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John Quiggin 
Peter Costello and others (mainly property developers) have been suggesting that the recent increases in property values have been as a result of local and state governments not freeing up enough land for development. Supply constrains leading to price increases.
An article that is currently on the Local Government Association of Queenslands web site seems to suggest otherwise.
http://www.lgaq.asn.au/portal/dt
With money supply increasing by 10% a year (according to what I’ve read recently), maybe the former Federal Reserve governor would like to make some comments on how increasing the supply of money affects inflation.
Hope this is not too long, some thoughts on the student life stimulated by Alice Garner’s book.
The popular perception of the universities is likely to range from an unrealistic vision of ivy clad colleges and oak-lined studies to an extension of school with more spare time to spend in the playground, or a grinding apprenticeship for a well paid professional career. Preparation for a lifelong learning and serious scholarship would not rank high but it is a credit to Alice Garner that this aspect of the experience does feature in her small book “The Student Chronicles”(The Miegunyah Press, MUP)
One of the least discussed topics, even among educated people and intellectuals is the ecology of higher learning and scholarship. The design and maintenance of ‘the house of intellect’ in the language of Jacques Barzun. Throughout the explosive growth of the university system and the traumatic reform process that followed, major decisions were made without any clear understanding on the part of the decision-makers of the life of the mind that the universities are supposed to sustain. Among the reasons for this are the neglect of Barzun’s report on the outcome of the American experiment with mass higher learning (“The American University”, 1968) which anticipated the Australian experience by a couple of decades, and the dearth of reflective writing on student life.
Alice Garner has made a small contribution to the genre, small enough to be capsulated in an essay so the resources devoted to this book could have resulted in a collection to provide a wider cross-section of university experiences. The best part is Garner’s account of her studies, the philosophy essays that never seemed to get past definitions, the overwhelming majority of students struck dumb in tutorials, the discovery of hidden treasures in the library stacks, the deliberate progress through the whole of Plato’s “Republic”, the thrill of handling original research materials in a foreign land. Some of the tutorials worked, like one in Fine Arts with the right mix of people who were prepared to argue and laugh at the same time, and to continue the discussion at the pub.
There is a small chapter on the ‘tight little worlds’ of the residential colleges and this prompts some reflections on the general failure of the colleges to deliver their potential contribution to the life of the campus, given their proximity to the scene while the vast majority of students are nine to five students at best. A “Current Affairs Bulletin” (March 1967) carried a perceptive survey of student life including the comment that the colleges recruited conservative young people and then diverted their energies into the life of the college (though not intellectual life) instead of contributing to the student community at large. Hytten Hall, the short-lived secular college in Hobart, was apparently unusual in this respect because it did provide something like the experience of a community of scholars,
We are talking early to mid 1960s when about 3% of people went on to uni. The Uni of Tasmania had less than 2000 students and a little over 100 academic staff. There were three colleges for men, Christ College (C of E), John Fisher (RC) and Hytten Hall (no fixed religious address) and one for women named after Jane Franklin.
The tone of the Hall was set to some extent by the leadership, namely George Wilson the Warden and Mike Vertigan, the President of the resident body, a graduate in economics, previously a prefect at Launceston Grammar and currently the Chancellor of Tas Uni , after a period of public service high in the Victorian Treasury.
George Wilson was a big man in a small body. A kiwi with the silver-haired appearance of Einstein and Albert Schwietzer he coached the Uni rugby team and actually played for Tasmania at half back, aged 37 when he first arrived in town. Later it transpired that he had been friendly with Popper and Colin Simkin in Christchurch. Simkin was Popper’s closest friend from NZ and when we became friends (some decades after Hobart) he reported that during the war George was trying to organise militia groups with food and weapons hidden in the hills to fight on after the impending Japanese invasion. Popper told me that he worked with George on a committee to push for representation of academic staff at the University Council or perhaps the Senate. The Registrar grumbled “You will want the college porter on the Council next�.
George wanted his young men to work hard and play hard which we generally did, at least in the third term when everyone went into examination mode. Not that George or anyone else was in a position to force people to do much, apart from abiding by the reasonably relaxed rules of the college. Once in the early evening we raided Jane Franklin, what would have been called a ‘panty raid’ in US parlance but not knowing better we just threw a lot of bedding down the stairs and carried some back to the Hall. The warden of Jane Franklin did not enter into the spirt of the occasion and told George that she had notified the police, so he felt obliged to read the riot act and tell us not to do it again.
