has the duty to give me basic necessities. However alcohol and cigarettes are not basic necessities. So if they give me food and shelter they are not neglecting any duty to provide basic necessities. They actively prevent me from using other drugs.

    Aboriginal Australians do still have the right to seek food and shelter by their own hand. They can legally hunt and camp in areas where the rest of us are prohibited from doing so.

  31. Crispin Bennett
    January 9th, 2006 at 16:02 | #31

    Terje,

    Your point about basic necessities is a fair one. That is, yes, I don’t think there’s a ‘duty’ for governments to supply alcohol etc. However that’s a far cry from admitting or accepting that provision of basic necessities can be made conditional on a recipient abiding by alcohol consumption rules.

    Is it the case that Aboriginal Australians generally have rights to hunt and camp in restricted areas? Does it depend on which aboriginal nation they come from? What about those born in cities?

  32. January 9th, 2006 at 16:14 | #32

    I know somebody that ligitamently makes about $40,000 per annum in welfare and lives in a house provided by the government. That is tax free income.

    Welfare benefits are taxable.

  33. Ian Gould
    January 9th, 2006 at 16:14 | #33

    “Before I get carried away rubbing my hands together, have you any estimate of the amount of money involved?”

    According to the AGO, total Australian greenhouse gas emissions are aroudn 850 million tonnes per annum.

  34. Ian Gould
    January 9th, 2006 at 16:20 | #34

    A question – does anyone know what the Aboriginal wokforce participation rate is?

    I can see several reasons why it’d be higher than the Australian average – i.e. fewer Aborigines in higher education, fewer Aboriginal households earning enough income that one of the adults can be a full-time homemaker, fewer peopel in a position to retire early.

    I can also see reasons why it’d be lower – higher incarceration rates and higher levels of serious chronic illness for starters.

    It’d be ironic if the higher Aboriginal unemployment was attributable to a higher proportion of Aborigines seeking work.

  35. Terje Petersen
    January 9th, 2006 at 16:20 | #35

    My understanding is that under the Native Title Act 1993 fishing and hunting rights were protected from government regulation so long as activities were limited to “personal, domestic or non-commercial communal needs”. Which seems to mean that aboriginies can’t form market economies within their communities. Anyway I am no expert on the subject.

    That is, yes, I don’t think there’s a ‘duty’ for governments to supply alcohol etc. However that’s a far cry from admitting or accepting that provision of basic necessities can be made conditional on a recipient abiding by alcohol consumption rules.

    A fair point. However it is not really contrary to what I have been saying all along.

  36. Hal9000
    January 9th, 2006 at 16:47 | #36

    Has Terje read George Orwell on ‘Cheap Luxuries’ (eg cigs and beer)? The point Orwell makes, eloquently, is that it’s the cheap luxuries that keep a human being able to function with some dignity. There have always been those, like Terje, who would have welfare recipients live in spartan workhouses and eat nutritious porridge. The fact that the humiliation kills them just as surely as starvation is neither here nor there to the self-righteous who believe their own prosperity is the result of genius and hard work, inferring that the poor are stupid and lazy. Time was, this line of thinking had its progressive side – as in when Andrew Carnegie gave away virtually all his vast wealth and left his family with modest assets, believing they would be corrupted by inheritance. These days the comfortably upholstered seem to think virtue transfers along with wealth.

  37. January 9th, 2006 at 16:56 | #37

    Crispin Bennett wrote  : I see it more as compensation for the institution of property having removed our natural right to seek food and shelter by our own hand.

    Absolutely spot on!

    And let’s not forget that a large component of welfare payments are, in fact, handouts to landlords and property speculators, who have been the recipients, at our expense, of unearned windfall increases in the value of their investments thanks to this Federal Government’s policies.

    Back in 1996, the new Coalition Government Social Welfare minister (can’t remember her name) announced that they would divert funds from public housing programs into subsidies for private rental accommodation. In an interview on ABC Radio National’s “Life Matters” program in that year, she justified this on the grounds that it was supposedly going to be more cost effective. In fact, it only served to help fuel housing hyper-inflation and put more taxpayer’s money into the pockets of landlords.

    Tragically, it has also added grist to the mill of those such as Peter Saunders of the Centre for Independent Studies, who has been seeking to demonise social welfare recipients. In his book, “Austalia’s Social Welfare Habit”, Saunders takes care to include the cost of rental subisidies when he calculates the overall cost to taxpayers of our social welfare system.

    If, instead, they had simply continued spending the money on public housing, they would have achieved a great deal more with, perhaps, with a lot less money. Indeed, the Housing Trust of South Australia, as an example, which provided good quality housing to all levels of South Australian society for many decades, never cost taxpayers a cent.

    In case it may be of interest, many of these issues have also been raised in earlier Online Forum discussions in response to Peter Saunders’ articles.

  38. January 9th, 2006 at 17:33 | #38

    My understanding is that under the Native Title Act 1993 fishing and hunting rights were protected from government regulation so long as activities were limited to “personal, domestic or non-commercial communal needs�. Which seems to mean that aboriginies can’t form market economies within their communities.

    Native Title has an extremely circumscribed application, and those rights you cite (which were circumscribed further both by the High Court and in Howard’s 1996 amendments) are rights which co-exist with property rights on leasehold crown land (in practice usually grazing and mining leases). Title to land in indigenous communities is usually collectively vested in the community as a result of state land law – and is a residue of the system of Aboriginal “reserves”.

    There’s been a recent example of what lurks behind the agenda to make this title alienable, or alienable by lease – the suggestion of Peter Lindsay MP to kick the entire community of Palm Island off. Palm Island is prime waterfront (obviously), largely unspoiled and a place of natural beauty. The same stories noted that developers were lining up to get their hands on it. Development companies are not usually Indigenous corporations!

    By contrast, many remote communities would gain little advantage from alienable property rights as the land is effectively worthless. The furphy that lies at the heart of Pearsonism is that there are simply no viable economic opportunities for Indigenous people in remote areas except where they’re blessed by minerals or scenery. Hence the introduction of schemes like CDEP (aka “sit down money”) in the first place. It’s all very well to talk about welfare dependency, but it seems to me that Pearson – by virtue of wanting to maintain the currently economically non-viable settlements and at the same time subject its residents to outrageous degrees of social control, is really about turning back the clock to Missions and Reserves rather than being the harbinger of a bold new social policy that he’s claimed to be.

    Some concrete examples of money being poured into training and agreements with mining companies to take on Indigenous employees (which makes sense given labour shortages anyway – I’ve worked as a consultant for a regionally based corporation which saw the virtue in attracting Indigenous employees precisely because they’re more likely to want to live in such areas than either metropolitan or locally raised white people) have had a much better practical track record than Pearson’s approach. But they’re unglamorous, and don’t fit in so well with the usual anti-welfare rhetoric that suffuses public debate, so the debate is very one sided.

  39. January 9th, 2006 at 21:21 | #39

    There’s a fundamental confusion in “However when somebody gives you a handout they have a basic right to set conditions”.

    When someone gives you something for something, of course they have a basic right to set conditions. But it is logically impossible to do that with a true handout – because that is of its nature a charitable gift with no strings attached, beyond what the recipient’s own conscience applies.

    It’s not that you can’t attach conditions, it’s just that that isn’t a handout any more. In case you don’t feel that’s a problem, remember that this is all being done because of the effect it has on people (including but not only the recipients). Start handling it as a different sort of thing and you start getting all sorts of different behaviour than you originally wanted. Like, no more social insurance attitudes…

  40. Ryan
    January 9th, 2006 at 21:31 | #40

    When I was on the dole, I considered it my compensation for having a government I don’t agree with forced upon me – if the masses want to impose their system on me, they can damn well pay for me to live in it.

    haha

  41. Ian Gould
    January 9th, 2006 at 21:41 | #41

    >I have no problem with circumscribing freedom for those on welfare in so far as welfare may include mutual obligation.

