TANSTAAFL

December 21st, 2012

At about the same time as announcing that Queensland was an economic basket case, requiring large scale sackings of public employees to balance the books, the Newman government called for tenders for a project that, among other things, involves demolishing the 1970s office tower in which the Premier, Deputy Premier and Treasurer work, and replacing it with a spiffy new one. Some might see a contradiction here, but according to Treasurer Tim Nicholls, the new building “won’t cost taxpayers a cent“.

I’m tempted to say “if you believe that, I have a bridge for sale”, but of course Australian governments of both parties have become adept in bogus sales of bridges, roads and assets of all kinds. So, I’ll quote the famous aphorism, There Ain’t No Such Thing As A Free Lunch.

In the case of the “free lunch” apparently offered by US bars in the past, it’s clear enough that you are unlikely to get the lunch more than once if you don’t order a beer or two, and that the price of the lunch is included in that of the beer. In a complex transaction like the current one, it’s not immediately obvious how we are paying for Mr Nicholls’ new office. Some of it is in the 15-year lease payable to the owners of the new building, some of it in land being given away with the deal and some of it, probably, in valuable rights being handed over free of charge. What we do know is that, when you can’t see the price of what you are buying it’s almost certainly higher than if you paid upfront.

Of course, we have a Commission of Audit, headed by former Treasurer Peter Costello, that is supposed to expose dodgy transactions in the State’s books. The Committee prepared its draft report over the same period as this deal was going down. The government hasn’t released the report. An amusing, but unlikely, possibility is that the Commission actually did its job and criticised this boondoggle, leading the government to bury the report. More likely, Costello has done his job by helping to create the panic needed to justify 20 000 sackings, and is now just an embarrassment.

Categories: Boneheaded stupidity, Oz Politics Tags:
  1. Ikonoclast
    December 21st, 2012 at 13:10 | #1

    The raison d’être for politicians in office, is to give money to your mates and get kick-backs in return.

  2. djm
    December 21st, 2012 at 13:33 | #2

    Cui bono?

  3. Doug
    December 21st, 2012 at 15:51 | #3

    Bow down and worship before real estate development … cranes as phallic symbols? surley this won’t go down well outside Brisbane?

  4. Fran Barlow
    December 21st, 2012 at 16:27 | #4

    Some might see a contradiction here, but according to Treasurer Tim Nicholls, the new building “won’t cost taxpayers a cent“.

    Nicholl’s could be right. You just have to keep in mind that “not a cent” does not mean “something less valuable than a cent” or “nothing”.

    I’ve never heard of someone undertaking a thing as complex as the design and construction of a public building for zero consideration and I cannot begin to imagine how Nicholls has found someone willing to do it. If there are indeed such folk about, why isn’t Nicholls commissioning quality public housing or getting them to build rail infrastructure or something of more use than the building they are demolishing?

    If, more realistically, the building will project will entail the privatisation of some valuable public assets at a firesale price, doesn’t this whole process inevitably diminish accountability in public finance? Given that governments are almost always better placed to borrow funds than are private businesses, what is the argument for allowing the private business to raise the funds and pass on this cost in the consideration for the deal?

  5. Edumak8
    December 21st, 2012 at 16:38 | #5

    QLDrs will be watching carefully who wins tender for this project given Newman’s background and family ties. Also Echo Entertainment has ties with James Packer and Casinos of course. Newman has rights to decide who gets casino licences. This was flagged by CEO of Sembawang, Ric Grosvenor, when their Gold Coast project fell through after a casino licence was denied. More casinos…just what we don’t need as a community!

  6. December 21st, 2012 at 17:17 | #6

    It’s a QLD magic pudding. Free buildings… why not free new homes for all, free ice-cream, and a free Ferrari. Think of all the jobs!

  7. Ben
    December 21st, 2012 at 22:06 | #7

    I thought we didn’t get our 30 November Costello “audit” because Can Dupe is on the nose even with LNP backbenchers, and the Premier doesn’t more trouble personally.

  8. rog
    December 22nd, 2012 at 03:39 | #8

    Obviously the costs to the govt are indirect and will be in rent and loss of assets equal to or greater than the cost of the building.