There was not a lot of organised college activity apart from a formal dinner dance each term and the annual game of football and cricket against the combined forces of Christ College and John Fisher. That hardly compared with the hectic roster of multiple sports played between the multiple colleges at some universities, notably Sydney. One year we put on a play, “The Admirable Crichton”, (What is natural is right!), performed in the dining room using sets home-made in the warden’s garage. That was in partnership with Jane Franklin, a great ice-breaker in social relations between the two camps.
About a quarter of the men in Hall were Asian students on the Columbo Plan, some of the cream of their generation who came to Australian universities to do engineering, economics and commerce. They tended to be studious and somewhat withdrawn from most activities, though many joined the campus badminton clubs and they provided the overwhelming majority of players at badminton intervarsities.
The common life of the Hall revolved around the common room and the dining room which gave off the entrance foyer to left and right respectively. People sat around in the common room to smoke and take tea or coffee after meals, play bridge, discuss the state of the world and generally avoid their room-mates and the work that they might otherwise have to confront in their rooms. I overheard some engrossing chat by overseas post-grads talking about their projects, politics, comparison of Australia and the US, etc.
Beyond the common room was a room with tables and chairs where people on the deadline for an assignment could get a break from noisy or distracting room-mates, and beyond that was a reasonably well-stocked library where George had decanted the bulk of his own collection. There I discovered Barzun “The House of Intellect�, Graham Greene, Arthur Koestler, some Bertrand Russell and many more. Also a well-thumbed copy of Balzac’s “Droll Stories�.
There were telephones in the common room and a PA system to summon people to take incoming calls and for other announcements of common interest or concern. One day there was a call at lunchtime call to get down to the Union building and vote to support Dennis Altman and block a move to have the student body ask the professional philosophers to lift their ban from the Tas Uni chair. This was a result of the Orr case that commenced some years earlier when Orr was dismissed from his lectureship in philosophy for alleged misconduct with a female student. It was widely believed that he was unfairly treated and the union of philosophers placed a ban on the chair of the department. A motion was before the student union that the ban be lifted, in the interests of students who might want to major in philosophy. Altman was speaking against the motion, in the interests of the Truth and High Principle, and with the support of fifteen or twenty men from the Hall the motion was lost by a narrow margin.
Getting back to the key point about the community of scholars, this was not planned or engineered, it was just there for anyone who was prepared to be interested in the work that other people were doing. The most obvious place to start was the room-mate, you could hardly ignore what they were doing, although often enough it was the same course because friends and course-mates obviously tended to room together. As it happened I mostly roomed with Arts men, and also talked a lot with other people doing non-science subjects. One of them showed me some offprints from a Geography journal, articles on location theory that alerted me to some of the problems of explanation in the social sciences.
The level of discussion in the Hall was no doubt helped by the fairly high level of ability of most students, practically all would have been on Commonwealth Scholarships, Ed Department scholarships or industry cadetships. Just about all were first generation uni students so there was not much family tradition of scholarship, but interest and ability made up for that to a large extent.
Here’s a test; Ask the next person you meet what percentage of the atmosphere is CO2
Answer?
What’s your IQ chrisl?
A genial post, Rafe.
Regarding “the problems of explanation in the social sciences”…
Do you (or anyone) know of some review paper that sets out what people have said as to how social science is different from natural science and to what extent this justifies different measures or markers of knowledge in the two branches?
What I read on the subject looks like it’s making excuses, to have the subtext: “We should RELAX the rules for social science because we CANNOT meet the standards natural science applies.” Overtly an article might show that social science is different (not less) but it comes across as special pleading. It seems most stuff has some kind of slant that justifies the author’s own program.
Know of anything that sets out the distinction authoritatively without pushing one view or the other?
Rafe,
That’s an interesting memoir of a bygone age. Reminds me of someone I knew who really wished he’d grown up in the Edwardian era (now he’s Master of a residential college – still pursuing the dream). My own memory of college life in that era is the horrible persecution of somebody close to me who happened to have a non-orthodox sexual orientation.
