In my experience there is a close to 100 per cent correlation between the stated belief that society is suffering from a decline in “civility” and a willingness to proclaim that we are all being oppressed by “political correctness”. John Howard neatly illustrates this. A week or two ago, he was denouncing public schools as hotbeds of political correctness, and the excessive concern with offending religious minorities that (allegedly) led to the curtailment of Christmas celebrations. Now he’s calling for more civility.

The common analysis underlying both demands for “political correctness” (this actual phrase was never used, except jocularly as far as I know, until critics seized on it, but terms such as “sensitivity” or “inclusive language” cover much the same ground) and for “civility”, is that offensive words give rise to offensive acts. In both cases, there’s some ambiguity over whether the problem is with the offence to the recipient or with the reinforcement of the hostile/prejudiced attitudes of the speaker, but the central claim is that modes of speech are an appropriate subject of concern and that some form of government action to encourage more socially appropriate modes of speech, ranging from subtle pressure to direct coercion, is desirable. The only difference between the two positions is that they have different lists of inappropriate words.

I don’t have a sharply defined position on any of this, except that I find people who think that being “politically incorrect” is exceptionally brave and witty to be among the most tiresome of bores. I doubt that changes in speech will, of themselves, produce changes in attitudes. The obvious evidence for this is the rate at which euphemisms wear out and become as offensive as the terms they replaced (for example, ‘handicapped’ for ‘crippled’). On the other hand, I think there’s a lot to be said for avoiding offensive words and forms of speech and can see a place for (tightly drafted and cautiously applied) laws prohibiting or penalising various forms of collective defamation.

In keeping with the blog tradition of bringing you tomorrow’s talking points today, I thought I’d look a bit further than the current election campaign and consider the implications of a Bush victory. On past form, there’s no reason to suppose that a second term will lead Bush to abandon his tax cuts, or to propose any significant net reduction in expenditure. At least not when there’s an obvious alternative, that only a few shrill Democrat economists and some incredibly out-of-date Republicans would ever object to. The US government has at its disposal and endless source of costless wealth – the printing press that turns out US dollars. Hence there’s no need to do anything tough like raising taxes or cutting Socil Security benefits. The only problem is that, according to some economists, reliance on the printing press as a source of government finance is likely to cause inflation.

As a first line of defence, the views of these economists can be criticised. There are plenty of Keynesian critics of monetarism who’ve pointed out that there’s no simple or automatic relationship between the money supply and the rate of inflation, and probably there are some who’ve been incautious enough to deny that there is any relationship at all. In any case, in the new era, the dynamism of the US economy is such that everyone wants to buy US dollars as fast as the Treasury can print them (ignore any recent observations on currency markets that might suggest otherwise).

Still, these are only delaying tactics. What will really be needed is a set of talking points showing that inflation (properly referred to as price appreciation or something similarly positive) is actually a good thing. In the hope of bringing the debate forward a bit, I’ve advanced a few.
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Until fairly recently, macroeconomic policy (the management of unemployment, inflation and the exchange rate) was the central concern of economic policy. Since the early 1990s, and particularly under the Howard government, these concerns have shifted to the periphery.

The Hawke government abandoned targeting of the exchange rate with the floating of the dollar, but Keating in particular continued to regard the current account deficit as an important policy target, at least until the early 1990s. Excessive concern with the current account deficit was widely seen as one of the factors behind the policy miscalculations that produced the 1989-92 recession. The counterargument, put forward most prominently by John Pitchford, was that, in a deregulated market, the current account balance is ultimately determined by the corresponding set of borrowing and lending transactions, and that these should not be a concern of macroeconomic policy. This view is now fairly generally accepted. Even though the current account deficit is as large in relation to GDP as it was in the 1980s, only a minority of commentators[1] express concern about it.

More significantly, the government abandoned the idea of using fiscal policy to manage the economy, and ceased to take an active role in the determination of monetary policy, leaving this entirely to the Reserve Bank. Although the Reserve Bank, unlike other central banks did not take the view that it should be concerned solely with inflation, the resulting policy regime was one in which inflation targeting was the primary focus, and unemployment was, at most, a matter of secondary concern.
Finally, the government abandoned Labor’s target of an unemployment rate of 5 per cent, and declined to set an alternative target.

fn1. I’m a member of this minority

I’ve spent the last five days in Israel, at a summer school on the Economics of Risk. Judging by the wrtings of visitors who’ve spent a similar amount of time in Australia, I ought by now to have formulated both an incisive analysis of Israeli society and a comprehensive plan for resolving the Israeli-Palestinian conflict. I haven’t done either, but I do have a few rather trivial observations to make.
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I’ve read a number of recent articles the burden of which is that the doctrine of terra nullius was a straw man invented by Henry Reynolds (sorry no links, but Christopher Pearson in the Oz states the point and lists others).

My own memory is that this doctrine was enunciated, both in name and in substance, by Justice Blackburn in a major case about 1971, which wasabout the beginning of Reynolds academic career. I’m prepared to believe that I’m wrong about the name, but I can’t see how the substance of Blackburn’s decision could have a basis significantly different from what we now call the doctrine of terra nullius . Maybe Ken Parish or some other well-informed person can set me straight.

Update: Commenter Dan has all the relevant info, so read the comments thread. Blackburn actually used the phrase “desert and uncultivated” which is taken in all the subsequent discussion to be synonymous with terra nullius.

My conclusion: Pearson and others are talking nonsense. The Blackburn decision made the validity or otherwise of the terra nullius doctrine a vital concern. Reynold’s research showed that this doctrine was not asserted as part of the British claim to sovereignty over Australia. Of course, the evidence can be read in ways more favorable to a terra nullius view, but there’s no sense in which this view was a straw man invented by Reynolds for the purpose of demolition.

