25 thoughts on “Beyond Reform: An economic policy agenda for the 21st century

  1. I haven’t listened to your podcast yet, ProfQ, but I have scanned through your slides (“the secret of success [in IBM] was giving good slide”). Just a couple of things I noted for further thought:

    Slide 16, you say: “But, still strong resistance to increased taxation” And while I accept that unconditionally for corporations and other rent-seekers, my understanding is that the general populace have almost invariably shown support for additional taxes/levies/whatever if they are tightly hypothecated and not just dumped into ‘general revenue’. For instance the Medicare levy.

    Slide 20 you say “Obsolescence of value chain model”
    Slide 22 you say “Irrelevance of C20 notion of value added”

    Well, I imagine Henri Fayol is tossing, but anyway, isn’t the “value added” chain precisely how GST is allocated and, at least notionally, charged ?

    Do you think perhaps there is no “value added” chain in “knowledge” ? Then you’re saying that my conditioning for all those years that ‘Data is not Information is not Knowledge is not Wisdom’ with the explicit ‘value chain’ thereby incorporated is all wrong ?

    Hmmm. This really just isn’t my world any more. Be warned: from about the age of 60, your world just fades away bit by bit until you become effectively disconnected.

  2. – Prices no longer closely related to social opportunity cost
    – Implies we can redistribute income with little social cost

    I haven’t heard the podcast, but one example that comes to mind is the carbon tax. A tax that corrects a market failure. However, isn’t this distributional potential exactly the reason the right is so much against it?

  3. The social benefits of redistributing income can outweigh any social costs, if and only if the poorest deciles are targeted.

  4. @Greg McKenzie

    Sounds cute – but a capitalist society benefits if income is redistributed from superprofits and capital accumulation into personal final consumption – irrespective of which decile receives it.

  5. @GrueBleen

    I don’t understand why I am doing this except that the human brain is very complicated and it seems a shame to me that you are feeling so out of touch with your society. I do believe that you can change your attitude and find a way to fit in and feel relevant, or at least feel better about your self than your complaints suggest that you currently feel.

    There is a lot of evidence now that brains even old brains are more ‘plastic’ than we thought and neurons can make new connections all through the life span so in fact old dogs can learn new tricks. The critical thing is, you need to want to change. Do you want to fit in or do you enjoy feeling different and holding on to the feeling that everyone else is wrong and only you can see the truth?

    Beyond the reforms that JQ speaks about and I couldn’t hear the talk above the background noise – probably hearing damage from all the loud rock music I listened to – I and others are sure that there are things we can do as individuals, families and societies that will be complementary to the political and economic policies that we need now to both deal with climate change and also to repair some of the dysfunctional human behaviours that have been forced on ordinary people by the rise of neo-liberalism.

    You seem to have some difficulties understanding how child rearing principles are relevant to the problems. So I’ll start there. You need to read more about these ideas.

    I don’t make them up all by myself. There are many of us who are making up this story and it is a good story. After all there is that old saying “the child is father to the man” so it is not something we have made up out of thin air. Not sure how relevant that saying is for me being a woman but women who want more than we have been allocated by the patriarchy have always had to translate this sort of language into something relevant for us.

    So I read this article at The Conversation this morning and thought of you and thought I could provide this as one example of one small way that our child raising methods have changed and how many of us are contributing to the increase in the sort of young men who can believe that they have the right to expose their chubby white bodies in budgie smugglers anywhere they like.

    “Nowadays children are no longer perceived as contributors whose work is essential for the survival of the family and its ability to thrive.

    Parental focus has shifted from the development of family responsibility to the development of children’s happiness and success.

    As a result, children’s sense of entitlement has been inflated, but the cultivation of responsibility has fallen by the wayside. So chores are not valued as much as they used to be.”

    There is more in the article that you can find if you go to The Conversation and many other articles that might help your confusion and you might find the commenters there more responsive to your questions.