    Hear, hear! Let’s breing back the stocks and the branding irons for “able-bodied vagrants”.

    Tell me does your admiration for Pearson extend to his description of John Howard as “racist scum”?

    How about to this:

    “I want to take the opportunity to reiterate the importance of the opportunity of the Mabo decision on 3 June 1992. In recent years I have been attacking the social, economic and cultural problems we face as a people, but in that rethinking about our policies in relation to Aboriginal disadvantage and suffering I have never repudiated the importance of Land Rights as a cornerstone for reconciliation.”

  42. Ian Gould
    January 9th, 2006 at 21:45 | #42

    >I get welfare myself. Its called family tax benefit. I used to get Austudy when I was a student.

    Has it destroyed your moral fibre and will to work yet?

  43. Ian Gould
    January 9th, 2006 at 21:46 | #43

    “my view is not that different to Noel Pearsons.”

    Which I believe he has said explictly should only apply to remote indigenous communties.

  44. Ian Gould
    January 9th, 2006 at 21:49 | #44

    >My understanding is that under the Native Title Act 1993 fishing and hunting rights were protected from government regulation so long as activities were limited to “personal, domestic or non-commercial communal needs�. Which seems to mean that aboriginies can’t form market economies within their communities.

    Why should the right to take fish or animals for personal consumption deprive you of the capacity to form amrket economies?

    Ever stop to think that maybe extreme poverty, abysmal education standards and sky-high crime rates have something to do with it?

  45. SJ
    January 9th, 2006 at 22:52 | #45

    Terje

    If you have a couple of hours to spare, please read the following (online, free):

    The Road to Wigan Pier

    Down and Out in Paris and London

    These are Orwell’s first-hand accounts of what the world you advocate is like.

  46. Seeker
    January 9th, 2006 at 23:37 | #46

    Those who think welfare is not a “right’ are wrong. It is a right if you fulfil the conditions set down for it. And if you do fulfil the very stringent and often onerous conditions then why is it a ‘bad thing’ to receive it, and why do you have to be subject to endless sneering abuse from the self-righteous likes of Peter Saunders? I’d like to see his sort deal with the kind of brutal real-life circumstances that force people onto welfare. Nobody goes onto welfare by choice, and certainly not for long.

    The real question for those hostile to individual welfare is what is the alternative? Do you honestly think that simply eliminating welfare support will cause the problem of poverty to magically disappear and make society a better place? (How does that help dependent children in particular?) An individual’s need for shelter and food and basic human acceptance vastly outweighs any else’s ‘right’ to own a Ferrari or a McMansion.

    And what about the vast de facto welfare payments to business, especially big business, via various forms of trade barrier, tax breaks, cheap land, insufficient minimum wage, state granted virtual monopolies such as TV licences, guaranteed minimium returns on some allegedly private investments such as freeways and tunnels, extraordinarily accomodating regulatory environments, ability to transfer business failure costs to the state via the individual welfare system while company directors often walk away with obscenely generous payouts for total failure, etc? The one thing big business is consistently good at is privatising the gains and socialising the losses, via the taxpayer and the broader society. In other words, gross hypocrisy.

    The tax/welfare nexus (very high marginal tax rate) alone for those on welfare is so problematic that nothing is going to even begin changing until that is fixed. Even then there are always going to be those who through no fault of their own cannot earn sufficient or even any income. The best form of welfare is NOT always a job. That is callous, unrealistic, self-serving ideological drivel.

    Don’t forget that virtually every cent of individual welfare payments goes straight back into the local economy, and very quickly. I’ll bet the same is not true for the proceeds from big business welfare, much of which ends up being moved out of the country.

  47. Terje Petersen
    January 10th, 2006 at 07:34 | #47

    There have always been those, like Terje, who would have welfare recipients live in spartan workhouses and eat nutritious porridge.

    Clearly Hal9000 thinks that all welfare recipients should be gassed to death and their bones turned into fertiliser. What a horrible view for him/her to have. Then again there have always been evil people like Hal9000.

    When I was on the dole, I considered it my compensation for having a government I don’t agree with forced upon me – if the masses want to impose their system on me, they can damn well pay for me to live in it.

    I don’t agree with the government that the masses impossed upon me. Which is why I am relunctant to pay taxes. As I see it you were part of the offensive system imposed on me for as long as you viewed welfare as an entitlement rather than as a gift.

    When someone gives you something for something, of course they have a basic right to set conditions. But it is logically impossible to do that with a true handout – because that is of its nature a charitable gift with no strings attached, beyond what the recipient’s own conscience applies.

    Unemployment benefits has always been conditional. Conditional on your state of employment. Get a job and they take the handout away. The pension is dependent on age. There have always been strings.

    Let’s breing back the stocks and the branding irons for “able-bodied vagrants�.

    Obviously Ian is an evil froot loop like Hal9000 who has no regard for basic human dignity.

    Tell me does your admiration for Pearson extend to his description of John Howard as “racist scum�?

    I have no admiration for personal insults. However its not uncommon in the political arena. Given the crap hurled at me during this discussion (with totally baseless assertions that I want the stocks brought back or that I want to put people in spartan workhouses) then I can understand the temptation. You evil bastard.

    Don’t forget that virtually every cent of individual welfare payments goes straight back into the local economy, and very quickly. I’ll bet the same is not true for the proceeds from big business welfare, much of which ends up being moved out of the country.

    Actually I would say that the bulk of both go back to the local community where it all came from via taxes. However the current process destroys efficiency (ie productivity) and reduces incentives.

    Regards,
    Terje.

  48. Vee
    January 10th, 2006 at 10:27 | #48

    anyone got a position on CIS latest paper – increasing self reliance? Lowering income tax and putting savings away yourself for health, retirement, etc instead of relying on the govt?

  49. Terje Petersen
    January 10th, 2006 at 10:45 | #49

    The paper is here: http://www.cis.org.au/IssueAnalysis/ia66/IA66.pdf

    I have only skimmed it, but so far it seems pretty spot on.

    Self funded welfare makes loads of sence. However I would be more inclined to incorporate it into existing superannuation funds rather than create a new set of funds. Also I am not sure if I would integrate medicare/medical insurance into the same scheme.

    I am glad that the CIS has continued to produce innovative and useful ideas in the area of welfare reform. The left-wing think tanks have been next to useless in this area. It makes little sence to even admit them into the debate given their dogmatic stance.

  50. January 10th, 2006 at 11:11 | #50

    Terje wrote : As I see it you were part of the offensive system imposed on me for as long as you viewed welfare as an entitlement rather than as a gift.

    I think a good many welfare recipients, whom you appear to resent, would be more than happy to switch places with you and pay even double whatever tax you are now paying. Teddy Roosevelt once said (something to the effect of) that there is absolutely nothing more important in life than to have a fulfillng meaningful occupation, and he is so right.

    How can you be so sure, that if your circumstances had been different – if your marriage had broken down, if you had been repeatedly ‘downsized’, and had other previously available career paths eliminated due to State and Commonwealth Government penny pinching, or if you had been betrayed by people in whom you had placed your trust – that you would not be in their shoes, and that they would not be in yours?

    Can I suggest that, instead of feeling sorry for yourself, you find out what it is truly like to live (even before this Government’s odious IR ‘reforms’ and ‘work to welfare’ legislation take effect) on social welfare or on low wages. If you feel the slightest bit of curiosity, can I commend the factual account of life in low wage occupations in “Dirt Cheap” by Australian journalist Elisabeth Wynhausen (see http://tinyurl.com/7rfjv, http://tinyurl.com/dxth8), or Nickel and Dimed and Bait and Switch by US journalist, Barbara Ehrenreich(seehttp://www.nickelanddimed.net)?