Like racehorses, Australia’s monarchs[1] all have the same official birthday, normally the second Monday in June (according to today’s Oz, this was based on the actual birthday of George IV III). It’s fair to say that, of all Australian public holidays, this is the one for which the official occasion is most completely ignored. (Labour Day isn’t marked by much, but taking the day off is an observance in itself).
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Governor-General Michael Jeffrey has been criticised, again, for political comments, this time backing George Bush against Mark Latham. Such criticism, in my view, is obsolete. Although he was more subtle about it, Jeffrey’s predecessor-but-one, William Deane made his disagreement with some of the more brutal policies of the current government pretty clear. The attempt to restore the status of the GG as an impressive nonentity was tried with Peter Hollingworth, and failed miserably. Next time around, not surprisingly, Howard chose to play it safe and appoint a Liberal party loyalist.

The real problem is with the GG position itself. It is now inherently political, but the appointment is entirely in the personal gift of the PM. This is most unsatisfactory, particularly when a change of government produces a situation where the GG and PM are of opposite parties. Under our current system, this will produce increasing pressure for the GG to resign when the government that appointed him/her loses office.

The only adequate remedy is direct election. A directly elected GG (or President) would be free to speak out on public issues from time to time, while maintaining a primarily ceremonial role. The case for direct election would be even stronger if we became a republic, but it’s overwhelming in any case.

Hat tips: The title of this post is from a book by David Solomon and Ken Parish revived the idea a while back.

Tim Dunlop has raised the question of whether there are enough reasons to vote Labor, and the related question of whether Latham has adopted a small target strategy. Having taken the “Anybody But Beazley” line in response to the last round of the small target strategy, the latter idea is really scary.

In general terms, the notion of a small target strategy is refuted by Latham’s stance on Iraq, which I support. I think the occupation is now doing more harm than good and needs to be brought to a conclusion, or at least greatly scaled down, in the near future. Elections should be held before the end of the year, which would fit Latham’s timetable neatly.

More generally, I think the current talk of a small target strategy is due in part to the fact that Labor hasn’t gone after the government aggressively over Iraq, or even the travel scandal. This is a sound tactical decision, and doesn’t necessarily imply a small target strategy.

The big problem relates to tax and public expenditure and here the problem is not so much that Labor has a small target strategy as that it doesn’t have an agreed strategy at all. This is not surprising in itself, since, except at election time, the natural tendency of opposition is to say nice things to everybody without worrying about the budget constraint. But this won’t work well at an election. Labor needs to decide what it stands for, in particular on the general relationship between tax and services. I’ll be putting forward some proposals on this soon.

If it isn’t obvious, since the shameful events of 2001 (Tampa, SIEV X, Children overboard), there is nothing that would induce me to put this government anywhere other than last on my ticket. But I certainly hope for more from Labor than the almost-equally shameful capitulation we saw last time around.

Tim’s post has a lot of worthwhile comments, and links to others who have posted on this, including Steven Wade, Tubagooba, John Abercrombie and Ken Parish

Among the many nice things about being a Federation Fellow, one of the nicest is the way it infuriates some of my opponents[1]. I mentioned the IPA a while back and now Peter Saunders of the Centre for Independent Studies has had a go in today’s Fin. He’s responding to a piece of mine developed out of this post on bracket creep, though the article switched the focus from Saunders to an earlier presentation of the same argument by Peter Costello. The same piece produced a somewhat incoherent letter from Sinclair Davidson of RMIT, who couldn’t come up with anything better than to say that my article was “drivel”.

Anyway, Saunders wants to argue that tax rates and economic incentives influence location decisions[2] and decides to use me as an example, saying that I moved to Queensland to take up the Fellowship[3] (he even quotes from this blog). In fact, as my handful of long-term readers may recall, I moved to Brisbane in late 2002 and didn’t get the Fellowship until March 2003. My reasons for moving were much the same as those of the other 50 000 people who made the same move that year, and are summed up here.

The Fin is subscription only, but I’ve added some relevant extracts over the fold

fn1. It’s not very noble of me to take pleasure in annoying my opponents, but I can’t deny that I do.

fn2. To be boringly serious, I don’t, of course, deny that incentives affect decisions, but I think there are many more significant incentives in our system than the top marginal tax rate.

fn3. Saunders is open to a tu quoque here, having recently moved to this high-tax hell from the dynamic UK.
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Among the many nice things about being a Federation Fellow, one of the nicest is the way it infuriates some of my opponents[1]. I mentioned the IPA a while back and now Peter Saunders of the Centre for Independent Studies has had a go in today’s Fin. He’s responding to a piece of mine developed out of this post on bracket creep, though the article switched the focus from Saunders to an earlier presentation of the same argument by Peter Costello. The same piece produced a somewhat incoherent letter from Sinclair Davidson of RMIT, who couldn’t come up with anything better than to say that my article was “drivel”.

Anyway, Saunders wants to argue that tax rates and economic incentives influence location decisions[2] and decides to use me as an example, saying that I moved to Queensland to take up the Fellowship[3] (he even quotes from this blog). In fact, as my handful of long-term readers may recall, I moved to Brisbane in late 2002 and didn’t get the Fellowship until March 2003. My reasons for moving were much the same as those of the other 50 000 people who made the same move that year, and are summed up here.

The Fin is subscription only, but I’ve added some relevant extracts over the fold

fn1. It’s not very noble of me to take pleasure in annoying my opponents, but I can’t deny that I do.

fn2. To be boringly serious, I don’t, of course, deny that incentives affect decisions, but I think there are many more significant incentives in our system than the top marginal tax rate.

fn3. Saunders is open to a tu quoque here, having recently moved to this high-tax hell from the dynamic UK.
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