    The argument that 1970s architecture needs to be modernised (ie demolished) implies that modern architecture is unsustainable and begs the question, why bother going to all that cost for something so short lived?

  9. Hal9000
    December 22nd, 2012 at 08:31 | #9

    Both the buildings to be demolished in this deal have interesting histories.

    The glorious Bellevue Hotel had to be removed in the notorious midnight Deen Brothers demolition in order to make way for the Public Works Building. Much of the old Bellevue site is now Brisbane’s least friendly open space (despite its views of Parliament House, the Mansions and the Queensland Club), dominated by a strange statue of the Queen holding a handbag.

    The Executive Building has seen significant public investment in power, communications and other services so it can operate standalone as the natural disaster and terrorism/public order coordination centre. It has extensive basements and carparks sunk into hard rock at the highest point of William and George streets on land relatively immune to flooding. The new building is to be built on lower ground much closer to the river. I would hope the State’s records are not to be stored in the basement of the new building.

    The block bounded by Margaret St and the old Lands Office (now Hotel Conrad) includes the old Government Printer’s complex, consisting of a building fronting George Street, now the Registry of Births, Deaths and Marriages, and another building fronting William Street, now the Public Service Club. There is an enclosed public plaza between the two buildings, usually occupied by a bizarre mix of public service smokers and small wedding parties made up largely of recent immigrants and older couples. There have been no public statements to my knowledge about the future of these buildings and public open space.

  10. Visitor
    December 22nd, 2012 at 13:06 | #10

    So many dodgy LNP hacks in the background ready to tender for this process, and a tamed CMC that won’t stop corruption … that’s not just a new building – that’s an election-winning missile for the ALP!?? Launch when ready, General Disaster!

  11. may
    December 22nd, 2012 at 14:36 | #11

    does anybody think it’s likely that corruption and infiltration of the public service and political parties for commercially nefarious reasons is confined to just one ideology?

  12. enlightened
    December 22nd, 2012 at 16:37 | #12

    Ask Quirke the valuation of the William st Site that they are leasing to these Giant developers
    WORK OUT THE INTEREST the council would have got ON THE CASH IF IT HAD BEEN PAID CASH
    The leasehold fee will probably be about half the bank interest fee If these developers had to borrow the money from the bank So the ratepayers are probably paying these guys bank fees for them as well Legalised gangsters are rampant in Government and councils

  13. TerjeP
    December 23rd, 2012 at 10:58 | #13

    What we do know is that, when you can’t see the price of what you are buying it’s almost certainly higher than if you paid upfront.

    That nicely sums up my criticism of Medicare. Neither the doctor nor the hospital tell you what they just got paid for helping you. The Medicare levy is a meaningless number unrelated to any cost. And if I wasn’t somehow already paying for if through the tax system or mandated insurance I could just pay cash at the point of service. Some price transparency would be a truly wonderful idea.

  14. Patrickb
    December 23rd, 2012 at 23:08 | #14

    @TerjeP
    Yeah but, that’s how all insurance works and over time it’s proven to be the best way of spreading risk so I think you’re stretching your bow a little. The actuaries work out the premium based on the risk, it’s very scientific and removes the uncertainty a libertarian “pay per injury when it happens” kind of system would lead to. The history law of negligence is a useful study in this area. Although what this has to do with QLD public works isn’t obvious…

  15. J-D
    December 24th, 2012 at 08:36 | #15

    I don’t know what Medicare has to do with Queensland public works, either, but I don’t think of Medicare primarily as a system for buying individual services; I think of it as a system for providing a society with a minimum level of health care guaranteed for all and the desirable social consequences that flow from that. From that point of view, the relevant questions are: does such a guarantee actually have desirable social consequences? how effective is Medicare in providing such a guarantee? are there operational defects in the Medicare system that could be remedied at an aggregate cost less than the aggregate cost of accepting the defects? is the aggregate cost of the system an acceptable price for the social benefits? I think those questions are of much more general interest, and much more relevant to an evaluation of Medicare, than the question of how an individual visit to the doctor or the hospital affects the system’s budget.

  16. TerjeP
    December 25th, 2012 at 21:10 | #16

    Health care is for people not societies. And the people using medicare services can’t generally see the price of what they are using. And medicare is for society then perhaps the building in Queensland is for society also, whatever the heck that really means.