    That so many of our workforce, both here and in the US, have to work so hard, for so long, endure so much disrespect and for such little pay, at least 20 years after the globalising economic ‘rationalist’ ‘reformers’ promised prosperity to everyone, is a disgrace.

    The real point of the current welfare ‘reforms’ is to make it so hard to obtain welfare, that people will have no choice but to accept employment at substandard pay rates with terrible working conditions for employers who refuse to treat their workers with any respect. (This point was made in a very eloquent article in The Age newspaper roughly a month ago. Can anyone else tell me where to find it?)

    Terje wrote : However the current process destroys efficiency (ie productivity) and reduces incentives.

    This is typical neo-liberal hogwash.

    In fact, there are now massive inefficiencies in our economy, not due to the remnants of a once decent social welfare safety net, but, rather, due to nearly unfettered market forces that have been unleashed since the 1980′s. If you don’t believe me, just take a look at how much petroleum is wasted in the gridlocked traffic on the roads in our cities, because our Governments were too timid to apply proper town planning for fear of upsetting property developers, land speculators, car manufacturers and the oil industry. (Don’t let me get started again on this one.)

    However, these inefficiences are largely concealed from by the use of inappropriate indicators of prosperity, including the Gross Domestic Product (GDP). I have had a fair bit to say about that here.

    Seeker, glad to know that you share my opinion about Professor Peter Saunders of the Centre for Independent Studies. Sadly, it seems that his dream, of rock bottom wages and the practical elimination of a decent social welfare safety net, is about to be realised.

    I must also add that it is astonishing to me that Peter Saunders has been treated so deferentially, when, for example, he has been interviewed in the past on ABC Radio National’s “Live Matters” program, or by Phillip Adams.

  51. Terje Petersen
    January 10th, 2006 at 16:14 | #51

    I think a good many welfare recipients, whom you appear to resent, would be more than happy to switch places with you and pay even double whatever tax you are now paying. Teddy Roosevelt once said (something to the effect of) that there is absolutely nothing more important in life than to have a fulfillng meaningful occupation, and he is so right.

    I don’t resent welfare receipients.

    How can you be so sure, that if your circumstances had been different – if your marriage had broken down, if you had been repeatedly ‘downsized’, and had other previously available career paths eliminated due to State and Commonwealth Government penny pinching, or if you had been betrayed by people in whom you had placed your trust – that you would not be in their shoes, and that they would not be in yours?

    I can’t be sure. I could be destitute next week for all I know. However it does not change my view on the need for root and branch reform to the tax and welfare system.

    Can I suggest that, instead of feeling sorry for yourself, you find out what it is truly like to live (even before this Government’s odious IR ‘reforms’ and ‘work to welfare’ legislation take effect) on social welfare or on low wages.

    I lived for 5 years on less than $10k per annum when I was a student. I have handed out food in a soup kitchen. I know people who have never had a job in their entire life. In my twenties I had a good friend who spend over a year on unemployment benefits. He now has a six figure income. I don’t spend my days wallowing in pity. However it does not change my view on the need for root and branch reform to the tax and welfare system. I would not be online pusing this barrow unless I thought it was important for my society. If it was just about me then I would be spending time with a sharp accountant and his friends.

    The real point of the current welfare ‘reforms’ is to make it so hard to obtain welfare, that people will have no choice but to accept employment at substandard pay rates with terrible working conditions for employers who refuse to treat their workers with any respect.

    So “employers who disrespect their workers” represent a large number of voters do they? Dream on.

    I find your entire tone to be condescending. You seem more interested in lecturing me on what you presume are some inadequacies of my life experience rather than discussing ideas and view points. Ironically Noel Pearson who has probably seen and dealt with more people in real hardship than either of us seems to have views not much different to my own.

  52. James Farrell
    January 11th, 2006 at 06:50 | #52

    Two comments on SWIO’s carbon tax:

    1. There’s no reason why it should be separate from Kyoto. As you mention yourself, the tax rate would have to be set with some target level of energy consumption in mind. If you don’t agree with the Kyoto targets, then you have to come with a different one and a rationale for it.

    2. It’s not clear what you’re saying about equity. Do you want to minimise the distributional effect of the carbon tax? If so, we should each get a cheque based on some estimate of our current fuel usage. Do you want to improve income distribution? If so, you need to compensate low income people who use a lot of petrol. Giving everyone an equal share of the revenue will redistribute income from low-income earners who drive a lot, to bankers who live in the inner city and take the train to work. If it’s equity you’re after, it would make more sense to use the money to raise the tax-free threshold or improve schools and hospitals. But it might be better to put equity in the too-hard basket, and use the money to promote efficiency instead, by lowering some disortionary taxes. Cutting payroll tax would be good for equity as well if more jobs are created.

  53. January 11th, 2006 at 08:25 | #53

    Terje,

    I find it extraordinary that, when, in recent years, so much wealth has already been transferred out of the hands of people on lower income levels to people like yourself, you still feel a victim of the ‘offensive system’ that you say has been ‘imposed’ upon you.

    Also, you have completely avoided the most important aspect of what the so-called welfare ‘reforms’ are about and focussed on the secondary aspect, for which it is all too easy to drum up resentment from ill-informed sectors of society . To quote myself from above :

    The real point of the current welfare ‘reforms’ is to make it so hard to obtain welfare, that people will have no choice but to accept employment at substandard pay rates with terrible working conditions for employers who refuse to treat their workers with any respect.

    Conditions, which a few months ago, nearly everyone had, rightly, taken for granted, are now under threat : the right not to work on weekends, or at anti-social hours, or to be adequately compensated if you do have to work these hours. The right not to have to work excessively long hours. The right to have predictable shifts of adequate length, etc.

    There may be almost no limit to how ruthless and creative employers can use these new laws to further reduce the pay and conditions of its workers. Those who are not inclined to be as ruthless, may, over time, find little choice but to do likewise.

    The ongoing ‘reforms’ to our social welfare system have made it ever harder for people to refuse to work for inferior conditions and rates of pay. On top of that people who were previously on disability support pensions and supporting mothers benefits will now be forced to compete for work with those on unemployment benefits and subject to the same petty harassment, which insiders acknowledge serve no useful purpose other than to dissuade unemployed people from seeking income support from Centrelink in the first place.

    Terje wrote : I don’t resent welfare recipients.

    You clearly resent paying taxes to support welfare recipients, so the distinction seems academic to me.

    Terje wrote : I could be destitute next week for all I know.

    Somehow this doesn’t quite ring true. You don’t strike me as someone who faces any realistic imminent prospect of long term unemployment and destitution.

    Terje wrote : However it does not change my view on the need for root and branch reform to the tax and welfare system.

    I somehow think it more than likely that if you suddenly lost your job and found your particular skills no longer marketable, your attitude would be quite different.

    Terje wrote : I lived for 5 years on less than $10k per annum when I was a student.

    Like many people who support this Government’s laws, which are designed to impoverish large sectors of the Australian population, you are able to claim that you have also endured times of material deprivation. Of course, this gives you more moral authority than if you had been materially privileged for the whole of your life, but it does not add any decisive weight to your case.

    I happen to agree that ‘less than $10k per annum’ is inadequate, but I just wish I had been given that sort of figure when I was a full time student. I got nothing for the last year and a half, so I had to find part time work, which did not help my academic performance as you might imagine. Most of the time I supported myself as a part time student.

    Also, it was probably my taxes which helped pay your income, inadequate as it was, when you were a student and helped get you through University.

    Terje wrote : I have handed out food in a soup kitchen.

    For how long? two months? a fortnight? a week? Did you ever discuss with people who were fed at soup kitchen how you believed that cutting back their welfare entitlements would be in their best interests?

    Terje wrote  In my twenties I had a good friend who spend over a year on unemployment benefits. He now has a six figure income.