I’m glad to say however, that Altman & co were right about Orr. Apart from that, where are huge the mid-60s debates about The Pill, student rights, Vietnam war, etc? Didn’t you read Gramsci on the essentially conservative role of universities in those days?
Smiley said:
“The recent increases in property values have been as a result of”
Excessive stamp duty constraining the market and reducing supply.
20 years ago when I bought a median priced Sydney house the stamp duty was a minimal, nearly an insignificant amount of the purchase. Now the stamp duty on the median price Sydney house is the equivalent of the nett amount received for one year of average earnings. In other words, now an average worker has to work for over 12 months just to pay the stamp duty on the median priced Sydney house.
The burden of excessive and bloated government on young people today is criminal.
“”With buying and paying off a home the biggest financial event in most people’s lives, there simply is no getting around the fact that the unexpectedly rapid increase in home (including land) prices has significantly devalued the lifetime earnings of non-homeowners, particularly young people.”
http://www.smh.com.au/news/national/if-its-not-near-the-city-and-the-beach-its-fringe-dwelling/2006/11/03/1162340049852.html
As the article states, increasing supply at the fringes will do little to help supply.
The solution to the supply problem is to abolish stamp duty to free up the market.
Mike, you might like to contact me off list for references on explanation in the social sciences.
rchamp@bigpond.net.au
The approach that I favour is something like the “action frame of reference” that can be found in a number of places including Collingwood, the early Talcott Parsons, Mises and Popper.
http://oysterium.blogspot.com/2006/07/success-and-failure-of-talcott-parsons.html
http://oysterium.blogspot.com/2006/05/jack-birner-on-situational-analysis.html
Melanie, thanks:)
The period in question was 1962-1966 in Tasmania and the great debates had not started down there at that point. In Adelaide 1968 I could mention walking through Adelaide with a sign reading “Dont Bomb Hanio”.
I don’t recall a debate on the pill. All the girls I knew were just saying NO. (I had to move on to Sydney):)
The great debate was about abortion. Beatrice Faust (a founder of WEL) came to Adelaide in 1968 to help Anne Levy and others set up the local reform group. I shared a place with the man who became the Treasurer and when he got his brand new receipt book I was the first paid up member. That was Anne Levy’s start in politics, later she became the first woman to be President of the Upper House. She was the wife of my supervisor at the Waite Institute and often I ended up at their place for dinner on Fridays after the pub.
In Sydney abortion law reform was heavily promoted by the Humanist Society: we convened a sub-committee to address family planning (prevention better than cure) and I found myself on the Board of the Family Planning Association.
And so on!
Smiley commented on land supply….
In to-day’s SMH there is an article (and a superb graphic) refuting the high cost of housing being a function of bad state land release policies. House prices in Sydney are found to be directly related to closeness to beaches and CBD.
Given that new land for housing will be (by definition) the furthest from coast and CBD, little impact on cost of housing Sydney-wide can be expected from new land releases.
The data comes from Macquarie Bank….
Inflation is a drop in the value of money. In particular it is a drop in the value of currency which is the unit of account that denominates all debt. If the supply of currency (basically M0) increases then there will be inflation, unless demand for the currency also rises. So an increase in M0 is not in itself a problem.
Targeting interst rates is however stupid policy.
Shiraz Socialist, that argument simply does not provide enough information to refute anything. The problem is, you can easily have prices that vary with location and also with amounts being released. We don’t have a controlled experimental situation in which we can sort out one thing at a time.
That doesn’t mean the conclusion is false, it just means that establishing it would take rather more thorough statistical analysis than just looking at location correlations in isolation.
I agree. Increasing money supply to accommodate increases in population is a good thing. But 10%! I don’t think that our population is growing at that rate, so surely it is inflationary? But I guess it comes down to what you mean by demand. If you create a false demand (such as a mania) then of course your currency will be perceived as having a high value.
But who gets that 10%, and who makes up the rules for distributing it? Does the government create it and then use it to pay off debts/infrastructure/employees’ wages?
I agree, partially. Maybe interest rates can be a scalpel instead of a bludgeon, if they are applied at a different rate for different markets. A boom in one area of the economy should see a tightening of the money supply to that area, in the form of higher interest rates. Booms represent a risk of a bust occurring in the not too distant future, but why should they affect other areas of the economy that are not booming.
