In the course of raillery with the famously scabrous Thames watermen, Boswell reports that Dr Samuel Johnson triumphed with the line “Sir, your wife, under pretence of keeping a bawdy-house, is a receiver of stolen goods”‘
That insult is applicable, with minimal modification to the Institute of Public Affairs. The IPA advocacy of dams in Northern Australia, long notorious among economists as the worst kind of boondoggle is the kind of scandalous behavior analogous to running a house of pleasure. But, as various interactions on Twitter and elsewhere have made clear, the IPA isn’t really keen on dams – that’s just bait to bring in the nostalgic believers in what Bruce Davidson famously called “The Northern Myth”
The real agenda is the creation of a special economic zone in Northern Australia, with lower taxes and less regulation, but apparently still receiving the same flow of public funds from the national government as at present[1]
Proposals for dams are mostly harmless since so few of them are likely to stack up, even with subsidies. But the suggestion of special tax treatment for businesses located in one part of the country rather than another is the worst kind of distortion[2], the public policy equivalent of receiving stolen goods.
And we don’t have to look further than the front page of the IPA website to see the promoter and biggest single beneficiary of this proposed ripoff – none other than Gina Rinehart, Australia’s richest woman and one who has done nothing to earn her wealth except to be very successful in Family Court.[3]
It’s a tough call whether the IPA has reached its lowest possible point in proposing that ordinary Australians should pay more taxes and get less services, in order to provide a targeted tax handout to Rinehart. That’s low, but arguably not as bad as lying in the service of the tobacco industry.
fn1. The NT government is easily the biggest per capita mendicant in the country, as can be seen from its massively oversized Parliament, more suitable to a medium-sized country than a population of 200 000. http://en.wikipedia.org/wiki/File:Legislative_Assembly_at_Night.jpg
fn2. Individual taxpayers already get a concessional “zone allowance”, but it’s small enough not to constitute a serious distortion. By contrast, the corporate handouts being pushed by the IPA could be huge.
fn3 As pointed out in comments, it was actually in the Supreme Court which deals with inheritance disputes, such as those between Rinehart, her stepmother and her children. The Family Court is only for divorces.
John Quiggin 
For those who don’t know the history, Gina Reinhardt is pretty much just following in her fathers footsteps in wanting a divorce from Canberra. Lang Hancock put time and money into the cause for a long time.
http://economics.org.au/2012/10/millionaire-puts-money-behind-secessionists/
I quite like the idea of WA cession. Personally I think it is neater goal. Although constitutionally hamstrung and probably only achievable through armed revolt.
@TerjeP
Yep. “Libertarians” are lackeys for the rich. Smart enough to make logic-chopping arguments for pro-rich policies, but too silly to see they’ve followed them down a rabbit hole. The smart ones, like the IPA and the US pundits-for-sale, sell out to the highest bidder, which is at least consistent.
@TerjeP
Tax havens are magnets for corruption, criminal money launderers and free riders. Obviously you think providing a safe haven for criminal gain and selfish free riding is a good thing.
@Ikonoclast
Sydney is a tax haven?
Not exactly a very original accusation. Never mind, I don’t come here seeking originality.
Is it the truth you seek TerjeP?
Yes Katz I do. I seek it everywhere. When seeking gems you often have to climb into dirty grimy places and get covered in muck. Seeking the truth is little different.
@John Quiggin You have a munificent view of consultants.
The best consultants actually believe what they say.
Those that are just pretending do not survive in competition with the true believers. Fakers will make too many wrong turns and lack conviction in their message.
The market for consultants is like any other. The most skilled outdo the rest.
The client hires the consultants that will tell them what they want to hear. The rest go out of business.
In the Telco business, there are the pro-incumbent law and economics consultants and the pro-entrant law and economics consultants and never the twain shall meet.
Consultants are different from the public intellectuals that Posner analysed so well. Public intellectuals do not have to survive in the market and win return business because they are tenured academics.