    I wonder how your friend would have coped with today’s Centrelink system? Now that he is on a six figure income would he approve of all the extra bureaucratic hoops that today’s unemployed have to jump through?

    Terje wrote  So “employers who disrespect their workers” represent a large number of voters do they? Dream on.

    I don’t see what that has to do with anything, unless you are somehow trying to imply that the laws have the endorsement of the Australian electorate. Given that neither the IR ‘reforms’ or the ‘work to welfare’ legslation were put to electors in October 2004, this is nonsense.

    On Noel Pearson, a lot of what he has said, makes sense in regards to Aboriginal Australians. However just removing welfare without also providing other means for Aboriginals to obtain dignifed and purposeful livelihoods is not acceptable.

    As I have already written about here, the prosperity of Aboriginal community in Moree, NSW as a consequence of employment in the cotton industry shows that they, like everyone else, need not be dependent upon social welfare.

    However, I am concerned that Pearson’s ideas are being used so inappropriately by this Goverenment to justify its attacks on wider underprivileged sectors of the Australian community, and I was also disturbed to learn that Noel Pearson is now paid as a consultant on social welfare matters by this Government.

  54. Ian Gould
    January 11th, 2006 at 08:40 | #54

    Vee: anyone got a position on CIS latest paper – increasing self reliance? Lowering income tax and putting savings away yourself for health, retirement, etc instead of relying on the govt?

    I haven’t read it but the CIS has been publishing drek for decades so I doubt this is any different.

  55. January 11th, 2006 at 22:23 | #55

    Ian,

    Sadly, much of the past drek from the CIS has recently become enshrined as legislation. In particular, the recently enacted IR ‘reforms’ and the ‘welfare to work’ pieces of legislation seem to have been uncannily anticipated by much of the writings of the CIS’s own Peter Saunders (mentioned above, here and here).

    If it is possible to make things any worse than they already are, the Government will probably find much of its inspiration to do so from documents, referred to above, from the CIS.

  56. January 11th, 2006 at 23:17 | #56

    The CIS proposal is sound as regards long term objectives, but almost certainly makes a huge wealth transfer away from people coming up to retirement, providing inadequate compensation.

    I discussed the area in detail in an article I wrote for News Weekly, after I had gone into the ramifications quite thoroughly. If you don’t handle these things right with a proper transition a lot of people get the short end – and there isn’t any quick and correct transition.

    It’s essentially the same problem on a larger scale as “compensating” people for the introduction of GST by making offsetting income tax cuts – people who were retired or just about to retire found their indirect tax costs going up just when their scope to receive offsetting benefits from income tax cuts went down.

  57. Ernestine Gross
    January 12th, 2006 at 05:38 | #57

    Ian,

    I have only questions regarding the CIS papers by Saunders and Humphreys. I haven’t read the others as yet. To start off:

    1. What are the economic policy objectives?

    2. What are the theoretical conditions under which the policy objectives can be shown to be achievable?

    3. Where are the modelling results?

    4. The only conclusion I could draw from Humphreys’ paper is that he likes the number 3 (eg 30%, 30,000, .3(30000)). Why?

    5. Why does Saunders conclude that the budget surplus shows that taxes are too high at the exclusion of the alternatives, namely that expenditure is too low or a combination of both?

    6. Why do Humphreys and Saunders ignore the theoretical and empirical contemporary knowledge on financial markets, including risk diversification, asymmetric information, informtion acquisition costs, speculative bubbles, discontinuities due to bankruptcy, etc.

    7. Why do Humphreys and Saunders ignore the alleged benefits of electronic data storage and data processing technologies?

    8. Why do the authores ignore the contemporary knowledge on incomplete markets?

    9. Why did they write their papers?

    PM Lawrence’s point on transition (‘change management’) is valid in general. However, I don’t know how PM Lawrence reached his conclusion on the relevancy of ‘long term objectives’; ie point 1 above.

  58. Terje Petersen
    January 12th, 2006 at 06:03 | #58

    James,

    I happen to agree that ‘less than $10k per annum’ is inadequate, but I just wish I had been given that sort of figure when I was a full time student. I got nothing for the last year and a half, so I had to find part time work, which did not help my academic performance as you might imagine. Most of the time I supported myself as a part time student.

    Sorry but the benefactor of the $10k was only partly government. They supplied me with roughly $2000pa in the peak years. The primary benefactors were my parents. Their contribution was considerable given that both were on below average incomes and neither had ever been to university themselves. Mum only worked part time. Still that did not provide all of the $10k. The rest was made up from me working part time on weekends or in the evenings.

    With the $10k I had to pay rent, buy food, buy clothes, pay bloody student union fees, buy text books and entertain myself.

    Every night I had a full stomach, a warm bed and head full of ideas. I also had good friends and occasionaly got a free meal with their folks (mine lived 600km away).

    $10k was enough to be comfortable on. However the early 1990s in Sydney were a lot cheaper than now.

    Regards,
    Terje.

    P.S. I could respond to all your other points and maybe I will at some later date. However most of it just appears to be an attack on my life experience and worldview. Neither of us can discuss that objectively. I can’t be considered objective because it’s my life. And you can’t be objective because you don’t know the facts.

  59. Ernestine Gross
    January 12th, 2006 at 07:09 | #59

    Sorry, some corrections:
    modelling = modeling
    information = information
    authores = authors

  60. January 12th, 2006 at 09:04 | #60

    Terje, you have still avoided responding to my main points, but that’s fine by me.

    Terje wrote : … most of it just appears to be an attack on my life experience and worldview.

    I don’t think other readers will see any more attacks on your life experiences in what I have written than you have made on others.

    I think, instead, that they will see that what I have written is a necessary response to ideas which have demonstrably caused enormous harm to many decent hardworking Australians.

    As I said, I accepted that your circumstances as a student were quite trying for you (and, I now see, your parents as well).

    However, I don’t accept that your life experience gives you the right to try to make the situation even worse for today’s students as well as many other sections of society who are unable to study at University.

    We both know that that, at the moment, the cards are stacked in your favour, because the sort of views I hold are unlikely to get anywhere near the same airing in our newsmedia as yours, however, at least this is a good start.

  61. Terje
    January 12th, 2006 at 09:44 | #61

    You say that the main point is:-

    The real point of the current welfare ‘reforms’ is to make it so hard to obtain welfare, that people will have no choice but to accept employment at substandard pay rates with terrible working conditions for employers who refuse to treat their workers with any respect.

    So lets discuss that.

    What is substandard about a pay rate that is higher than welfare benefits?

    How do you regard the people who already do these jobs?

    Why do we continue to tax these people?

  62. Mike Pepperday
    January 12th, 2006 at 10:29 | #62

    The other night, after a couple of schooners had lubricated the cogs, I realised that the attractive thing about SWIO’s carbon tax distribution was its democratic potential.

    The Carbon Board should like their job (you know: $50K pa for a meeting a week) and they should be answerable to the people (elected, I guess) and the emissions target or the tax rate (same thing in effect) should be directly approved by the people.

    So now the people would decide the trade off between equity, income and the state of the planet they are leaving to their grandchildren. The board would make its recommendations and the people would choose.

    Ah, castles in the air: people actually taking charge of their own lives.

  63. Ernestine Gross
    January 12th, 2006 at 11:00 | #63

    1. ” What is substandard about a pay rate that is higher than welfare benefits?”

    Answer: Welfare benefits are defined with respect to a period of time, such as ‘per week’. A pay rate for the same period may be higher but it has the disadvantage that accepting the job may kill or cause harm(exhaustion due to hours of work or health and safety factors).

    2. “How do you regard the people who already do these jobs?”

    Answer: Which jobs?

    3. “Why do we continue to tax these people?”

    Answer: Which people? I don’t tax anybody.