Maybe this is a mechanism that could smooth out the boom bust cycles. The question is, how do you police it? How do you stop someone from taking out a loan for one purpose, and then sneaking the capital into another investment, where they think they are going to get a higher rate of return?
Who said the RBA was targeting interest rates? Interest rates are the policy INSTRUMENT not the policy TARGET. The target is inflation.
PM Lawrence and real estate prices and location correlation.
Controlled experiments of the sort you imply are not generally feasible in economic research.
That said, the same logic that you use against the argument put in the SMH is applicable against Howard and Costello.
This pair have been trying to beat states (read ALP) about the head on land release policies, and thereby diminish the libs guilt_by_association with the coming/sharpening housing affordability squeeze.
As I have commented in the past, the interesting thing is how the inflationary effects of a lax money supply policy are confined to a few asset classes, eg. housing, sharemarket. The Govt. runs a deflationary environment for consumers (high taxes, vigorous union-bashing, low wages) but seems to happily tolerate asset inflation. Easy to guess why.
By the way, why does the “comments” box run now run way past the edges
of my screen, so that I have to either constantly use the little arrows on the bottom
to keep what I type in the visible area, or insert line breaks to stop running
off the edge?
Money supply, inflation and interest rates
I think most will agree that “money supply” growth should not outstrip “real growth in demand”. The trouble is these economic concepts are very difficult to measure.
nominal GDP growth = real GDP growth * inflation
nominal GDP growth = f (some function of)* money suppy growth
money supply growth = change in (money * velocity)
Measurements of “money” are arbitrary (there are lots of definitional issues) and subject to measurement error, including failure to take account of rapidly changing financial market structures and products.
Velocity of money can only be measured indirectly. Measures of money supply which do not take into account velocity are misleading.
The relationship of money supply growth to inflation and real GDP growth is also slippery, outside measurement difficulties because of changing structures and efficiencies.
Given all this, most countries look to money supply measurses as only one of a range of indicators of activity and inflation, and not a target for policy settings.
Interest rates as an instrument of policy are notoriously blunt in their impact. The central banks can only contain the impact of their national policies within the nation-state through the mechanism of a variable exchange rate. Otherwise we would all be running on US interest rates.
In the current context of a 2-speed economy in Australia (West and North inflationary, East and South stagnating), the one “obvious” way to corral interest rate impacts would be to have the impossibility of a West/North to East/South variable exchange rate.
The Euro area is a living experiment on trade-offs between regional and whole-of-market monetary policy settings and outcomes.
Watch out for “fiscal equalisation” type tax and subsidy policies to cope with the blunt instrument of interest rates.
But why does it have to be based on a geographic boundary? Why not an industry boundary?
I’m sure the farming industry would agree that in a time of drought, when they are not doing as much business, low interest loans would be a godsend.
Rafe those personal reflections were a pleasure to read. I was only a 9-5 student in those days unfortunately but the thing I remember most vividly was the amount of time we had to talk and debate (nothing relevant to our studies I hasten to add). I suspect that academic staff similarly had time to think and debate.
One of the hallmarks of today’s universities is that nobody has time to think or engage in reflective discourse. Students are too impatient to get back to their jobs to hang out on campus, and staff’s reflective discourse is usually limited to formal seminars … preferably associated with papers intended for DEST-approved publication.
In my endless optimism I hope that the blogosphere is re-creating a forum for genuine reflective discourse. For God’s sake let’s hope nobody tries to include a prescribed amount of blogging in academic staff’s workload models (random thought).
No I didn’t. In fact, stamp duty (as far as I am aware), is a percentage of the property value when it is sold. It is a function of the value, not the other way round.
But if you are a first time buyer, then come to Queensland where, if you buy a property below 250k in value, the state government will waver the stamp duty. This policy ensures:
1. That greedy real-estate agents and property developers don’t use the reduction in tax to jack up the price of housing (as they did with the first home buyers grant).
2. That first time home buyers keep their expectations low.
So I would suggest that other state governments adopt such a policy.
Mike
good question.
