24 thoughts on “Monday Message Board

  1. Two recent concerns jump and land in one solution, in my mind.

    First, there was the OECD report that our Newstart allowance was probably below the optimal level. Second, there is persistent pressure to relax Fair Work regulations.

    Now, first, I suspect that chasing productivity gains through labour market regulations is a waste of time, and is only forced on the public discussion by ideological interests. However, would some strategic concessions not only placate the lobby, but possibly make some small efficiency gains in certain restricted industries?

    My thinking is that this might placate the business lobby, while also having the appearance of IR pragmatism. But the clincher is that in return for slight labour market deregulation, the Newstart allowance is seriously increased. Or rather, it is increased substantially for, say, the first year of unemployment, and then descends for each year of unemployment. This, I believe, is how unemployment benefit is distributed in Germany.

    This scheme would then be quite close to the Danish version of ‘flexicurity’. Labor could get a win by raising Newstart, and return, makes some FW concessions. Is there any prospect for the success of this? Is it even worth bothering with?

  2. All supply side attempts at solving unemployment have failed. Why persist with empirically proven failure? The only solution is a Job Guarantee, demand side economics and the general Keynesian approach of anti-cyclical budgets. Also, increase taxes on the top 20% earners with even higher rates for the top 5% and higher rates agains for the top 1%. General increases in social spending and targetted public programs would provide Job Guarantee employment.

  3. @RJL

    “First, there was the OECD report that our Newstart allowance was probably below the optimal level.”

    Has economic policy in Australia been outsourced to the OECD?

    Where does the OECD get the money from to write reports?

    Does the OECD take financial responsibility for its recommendations?

    “Second, there is persistent pressure to relax Fair Work regulations.”

    Where does this pressure come from?

    What does ‘relaxing’ Fair Work regulations mean?

    Is there any evidence that these regulations are followed by every member of society?

    How costly is it to enforce these regulations?

    How would you measure cost? In absolute monetary terms or in relative terms – relative to the financial resources of ‘the employer’ and ‘the employee’?

    I am not trying to waste your time with these questions. From the remainder of your post I gain the impression you are interested in a policy in a party political sense. If I may say, your thinking and your suggestions are of the type which is the subject of great dissatisfaction among people. It is concerned with playing perceptions games.

    Incidentally, according to the Sueddeutsche Zeitung, the idea that Germany provides a role model for a fair society in terms of economic wealth distribution via taxation and various forms of social security payments is outdated since the Schroeder Social Democratic Party was in power. It wasn’t immediately obvious but it is now. Last week-end, this paper reported that there is an increasing number of people in Germany that are a risk of poverty. The distribution of the fraction of these people across the country is very uneven, ranging from around 11% in Munich to about 27% in a former East German city. These people include Hartz IV (unemployment benefit) recipients, single parents, and pensioners.

    It seems to me, theoretical models of market economies provide a better insight on what the problem is. It is the wealth distribution.

    You ask: “Is it (it being your suggestion of a perceptions game) even worth bothering with?”

    My answer is NO.

  4. Surely, Tony Abbott’s promise to “tow the boats” back into Indonesian waters is a matter for discussion between heads of government of Australia and Indonesia.

    Yet, Abbott funked his opportunity to raise this issue of grave importance and of great national sensitivity.


    If Abbott cannot demonstrate that he can cope with the difficult consequences as well as the populist acclaim of his policies, then he is not fit to govern.

  5. @Ernestine Gross

    The big question is this. What is worth bothering with? To expand, what measures would;

    (a) actually assist our economy; and
    (b) stand a realistic chance of entering the discourse and being implemented?

    Without trying to answer these questions here and now, it is worth asking why, in the West, the EU is in the most trouble and the US is in some trouble? It is also worth contrasting the EU and US to China and to ask why China suffered less from the GFC and is still growing at a strong rate, albeit from a low per capita GDP base?

    Again, without trying to answer these questions here and now, it is worth asking why there appears to be some sort of malaise in the West? This malaise is not only one of economic performance, it is one of contemporary economic theory, at least in its popularised and bowdlerised form. It is also a malaise of political theory, political practice and even one of a philosophical nature with respect to epistemology (theory of knowledge). To use a psychological analogy it is clear that, as a culture, our reality testing has become very poor.

    The public’s ability to distinguish between fact (real, external events) and fantasy (internal cultural, religious and idelogical representations of external events) is badly compromised.

  6. Towards the end of the Sherlock Holmes stories we had the appearance of this figure Dr Moriarty. Whereas the early Sherlock Holmes stories were somewhat naturalistic, the appearance of Dr Moriarti was a move to ramp up towards melodrama and unrealism. In this story Moriarty had this entire infrastructure of evil that seemed almost unmotivated and lacking in profitability.

    Does anyone still believe the myth of Osama Bin Laden? Is anyone really buying that ridiculous Bin Laden “hit”.