    Question: Why doesn’t ‘private enterprise’ create jobs which suit the skills of people and do it in a sustainable and efficient manner? By sustainable I mean a ‘decent living wage’ (I can’t remember the exact name). By ‘efficient’ I mean actions that are at least logically consistent with the notion of a Pareto improvement. Incidentally, a point to this effect has been made by an MBA student with about 10 years experience in the Chemical Industry and with an honours degree in chemical engineering. I wonder whether his ‘politically incorrect’ but insightful comment helped him in his career or whether his scientific education and his logical mind is a hindrance to personal wealth.

    Question: Have you noticed that Tony Abbott has understood the incentive problems arising from corporatised medicine? This is an important event.

  64. Ernestine Gross
    January 12th, 2006 at 12:05 | #64

    Mike,

    Isn’t it the purpose of theoretical models of non-dictatorial resource allocation systems to provide a few clues as to how one can develop institutions that solve practical problems, which cannot be solved by the market – competitive or otherwise, without giving up the idea that people know best what is good for them?

  65. Mike Pepperday
    January 12th, 2006 at 13:01 | #65

    Sorry Ernestine, I have read and re-read your question but I do not understand it. Could you perhaps re-phrase it?

  66. Terje Petersen
    January 12th, 2006 at 14:18 | #66

    Ernestine,

    My question (that you seem to have responded to) was intended for James. I am sorry if you though that these questions were addressed specifically to you however I am happy that you have responded.

    1. Yes jobs may kill you or harm you. However jobs with an unacceptably high risk (eg mining) are subject to safety laws. Perhaps you could ellaborate with examples.

    2. Jobs comparible to the ones seen as substandard (whatever that benchmark means).

    3. I’ll rephrase the question. Why does the government continue to tax people who do jobs compariable to the ones seen as substandard (whatever that benchmark means).

    Regards,
    Terje.

  67. Ernestine Gross
    January 12th, 2006 at 14:25 | #67

    Mike,

    Apparently I have spoken in riddles. Apologies.

    I wrote my question in response to your post regarding the Carbon Board. In your post you talk about ‘castle in the air’, which surprised me.

    IMHO, theoretical models of non-dictatorial resource allocation systems (ie general equilibrium models which take as axiomatically given that individuals are ‘rational’ in the sense of acting in a manner which is consistent with their preferences) can provide insights into the design of new institutions to deal with market failure (incomplete markets) while aiming to adhere to the idea that people know what is best for them. Setting aside details, I would consider the idea of a Carbon Board as one example. So, from my perspective, the ‘castle’ is conceivable. How well it is designed and how well it can works is to be seen.

    I am relatively new to blogging. I find it interesting and challenging to write against no or minimal information on ‘common ground’. On this occasion I obviously misjudged.

  68. Ernestine Gross
    January 12th, 2006 at 18:29 | #68

    Terje, sorry I didn’t know you wanted to discuss your questions with James; your questions were addressed to nobody in particular. You skipped my questions.

  69. James Farrell
    January 12th, 2006 at 19:59 | #69

    Mike

    What function is this Carbon Board serving? You seem to be implying that ‘the people’ will make the crucial decsions, and that the Board simply offers some kind of menu of choices, in which case its role is essentially one of gathering informatiion.

    Given that the propose Board was initially compared to the RBA, it’s worth pointing central banks don’t in fact work like this. They are given only the broadest guidelines (e.g. achieve a stable currency), and then they determine both the specific targets they will pursue and the instruments they will use. There is nothing especially democratic about them, and indeed the trend has been toward independence from governments, who might pander to popular preferences (which will be biased toward the short term) and mess things up.

    Supossing, however, that the Board’s role was to ‘offer choices’, the real question is to what extent it would really be capable of defining the alternatives. You don’t give the impression you want the Board to be actually studying climate issues itself, and attempting to determine the effects of different targets. In the first place, these issues are, as we know, vast and controversial, and it would be impossible to define any trade-off that didn’t involve a huge margin for error. Secondly, changes in carbon emissions within a small country like ours have little effect on temperatures, so the trade-off between current domestic fuel consumption (on the horizontal axis) and future temperature will be very flat.

    Therefore, I gather that the Board would just let the public form their own beliefs about the effectiveness and utility of different targets. In that case, the Board’s only role would be to figure out what tax rate was necessary to achive each target – in other words, to determine the price elasticity of the demand for carbon based energy.

    But that’s an essentially technical task, not one inviolving a great deal of discretion, or requiring a huge investment of public trust (in contrast to the task of setting the interest rate). It would mostly be a matter of trial and error. Some forecasting would be necessary to assess long term adjustments in consumption and the development of alternative energy sources. But I don’t see why this couldn’t be done by a small team of researchers in the Treasury.

  70. Mike Pepperday
    January 12th, 2006 at 20:21 | #70

    Ernestine
    Oh, the castle in the air was just the idea that people should take charge of their own lives in the specific instance of setting the carbon tax.

    I see it as a castle in the air because generally we are not able to have such control. Our rulers don’t like it. They don’t think that people are rational. On the rare occasions when the people do have a say they nearly always get it wrong. The classic example is constitutional referendums (wrong 36 out of 44 times so far).
    Or consider another example of what happened when the people were allowed to control their own lives. They asked us whether we wanted daylight saving in WA. We said no. This was the wrong answer so they asked us again. Again we said no.
    Our rulers couldn’t accept we were really this irrational so they asked us a third time. Would you believe, the cretinous WA public messed it up again?
    Now to the pollies this is a clear lesson in the foolishness of allowing people to be in charge of their own lives.
    I am quite sure that anyone who (like me) ponders the mechanics and incentives of the people taking charge of carbon emissions is building castles in the air.

  71. Terje Petersen
    January 12th, 2006 at 20:36 | #71

    Ernestine,

    I answered all your questions except the last one, which I missed.

    Q1. Which jobs?

    A1. Jobs comparible to the ones seen as substandard (whatever that benchmark means).

    Q2. Which people?

    A2. I’ll rephrase the question. Why does the government continue to tax people who do jobs compariable to the ones seen as substandard (whatever that benchmark means).

    Q3. Have you noticed that Tony Abbott has understood the incentive problems arising from corporatised medicine? This is an important event.

    A3. No.

    Regards,
    Terje.

  72. Mike Pepperday
    January 12th, 2006 at 20:58 | #72

    James
    “the Board simply offers some kind of menu of choices, in which case its role is essentially one of gathering informatiion.”
    Yes – tax x% may be expected to yield y tonnes of carbon.

    “don’t give the impression you want the Board to be actually studying climate issues itself, and attempting to determine the effects of different targets.”
    No no – that is the wider debate. The board would suggest rates and consequences in tonnes of carbon; the govt would make its recommendations to the people and the people would take that into account along with the lines of other pushers of the debate, and make a decision.
    “these issues are, as we know, vast and controversial, and it would be impossible to define any trade-off that didn’t involve a huge margin for error.”
    They are complex. Who decides best – the people (after discussion) or the pollies whose mates tell them what the rate should be when they give their donation to the re-election kitty?

    “the Board’s only role would be to figure out what tax rate was necessary to achieve each target …an essentially technical task, not one inviolving a great deal of discretion..”
    Hmm. I am not sure that purely technical tasks are quite that objective. Whether Saddam had WMDs was purely technical.
    As you say – vast and controversial and so the board would be handling a hot potato and it would want to be seen to be impartial. I don’t think we can have it in treasury.

    The carbon board would be like the RBA. It and a few other agencies (electoral commission, auditor general and maybe one or two more) are independent of the executive govt – or pretty independent. I do think they are under-theorised.
    I know what you mean by saying not particularly democratic but it’s a matter of what you call democracy. If that is “the people ruling” then are the people ruling if the pollies are playing with interest rates prior to an election and a Jeff Kennett puppet AG is cooking the books? Or are they ruling when the pollies can’t get their clammies onto these things? We get into thinking that having elected reps rule is the same as having the people rule.
    Now SWIO’s putative carbon board was to distribute its spoils equally to all citizens so I thought: so let the citizens set the rate. That would be democratic.
    But it’s all castles in the air!