  6. It would be good to get a transcript given the audio. Anyway, me still likes reading things.

  7. @Julie Thomas
    Your #5

    I don’t think I understand why you’re doing it either, Julie, though I do appreciate your apparent concern for my emotional welfare. I am not in any particular need in that respect though, but I will do my best to learn all the “new tricks” that may come my way.

    However I would essay the thought that regardless of the abilities of old dogs, it takes much time and effort to teach old tricks to new dogs – such as not always believing literally in everything they read.

    Regarding any conclusions you may have reached about your various attributions as to my emotional and intellectual state, I myself try, in the absence of any reliable epistemology, to remain in the realm of ‘non-belief’. Certainly In respect of my ‘take’ on people, but also in respect of articles in that very mixed bag, The Conversation, and particularly such as “‘It’s all about me, me, me!’ Why children are spending less time doing household chores.” Nonetheless I do recommend another current article therein, the one titled “One reason so many scientific studies may be wrong” which, given your background in statistics, might appeal.

    But I am truly glad that “Nowadays children are no longer perceived as contributors whose work is essential for the survival of the family and its ability to thrive.” because I don’t think I’d have liked being a 6yo chimney-sweep. Or even a 14yo bricklayer’s apprentice like my father.

    And in keeping with ProfQ’s preferences, that should be sufficient unto this thread, perhaps ?

  8. JQ, I read your slides and recalled most if not all your previous threads on the topics listed.

    The beauty of your public lectures, including your blog threads is, IMHO, that you allow the audience to gain an insight into how mature policy advice is arrived at, including the advice that one has to first have a very good idea as to what are the significant contemporary linked problems, which require recognition, before recommending specific policy actions for discussion. This art is often missing in contemporary public discourse.

    I suspect the older members of the audience (age greater or equal to 45 years) are familiar with this approach, more or less, and the young (age less than or equal to 25 years) may experience your review of the state of affairs as a breath of fresh air. But how will the generation of aspirationals react? Of course, among all age cohorts there are open and closed minded people.

  9. @Ernestine Gross
    Your #10

    When ProfQ is at his best, Ernestine, I think of him as a kind of ‘rational mediator’ in a complex eco-system.

    In its own way, “nature”, over time, tries out many different variations of life – though, because of the ‘sticky nature’ of variation (either mutation or random gene drift – eg, once an organism has legs, it can be quite hard to get rid of them) there tends to be continuity over time. So ‘revolutions’ (cf rapid, radical group mutation) is rare. Lots of small changes, with weeding out of the worst failures, is the usual process. (Sounds just like the “free market” doesn’t it).

    But then, change can be glacial at times (though I am fascinated by the ultra-rapid spread of the adult lactose-tolerance gene from Africa to Europe in just a very few thousand years). To the point where some chap named Jason Brennan has proposed a new way (the Fourth Way ?) called epistocracy, in which “political power is to some degree apportioned according to knowledge.”

    Now that would suit ProfQ, think you not ? Just as a matter of interest, Brennan claims that:

    “Most voters are ignorant of both basic political facts and the background social scientific theories needed to evaluate the facts. They process what little information they have in highly biased and irrational ways. They decided largely on whim. And, worse, we’re each stuck having to put up with the group’s decision. Unless you’re one of the lucky few who has the right and means to emigrate, you’re forced to accept your democracy’s poorly chosen decisions.”

    That says it all, doesn’t it ? I mean there wouldn’t be any difficulty at all deciding on who had what level of “knowledge” and thereby calibrating their corresponding political power, would there.

    Besides, I think that, if we look, we might find that truly enlightened men (always men, of course) such as Edmund Burke, have said much the same long ago. Not to forget “deliberative democracy” (look up the Wikipedia entry) too.

  10. “That says it all, doesn’t it ? I mean there wouldn’t be any difficulty at all deciding on who had what level of “knowledge” and thereby calibrating their corresponding political power, would there.”

    GrueBleen It is a problem but it is the only problem that needs to be solved.

    One part of the growing movement to make the future a better place for our children, is to ensure that we raise children who do understand that they can grow into individuals/adults who are able to ‘give according to their ability and take according to their need’.