    To me the entire career of the character of Bin Laden was just childish. Just silly. So silly in fact that you’d never leave it to a man who was still alive. No extant evidence places Bin Laden alive after 2002-2003. I’m saying we’ve all been had. Me more then most. I after all was on a full-blown war footing as late as 2007.

  7. Hi,

    I recently posted a piece on my small and insignificant blog at Somewhatlogically.com about the economic history leading up to Downton Abbey which got a number of hits unlike any I have had
    before. Seemed to hit a real chord. What is interesting is that the arc of the development starts out with a bailout of the landed gentry and the Corn Laws, and ends up with dependence on the financial sector, declining internal investment and obsolete industry, which seems to be a repeating pattern in history. http://somewhatlogically.com/?p=702

    I’d be very interested in the Australian perspective as to how you view the historic impacts of the industrial revolution, the decline of Commonwealth trade and the increasing interaction with S.E. Asian economies.


    John H.

  8. I’m still following the US Presidential election. I find it fascinating, in a morbid car-crash-on-the-freeway fashion. It is, like just about everything else associated with America, totally bombastic and hyperbolic and has become a caricature.

    According to probably the most reliable electoral model (Fivethirtyeight) Obama took a massive hit in his chances from a peak of 81% to the current 61% due to a very weak first Presidential debate in which Romney repudiated his far-right campaign stances so far and galloped to the centre leaving Obama without a response. The decline was arrested by the Vice-Presidential debate in which Joe Biden casually schooled Ryan in the art of political debate. One of the differences between the two sides is that the Dems are simply more rooted in reality. Most Dems concluded that Obama lost the first debate and Biden won the second, while the Repubs proclaim clear victory for both debates. However, this is typical behaviour from those who claim that any media outlet which runs information which puts them in a poor light is “biased” (eg, many different polls showing Romney behind).

    It’s hard to know exactly what will happen if the underdogs Romney/Ryan get up to win since they change their positions frustratingly often, but I will guess a return to neoconservatism will be on the cards with another helping of supply-side madness including tax cuts targeted at the wealthy, government spending cuts on health and welfare, government spending increases for defence and corporate subsidies, an invasion (most likely Iran) and yet more very heavy government deficits.

  9. @John Hulls

    I am not really qualified to answer other than by general reading and a general interest in various relevant matters. I am neither an economist nor an historian.

    One of the early comments you made which stood out to me was;

    “The fundamental battle was the landed gentry against the combined job creators and the working class.”

    I can’t agree with this. It can be risky to take our social history from novels but Elizabeth Gaskell’s novels are certainly worth reading in this context. Mrs Gaskell at her best is a bit like a fusion of Jane Austen and Charles Dickens but without the excess sentimentality, melodrama and surrealist tendencies of Dickens. My apologies to Dicken’s fans but I consider Austen and Gaskell to be greater novelists than Dickens.

    In the novel “North and South”, apart from the almost Austen-like romance, Gaskell concentrates on the conflict between “Masters” (cotton mill capitalists in this case) and workers. The aristocracy or major landed gentry do not really figure in N&S. The Hale family figure as minor gentry. Mr. Hale is a Parson. The daughter, Margaret Hale begins an social oddysey which places her between Masters and workers as one seeking elightened solutions for both classes. Mrs. Gaskell’s identification of the educated minor gentry as the mediating and civilizing class probably flows partly from her own position in society but might also have some historical basis. In support of the above, we might note that Marx was decidely of the opinion that the main conflict in the 1800s was between capital and labour.

    The “old society” – “new society” conflict is amusing and highlighted in the BBC adaptation. Mrs Hale secretly looks down socially on the capitalist or industrialist Mr Thornton, whilst Thornton’s mother considers her son well above a Parson’s daughter on the social scale.

    Before the industrial revolution, the land was the greatest source of wealth. Thus the landed gentry, including the full aristocracy, possessed by wealth and political power. The two act in a cycle of continuous reinforcement. After the industrial revolution, manufacture was the greatest source of wealth so first wealth and then power passed to the capitalists. Some old landed gentry wealth remained and might have made the tranition as you suggest to the financial sector of the economy. The FIRE (Finance, Real Estate, Insurance) sector would seem the natural harbour for landed gentry transition into the modern economy.

    Downton Abbey is intersting on a number of levels (a show with high production values but also a high “soap” content) but I will write about that in another post.

  10. “The fundamental battle was the landed gentry against the combined job creators and the working class.”

    That sounds pretty right until you get a state of banking development wherein banking becomes the key exploitative industry, but they have to cut other people in on the loot. So they cut in big business and real estate investors. You go from rags to riches by being the other half of the banking scam.

  11. @Ernestine Gross

    It seems to me, theoretical models of market economies provide a better insight on what the problem is. It is the wealth distribution.

    Huh? How on earth can wealth distribution be “the problem”. It is an effect, not the cause.

