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Archive for May, 2014

Piketty and nitpicky (updated with link to Piketty’s refutation of FT)

May 30th, 2014 168 comments

I have a couple of pieces up on the topic that’s likely to consume much of my attention for some time to come: Piketty’s Capital in the 21st century.

Here’s a long review article at Inside Story focusing on the conditions that have made Piketty a bestseller. And here, at The Drum is my take on claims by Chris Giles at the Financial Times that Piketty’s data is fatally flawed.

Update Piketty has responded to the Financial Times. To sum up, as I said in the Drum piece, the criticisms are (mostly incorrect) nitpicks except for the point about UK wealth inequality. Here Piketty’s demolition is convincing. The FT hasn’t used a consistent series. Rather, it’s taken a recent survey estimate (likely to underestimate wealth) and spliced it onto older estate data to produce the counterintuitive finding that the inequality of wealth hasn’t increased.

Categories: Economics - General Tags:

Campus reflection

May 22nd, 2014 54 comments

That’s the mild pun the Chronicle of Higher Education picked for my article (paywalled, but I’ve put my draft version over the fold) making the point that a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate. I make the point that, like the US health system and labor market, the US higher education does a great job for the 1 per cent who go to the Ivy League Schools (and whose parents are mostly in or close to the top 1 per cent of the income distribution), does an adequate but expensive job for the next 20 per cent or so, and leaves everyone else in the lurch.

This is important in the context of the Abbott governments proposed removal of caps on fees for higher education, explicitly aimed by Education Minister Pyne at creating a system in which we might have institutions like Harvard and Yale. I plan to write more on this, but the central point will be that, far from creating more places at existing universities, fee deregulation will give them incentives to shrink, pushing students out to the alternatives now being funded under HECS: for-profit institutions and the TAFE system (which has its own funding crisis), corresponding to the bottom tiers of the US education system, where all the recent growth has taken place.

Read more…

Categories: Economic policy Tags:

If it looks like a debt, walks like a debt and quacks like a debt …

May 21st, 2014 11 comments

I’ve finally got around to checking out the big-ticket item (estimated value $28 billion) in the Queensland government’s privatisation program, involving the electricity distribution sector. It’s called a Non-Share Equity Interest, and the Treasury web page explains its appeal to the government.

Under this option the State retains 100 per cent ownership of the ordinary shares in the network businesses and assets. Private sector participation occurs through a hybrid security instrument, a Non–Share Equity Interest (NSEI).

The private sector contribution will equate to the net funding for the capital expenditure requirement and therefore represents new capital injections.

The NSEI security is debt in its legal form, but classified as equity for tax and accounting purposes and these characteristics give the security it’s (sic) “hybrid” form. (emphasis added)

The returns on the NSEI are sculpted to reflect the holders proportionate interest in dividends and tax equivalents paid by the network businesses separately.

In other words, the government is replacing debt raised by the Queensland Treasury Corporation from the private sector with an instrument that’s almost identical, but is classified as equity, and can therefore be presented as a reduction in debt

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Categories: Economic policy Tags:

Monday Message Board

May 19th, 2014 141 comments

It’s (long past) time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Piketty Crossing the Delaware

May 19th, 2014 50 comments

Like lots of other readers of Thomas Piketty’s Capital, my big concern is not with the accuracy of the diagnosis and prognosis but with the feasibility of the prescription. Piketty’s proposal for a global wealth tax requires an end to the capacity of capital to escape taxation by exploiting the limitations of national taxations system, through tax havens, transfer pricing, artificial corporate structures and so on.

Given the limited record of success in past efforts to control global tax evasion and avoidance, Piketty is reasonably pessimistic about efforts in this direction. But the latest news from the OECD is remarkably positive. All members of the OECD (notably including evader-friendly jurisdictions like Austria, Luxembourg and Switzerland) have agreed to a system of automatic information exchange for tax purposes. Moreover, the “too big to jail” status of major banks engaged in facilitating tax evasion and money laundering, may finally be coming to an end.

On the face of it, the oft-repeated, but so far unjustified claim that “the days of tax havens are over“, may finally be coming true, at least for all but the wealthiest individuals. But the crackdown on individual tax evaders only points up the ease with which corporations (and individuals with the means to establish complex corporate structures) can avoid tax through a mixture of legal avoidance and unprovable evasion (for example, by illegal but unprovable internal transfers).

At the core of the problem is the ability to establish corporations in ways that make their true ownership impossible to trace. And, the jurisdiction most responsible for this is not a Caribbean island or European mini-state, but the “First State” of the US – Delaware, which has long been the preferred location for US incorporation by reason of its business friendly laws.

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Categories: Economics - General Tags:

Core promises (repost from 2008)

May 18th, 2014 55 comments

Now that Tony Abbott’s ‘fundamentally honest’ has joined John Howard’s ‘core promises’ in the lexicon of spin, I thought I’d repost this piece from 2008, urging Kevin Rudd to keep his (unwise and damaging) promise to adopt most of Howard’s proposed tax cuts.