    All humans philosophise – women and ‘beta’ male 🙂 but some philosophy is inaccessible to a type of man who believes that only wealthy white men like themselves know things that are worth knowing and only this type of knowledge can provide solutions.

    There were some appallingly ignorant and narrow minded arrogant male philosophers. Kant apparently said that there was nothing about Oriental philosophy that was philosophy. So I’m sure we need to look at philosophies that come from other cultures and further back in time than we westerners currently do when looking for solutions.

    Eastern philosophies do understand the relationship between the individual and the others, in a different way most western philosophers – except Spinoza.

    Spinoza understood that the only way an individual who wants to change the world for the better can be sure they are changing the world for the better is to understand what is moral, monitors their own conduct and sets an example for those, like Pauline Hanson and her voters, whose philosophical outlook has been limited by the lack of access to the knowledge that they need to make good choices.

    We are not required to accept our democracy’s poorly chosen decisions. We can change things and we will get better at changing things. People, even poor people are not stupid.


  11. @GrueBleen

    Your #11. ProfQ’s lecture is on economic policy.

    Your # 1.
    a) Taxation. I agree with your assessment.
    b) Obsolescence of value chain model. Like you, I did not listen to the podcast. Hence I don’t know whether JQ qualified the statement and, if so, how. The value chain model, on which VAT is based, works very well for marketable commodities (commodities as I defined this term in an earlier thread; the term ‘marketable’ is just another words for an exchange value, which we tend to call price.) It would not work at all in an economy where everybody produces for their own consumption. So we have the two limiting cases: 1) everything of interest in ‘an economy’ consists of marketable commodities’ and 2) commodities and services are non-marketable.
    In the context of JQ’s topics, listed on the slides and his previous blog threads, my interpretation is: Many services cannot be considered to be ‘commodities’. As the service sector in an economy becomes more important, the value-added model becomes less relevant for the whole economy. Furthermore, many services are provided outside the market (eg household) and there are public goods (defined as consumable by many). In conclusion, the relevance of the value added model in the observable economy depends on the weights of the factors I have mentioned. These weights have changed and are expected to change even more such that the value added model becomes obsolete in the limit.

  12. @Ernestine Gross
    Your #13

    “Your #11. ProfQ’s lecture is on economic policy.”

    Are you sure ? It seemed to me that he was talking about an unruly, unmanaged eco-system in which various ‘mutations’ occurred from time to time which were then subject to the survival (thrival ?) test leading to longer term species evolution. The whole 1980s “reform” thing, in those terms, was really just a “random gene drift” phenomenon that ran its course in time without having produced any particular inter- or intra-species competitive benefit. Which as you recognise is an aspect of ‘neutral’ – or even harmful, but non-fatal – variation as distinct from the ‘survival of the fittest’ kind of variation as propounded by Darwin. I did like the Darwinian evolution model as an analogy of the ‘free market’ though.

    Oh well, so much for reasoning by analogy.

    The ‘commoditisation’ thing is interesting also. Yes there is a strong tendency to see ‘value added’ in physical product (secondary stage via slide #3) terms. And indeed I tend to see such commodities as ‘Hotelling’s Law’ items, basically – though I daresay that the manufacturers of Mercedes cars would maintain that they have zero intent of ‘minimum differentiation’ with, say, the manufacturers of BMWs, I suppose. Nonetheless, that is largely the outcome of intensive automobile commoditisation (aka ‘single product mass production’ as per Drucker). In short, if the Beamer has it (whatever it is), then the Merc has to have it too, or lose sales.

    But I think it is possible to see ‘commoditisation’ in service industries: I instance H&R Block which basically has a ‘commoditised’ tax return preparation and submission service – with a form of ‘value added’ in terms of the standardised and computerised processing that occurs and thus minimises the interaction time and cost. Even high-power medical surgical teams are becoming ‘commoditised’ as robot surgery begins to take over from old-fashioned ‘cottage industry’ hand made surgery.