  73. Ernestine Gross
    January 12th, 2006 at 22:42 | #73

    Mike,

    Thanks for your kind reply. What you say is interesting for someone like myself who is essentially ignorant about politics. But I am much more optimistic about what you call ‘castle in the air’. It is conceivable. In my experience, institutional changes in financial markets followed theoretical work which belongs to the realm of the conceivable. There were difficulties and some persist. Some of these difficulties were ‘predictable’ in the sense of being conceivable possible outcomes (eg the impossibility of portfolio insurance by means of mechanised options trading). One could even argue that some of the difficulties were perhaps incidentally encouraged by throw-away comments by an influential politician at the time, such as ‘greed is good’.

    There is one point I’d like to raise. It concerns the notion of ‘rationality’. You have given two examples of ‘irrational behaviour’. On the basis of the information provided, I would not be able to conclude that the people’s decision was ‘irrational’. This issue comes up very frequently in the empirical literature in various social sciences (eg sociology, psychology). I am going to illustrate my point with the easier of the two examples, namely day light saving. To conclude that people have acted irrational in rejecting day light saving, one would have to have observations, one for each individuals, which allow a comparison between the decision and their actions. For example suppose the day light saving involves +1 hr during summer time, defined over a calander period. If one would observe that people who voted NO on day light saving but started their day one hour earlier during ‘summer time’ (approximately) then one would have a reasonable data set for rejecting the null hypothesis of ‘rational behaviour’. It wouldn’t be a water-tight conclusion because people may prefer to change the time of the ‘standard’ day at which they carry out activities of type X, Y, Z…., to changing the clock forward by 1 hour. If one really wants to be thorough, one could check this one out too. Sampling techniques could be used.

    I agree with you that the pricing of Carbon emissions (locally) would not be ‘technically simple’ – there are no existing prices which could be used to estimate demand (or income) elasticities. But there are methods in environmental economics that assist in eliciting information about people’s willingness to pay for a reduction in pollution. So, expert knowledge in economics and, of course, in the natural science, would still be required and government would be involved in several ways (enforcement, coordination, research – well in reverse order). Many people have experience in investing in financial securities (or horse races, etc). So, I am optimistic that their ability to deal with uncertainty is not the problem.

  74. January 12th, 2006 at 22:47 | #74

    Ernestine, my own MBA didn’t help me make a career change out of computers the way I wanted, mainly because I was after getting into something constructive (and I was still heavily typecast).

    As to where I got my own ideas about the desirability (rather than soundness) of an objective of winding back state involvement in pension provision, that is partly described in the article I linked to, partly comes from a full appreciation of the huge sovereign risk people face, partly from a distaste for being disabled by government squeezing out – and partly from looking at a graphical tool I worked out.

    I can only describe it here, and I doubt if it’s fully original. It has two time dimensions, age vertical and calendar date horizontal. An individual would be represented as a single 45 degree segment from birth to death.

    With this, it’s quite clear that even returns on past investments represent a vertical activity with interest or discount factors irrelevant. But on the other hand a mere transfer does nothing to build up transfer capacity further off to the right – corresponding to someone “getting back” what he “paid in”. I devised a wedge approach to make a smooth transition from one approach to the other, which would have an ultimate benefit of increasing capacity (I’d say “growth”, but that has a different technical meaning).

    Anyhow, I don’t like the heading for the skids inherent in today’s steady as she goes alternative any better than a cut the benefits and let the hogs root approach implied by a CIS style of not making offsetting resources available to individuals in a timely manner that they can actually do something with.

  75. January 12th, 2006 at 23:35 | #75

    Terje said : What is substandard about a pay rate that is higher than welfare benefits?

    Do I understand you correctly? Are you actually saying that any wage above the level of welfare benefits is not substandard?

    If you seriously think that anything just in excess of social welfare payments is not substandard, then you must be amongst a tiny and extremist minority in our community.

    In her Epilogue to “Dirt Cheap” (2005), Elisabeth Wynhausen wrote :

    … the ruthless restructuring that accounts for (Australia’s) new found efficiency has left almost one in five families jobless. Those who have work include 2.3 million casual workers who are largely denied ‘the perks of permanency – respect, security predictability, paid holidays and sick days.’ More than one in four Australian workers are casuals, pining for ‘perks’ like job security; one in three part-time workers want more work than they have; two thirds of young people have no choice but to enter the work force as casuals; and the most comprehensive Australian study of the changes in the workplace wrought by twenty years of the vaunted economic reforms suggests that one fifth of the workforce will be casually employed by the end of the current decade.

    Confronted with such figures, representatives of business organisations almost invariably demand more of the same, promoting the fiction that workplace reform benefits employees by giving them choice over conditions of their employment, a theme continued by the Howard Government. …

    Members of the overclass who promote such reforms have only profited from them, to judge from the widening wealth gap. Unabashed, they continue to scold low-wage workers about the need for wage restraint. Unceasing in their efforts to crank up the revolution they started (as if building a new country on the unloved bones of the old) columnists on six figure salaries rail against regular increases in the minimum wage, now $24,700 a year.

    In my experience as a low wage worker, the jobs all had one thing in common: I no sooner took them on than I, like my fellow employees, seemed to be rendered invisible. I was no longer consulted about my schedule, nor burdened with explanations about the nature of work I was hired to do. I found the lack of respect for employees most noticeable in the largest company I worked for, which doesn’t bode well for the other half-million or so casuals in retail, the fastest growing industry in Australia.

    I tried but failed to do what millions of Australians do every day, struggling to support themselves and their familes on $467.40 a week – less than twice the average rent for a two bedroom flat in Melbourne or Sydney. I managed to live on my income because I had no one else to support and no bills outstanding. I paid for my private health insurance, my home insurance and the cost of keeping the car on the road out of my savings. I put the $1868 for my car on my credit card and tried to forget it, but $1868 is hard to forget when it takes a month to earn.

    Terje said : How do you regard the people who already do these jobs?

    I think they deserve a lot lot better.

    Would you agree, or do you, instead, still think that they deserve to have their wages and conditions reduced even further as John Howard and his Government transparently intends to do to them?

    Terje said : Why do we continue to tax who do jobs comparable to the ones seen as substandard?

    I don’t know. Perhaps you should put that question to our boy genius Federal Treasurer.

    If they had simply automatically indexed the tax thresholds in line with the official inflation rate (or, better still, the true rate of inflation) all these years these problems would not have occurred to such an extent.

  76. Terje Petersen
    January 13th, 2006 at 00:11 | #76

    1. Clearly we take a different view. I would rather see people in paid employment rather than on welfare. And the low paid are not a permanent underclass so much as a group of people mostly in transition. Elisabeth Wynhausen (as quoted) implies a frugal existance without any hope for the future.

    2. There is no move to reduce the minimum wage. Over time it may decline in real terms. If it does it will reduce unemployment. However I am all in favour of a lift in the tax free threshold to reduce its burden on marginal workers. And if there is no lift in the tax free threshold I will continue to regard the tax burden as the source of hardship rather than IR laws. A full time employee on minimum wage should not be paying income tax.

    3. I would suggest that tax brackets should be indexed to wages growth rather than inflation. Or even better, tax brackets should be indexed so that income tax revenue remains static (in real per capita terms).

  77. still working it out
    January 13th, 2006 at 08:59 | #77

    Sorry I have been absent from the follow up to my original comments.

    Mike,

    I don’t think the Carbon Board should be elected. Their role really is limited to getting the Carbon Tax Rate at the right level to meet the Carbon Emission Targets. It really is a largely technical role, which is why I thought that an appointed board made more sense.