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Categories: Oz Politics Tags:

Sandpit

May 17th, 2014 74 comments

A new sandpit for long side discussions, idees fixes and so on.

Categories: Regular Features Tags:

Weekend reflections

May 17th, 2014 28 comments

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Categories: Regular Features Tags:

Australian right a dumping ground for failed US ideas

May 16th, 2014 63 comments

It’s been obvious for quite a few years that the Australian rightwing commentariat takes most of its ideas from the US Republican party. A more recent development is that they seem to be importing ideas that have already failed in their home country. I mentioned Voter ID recently. My Twitter feed has also been full of factoids along the lines “48 per cent of Australians pay no net tax”, being pushed by Miranda Devine and others. Obviously these are derived from the “47 per cent” line made famous by Mitt Romney in 2012 [1]. We all know how that went for Romney, and of course we also know what’s wrong with the factoid. I’ll talk a bit more about the specifics over the fold, but it’s worth asking what’s going on here.

The most obvious point is that the Australian right hasn’t had any new ideas in 30 years or more. Everything in the recent Commission of Audit report (a more coherent version of the ideology reflected in a distorted fashion in Hockey’s Budget) could have been (and often was) taken from the 1996 version, and everything in the 1996 report could have been found in documents like Wolfgang Kasper’s Australia at the Crossroads published in 1980, and similar documents. Everything useful in this set of ideas was implemented decades ago: what remain are the items that are either permanently untouchable in political terms (eg road pricing) or unworkable for one reason or another (eg handing income tax back to the states).

So, it’s scarcely surprising that they need to import from abroad. But the US Republicans aren’t in any better state. Their big causes a decade ago were the culture war (primarily equal marriage which was seen as wedging the Democrats), climate denialism and the Global War on Terror, which was transmuted into the invasion of Iraq. Most of our current rightwing commentariat (Bolt, Blair, Devine etc) cut their teeth on this stuff, and have never really outgrown it.

The Repubs are now in a state of complete intellectual collapse, unable to produce a coherent position on anything, from immigration to health care to budget policy. They survive only on the basis of tribal hatred of Obama. Since that doesn’t sell well in Oz, the local right is forced to live on discredited failures like Voter ID and “47 48 per cent of the population are takers”.

It’s the combination of tired economic rationalism and imported tribalism that makes the Abbott-Hockey such a mess, and the efforts of its remaining defenders so laughable.

Read more…

Categories: Boneheaded stupidity, Oz Politics Tags:

Mean and tricky

May 14th, 2014 40 comments
Categories: Oz Politics Tags:

Bahnisch is back!

May 14th, 2014 24 comments

I missed the memo, but Mark Bahnisch, formerly of Larvatus Prodeo is back, at the (much more sensibly named) New Social Democrat. Not posting often, but I still have a lot of reading to catch up on. This, on the Budget and the crisis of Australia’s political class, is superb.

Categories: Metablogging, Oz Politics Tags:

The Budget, the bottom billion and the 1 per cent

May 14th, 2014 25 comments

My first Budget commentary is up at the Guardian. Teaser

No progress on tax avoidance, no sign that Australia will responsibly lead the G20, no reform of expensive concessions to the wealthy: this Budget is a massive moral failure

Categories: Economic policy Tags:

Don’t Follow Leaders, Watch The Parking Meters

May 13th, 2014 78 comments

The dispute over the Greens apparent intention to oppose a more progressive tax system has heated up again, on Facebook and elsewhere, especially given indications that the proposed return to indexation of petrol excise will be passed, as it should be. In combination, if pursued, these policies can be presented, with some justice, as pandering to the self-interest of the stereotypical Greens voter: high income, inner city, with no need to use much petrol.

I haven’t seen anyone defend the pro-rich tax policy on the merits, but I’ve had vigorous pushback from people whose views I would generally respect, taking the following lines

* Labor is doing the same thing, why pick on the Greens
* The policy may be right, but it’s being advocated for the wrong reason (deficit fetishism)
* The policy may be right, but it’s being put forward by the wrong people (evil Abbott government)
* This is only a small step, we need something much bigger and more comprehensive

I’ll respond to these points over the fold, but for the moment I want to observe that these excuses, or minor variants, can be and have been made for every policy sellout in the history of politics. No one gives them the slightest credence when they are put forward by people who aren’t close allies.

The fact that so many intelligent people are willing to buy this sort of case when it’s put forward by the Greens is evidence of the proposition that none of us is immune to the kinds of biased thinking that have completely corrupted the intellectual base of the political right. Fortunately, I think, the left as a whole is more self-critical, so that this kind of reasoning gets a tougher run. But for me, this emphasises the importance of not being aligned with any political party to the extent that loyalty clouds my judgement on the issues. That doesn’t immunise me from various kinds of biases, but at least it helps with problems like this.