  17. Peter T
    December 26th, 2012 at 11:30 | #17

    “Health care is for people not societies”. Oh dear. Look up “epidemics”, “herd immunity”, “threshold effects” and related topics.

  18. Will
    December 26th, 2012 at 13:37 | #18

    The above illustrates yet another major flaw in current libertarian thinking. The bulk of healthcare spending goes towards the elderly, and most of that portion in the last six months of their life. Elderly with zero chance to repay large amounts of debt and zero future income potential. That is in no way an attractive market and can in no way deliver even mediocre healthcare outcomes. This is a monstrous market failure. But, we are told, the magic free market fairy will make everything better.

  19. Julie Thomas
    December 26th, 2012 at 15:03 | #19

    “Health care is for people not societies. ”

    One of the sacred libertarian mantras is; ‘there is no such thing as society; there are only individuals’.

    But it seems clear that the evolutionary mechanism that changed us from just another type of primate, into a distinctly different species, was the development of ‘society’. Perhaps, therefore libertarians might like to give the idea of ‘society’ a bit more respect and consideration.

    It could be one of the essential mechanisms, along with ‘the family’, that humans need to be able to raise decent individuals.

  20. Ikonoclast
    December 26th, 2012 at 16:31 | #20

    If society does not exist then humans don’t exist because humans are only collections of cells. There is no such things as a person only cells. But hang on a minute, that formulation is flawed too. There is no such thing as a cell only complex molecules. There is no such thing as a molecule, only elements. There is no such thing as an element only elementary particles. There is no such thing as an elementary particle only wave-form matter-energy.

    We see that libertarianism is a selectively reductionist philosophy. It can clearly recognise emergent phenomena only to a certain point (the emergence of the individual). Beyond that point certain emergent phenomena seem opaque to libertarians. Yet they are strangely inconsistent. They cannot see “society” but they can see “markets”. Markets are nothing if not a social phenomenon.

  21. TerjeP
    December 26th, 2012 at 22:18 | #21

    One of the sacred libertarian mantras is; ‘there is no such thing as society; there are only individuals’.

    That is news to me.

    Look up “epidemics”, “herd immunity”

    Admittedly there are some positive externalities. However mostly health care is a private good. I’ll readily concede ground on issues such as vaccination but this is hardly where the bulk of the money is spent.

  22. Julie Thomas
    December 27th, 2012 at 06:00 | #22

    News to you Terje? And yet you participated in the group delusion blog Catalaxy, and never noticed this claim being made?

    But then, you are not part of the ordinary libertarian ‘herd’. You are a bit more of an individual than the usual libertarian.

    It is rubbish that health care is primarily a private good.

    Every time an individual receives health care that enables them to increase their participation in society, they will be more efficient, more productive, less stressed and angry, etc and in that way every one of the individuals they associate with, the individuals who make up the society, will also be better off.

  23. Katz
    December 27th, 2012 at 06:06 | #23

    But as Will points out, a large element of the cost of Medicare is cross-subsidisation by the living for the dying. I wonder whether awareness of that fact would tend to strengthen or weaken support for the system as it currently operates.

  24. Jordan
    December 27th, 2012 at 07:04 | #24

    @Katz

    cross-subsidisation by the living for the dying

    But who gets paid for doing the services?
    Why did you stop only at dying? If those doing the services are getting the money and are living, wouldn’t that continue then that “living are subsidising living”? Maybe you just want to stop at one point in a circulating process that is called economy?
    The core of an economy is in Surplus Circulation, surplus as in “income spent on someone else” like in parents spending on kids, like savings used by someone else trough credit, investing in production or financial assets that will end up enabling someone else to use real product and services, not in Marxist sense.
    My spending is someone elses income.
    Spending so much money at the end of someones life is enabling someone elso to enjoy such spending for their benefit.
    In a world where a productivity is such that about 15% of working population can produce for substinance needs of 100% of population, what will other 75% of workers do? Isn’t good if they can work on providing services that will benefit in less and less visible benefits to individuals as less and less workers are needed to produce substinance products.
    In a evermore automated production, when robots will take over all production and needed work, what will able bodied people do all days unless they are orginised to provide marginal benefits to someone else?
    Money is nominal value, products and services are real value. Circulation of money only enables real value to be used. Surplus circulation is esential to an economy. Providing benefits to dying enables living to use real value trough Surplus Circulation.