    The real democratic debate would be about the Carbon Emissions Target we wanted. This would have to be carried out within the existing democratic framework and ultimately would involve the politicians as they would be the ones setting the Carbon Emissions Target in legislation. However there is no reason that debate should involve just the politicians. The great advantage is that we can have a meaningful debate about the target we were after, and then have it set in stone. This would avoid giving politicians the chance to constantly re-jigg the system and allowing politicians to go about changing everything while our attention is elsewhere.

  78. January 13th, 2006 at 09:20 | #78

    Terje wrote : And the low paid are not a permanent underclass so much as a group of people mostly in transition.

    If we look at the example of the United States, as well as the experience up until now in Australia, we will find that there is every prospect of larger numbers of workers remaining a permanent underclass ‘living a frugal existence without any hope for the future’ as a consequence of these new laws. I recommend you read Barbara Ehrenreichs’ ‘Nickel and Dimed’ and ‘Bait and Switch’ and (which, as well as “Dirt Cheap”, seems to somehow have escaped the attention of the CIS‘s ‘social research director’ Peter Saunders, in spite of his case for ‘reform’ having been based on the supposedly positive experience of the US.)

    Elisabeth Wynhausen also has something to say about the US:

    They often point to the United States to bolster their argument that keeping wages low creates jobs, but the argument was less convincing by 2004. On 19 August, the New York Times reported: ‘The labour market only adds a trickle of new jobs each month despite nearly there years of uninterrupted economic growth … there are still about a million fewer million jobs in the United States than there were at the beginning of 2001.’(“Dirt Cheap“, p 233)

    In any case, even if we accept that low pay increases job opportunities, as appeared to be the case when Barbara Ehrenreich wrote “Nickel and Dimed” in 2001, just what sort of demeaning work should we force people to accept? She writes of workers who work flat out for hours on end, rushing in and of houses they are paid to clean. One, on one occasion, would not even stop to seek medical attention when they badly strained her ankle, so worried was she that she would lose her job. People who do these jobs are subject to all sorts of ritual humiliations including the requirement to supply urine samples to test for the use of recreational drugs.

    This is the future which Australia faces. Perhaps, you truly believe what you have written above that, somehow it will miraculously finally turn around and everyone will achieve the prosperity that was promised to all of us more than 20 years ago at the outset of the neo-liberal ‘reform’ process, but as Crispin has observed elsewhere, many employers fully understand just how these laws will completely screw large numbers of ordinary Australians and are relishing the prospect.

    Terje wrote  I would rather see people in paid employment rather than on welfare.

    So, would I, but only if it is stimulating, socially beneficial, decently paid and with decent career prospects. This is not the case with nearly all of the 2.3 million casual jobs referred to by Wynhausen.

    If the ‘free market’ can’t give this to ordinary Australians, (not to mention many of today’s unemployed IT graduates), isn’t it time that the Government did so, instead, as US President Roosevelt did in the 1930′s when his Government’s “New Deal” employment programs provided dignified work, which was of immense value to the US economy, to millions of previously unemployed Americans?

    Terje wrote  Clearly we take a different view.

    It’s not just you and I who ‘take a differnt view’.

    It’s you and all of those people whom you claim will be the beneficiaries of these ‘reforms’, as well as you and the majority of the Australian electorate, who take a ‘different view’ on these questions. Given that we have all just been subject to the most lavish taxpayer-funded propaganda campaign in our history, as well as the usual biased dishonest spin that emanates from our newsmedia, I would suggest to you that the public’s strong opposition to the IR ‘reforms’ is emphatic (although I am not able to comment on the ‘welfare to work’ legislation as I am not aware of any public opinion polls taken).

    Why the fixation only on welfare recipients?

    I find it noteworthy that the neo-liberals are so fixated on the relatively small amount of wealth which is transferred towards the more underprivileged in our society.

    Why not also pay some attention to the ongoing scam of property speculation, where those who failed to buy themselves shelter when it was relatively cheap are now paying through the nose for the unearned windfall profits of those who able to snap up the houses or apartments in which they now live?

    In 2001, when I was a reluctant spectator in negotiations for the sale of an investment rental property, the real estate agent shamelessly pointed out to my friend that for every three investment properties bought, the renters effectively pay for one.

    Why do you apparently find this transfer of wealth, away from the rest of us, towards a sector which makes no tangible worthwhile contribution to our society, to be any less ‘offensive’ than the requirement for both of us to pay taxes for social welfare?

  79. still working it out
    January 13th, 2006 at 09:26 | #79

    I share your frustration with our political system’s failure to fully represent the will of the people.

    Have you looked at the concept of “Demarchy” as a possible solution?

    http://en.wikipedia.org/wiki/Demarchy
    http://www.uow.edu.au/arts/sts/bmartin/pubs/92kio.html

  80. January 13th, 2006 at 09:27 | #80

    Terje,

    Also, of course I agree with your points about raising the tax-free threshold, but even if it were done it could not begin to fairly compensate for the effects of the new laws.

    I put it to you that the reason that the Government keeps these unfair tax thresholds in place is that they perfectly intend to gouge ever dollar they can out of the poor.

  81. Mike Pepperday
    January 13th, 2006 at 10:51 | #81

    Ernestine
    Thank you for your attempt at a non-tautologous definition of rational. My definition was simpler: whenever the people disagree with the pollies, the people are ipso facto irrational.

    That is why the people are not permitted to run their own lives (except for the occasional relatively inconsequential item such as daylight saving or a national anthem). At least, irrationality is their excuse. Another explanation would be lust for power.

    They will never allow the people to set the carbon tax. Never. On that basis (that alone), the concept is pure castles in the air.

    SWIO
    Okay, I am persuaded (from James Farrell’s post too): we don’t need to elect the board.

    My whole premise was that the people, and NOT the legislators, would set the tax rate.

    This “demarchy” is even more of a fantasy. At least what I was suggesting does function in numerous successful polities.

  82. James Farrell
    January 13th, 2006 at 21:03 | #82

    Mike and SWIO

    The reason we have an independent central bank is that monetary policy involves a large measure of discretion. This discretion is exercised (1) in reading the mechanics of the economy – how low can unemployment go before wage pressure emerges? how sensitive are investment and cnsumption to intetrest rates? and so on – and (2) in judging what’s the optimal balance between price stability and short term growth, to keep us on the highest sustainable longer term growth path. These judgements are beyond the competence of voters, and can’t be entrusted to politicians. In the context of monetary policy there’s the additional factor that the objectives of the policy are achieved in large part simply by influencing people’s expectations: that is, as long as people think the central bank has inflation under control, they are less likely to take actions that cause inflation.

    Few if any of these considerations apply to the setting of a carbon tax rate. Obviously, as we’re falling over ouselves to agree, the choice of an appropriate emission levels is complex and controversial – indeed more so than the management of interest rates. But, as you’ve now made clear, you don’t actually want your board to be concerned with that side of it. The task you have in mind – determining the tax X that will deliver emissions level Y – is much simpler and more transparent than setting the cash rate.

    I’m not dead against having an independent authority, though. It’s just that, if we can’t trust the Treasury to get a particular tax right, then we probably can’t trust them with fiscal policy either. You might be interested in Nicholas Gruen’s proposal for an independent fiscal authority. (I’ll ask him for a reference in case you don’t already have one.)

  83. January 15th, 2006 at 18:22 | #83

    Terje, one problem with the idea that the lowest paid are not in a permanent situation but only moving through is, that we aren’t in equilibrium. There is at the moment a new lot coming in at the bottom. What happens when the music stops? Will the moving through stop? Or, if it doesn’t stop for a while, will the bottom get even lower?

    Another problem, of course, is to know how accurate that idea that people are moving on and up actually is. If it were true, demographics and/or unsustainable immigartion would mean an entrenched demographic split too, which is really only a good thing in a static society (which is of course not intrinsically bad, but we’re certainly not used to it).