Really? I realise that there are libertarian arguments that tax rates overall should be lower, but why not apply these equally across the board? I’m not clear what goal (libertarian or otherwise) a tax haven achieves other than reducing the tax rate for rich people who can arrange their financial affairs in a particular way to take advantage of it.
Tax havens are the antithesis of the level playing field whose existence is the sine qua non of libertarian principles.
Tax havens are the playground of rent seekers and crony capitalists.
That’s spurious, because those non-tenured consultants have a long track record of being terribly wrong and not paying any sort of penalty for it.
These are the think tank intellectuals who predicted that the housing boom would last forever, that austerity would be a grand success in Europe, and that the Iraq war would be a roaring victory at little cost.
And where are those people now? Right where they were: employed by the same organisations and writing for the same publications.
So, you’re correct in saying that those people are successful in the market, but not because they’re actually good at their jobs, but because the people they mislead want to share in the false belief that the being wrong never happened.
Given that I’m a self-described public intellectual, and this comment is on my blog, I’m going to take it personally. So, I’ll point out that
(i) I’m not a tenured academic, and except for a couple of very brief stints, never have been. The great bulk of my academic career has been on 5-year fellowships like the one I have now
(2) I can get all the consulting work I want, and reject a lot more offers. That said, Sancho is right about the consulting biz. It’s mostly not about being right.
Maybe, but the tax avoided by one is vastly greater than the other.
@Jim Jim, it does seem that there is no realistic way large northern dams could currently pay for themselves. It is possible to make the argument that we should be taking steps to mitigate the possible effects of terrible harvests that could result from climate change that wouldn’t make economic sense to do if we hadn’t destabilized the climate to such an extent. But I really doubt that northern dams would be the best way to do that.
sancho, On non-tenured consultants have a long track record of being terribly wrong and not paying any sort of penalty for it, if you mean forecasting, you are right.
Posner’s book takes much of its space discussing the failed predictions of academic intellectuals and the lack of consequences for being a failed pundit.
As for the reasons for hiring consultants, Deirdre McCloskey attributes it to the case law on director’s duties.
To show you were acting in a responsible manner, and the failure of the company or the loss of the widow’s inheritance was not your fault, you show you took advice on a regular basis from the usual suspects.
John, Posner donned his hanging judge mode for tenured academic intellectuals.
I’m 11 years ahead of you Jim. My review of Posner made the point (already observed here by Sancho) that he never compares the predictive record of academic intellectuals with that of market professionals (equally bad, IMO).
http://www.uq.edu.au/economics/johnquiggin/Reviews/Posner02.html
John, I saw an essay somewhere about Posner’s extraordinary productivity.
When he was offered a judgeship, he estimated that it would take up as much time as he was spending in 1981 on faculty admin and running his consultancy. He therefore did not think a judgeship would encroach on his academic output.
2,500 judicial opinions later his finds time to teach, publish, op-ed, book review, a blog, a book a year, and shows no outward signs of extraordinary work habits. he drafts two judicial opinions every Monday night.
He as a serving federal judge even ended-up serving on a state criminal jury.
@John Quiggin The failings of Australian PPPs could be due to lack of independent academic analysis and and an over reliance of “in house” consultants.
@rog
I think PPPs generally fail (in one sense) because they’re actually a mechanism for spivs to extract public money for private profit. In fact, they’re usually successful.
@David Irving (no relation) You would have to properly analyse a significant number of PPPs before forming any conclusions of substance.
Opinion from some of the banking sector is that failure of PPPs is a failure of governance ie lack of. In that respect expert opinion from qualified and independent sources should be a pre requisite for PPPs.
That’s not very consistent, Jim.
First you said that only committed consultants survive in the open market, because they need to be accountable for their advice, then criticised tenured academics for not being subject to the same scrutiny.
But as soon as the record of those consultants is criticised, you agree that they’re terrible.