  25. rog
    December 27th, 2012 at 17:52 | #25

    Terge presents arguments without evidence, as libertarians feel free to do. As for pricing transparency….

    http://www.medicareaustralia.gov.au/provider/medicare/mbs.jsp

  26. may
    December 27th, 2012 at 18:12 | #26

    i wonder if i’m a positive or a negative externality.

    “externality”
    what kind of word is that?

    something to do with making sure the costs are externalised so some-one else has to pay them?
    or is it a way of isolating realities inconvenient to an ideology?

    or. or.

    turgid’s pretty slick—he’s managed to sidetrack the discussion to the point where the topic almost becomes not worth discussing.

    i don’t think so.
    any chance of returning to the main topic?

  27. TerjeP
    December 27th, 2012 at 18:18 | #27

    Julie – I don’t regard Catallaxy as particularly libertarian.

  28. TerjeP
    December 27th, 2012 at 18:19 | #28

    Rog – not sure of your point. Please elaborate.

  29. TerjeP
    December 27th, 2012 at 18:22 | #29

    May – the term “externality” is quite common in economic discussions. Perhaps you are not familiar with it but that need not make it a sinister idea.

  30. may
    December 27th, 2012 at 18:26 | #30

    sinister—of the left hand.—-pertaining to female?

    never mind.

    as a common economic discussor, what does it actually mean in relation to the topic?

  31. December 27th, 2012 at 18:30 | #31

    I can confirm Terje does not think Catallaxy is libertarian.

    I also think a large number of coments directed at Terje are the mirror image of Catallaxy.

  32. may
    December 27th, 2012 at 18:37 | #32

    what’s cattle axy?

    alright JQ, i’m going now.

  33. December 27th, 2012 at 19:04 | #33

    Actually at present at that blog Sinclair Davidson is arguing black is white ( ABC etc) and naturally most agree.

    No-one has the presence of mind to realise they are merely showing anyone that reads that they are idiots.

    very sad. It used to be such a good blog as well.

  34. TerjeP
    December 27th, 2012 at 20:10 | #34

    May – externalities are costs or benefits not captured by the price mechanism. In the context I was using it my meaning was to accept that some of the benefits of health care, such as herd immunity, would never be fully encapsulated by a price mechanism. My assertion is however that most of the benefits of health care are private goods not public goods (ie the goods are excludable and rivalrous).And that as such a price mechanism would encapsulate most of it and would on balance be a very good thing. As John Quiggin indicated things usually cost more when prices are not visible. It would be better to have a transparent price system and to simply offer subsidies to certain groups as part of a social policy agenda than to have the current opaque system where few people know what things really cost.

  35. TerjeP
    December 27th, 2012 at 20:12 | #35

    p.s. For the record I think JQ is pretty much on the money regarding the property deal in Queensland. It smells fishy.

  36. Ernestine Gross
    December 27th, 2012 at 21:19 | #36

    Terje, I wouldn’t consider health services a ‘private good’ even though I’d agree a health service may benefit predominantly a person to the exclusion of others. One of the difficulties is the person receiving a health service is usually not in a position to judge whether it is necessary or appropriate. This applies to all specialist services (asymmetric information between the supplier and the ‘consumer’ is the problem). Changing the system to subsidies for certain groups, as you suggest, doesn’t solve this problem.

    As for property deals – the costs of finding out what is going on is another interesting problem outside the reach of price theory.

  37. TerjeP
    December 27th, 2012 at 21:44 | #37

    Are you saying that all specialist services in general are not “private goods”? Or merely that subsidies wouldn’t be effective? At the moment the asymmetry of information still exists and I don’t envisage a price mechanism would make it any worse.

  38. Chris Warren
    December 27th, 2012 at 22:30 | #38

    Just to set TerjeP straight…

    Public health care should not exclude anyone.

    Public health care should not create rivalry.

    If it does then some anti-social principle has intruded and it is the responsibility of democracy to fix this.

  39. TerjeP
    December 27th, 2012 at 22:34 | #39

    It’s like talking to a ten year old.