    We need to understand what causes problematical “wealth distribution” and disrupts markets.

  12. @Chris Warren

    I’ll try to interpret my statement for you. Consider an extremely unequal wealth distribution, namely 1 individual owns ‘everything’. In this case, the insight from these models is that there is no market economy. Furthermore, the concept of wealth is empty (makes no sense; is not defined.) The insight I take from this is that those who want to have a market economy but also want to ignore wealth distribution are talking in the wind. Similarly people who want a society where people to have ‘choice’ but ignore the wealth distribution are taling thin air.

  13. “The insight I take from this is that those who want to have a market economy but also want to ignore wealth distribution are talking in the wind.”

    In order for us to always be at odds with each-other, if there is some sort of malignant force in the universe that seeks to keep us eternally in disagreement, it must be the case that we always be steered away from small-government egalitarianism …. and sorts of thinking that emphasise both liberty and egalitarianism at the same time. One of the regulars brought up small government egalitarianism at Club Troppo. He brought it up once. And it was never spoken of again. Perhaps people started treating him like a leper. Like he had committed a terrible social Faux Pas. I don’t know.

    Here of course I’m not advocating shirking on building infrastructure momentum. Over at catallaxy I’d try and try to get some sort of discussion going of how a non-cronyist free enterprise approach to infrastructure may be had (in this regard I coined the phrase “the law of pipes” on a Bob Ellis thread at unleashed, since I was talking about infrastructure being analogous to piping. Another phrase I use is “trans-spatial goods” but that doesn’t grab it so “pipes” is a good way of thinking about it.)

    Anyway for the moment I’ve given up on any hope of promoting free enterprise infrastructure. Because over at Catallaxy the attempt to catalyse a discussion on the matter, didn’t so much as fall on deaf ears. More it fell on the heads of people with their fingers firmly planted in their ears. I had always thought that those calling themselves libertarians were for a fair set of rules. Catallaxy began to confirm a lot of the bad things that the left had been saying about the advocates of small government. And in point of fact most of these people weren’t for small government at all. They were just for their team. The big end of town. Subsidised corporate communism. Assume that the high-paid people are genetically superior and shower all the wealth on them (perhaps in the hope that they’ll have more children.) A real belly-crawling lick-spittle attitude a lot of them seemed to have.

    So until we have a more mature attitude towards the problem of non-cronyist infrastructure then I’m for slowly building a massive debt-free momentum in infrastructure, and pulling the money off the truly rich to do it. How about 1% total revenue tax with a threshold for sole traders. 1% total assets tax, artificial persons need not apply for a threshold? We always put too much emphasis on high rates of taxes on profits. But to me taxing retained profits is sin. It ought to be outlawed at the UN in favour of these total revenues and total assets taxes, and excess land-holding tax as an overlay. These sorts of taxes in the context of very small government is what an egalitarian small-government society would be about.

    Really we cannot get on in this world, as a species, without going for a small government egalitarianism. Catastrophic events are an established fact in geological history. We’ve used up all the close-to-the-surface super-rich ore grade gear and coal no longer makes a nuisance of itself poking out of the ground. Oil no longer pollutes the rivers and forms big spouts in the air in Texas when you lance that boil. So if we don’t get it together with a form of liberty that is egalitarian, the next perfect storm can take down humane civilisation forever. I surmise that we will wind up like Cormac McCarthy’s “The Road” if not worse.

  14. @Ernestine Gross

    I am not sure what you are saying now.

    If you run a capitalist market model long enough, maintaining profits and reducing the shares to others as necessary, you end up with 1 person owning everything. This is the result of a capitalist market.

    The concept of wealth is not empty – just think of Robinson Crusoe.

    People looking at wealth distribution, but ignoring underlying causes, are

    talking in the wind

    Whatever this means?

  15. I’ve gotten interested in the balance between earned income (as in when someone pays you to work) and investment income. Is there anywhere that shows how the ratio of these two quantities have changed over time?

  16. Can presidents create jobs?

    Claims by candidates about how many private-sector jobs can be created should be viewed as rough guesses, because overall macroeconomic conditions drive aggregate employment in ways that dominate any net effects of policies.

    87% of their panel either agreed or agreed strongly with the statement.  It’s still possible we’re making it up, but at least we agree.  The comments are interesting, too.  From Barry Eichengreen:  ”Rough guesses is a polite and understated way of putting it.”  From Austan Goolsbee:  ”The question is whether rough guesses too generous.”  My answer:  ”Yes, it’s too generous.”

    See http://t.co/aGAnecOI and also http://t.co/ZmxCxAR8

  17. Conservative columnist David Brooks writes about climate change and gets critiqued

    It’s a story, to put it simply, of Democrats doing everything they can to address a problem Brooks says is real in the way Brooks says is best, and Republicans doing everything they can to stop them. And it’s a story that ends with Democrats and Republicans receiving roughly equal blame from Brooks.


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