A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).
Monday Message Board
Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
The Australian Sharia Lobby
There were a bunch of demonstrations and counter-demonstrations at the weekend, sparked by supposed concerns about the possibility of Islamic sharia law being imposed in Australia. While the anti-sharia demonstrators were clearly drawn from the extremist fringe, there has been plenty of commentary on this subject from commentators generally regarded as mainstream, and from elected politicians such as Cory Bernardi and Jacquie Lambie.
The prospect of any significant legislation being based on Islamic sharia law seems pretty remote. On the other hand, those who claim to be concerned about sharia law (the Arabic term simply means ‘religious law) might want to consider the much more relevant issue of ‘shar??at al-Mas??’ (the Arabic term for ‘religious law of Christianity’).
Despite the Australian Constitutional prohibition on establishing any religion, lots of Australian laws are derived from Christian taboos, and many more have been in the past. Equally importantly, there is a group called the Australian Christian Lobby which, as the name implies, lobbies for the imposition of shar?at al-Mas??. Its activities are reported as if it is a legitimate political grouping, and not, as concerns about sharia law would suggest, a theocratic danger to our personal freedom.
When you look at the kind of issues being pushed by the Australian Christian Lobby, notably on their signature issue of opposition to gay rights, there’s not much difference from what you might expect from proponents of sharia law.
As I’ve said before, it seems highly likely that Christians will soon be in the minority in Australia. So, my unsolicited advice to the ACL is that they should support tolerance and civil liberties for all, rather than attempting to use the temporary majority status of Christianity to impose their version of sharia law. There’s nothing wrong with political activity being motivated by general religious values, but a lot wrong with attempts to impose your own religious taboos on others.
Cognitive biases
Ross Gittins cites some interesting questions used by some of my QUT colleagues to assess cognitive biases before undertaking a study of investment behavior. Here you go: Try to answer before reading on or checking comments:
Give me high and low estimates for the average weight of an adult male sperm whale (the largest of the toothed whales) in tonnes. Choose numbers far enough apart to be 90 per cent certain that the true answer lies somewhere between.
Don’t like that one? Try this: give me high and low estimates of the distance to the moon in kilometres. Choose numbers far enough apart to be certain that the true answer lies somewhere between.
Now something more personal. When you buy a Lotto ticket do you feel more encouraged regarding your chances if you choose the number yourself rather than using a computer-generated number?
Handicapping the Oz-NZ GDP growth race
There has been even more media excitement about the fact that New Zealand is currently experiencing more rapid economic growth than Australia. This is largely due to the fact that the two economies are in different phases of the medium term macroeconomic cycle.
However, there is another important factor that needs to be taken into account in making comparisons of this kind. Given access to the same technology, and with similar levels of education, poor countries will grow faster than rich ones, and will eventually converge to similar level of income. There’s a huge literature on this, to which I contributed a little bit back in the 1990s. The key finding is that, on average and under the conditions just stated, we should expect to see a poorer country make up around 2 per cent of the income gap with a richer country each year. That is, convergence will typically take around 50 years (there’s some tricky Zeno-style paradoxes here, which I don’t have room to discuss)
How does this affect comparisons between Australia and New Zealand. The IMF estimates here give income per person of 45138 for Australian and 33626 for New Zealand. So Australia’s income is about 35 per cent above the New Zealand level. The two countries were roughly on a par until the 1970s.
The standard convergence estimate is that NZ should make up about 2 per cent of that gap (or 0.7 per cent of GDP) each year. If the gap is larger, NZ could reasonably be said to be outperforming Australia for the year in question, relative to the standard 50 year timeframe for convergence. If the gap is smaller, NZ is doing worse than par.
Monday Message Board
Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
How should we tax banks?
The first real Budget leak of the season has sprung, with indications that the government will introduce a tax on bank deposits, aimed at financing a deposit insurance fund. This was proposed by Labor in 2013, and attacked by Tony Abbott at the time. Judging by Andrew Leigh’s comments that “I don’t think we’re going to take any lessons on bipartisanship from Joe Hockey”, they haven’t forgotten.
The best course for Labor would be to support the measure, but to impose ACCC supervision to stop the banks passing the charge onto consumers. That should be the wedge for permanent ACCC oversight of fees and charges.
None of this, however, gets to the real issue. Banks are immensely profitable, and their profitability rests on the fact that they can never really fail. It’s nearly always cheaper for the regulators to bail a bank out (for example, via a takeover) than to actually shut it down and pay out the depositors.
The appropriate tax base for a profit-enhancing subsidy is profits, currently running at $29 billion per year. Bank profits should be subject to a special tax, reflecting their special status. This would raise substantially more revenue than a deposit insurance levy.
Voting with their feet, and following the business cycle
Among the regular themes in the Australian business press is the claim that we are being outperformed, in economic terms, by New Zealand. I collected a bunch of such claims here, and they were even more prevalent (but hard to find now, being pre-Internet) in the late 1980s. I’m seeing the same theme recurring today (too many repetitions to link).
This is a recurring rather than a continuous theme: there are long periods during which Oz-NZ comparisons are absent from the press. So, if you took the Australian press at face value, it would be reasonable to suppose that Australia was becoming relatively poorer than NZ, not continuously, but in a series of downward steps.
In fact to a close approximation, the reverse is the case. But because market economies are cyclical, there are inevitably brief periods when the NZ economy is on an upswing and Australia in a slowdown or recession. It is only at such times that the business press notices New Zealand’s existence.
A point often made at such times is that net migration from NZ to Australia has slowed to a trickle, usually with the implication that this marks the end of the long term movement. In reality, the cyclical nature of net migration has been a marked feature of movement patterns, ever since the beginning of mass migration westward across the Tasman. The starting point was 1973 Closer Economic Relations Trans-Tasman Travel agreement, which coincided with the beginning of New Zealand’s relative decline. The authority here is Jacques Poot, and this 2009 paper sums up the story.
Interestingly, the flow has continued, unabated though still cyclical, despite the Howard government’s move to exclude Kiwis from welfare payments (arising, IIRC, from a dispute over concerns that NZ’s more liberal immigration policy would provide a ‘backdoor’ path to Australia).
The inevitability of red tape
I have a piece in The Guardian pointing out that the Abbott government’s Red Tape Reduction program is basically cover for a couple of big measures benefit the mining and gambling industries.
A bigger question raised by the piece: why does bureaucracy and red tape seem to grow without limits? Anyone who has ever worked as an academic, faced with a proliferation of pro-vice-chancellors, executive deans and multiple layers of hierarchy has certainly asked this question, and there’s nothing unusual about academics. The uselessness of administrators is the central theme of the comic strip Dilbert, popular in offices around the world.
The obvious explanations are
(a) stupidity; and
(b) administrative bloat benefits administrators and they are the ones who make the decisions
I don’t think either of these works adequately. Stupidity is certainly common, but the phenomenon is too pervasive to be explained in this way. As regards administrative self-interest, the problem is that senior executives could potentially gain a lot by cutting mid-level bureaucracy, and many have tried (remember ‘flatter organizations’ and ‘lean and mean’).
My own hypothesis is that every big mistake (for example, an undetected embezzlement or a mishandled episode of harassment) produces a permanent bureaucratic response designed to prevent a recurrence. This is very costly to reverse (who wants to deal with the first big embezzlement just after they downsized the accounting department) even if it would, in some sense, be less costly to put up with occasional failures. Moreover, for both good and bad reasons, I think we are, as a society, becoming less tolerant of institutional failures across a wide range of activities (systematic wrongdoing by financial institutions is a major counterexample but, I think, exceptional). So, we have more checks and balances, and more bureaucrats to enforce them.
Sandpit
A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).
John Quiggin 