  40. rog
    December 28th, 2012 at 04:08 | #40

    It takes a particular state of mind to be a libertarian; here Ron Paul argues that govt is both too big and too small. The fact that the proliferation of weapons is related to the frequency of shootings is ignored.

    http://paul.house.gov/index.php?option=com_content&view=article&id=1817

  41. rog
    December 28th, 2012 at 04:10 | #41

    @TerjeP You claim that prices are obscured.

  42. rog
    December 28th, 2012 at 04:15 | #42

    @TerjeP Cattle axey claims to be Australias no 1 libertarian blog, a claim not in dispute? I would say that fear bordering on psychosis of govt is shared by all self claiming libertarians.

  43. J-D
    December 28th, 2012 at 08:24 | #43

    TerjeP :
    Health care is for people not societies.

    Medicare is a system for providing health care, but is not itself directly describable as health care. Perhaps you still nevertheless choose to look at the trees and not at the forest. I choose differently.

    TerjeP :
    And medicare is for society then perhaps the building in Queensland is for society also, whatever the heck that really means.

    If the building in Queensland is not for society, then there’s no justification for it at all. But even if it is for society, that doesn’t automatically mean it’s a good choice for society.

  44. Tom
    December 28th, 2012 at 08:30 | #44

    @TerjeP

    A interesting point you’ve pointed out is asymmetrical information of the price.

    http://www.kff.org/insurance/snapshot/oecd042111.cfm

    Not that this data by itself is enough to prove that single payer medicare is always cheaper than a competing market (e.g. USA have a near 1:1 ratio of public and private expenditure on medicare as a % of GDP and is at the top of the chart).

    Factors such as the food culture, average exercise, quality of the medicine and skill of the doctors etc. is obviously important as well but not included in the data even thou USA shouldn’t be lagging behind in the latter two.

    However, when you see all the single payer systems are cheaper (or indeed much cheaper) than the USA, you should also sense something is fishy with private providers at medical service.

    P.S. I know, I love criticising the US, but they are always so far ahead in mindless privatisation that there is no other better examples out there.

  45. Ernestine Gross
    December 28th, 2012 at 09:18 | #45

    Terje, I was saying your argument for your proposed policy change is not convincing and I gave my reason.

  46. December 28th, 2012 at 12:48 | #46

    rog, it can claim whatever it wants.

    Let’s face it evidence and facts is not a high priority there

  47. Ikonoclast
    December 28th, 2012 at 17:03 | #47

    For my New Year’s resolution I vow to not attempt to convince any person with facts and logic. My last three years or so of blogging (reading and writing) have demonstrated to me that facts and logic NEVER prevail against dogma. Since I never attempt (knowingly) to use lies and false logic, this will of course mean I will engage in no arguments at all.

    Let’s all hope I can keep to this pledge. We will all have a more enjoyable 2013 if I can do so.

  48. Jordan
    December 28th, 2012 at 20:56 | #48

    @Ikonoclast
    How much did YOU learn by presenting your arguments in those three years?
    I find more important how much i can learn about facts and about myself by argumenting my side then how important it is to persuade soemone else.
    I learned a lot from you, so it would be a shame if an oportunity for someone else to learn from you is lost.
    I appreciate that you were active and pray that you will break your stupid resolution.

  49. Jordan
    December 28th, 2012 at 21:07 | #49

    I also find that facts and logic do not prevail against the dogma, but i find that questions do.
    Questioning the resoning of dogmatic person can lead to his/her attempt to answer them and get to the right conclusions. Most trouble i find is in finding an assumtion that needs to be questioned about.
    Example; In advocating privatisation dogma claims that market is best price mechanism, which is true for things that have market competition, but what they want privatised do not have market competition.
    Talking only about such assumption can produce results in breaking up a dogma. Privatisation of natural monopolies do not have market price discovery.

  50. Ikonoclast
    December 29th, 2012 at 05:22 | #50

    @Jordan

    Yes, I learnt some things. I even modified my stance on at least one matter and learnt to be cautious on one or two other matters.

    I will continue to pose questions and to try to learn about a few matters. And as you say, asking questions alone can be effective in probing assumptions.

    But I won’t be arguing to attempt to sway, at least I hope not. I hope I have learnt my lesson in that regard.

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