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Archive for March, 2018

Economics in Two Lessons, Chapter 7

March 27th, 2018 24 comments

Thanks to everyone who the first six chapters of my book, Economics in Two Lessons. That brings us to the end of Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.

Now its time for Lesson Two: Market prices don’t reflect all the opportunity costs we face as a society.

I’ll start with a brief intro and then the draft of Chapter 7: Property rights, and income distribution

As usual, I welcome comments, criticism and encouragement.
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Categories: Economics in Two Lessons Tags:

Fortune favours the brave (updated)

March 27th, 2018 75 comments

Most of the political commentariat were convinced that Bill Shorten had got things badly wrong by announcing his policy on dividend imputation immediately before the Batman by-election. It was even more striking that, despite the pressure, Shorten didn’t cave into demands for changes to the policy. Michelle Grattan, for example, described the policy as an “own goal“. After Labor’s easy win, she backed off a little bit, but still claimed that Labor “has a selling job“. M

Maybe so, but I’d say the government is the one that has scored goals for the other side.

(Update 27/3) As predicted, Labor has tweaked the policy to exclude pensioners. That blunts the remaining lines of attack, but doesn’t cost much money, since the benefits go primarily to high-wealth self-funded (but massively tax-subsidised) retirees. By waiting until after the Batman by-election and the latest Newspoll, Labor looks gutsy (even Dennis Shanahan in the Oz conceded this) and Turnbull looks even weaker than before

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Categories: Tax and public expenditure Tags:

A sign of the times

March 27th, 2018 51 comments

Is the ball-tampering crisis:

(a) A sign of our national obsessions with sport, trivia and scandals at the expense of more important issues;
(b) A symbol of the socially corrosive and corrupting effects of neoliberalism;
(c) The End of Western Civilization As We Know It

Vote below

Categories: Sport Tags:

Grattan unreliable on electricity networks

March 26th, 2018 14 comments

The Grattan Institute has just released a report blaming high electricity network costs on public ownership and excessive reliability standards. I commented on a draft of the report, but there wasn’t much change in relation to my comments.

My comments are over the fold. Let me offer the following, slightly ad hominem argument. Grattan has backed the National Energy Guarantee, a radical change in Australia’s energy policy, which was justified mainly by the occurrence of a single blackout in Adelaide. Yet it asserts (without any evidence I can see) that the responses to earlier blackouts in Queensland and NSW represent unjustified “gold plating”.

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Categories: Economic policy, Environment Tags:

Francis Bator has died

March 26th, 2018 4 comments

Francis Bator, the economist who popularized the term “market failure”, has died at the age of 92 after being hit by a car. His NY Times obituary is here.

Francis’ passing is a cause of sadness for me as my book, Economics In Two Lessons draws heavily on his work from the 1950s and 1960s. He had read excerpts on Crooked Timber and corresponded with me about it, much to my surprise and delight. I was looking forward to sending him the manuscript but now I won’t get the chance.

Categories: Life in General Tags:

Sandpit

March 26th, 2018 2 comments

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

Categories: Regular Features Tags:

Monday Message Board

March 26th, 2018 29 comments

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:

Another High Court disaster

March 22nd, 2018 16 comments

The High Court has done a great job in messing up Australian democracy with its absurdly literalistic reading of the Constitutional provisions on dual citizenship. It’s now added another layer of disaster with its refusal to hear Labor’s attempt to have Liberal MP David Gillespie disqualified on the basis that he rented space to an Australia Post outlet.

Of course, this case is utterly lacking in merit. Had the High Court heard it, and thrown it out without retiring for consideration, I’d be cheering them on.

In fact, however, they refused to hear the case because Labor couldn’t get the Parliament to refer the case, relying instead on a “common informer”.

So, we are now in the position where a Parliamentary majority can move to disqualify anyone on the opposing side, and the High Court will assess whether they have breached any of the byzantine rules they have constructed, rules that might potentially disqualify anyone who has ever taken money from the government, or had foreign born parents, or is Jewish, or can’t document every aspect of their ancestry back to the Paelolithic era. But if there is no such majority, it seems that there is no recourse.

What’s worse is my total confidence that there will be lots of comments explaining how the High Court has protected us from the risk that someone might serve in Parliament despite getting their paperwork wrong.

Categories: Boneheaded stupidity Tags:

Government report cheers for wage cuts

March 22nd, 2018 30 comments

There’s been a lot of discussion recently about stagnation in real wages and the decline of the labour share of national income. In a recent Senate Submission, I made the point that there is nothing surprising about this

For the last 40 years, changes in labour market regulation have been almost uniformly anti-union and anti-worker, while public policy has been premised on the desirability of reducing wages.