I’m not sure why you put an argument in the first place. It’s like saying “horses suck because unicorns are much better, and unicorns don’t exist, therefore horses suck.”
One example of failed PPP is BrisConnections which, according to this had an obvious lack of transparency from the financial sector (not in the public interest). A retired academic had to run his own modeling which concluded BrisConnect was a FAIL.
Well to help you be clear try “tax competition”.
@TerjeP
Tax competition is only a good thing if you think current taxes are too high. If like me, you believe they’re too low, it’s going in the wrong direction.
What Sam said.
@John Quiggin
If I can be pedantic, the predictive record of some academic intellectuals is very, very good… that of physicists for instance! 🙂
Terje, you started with
I can see the argument that this might come out of tax competition. But surely you’re not claiming that this is relevant to Jersey, or Monaco, are you? If so, you seem to have little idea of how tax havens (rather than tax competition) work.
@TerjeP
TerjeP, I will try to talk TO you this time and avoid the “appeal to the crowd” rhetoric that crept into my last reply.
It seems to me that your opposition to taxation is visceral, emotional and absolute and for this reason ill considered. I say this because a well considered low tax policy, coupled with a minarchist position for example, would still posit minimum tax levels, taxation equity and a just compliance regime. It would still recognise the free rider problems and criminality risks of selectively permitting complete tax avoidance in some jurisdictions.
So, you seem to me not to have any well-considered low tax policy based on a minarchist position or some other consistent position but merely a visceral hatred and rejection of all taxation per se. The only “socio-political” position consistent with this would be solipsistic anarchism.
(The “socio-political” is in quotes because a solipsistic anarchist would not recognise “socio-political” as a valid category.)
rog, I suspect you missed my point. PPPs generally fail (from a quick survey) as far as the public is concerned, but someone makes a lot of money. I’m looking at you, MacBank.
Ikonoclast – I’m a minarchist. I think a minimal state financed by low level taxation is optimal. I think tax is an evil but probably a necessary evil. In spite of being necessary it should still be considered evil and minimised as far as possible. It belongs in a similar category as war. Something you accept as a legitimate option but not something you accept happily.
The high tax social democrat model which is in vogue around here is riddled with free rider problems. I don’t think any system is free of the problem but the system you defend suffers more so than the one I prefer.
@David Irving (no relation) I guess I was making several points, none being conclusive. However, for some of the banking sector to call for greater transparency and accountability in the process indicates that the banking sector have been hurt by their own actions eg BrisCon has hurt MacBank.
@TerjeP
A minarchist recognises the necessity for a minimal state. The legitimate functions of the minarchist state are usually seen as protection of individuals from aggression, theft, breach of contract, and fraud. For this to be operationally effective, a certain minimum of government institutions are necessary; namely, the military, the police, and courts. Clearly an executive and a legislature must also exist or no effective government and no legislated law could exist. Some administrative apparatus must also exist or the government is a head without body or arms and could thus effect nothing. Even a minarchist state is already bigger than you would think.
If the minarchist sees protection of individuals from aggression, theft, breach of contract, and fraud as a good, I cannot see how that which assists in providing and supplying that (taxation) by consensus in a democracy can be intrinsically bad (evil). Tax in itself is morally neutral. The purposes it is put to may be good or bad relative to our various moral frameworks.
The resort to absolutist and quasi-religious language (“tax is evil”) really gives the game away. There is nothing logical, rational, reasonable or considered about your rejection of the principle and purpose of taxation in a democracy.
@TerjeP
So your concern is mostly with the free rider problem, not so much with whom you pay for the services, private or public sector, that are needed. Like free riders in education, road use, air controll, and so on.
But don’t you know that societies used to have such systems without free riders long time ago, and such systems created inequalities and insecurities which self conscious societies decided to reduce by changing such systems.
Why do you want to go back to such systems that produce inequalities and insecurities?
Jordan – I never said my concern was mostly with the free rider problem.
Ikonoclast – is torture evil or is such language devoid of logic, rational, reasoned or considered though?
@TerjeP
OK, you did not say mostly, but my last question still stand.
Why do you want to go back to such systems that produce inequalities and insecurities?
PPPs is a flash name for the project finance that now funds the majority of private mega-projects at a lower cost than before.
as with private mega-projects, some PPPs fail. many mega-projects go bankrupt. do PPPs go broke?
No Terje, torture can be a remarkable concept, as those who suffered your postings over the last decade will readily admit..
Here’s a commemoration for the tenth anniversary of one of America’s foremost public analysts, who has been successful in the market without relying on university tenure to shield him from the repercussions of being woefully wrong about pretty much everything.
@John Quiggin
No need for ‘self-described’ John. Lots of others (including, emphatically, me) describe you in the same way. And mean it entirely as a compliment.
@TerjeP
Toture is morally wrong. It is a very serious moral wrong. It is also relatively ineffective in achieving its usual goals of information and/or compliance. Repeated studies have shown this.
The term “evil” is religiously loaded and that is why I avoid the term. It’s tenor is emotive, its definition imprecise and it is subject to dogmatic and fundamentalist interpretations.
Too often, people using the term “evil” to proscribe something that is not an obvious fundamental moral wrong (as in taxation which is not an obvious fundamental moral wrong like torture) are dangerous fundamentalists who want to dictate how others may or may not think, behave and cooperate.
Sorry, bad punctuation (and grammar). I should have written, “Its tenor..”
How does that apostrophe plink through my typing finger when my brain knows it is wrong?
I believe that it is logical to say that you are also a maxichist.
If you believe that there is an optimum level of taxation, then the level of taxation should be neither lower nor higher than the optimum level.
The optimum level of taxation is an empirical, historical, cultural and contingent question. In short, there is no a priori answer. there will be different answers for different times, places, and circumstances.
Katz – essentially a distinction without a difference. In this time, place and culture I believe we are over taxed.
@Ikonoclast
I agree that we should avoid the term ‘evil’ as religious hokum. All it really says is “I don’t like this (a lot!) and because I don’t neither should you or any ‘right-thinking’ person”.
One should simply specify the scope, quality and nature of the alleged ethical breach entailed in the activity one abhors.
@TerjeP
Presumably you have some criteria for determining the optimal level of taxation in the present time and place.
Necessarily the question of taxation is subsidiary to the question of optimal public expenditure. Because no rational government taxes for its own sake.
@Katz the optimal rate of taxation on income from capital is zero. the Nordic countries already have low rates of tax on capital incomes.
Katz, as I’m sure you already know, it’s impossible to have a sensible discussion about tax levels with Terje (or Jim Rose, for that matter). Glibertarians will always claim we’re over-taxed, whatever the actual levels of taxation and govt expenditure.
@David Irving (no relation)
Thanks for the reminder.
The mark of a blind ideologue is her unwillingness to define as accurately as intellectual honesty will allow the limits of the applicability of her particular nostrums.
You may recall I invited JR to contemplate the limits of his climate “scepticism”.
He isn’t the first “sceptic” who has refused my invitation. Indeed, no “sceptic” has ever accepted my invitation.
Coincidence? You decide.
David – I think the optimal tax level is somewhere below 15% of GDP. In practical terms I don’t think it would be optimal to go there over night because the dismantling of the state at too fast a pace would leave a vacuum that civil society and market mechanisms takes struggle to fill over night.
Given that nowhere today is down at that sort of tax level and given that we have not been at that sort of tax level any time in living memory then of course it seems like I would never be content with any tax rate irrespective of how low. Every tax rate in my life time has been substantially higher than what I see as optimal. It doesn’t mean however that it couldn’t be lower than what I was comfortable with. It’s just extremely unlikely to happen any time soon.
For what it is worth the crowd around here seems to think taxes are never high enough. From my vantage point, on the issue of tax, you’re all ideological nuts. Or at least most of you are.