    In my own experience, I once worked for a 3-letter-acronym multinational that provided services it the IT/ICT sphere. Even there, ‘value added commoditisation’ of a kind occurred. For instance, once upon a time if there was to be, for instance, a significant hardware or softwere upgarde project, then the successful bidder would just assemble as many ‘smart. experienced people’ as they could get and hope for the best But after a while, the company developed a set of what were called ‘engagement models’ (one for software install, hardware install, upgrades etc etc) and, having identified which kind of engagement a particular contract was, the push of a button would produce a comprehesive project plan for the project. I always thought of that as clearly ‘value added’ and the result as more ‘commoditised’.

    But that’s just me.

  13. @Julie Thomas
    Your #12

    I do enjoy interlocuting with you, Julie [regardless of whether or not the feeling is reciprocated] but I think that this thread is not the place to continue. I’ll think a wee bit more and do a response in the Monday Message Board thread (since ProfQ has not created an accessible Sandpit at present).

  14. John, I had a look at your slides. They were much I would should have expected and I guess unexceptionable. But at the same time I was very disappointed.

    If you had billed your talk as toward 2025 or maybe 2030 it would have been fine. But by aspiring to the 21st century your “vision thing” was by implication for the next 85 years, a period equivalent in length to the Keynesianism and Neoclassical economics periods combined.

    What would I like to have seen/you might speculate on in a future if you have a mind to but didnt touch on?

    (Because you appear to be deeply skeptical of many ‘limits to growth’ arguments I had intended to put this first item last but on reconsideration it has to be top of the wish list.)

    1. The development of economic theory supporting a genuinely sustainable interelationship between the human and natural environments.

    Why? By way of background LtG captures the problem but really the Meadows et al. work is just one outgrowth of a larger problem a potted background for which is as follows. In the 1950s/60s most of these ltg issues were nascent as biologists were only starting to understand how the geo and biosphere operate as a whole. People knew of Malthus and maybe Walden and there had been population conventions. Conservation was still pushed by pretty conservative organisations like WWF and IUCN. In popular culture you had Brave New World. But there was no mass Green movement or as I understand the times, a widely accepted multidisciplinary global ecology paradigm, as far as I can tell. The legendary Sand County Almanac was only written in 1948.

    Finally at this time information to underpin the latter finally started coming in with early initiatives like
    IGY https://en.wikipedia.org/wiki/International_Geophysical_Year and the IBP https://en.wikipedia.org/wiki/International_Biological_Program. Subsequently research blossommed and cause celebres appeared, captured most tellingly in IMO by Earthrise https://en.wikipedia.org/wiki/Earthrise. Initiatives like LtG were necessarily very imperfect in detail, but are still seen as valid in principle by all environmental scientists I know.

    The next step in this story was the response. Free market types went hysterical but where economics really entered the fray was the Stockholm Environment conference and its spawn UNEP.
    UNEP was actually developed specifically with future economic policy in mind!
    “UNEP reflects the ideas of the early 1970s concerning the appropriate relationship between the environment and other areas of policy, notably economic policy. ………… (but the trouble remains that)… The environmental agenda is not a human invention. Unlike the rules of international relations or of the economy, it responds to developments in the natural environment which are exclusively subject to the laws of nature. From that perspective, clever political and bureaucratic manoeuvring were bound to fail.” VON MOLTKE, K. 1996. Why UNEP matters. Green globe yearbook, 55-64.

    Today UNEPs most well known and accepted progency is certainly Kyoto and the IPCC via Stockholm’s successor Rio https://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change . UNEPs first director was Maurice Strong which explains the strong emphasis on links to economic policy.

    But there was much more identified of economic concern at Stockholm which is still essential unaddressed.

    Stockholm had a list of 25 principles http://www.unep.org/documents.multilingual/default.asp?documentid=97&articleid=1503 which might be viewed as motherhood statements though in hindsight they were revolutionary. More useful to those who like KPIs, were no less than 107 recommended actions
    http://www.unep.org/documents.multilingual/default.asp?DocumentID=97&ArticleID=1506&l=en and http://www.unep.org/documents.multilingual/default.asp?DocumentID=97&ArticleID=1504&l=en most of which still languish in the too hard basket.