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Categories: Oz Politics Tags:

Voter suppression comes to Oz

May 13th, 2014 11 comments

I’ve been commenting for a while on the descent of the Australian right into tribalist politics, largely imported from the US Republicans. Even people you might expect to be unaffected like this, such as Joe Hockey, come out with tribal shibboleths such as his statement that wind turbines are offensive[1]. A striking instance of this is the campaign for voter ID, now being pushed by the Murdoch press. Those involved in this shameful exercise include Clive Palmer, Jarrod Bleijie and the Liberal party apparatus, none of which is surprising. More depressing is the fact that Malcolm Turnbull is part of the push. It really seems that there is no hope for a sane and decent conservatism[2] in Australia.

This Republican strategy for suppressing voters works well in the US where registration and voting are both voluntary and (for poor and black people) as difficult as the Repubs can make them (though of course, they have nothing on their own former incarnation as Southern Democrats, in the years before the Voting Rights Act. It’s hard to see this working to suppress votes in Australia, unless voting is made voluntary. Even if you are sent home for not having ID, the requirement to vote is still there. More generally, the whole ethos of Australian electoral systems has been to promote voting[3]

In any case, the timing of this latest foray into tribalism looks pretty bad. US courts are striking down voter ID laws following the obvious evidence that they suppress legitimate voters rather than stopping fraudulent ones. In many cases, the proponents of the law have been unable to produce a single instance of in-person voter impersonation (the only kind of fraud stopped by ID laws).

fn1. As, I think Fran B commented on my Twitter feed, George Brandis will doubtless note that “but they have a right to be offensive”! Brandis, another supposed “wet” has been busy outing himself as a conspiracy-theoretic climate denier
fn2. AFAICT, self-described libertarians are no better on this
fn3. Howard tried some dirty tricks to stop newly eligible 18 years olds from voting, but this is tinkering at the edges.

Categories: Oz Politics Tags:

On the Run: Fugitive Life in an American City

May 7th, 2014 20 comments

I got a review copy of this book by Alice Goffman a while back, and have been meaning to review it, but the multiple demands for Piketty reviews, responses, rejoinders to rightwing critics etc make it highly unlikely that I’ll get to it. So, I’ll just say that it gives some amazing insights into the way the War on Drugs is fought on the streets of US inner cities.

Categories: Books and culture Tags:

Wealth: earned or inherited

May 7th, 2014 91 comments

The efforts of the right to discredit Piketty’s Capital have so far ranged from unconvincing to risible (there’s a particularly amusing one from Max Hastings in the Daily Mail, to which I won’t bother linking). One point raised in this four-para summary by the Economist is that ” today’s super-rich mostly come by their wealth through work, rather than via inheritance.” Piketty does a good job of rebutting this, but for those who haven’t acquired the book or got around to reading it, I thought I’d repost my own response, from 2012.

Read more…

Categories: Economics - General Tags:

Zombie Apocalypse: Commission of Audit edition

May 5th, 2014 20 comments

I’ll be talking on this topic at a hastily-organized workshop at ANU tomorrow. Details here

Categories: Dead Ideas book, Economic policy Tags:

Licenses for cyclists?

May 3rd, 2014 95 comments

NSW Transport Minister Duncan Gay (seemingly one of the few NSW Ministers still in his job) has raised the idea of licenses for cyclists, in response to growing numbers of fatal and near-fatal accidents and (entirely justified) pressure for action against motorists who endanger fellow road users.

He can expect a negative response for a number of reasons. A license scheme is problematic, most obviously because children are (and should remain) free to ride bikes, but can scarcely be expected to pay license fees or sit for an exam. But the policy goal could be achieved without a license. All that is needed is to create a general right to cycle on roads, with no requirement to obtain a license, but with the courts having the power to suspend that right for cyclists who commit traffic offences. There’s no longer any practical requirement for a physical license. If an offender doesn’t have formal ID, a photograph or a phone would be enough to confirm identity in 99 per cent of cases (sad, perhaps, but true).

Then there’s the question of registration. Again, that’s a system that makes much more sense for cars than for bikes. But, if we had a proper system of road pricing, there wouldn’t be much difficulty in including bikes, though I suspect economic analysis would show their contribution to road costs to be very low.

Categories: Economic policy Tags:

Sandpit

May 3rd, 2014 93 comments

A new sandpit for long side discussions, idees fixes and so on.

Categories: Regular Features Tags:

Weekend reflections

May 3rd, 2014 16 comments

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Categories: Regular Features Tags:

Reviewing the Commission of Audit’s opening night

May 2nd, 2014 42 comments

I played my little part in the political theatre that was the Commission of Audit, with about 15 seconds on ABC Lateline. I’m pleased to see that other reviewers agreed with me in dismissing this tired remake of the 1988 and 1996 hits as stale and derivative. Attempts to gin up a bit of excitement by introducing the minimum wage as a new villain wnet nowhere, and reviving the golden oldie (last performed by Malcolm Fraser in the 1970s) of returning income tax powers to the states fell flat. And of course, a supposed audit of the public finances with tax expenditures cut out of the show is like Hamlet without the Prince. About the only thing to be thankful for is that they toned down the Hockey-Abbott melodrama of a debt crisis and budget emergency, preferring instead some dark murmurs about ominous long term trends.

I give it one star.

Categories: Economic policy Tags: