Some post-school education bodies we could do without

John Quiggin39 Comments

First, there’s the Australian Skills Quality Authority, which is supposed to regulate the quality of vocational education. AQSA’s performance makes the Greyhound Racing Queensland Board look good

In 2012, when I wrote a report on vocational education, it was common knowledge that the for-profit education sector was comprehensively rotten, particularly in Victoria where the push to privatisation began. This ABC report suggests that ASQA was on the case. But three years later, the only thing that has changed is that the rot has spread nationwide. All the big names in the industry – Evocca, Aspire and so on – are engaged in practices like using laptops as inducement to recruit low-income students who have no chance of either completing their courses or repaying their HECS-HELP debts. There’s no surprise here – it’s exactly the business model of US for-profits like the University of Phoenix.

The right solution is to stop giving any public money to for-profit education businesses. But, in the current market liberal environment that would probably fall afoul of competition policy. So, my suggestion is to cap the amount any publicly funded institution can spend on marketing to Australian students. Ideally the cap would be well below the amount currently being wasted by universities and other public providers competing against each other with our money. That in turn would be far below the rake-off being taken by the recruiters on whom the for-profits depend.

In the meantime, AQSA is a proven failure. It needs to be scrapped and its functions turned over to a body with some real teeth and a willingness to defend the interests of students and the public purse, rather than being a captive of the industry it is supposed to regulate. A joint investigation by the ACCC and the Auditor-General would be a good start.

Next, Universities Australia, the Go8 and the other Vice-Chancellors’ clubs. Fresh from the fee deregulation debacle, they’ve turned their attention to the question of how we should allocate research training places (such as PhD programs).

In the case of fee deregulation, the VC groups were uniformly wrong, not to mention tin-eared. This time, we have the odd spectacle of the Go8 directly opposing UA, even though one is a subset of the other. The Go8 want to stop departments with poor research records, based on the “Excellence in Research Assessment” from getting funding for research training places. UA is opposed, making the point that ERA is not “fit for purpose”.

In the abstract, I have some sympathy for both sides of this argument but in practice it just looks like special pleading on both sides – UA wanting to keep something for all its members, and the Go8 lobbying for special treatment.

But the real problem is the one I identified in the deregulation debacle. The VC groups claim to speak for universities, but exclude all but 40-odd of the people who work and study in them. In the present case, wouldn’t the perspectives of research students and the academics who supervise them be more useful than those of VCs and administrators? To repeat, we need to replace UA with a body that represents students and staff as well as top management.

And, while we’re at it, how about dropping the linguistic abomination of names like Universities Australia[1]? Even knowing nothing else about the group, a name like this reeks of the worst kind of 1990s managerialism.

[^1] Are there any grammar experts who can give a name to the part of speech represented by “Australia” in this title? It’s not known to Standard English, I’m pretty sure.

Bookplug: Phishing for Phools, Classical Greece, Luck in Politics

John Quiggin19 Comments

Among the winners of the Economics Nobel [1] two of the most interesting are George Akerlof and Robert Shiller. Their book Animal Spirits provided me with much of the intellectual stimulus to write my own Zombie Economics. Their latest has the intriguing title Phishing for Phools: The Economics of Manipulation and Deception.

The central theme is simple. We are all prone to errors in reasoning. Given the complexity of the world, and the finiteness of our reasoning capacity, it could scarcely be otherwise. This obviously leads to decisions that differ from the perfect optimality assumed in simplistic versions of economics.

More importantly, markets create opportunities for others to exploit and amplify our errors in reasoning. Advertising uses all sorts of device to encourage us to make decisions that we would not make if we gave careful and rational consideration to our choices. The entire credit card industry relies for its profitability on the fact that cardholders don’t (as is almost always sensible) pay off their balances every month. And so on.

As Akerlof and Shiller observe, the fact that markets systematically amplify reasoning failures undermines the standard claims about the optimality of market processes.

The proposed policy responses are a bit limited, focusing mainly on regulation and consumer protection. Still, the book is well worth reading.

An interesting side point is an argument that the harms of alcohol, a notorious source of suboptimal decisions, have been greatly underestimated.

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Income distribution: where should we start ?

John Quiggin18 Comments

Here’s another draft extract from my book-in-progress, Economics in Two Lessons, looking at income distribution. The entire draft section on this topic is available here. And the introduction, describing the general approach of the book is here.

Praise is welcome, and useful criticism even more so. As a reminder, this is an extract. If you think a crucial point has been missed, point it out, but bear in mind that it may be addressed elsewhere in the book.

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Meet the new boss …

John Quiggin44 Comments

As has happened before, I was travelling when the Prime Ministership suddenly changed hands. I’m still on holiday, though I briefly appeared before the South Australian Royal Commission on the Nuclear Fuel Cycle yesterday. But even without following the news closely, it’s easy enough to see that the Turnbull LNP government is basically the Abbott government with the gratuitous culture war element removed.

On climate change, for example, we’ve seen the end of attempts to kill the highly successful Clean Energy Finance Corporation, but no major change to the absurdly misnamed “Direct Action” policy, and a doubling down on Abbott’s support for coal from newly promoted minister Josh Frydenberg.

In particular, contrary to suggestions that Turnbull is going to push for a more “market liberal” approach, Frydenberg is still touting the idea of subsidising the Adani Carmichael boondoggle. I doubt that anything will come of this (on this score, the supposed deal with Downer EDI to build Adani’s railroad seems to have quietly died), but it’s indicative of the government’s position. And the new coalition deal, handing over water policy to Barnaby Joyce, amounts to a repudiation of everything Turnbull stood for when he was Water Minister under Howard.

The abandonment of the culture wars looks like something of a double-edged sword. On the one hand, it was obviously necessary, given the extent to which Abbott’s absurdities discredited the whole enterprise. On the other hand, much of the LNP base and commentariat are so committed to culture war politics that they will have grave difficulty in supporting Turnbull even if they want to: most of their usual lines against inner city elites, latte liberals and so on are far more applicable to their own new leader than to Labor and the Greens.

My success as a pundit is notoriously mixed. Still, I find it hard to see how Turnbull can sustain his initial bounce in the polls without taking tougher decisions than those he has been willing to make so far.

A CHAFTA election? (updated)

John Quiggin47 Comments

Malcolm Turnbull’s coup against Abbott has been the subject of much commentary, and I didn’t have anything to add. But now it’s time to look beyond the juggling of Cabinet positions and to consider some of the long term implications. Turnbull’s rise takes off the table, or radically changes the politics of, a number of issues that would have been central to an Abbott election campaign. Most obviously, there are the issues (climate change, equal marriage, republicanism) where Turnbull is known to agree with Labor but has said he will stick with Abbott’s policies. Obviously, Turnbull can’t run hard on these. It remains to be seen whether Labor can make political mileage out of the contradictions involved.

The ground Turnbull wants to fight on is that of economic liberalism, primarily as represented by the so-called Free Trade Agreements with Korea, Japan and, most importantly, China.

Turnbull has the near-unanimous support of the elites on these deals, even though it’s hard to find even a single economist who would support them with any enthusiasm. Anyone who has looked seriously at the issue understands that the trade aspect of these agreements is trivial. What matters are the side clauses on issues like Investor-State Dispute Settlement procedures, intellectual property, environmental protection and so forth. Unfortunately, political journalists, as a class, don’t do much thinking.

Here, for example, is Laurie Oakes, asserting that

>Labor needs to end up supporting this trade deal. That is the bottom line

but not providing a single argument in favour. In typical “Insider” style, Oakes says

The government charge that Labor is sabotaging jobs would not be a difficult one to sustain.

without worrying about whether this charge is actually true (it isn’t).

In the case of CHAFTA (the unlovely acronym for the China deal), the big problem is not in the agreement itself, but in a “Memorandum of Understanding”, which provides for circumstances under which a Chinese company can import its own workforce, without labour market testing (that is, even if there are Australians willing and able to fill the jobs) and without matching existing conditions.
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