    And if held to day many new ones would be added like ocean acidifcation and coral bleaching. But the original action list developed specifically for economists is still unexceptionable and regretably largely unaddressed especially in economic development policy.

    In the intervening years scientists have taken all these concerns on board as cursory reading of Nature and Science review articles will confirm (see list at end). But where is this action list in the priorities for Economics for the 21st Century? Climate change is there but nothing else.

    Sorry to go heavy John, but there still appears to be a chasm of appreciation among even progressive economists reflecting a denial/failure of conceptualization/imagination call it what you will which economics in the 21st C must address.

    2. Now for something less serious…perhaps…An interesting feature economic science that to my knowledge there is no “economic” science fiction worthy of the name except the fraud Ayn Rand. Perhaps there is a need for real imaginative speculation in economics.

    3. It seems that we are stuck in a debt trap like Japan. What would have been really nice is a list/agenda of theoretical economics approaches to address this that a new theory fit for the 21st Century might encompass.

    4. You discussed the cyber economy but dont seem to have looked at its impacts on social structure and from there the economy. Where does economics fit in with this increasing manipulation what we buy and consume and aspire to?

    5. AI is certainly overhyped. But its rapidly evolving. How will this impact the economy? There is much speculation but not from what I’ve seen from a sober economist.

    6..I saw nothing about how economics should better integrate with/interelate to/be a servant of emerging philosophical, religious and existential issues which us non economists tend to believe drive society. A pressing existential problem is the changes wrought by an aging population. We already have huge allocation of resources to medical science, the retirement and nursing homes and the superannuation industry. What is next?

    7. There is the general issue of what Economic theory should be doing about externalities, which are still by in large dismissed. You did touch on one – climate change but there are so many more. Could a 21st century theory incorporate externalities and uncertainties into economics?

    8. Lastly I return to LtG issues and how to factor them in to the economy – risks which are a concern ironically at Davos (see WORLD ECONOMIC FORUM 2015. Global Risks 2015 10th Edition.) even if they are not a priority in Oz.

    A key problem seems to be the arithmetic of discounting things like soil erosion, acidification etc which get ….. well…..discounted over too long a period…. like CO2 emissions.

    ACKERMAN (, F. 2009. Can We Afford the Future? The Economics of a Warming World, Zed Books Ltd, Cynthia Street, London.) beautifully describes the problem which Stern fudged by imposing his own low discount rate rather than acknowledging that we determine the latter. Surely this is a problem for 21st century economics to address.

    In considering the above which is in many ways a cry from and environmental scientist to an economist for your profession to wake up, you might consider these more recent documents below which lay out where we are heading but are unaccounted for in your current 21st century economics vision.

    Or alternatively you might enlighten us why the expert environmental/ecological science community continues to get things so wrong.

    NEWBOLD, T., HUDSON, L. N., HILL, S. L., CONTU, S., LYSENKO, I., SENIOR, R. A., BÖRGER, L., BENNETT, D. J., CHOIMES, A. & COLLEN, B. 2015. Global effects of land use on local terrestrial biodiversity. Nature, 520, 45-50.

    DOW, K., BERKHOUT, F., PRESTON, B. L., KLEIN, R. J. T., MIDGLEY, G. & SHAW, M. R. 2013. Limits to adaptation. Nature Climate Change, 3, 305-307.

    SARRAZIN, F. & LECOMTE, J. 2016. Evolution in the Anthropocene. Science, 351, 922-923.

    TILMAN, D., FARGIONE, J., WOLFF, B., D’ANTONIO, C., DOBSON, A., HOWARTH, R., SCHINDLER, D., SCHLESINGER, W. H., SIMBERLOFF, D. & SWACKHAMER, D. 2001. Forecasting Agriculturally Driven Global Environmental Change. Science, 292, 281-284.


    VITOUSEK, P. M., EHRLICH, P. R., EHRLICH, A. H. & MATSON, P. A. 1986. Human appropriation of the products of photosynthesis. BioScience, 368-373.

  15. @Newtownian
    Your #16

    “… to my knowledge there is no “economic” science fiction worthy of the name except the fraud Ayn Rand.”

    To my knowledge there only ever was one “economic” science fiction, namely Frederik Pohl and Cyril Kornbluth’s ‘The Space Merchants’. Though maybe Heinlein’s ‘Citizen of the Galaxy’ could just squeeze into the category.

    But Ayn Rand ? You don’t mean ‘Atlas Shrugged’, do you ? But if not, what else could you mean ?

  16. @Newtownian

    Thanks for this. I probably won’t have time for a full reply but I’ll start at the beginning and say that I didn’t mean to claim a program extending to 2100, just one appropriate to the present century rather than the last one. In that context, I’d say that analyses like LtG are every bit as outdated as the pro-growth literature of C20. If you want to make an LtG type analysis for this century you don’t want to be worrying about whether we will run out of lead, as LtG did.

  17. @John Quiggin
    Your #19

    Ah, well I only ever got around to reading one of those: ‘Consider Phlebas’ which was, but of course, pure ‘space opera’ and the first appearance of ‘The Culture’ – though Banks was creating a divergent scenario for ongoing exploitation.

    Heinlein, Asimov (esp. the Foundation series) and even Cordwainer Smith (eg Norstrilia) were all doing ‘future histories’ of Earth, as was ‘The Space Merchants too, I guess.

    Banks, otoh, was creating a more divergent scenario

  18. @John Quiggin

    I think you need to distinguish between principle and method. The LTG principle is not outdated. The in-detail method that the Club of Rome used for prediction might be partly outdated, particularly and perhaps only, in some of the parameters chosen.

    The LTG principle is a hard law, albeit a kind of composite law of physics, biology and ecology. Growth of a sub-system within a finite system cannot continue indefinitely. Of course, we must ask which kind of growth we mean. Clearly, the growth of human biomass cannot rise indefinitely. The growth of the total mass of infrastructure cannot rise indefinitely. The paved area, the farmed footprint area and so on cannot rise indefinitely.

    Economic growth could continue after all the above have plateaued. Let us assume for the argument that we plateau all the above elements successfully and sustainably as opposed to falling off the “Seneca cliff”. However, once again economic growth could not continue indefinitely even though it could continue much longer than the other forms of growth listed above. Qualitative growth, especially in knowledge, science and technology, must always be based on increasing order as stores and communication of data and knowledge. Maintaining more highly ordered conditions requires more energy at a given level of technology: albeit Moore’s Law then comes into play so the “equation” consequently becomes complex.

    The more concerning side of matters, as you have correctly pointed out in the past, is the issue of waste. Wastes appear to be “bidding foul” to become the major limiting factors to economic growth. Climate change is the greatest and real bête noire in this regard. If climate change continues to say 6 degrees C of average global warming, then I think, as the educated among us are all aware, this will end all economic growth and send the economy and world population plummeting in the other direction.The film “Death of the Oceans” talks about another crucial issue (partly related to climate change) which gets little airtime or print time in our MSM or even in many Schools of Economics I imagine.

    Economics which forgets it is a subsidiary discipline to the hard sciences and to the full spectrum of sociological sciences is economics misconceived. There seems in some quarters, especially in neoliberal economics, to be a false assumption about the absolute centrality, superiority and primacy of economics as a discipline over all other disciplines. I am sure that you, J.Q., do not make that false assumption.

  19. @Newtownian

    I found the slides and podcast interesting but like you somewhat weak.

    John Quiggin is still mired in some search for a workable proto-Keynesian form of capitalism.

    This is why we need a deeper understanding of political economy and not provocation of the LTG work.

  20. @J-D
    Your #24

    True. Though personally I wouldn’t put them in quite the same group as the ones I mentioned – though it’s been a very long time since I read any of them. I did enjoy the first of them: The Man Who Counts back when I read it – a fine creation of an alien civilisation indeed -but otherwise van Rijn was just a tad too much of a “pulp hero” for sustained interest.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s