  84. James Farrell
    January 16th, 2006 at 05:53 | #84

    Here’s the case for an independent fiscal authority, as promised above. Forgive my cruelty in keeping you all on the edge of your seats.

  85. Ernestine Gross
    January 16th, 2006 at 10:57 | #85

    P.M.Lawrence,

    Thanks for your reply. I think I’ve worked out how you characterised and analysed the transition problem. For reasons given below, I don’t wish to spent time on the transition problem.

    I don’t wish to make a blanket statement on CIS publications, partly because I haven’t read all of them, partly because I’ve come across some papers in the past, which I would consider well researched and non-dogmatic, and partly because I’ve come across a few where the authors seem to say what they seem to think the audience wants to hear – empty would be one way of describing the content.

    The Humphreys 2005 paper on taxation contains a confusion of a 19th century economic theory result, known as the marginal productivity theory of income distribution, with reality. That is, Humphreys states, as a matter of fact, ” In the labour market, people’s wages will approximate their level of marginal productivity.” He does not provide any empirical evidence or references to empirical evidence. I cannot take seriously a paper which is fatally flawed in this manner. He also copies Milton Friedman’s 1962 idea of a negative income tax (acknowledged) without being apparently aware that since then many countries including Australia, have adopted a goods and services tax (GST). I don’t believe Milton Friedman can be held responsible for this flaw.

    Saunders’ seems to wish to substitute 20 million bureaucracies for one, while ignoring the possibility that the transactions costs involved might be larger than the total future funds which he wishes to ‘decentralise’. Why, I ask, would somebody who pays 16% interest on a credit card loan on an amount that is at least equal to the value of the ‘personalised future fund’ benefit from any of the calculations shown by Saunders on how the personalised future fund could replace, or partially replace social services? Saunders includes the proceeds of the completion of the Telstra sale in the hypothetical future fund to be ‘privatised’. If I may suggest, there is a much easier way of completing the privatisation. The government could distribute the remaining shares to the residents of Australia. Given the numbers involved, I don’t believe it would matter much if the shares would be distributed equally or according to some weighted average of past contributions (mixture of taxes and subscription) – I would be indifferent.

    So, what is one to do with two papers which present solutions to problems which do not exist, without addressing problems people talk about, namely deterioration in the provision of public services (health, infrastructure, education), the level of private debt, housing affordability in Sydney and other capital cities, the decline in the ability of individuals to look after their retirement by means of small scale (individualised) property speculation as a result of large corporations having entered the field, people being forced to choose from products offered by corporations which do not have the international trade account in their objective functions, and the increase in uncertainties created by the new Industrial Relations Laws?

    I would imagine there is some clever expression, attributed to a traveller to or from Dublin, which could be an appropriate answer.

  86. Ernestine Gross
    January 16th, 2006 at 10:59 | #86

    Mike,
    Thanks for your reply. I did not attempt to resolve a tautology; there was none to be resolved.

    There is a distinction between a definition of a concept (eg rationality, as defined in mathematical economics, game theory, and decision theory) and the derivation of a testable hypothesis, given the definition of a concept. The former belongs to the creation of theoretical knowledge, the latter belongs to the creation of empirical knowledge. I have given you an example of the latter, using a definition from the former.

    I can’t see how “the pollies” have anything to do with your conclusion.

  87. Terje Petersen
    January 16th, 2006 at 12:22 | #87

    Perhaps, you truly believe what you have written above that, somehow it will miraculously finally turn around and everyone will achieve the prosperity that was promised to all of us more than 20 years ago at the outset of the neo-liberal ‘reform’ process, but as Crispin has observed elsewhere, many employers fully understand just how these laws will completely screw large numbers of ordinary Australians and are relishing the prospect.

    1. I truely believe what I have written (baring typographical or errors in articulation). You seem slightly doubtful.

    2. We may have the rhetoric of “liberal” reform (ie privatisation and reduced tariffs) however we have taxation at record levels (ie high tariffs on domestic trade). For what it is worth I would happily have skipped the privatisations and reductions of import tariffs if we could have stuck with a low tax structure.

    3. I met another couple on the weekend who have faked their separation so that she can claim sole parent benefit and a study allowance as well as rent assistance.

    Our welfare system is sick to the core. We are shoving welfare at the middle class. We are shoving welfare at industry. We are locking the unskilled out of markets by rubbishing incentives on both sides of the fence (employer and employee).

    I don’t blame the current government any less than the ALP. Both sides have let simplistic appeals to short term majority sentiment get in the way of creating a meaningful system.

  88. Terje Petersen
    January 16th, 2006 at 12:30 | #88

    I should have said “a working system”. No doubt the current system is “meaningful” to some people.

  89. Ernestine Gross
    January 16th, 2006 at 13:22 | #89

    Terje,

    Do you mean to say ‘short term minority sentiment’ rather than majority sentiment?

  90. Terje Petersen
    January 16th, 2006 at 14:23 | #90

    Ernestine,

    No. I meant that in the short term the sentimentality of the majority (eg in the heat of election) can be swayed towards bad policy. Political parties exploit this all the time.

    In practice a lot of people are loyal party voters (ie party trumps policy). So in practice it is probably an appeal to the sentiment of the uncommitted voters that swing elections. I am not going to die defending my comment about it being the majority. It was not central to my point.

    Regards,
    Terje.

  91. Ernestine Gross
    January 16th, 2006 at 15:42 | #91

    Terje,
    ” For what it is worth I would happily have skipped the privatisations and reductions of import tariffs if we could have stuck with a low tax structure”.

    I don’t think you can justify your current wish list by means of wishing that the past had been different.

    You once asked me to make a guess on monetary systems and I refused. However, I am prepared to make a guess now. The uncertainties created by the latest ‘reform’ – the industrial relations laws – have introduced more uncertainties for people. My best guess is that the best policy on taxation at present is to do nothing and wait and see what Ian Harper makes out of the Commission he is heading and to wait for the results from that.

    Incidentally, I have also spoken with people over the week-end. I found that the people who currently have their children in private schools resent it. They would be prepared to pay a little more tax to have a well functioning public school system. They don’t think the problem is with the teachers but rather that the teachers’ authority has been taken away and the education department does not support teachers against legal actions brought on by parents who seem to vent their anger on teachers that their prodegees aren’t all ‘Einsteins’ and some parents can’t cope with the news that their children are not well behaved in school.

    My sample size is probably is big as yours.

  92. Terje Petersen
    January 16th, 2006 at 22:05 | #92

    They would be prepared to pay a little more tax to have a well functioning public school system. They don’t think the problem is with the teachers but rather that the teachers’ authority has been taken away and the education department does not support teachers against legal actions brought on by parents who seem to vent their anger on teachers that their prodegees aren’t all ‘Einsteins’ and some parents can’t cope with the news that their children are not well behaved in school.

    That seems entirely consistent with my own sampling. The only problem is we used to have a functional public education system and a much lower tax burden. Mission creep is cripling government agencies.

    I don’t think you can justify your current wish list by means of wishing that the past had been different.

    I agree. However I also don’t think James can dismiss my current wish list (lower taxes, less state) by simply complaining about “the prosperity that was promised to all of us more than 20 years ago at the outset of the neo-liberal ‘reform’ process”.

    The uncertainties created by the latest ‘reform’ – the industrial relations laws – have introduced more uncertainties for people. My best guess is that the best policy on taxation at present is to do nothing and wait and see what Ian Harper makes out of the Commission he is heading and to wait for the results from that.

    Nice to see you take a position on something. Perhaps it means that you have overcome your fixation with never being wrong.

  93. Ernestine Gross
    January 17th, 2006 at 07:27 | #93

    Idle speculation on your part, Terje.

  94. Terje Petersen
    January 17th, 2006 at 08:28 | #94

    No doubt.

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