I saw an interesting (and, I suspect, largely unconscious) illustration of this in a recent report from the grandly-titled Office of the Chief Economists. Among the many benefits of economic reform, the report cited the following

How does this relate to the wage share? When real wages are growing faster than GDP per person (and assuming a constant employment/population ratio, which is reasonably accurate), the wage share of GDP is rising. When real wages are growing more slowly than GDP per person, as they have done for the past 25 years or so, the wage share is falling. Looking at the beginning and end points we can see that wage growth has been slower than GDP growth over the period as a whole So, we can restate the conclusion as

Under the labour market institutions that prevailed between 1951 and 1981, the labour share of income increased. Since then, thanks to the adoption of market based approaches, workers have lost all the ground that they gained in the postwar decades, and then some.

Categories: Economics - General Tags:

Economics in Two Lessons, Chapter 6

March 22nd, 2018 5 comments

Thanks to everyone who the first five chapters of my book, Economics in Two Lessons. Now here’s the draft of Chapter 6: The opportunity cost of destruction This is the last part of the book devoted to Lesson 1 Market prices reflect and determine opportunity costs faced by consumers and producers. and the one where I agree mostly with Henry Hazlitt’s Economics in One Lesson. It seems particularly apposite 15 years after the beginning of the Iraq War.

As usual, I welcome comments, criticism and encouragement. I’d appreciate any comments on/ alternative suggestions for the opening quote – it’s not a perfect fit, but the best I could come up with.

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Categories: Economics in Two Lessons Tags:

Adani: Put up or pack up

March 19th, 2018 7 comments

That’s my suggestion for the way Bill Shorten can resolve his continuing problems over the Adani Carmichael mine-port-rail project. To spell it out, he should set a deadline (say June 30) for Adani to achieve financial close for the entire project, and commence construction. If the deadline isn’t met, Labor should oppose the project outright. This is only a marginal variant on the position of leading Adani supporter, Jenny Hill, who suggested a six month deadline in February. So, it gives plenty of cover for those who have supported Adani to fall into line.

The big risk is that Adani will somehow come up with the money to fund the project. As Tim Buckley has pointed out, Gautam Adani is, on paper, rich enough to pay for it out of his own personal wealth, but he shows no sign of doing so. The basic problem is that, while India may not achieve its stated goal of eliminating coal imports, the long term trend is clearly down. That’s only going to accelerate with the shift to renewables, in which Adani itself is a major player. While Mr Adani would rather keep the Carmichael project alive on life support, he’s unlikely to risk his own fortune on such a marginal project.

The end of Adani’s project will entail the end of the whole idea of developing the Galilee Basin. None of the other potential mines have any chance of starting if Adani fails. That leaves open the broader question of a moratorium on new coal mines, which Labor will need to address sooner or later. But the threat posed by the Galilee Basin coal is so great that it’s worth an inelegant compromise.

Categories: Environment Tags:

Monday Message Board

March 19th, 2018 23 comments

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:

Changing places

March 17th, 2018 26 comments

When Malcolm Turnbull, as PM, first faced Bill Shorten, as Opposition Leader, I correctly surmised that this would be a contest between a bold and innovative leader, unafraid to put forward controversial policies if they were right for the country, and a timid pragmatist, tied down by secret deals with factional warlords, and standing for nothing. I just didn’t realise which was which.

Categories: Oz Politics Tags:

Economics in Two Lessons, Chapter 5

March 17th, 2018 5 comments

Thanks to everyone who the first four chapters of my book, Economics in Two Lessons. I’m continuing with policy applications of Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.
That will be followed by Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

Now here’s the draft of Chapter 5. Again, I welcome comments, criticism and encouragement.
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Categories: Economics - General Tags:

Where are the Greens going?

March 17th, 2018 84 comments

I haven’t had time to do a proper economic analysis of Labor’s proposals on dividend imputation credits. But you don’t need an economic analysis to see that making an overt appeal to conservative voters on the issue, as Richard di Natale has just done, is a very bad move if the Greens party wants to present itself as a left alternative to Labor.

Perhaps this is poor judgement in the heat of a by-election campaign, the significance of which seems to me to be greatly over-rated by all.

Alternatively, perhaps it indicates that di Natale is taking the Greens in a different direction. The obvious choices are

(i) A soft liberal centrist party in the mould of the Australian Democrats under Don Chipp
(ii) A serious push to displace Labor as the main alternative to the LNP

I don’t think there’s a real constituency for (i) and, to the extent that there is, it’s very different from the existing Greens support base.