Not sure if this is helpful, because this is an old reference and probably not exactly what you’re after, but I remembered this article from back when I (briefly) studied this stuff:
McIntyre,A “The character of generalisations in the social science and their lack of predictive power”, Ch 8 in ‘After virtue’ 1981
Its not too long. However a search to see who has cited this chapter, or this author, in a more recent philosophy of social science text, might be more what you’re after.
Cheers!
Smiley and targeted interest rate policy…
Geography, industry, any other characteristic to distribute the pain of the blunt instrument of interest rate policy does not have a market means of implementation that I can see. Depositors and shareholders in financial institutions would not accept differential returns based on “artificial” boundaries of any sort.
The only mechanism I can see is fiscal action of some sort. Interest rate subsidies, paid to farmers or, in living memory, to financial institutions to keep mortgages at the pegged maximum of 13% before deregulation by Keating. Perhaps there should be a “Swan Riverbank location tax” or a “Sydney Harbour View Co-payment” to encourage alternative locations.
Of course there is nothing wrong with using the tax system and government expenditures to redistribute in favour of the disadvantaged, in my view.
At least in a democracy fiscal measures put the responsibility and the accountability for targeting policies on politicians subject to the ballot. Better than having technocrats perched in an ivory tower at the top of Martin Place pull direct regulation levers such as allocation of credit by industry, geography or whatever the flavour of the month is.
I thought the reason why it is called a blunt instrument is because every borrower feels the pain equally, irregardless of whether their industry is booming or not.
Given that Elders Rural Bank is generally considered a farmers bank (I stash some of my savings with them), couldn’t the Reserve Bank offer them a different short term rate when the farming industries were in difficulties? Surely the financing industry could be regulated to allow for different rates to be applied to different sectors, based on measurements (like the CPI) that the Federal Reserve calculates.
I guess the problem is, how do you encourage people to leave their savings in an industry that is not performing well?
Gee, you sound like a real socialist. But to some extent I agree. Something needs to be done to decentralise the population. Many of the problems that Australia faces seem to be directly related of our highly concentrated population centres.
I’m sure that the water crisis in South East Queensland would not be as drastic, if immigration in the last decade had been managed better and redirected to the regional centres.
Maybe the first home owners grant should only apply to housing outside the capital cities.
I was arrested last night for failing to obey a move-on order. I am seeking legal advice from anyone willing to offer it. The details and description of the situation are on my blog: http://yobbo.wordpress.com/
Yobbo, I’d go see a decent lawyer (sorry, can’t recommend one in WA). Probably cost you $150-$200 for the first meeting but they’ll tell you whether you’ve got any chance of fighting the charge and what it is likely to cost to do so.
According to the TV, Saddam Hussein has just been sentenced to death. I imagine JQ will muse on this shortly.
Smiley,
The Australian dollar is highly traded on world markets and is in amoung the top ten most traded currencies. Why would you exclude foreign demand from your assesment. If for instance foreigners were diversifying away from the US dollar I would expect that the Australian dollar might have a temporary bout of higher demand. During such times the supply would need to be higher simply to keep the value stable.
And in such an instance when the RBA needs to supply more aussie dollars to the market to compensate for the effects of global demand it may well be creating demand for other currencies. Fiat currencies can pile up as corresponding reserves in central banks with no net effect on value or inflation. Such is the contrived nature of a world with a multitude of floating fiat currencies.
Regards,
Terje.
Very interesting show on the ABC’s 50th birthday just ended. I can’t shake the impression that whilst the ABC was once a major influence on television in this country, its star has very much faded in the last decade or so.
Or is that just another example of grumpy old man syndrome: “things were better in my day”?
Ziggy Switkowski’s leaked report into the potential use of nuclear energy comes as no surprise. This is the sort of outcome you get when you ask a fox to write a report about the need for greater security for our hen houses! As a nuclear physicist, what else is he going to recommend.
The interesting aspect, however, is this is yet another example of John Howard mis-reading the political wind. Whether you support him or not, clearly John Howard has been an astute reader of the Australian political scene. However, over the past eighteen months there has been a steady stream of decisions that are starting to show that the once infallible “Howard nose” has started to let him down.
With this issue, there may be some supporters for Howard’s nuclear solution but none of them will want the reactor built in their back yards.
Peter,
This all assumes that your political nose is better than John Howards. He may in fact be catching some change in the wind that you are missing.
Regards,
Terje.