I also don’t think (ii) has any chance of success. But, if it does, it will involve a lot of the kind of grubby compromises that are inevitably entailed in an attempt to put together an electoral majority. Labor’s shuffles on Adani and refugees are obvious examples, which have driven a lot of people to support the Greens. But now it looks as if the boot may be on the other foot.

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Categories: Oz Politics Tags:

Economics in Two Lessons: Chapter 4

March 15th, 2018 8 comments

Thanks to everyone who the first three chapters of my book, Economics in Two Lessons. I’ve learned a lot from the comments and made changes in response to some of them. These chapters have been a bit abstract, but now I’m moving on to some applications, which might be more interesting for some readers. Here’s the introduction to Part II

Lesson 1, Part II: Applications

The economic analysis showing how market equilibrium prices reflect the opportunity costs facing producers and consumers is elegant and, for a certain kind of mind, convincing.

For most of us, however, it’s more useful to see how the logic of prices and opportunity costs works in particular cases, sometimes in ways that conflict with strongly held intuitions. This will also give us more insight into the ways in which prices can fail to reflect opportunity costs for society as a whole, some of which we will examine in Lesson 2.
end

Now here’s the draft of Chapter 4:Lesson 1: Applications. Again, I welcome comments, criticism and encouragement.
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Sandpit

March 12th, 2018 5 comments

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

Categories: Regular Features Tags:

Monday Message Board

March 12th, 2018 32 comments

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:

Economics in Two Lessons: Chapter 3

March 10th, 2018 4 comments

Thanks to everyone who commented on Chapter 2 of my book, Economics in Two Lessons. I’ve learned a lot from the comments but haven’t yet had time to respond to them.

Now here’s the draft of Chapter 3. Again, I welcome comments, criticism and encouragement.

The book so far is available
Table of Contents
Introduction.
Chapter 1
draft of Chapter 2
Feel free to make further comments on these chapters if you wish.

The Generation Game is over (at least for me)

March 7th, 2018 19 comments

For more than a generation, I have been criticising the Generation Game, that is, the insistence on dividing society into groups based on birth year and imputing different characteristics to each group. Today, I’m following the classic advice for those involved in an endless war: declare victory and get out. The basis for my claim is that I’ve managed to publish my latest critique in the New York Times, under the headline ‘Millennial’ Means Nothing (paywalled*). I expect this will reach more people than anything I could do with the blog, so I will leave this topic and move on.

* It’s fairly easy to get around, I believe.

Categories: Politics (general) Tags:

Free speech, unfair dismissal and unions (crosspost from Crooked Timber)

March 5th, 2018 27 comments

(Reposted from Crooked Timber, hence written for a mainly US audience, but referring to the Australian debate.)

I’m seeing a lot of comments from the political right and centre-right worrying about the possibility that workers may be fired for expressing conservative views. For example, here’s David Brooks (paywalled, I think) linking to Andrew Sullivan.

It strikes me that this would be a really good time for people like Brooks and Sullivan to campaign for an end to employment at will, and the introduction of the kind of unfair dismissal laws that protect workers in most democratic countries, but not, for the most part, in the US. Among other things, these laws prohibit firing employees on the basis of their political opinions. Better still, though, would be a resurgence of unionism. Union contracts generally require dismissal for cause, and unionised workers have some actual backup when it comes to a dispute with employers.

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Categories: Politics (general) Tags:

Monday Message Board

March 5th, 2018 17 comments

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:

ABC biased against coffee?

March 2nd, 2018 24 comments

After the kerfuffle about Emma Alberici’s piece on company tax, I’m highly attuned to signs of bias at the ABC. And, sure enough, I just found one. Its an article on coffee consumption that quotes just one authority, Laure Bajurny of the Alcohol and Drug Foundation, where her Linkedin profile describes her as a content developer.

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Categories: Economics - General Tags:

A snippet on bounded rationality

March 2nd, 2018 25 comments

A Crooked Timbercomment on my last post, about Chapter 2 of my book-in-progress, Economics in Two Lessons, convinced me that I needed to include something about bounded rationality. I shouldn’t have needed convincing, since this is my main area of theoretical research, but I hadn’t been able to work out where to work this into the book. I’m still not sure, but at least I’ve written something I’m reasonably happy with. Comments, praise and criticism welcome as usual.

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Categories: Economics - General Tags: