A snippet on screening

John Quiggin14 Comments

One of the long-running disputes in the theory of education is whether students are actually acquiring knowledge and skills that will be useful to them and society, both in earning an income and in life generally (among economists this has the unlovely name of human capital theory) or whether the primary purpose is to sort out the most able young people and direct them into the best jobs (screening). I’m a strong advocate of the human capital view, but there have always been some troubling counterexamples, such as the supposed preference of the British Civil Service for employing people with a classical (Latin and Greek) education. While doing some work in the general field, I came across the fact that this actually ceased to be true nearly 100 years ago. I couldn’t use this in the piece I was working on, so I decided to post it here.

There are instances where the ‘screening’ model appears appropriate. At one time, for example, aspirants to enter the British Civil Service were well advised to take a degree in classics from Oxford or Cambridge, since this course was seen as a test of general intellect. This was a long time ago, however. From the 1920s onwards, the most preferred general education for aspiring civil servants has been the PPE (politics, philosophy and economics) degree, particularly that offered at Oxford. No fewer than six members of the current UK Cabinet, along with many senior civil servants and journalists, hold Oxford PPEs. The shift from classics to PPE is a clear indication that the actual content of education is more significant than the screening effect.

There are some big problems with such a political monoculture. But that’s a topic for another post.

The grandfather clause (repost)

John Quiggin30 Comments

With the announcement of the Romney-Ryan ticket, I decided to repost this piece on the most striking (to me) aspect of Ryan’s plans, namely the exemption of those currently over 55 (or maybe those who were over 55 in 2010 or 2011, when the plan was first announced. If everything goes to plan for the Repubs, Ryan would be the presumptive candidate after Romney’s second term in 2020. Coincidentally or not, that’s just about the point when the exemption runs out. People retiring after that will have spent a decade or more paying taxes to support benefits for those grandfathered in, but won’t be eligible themselves.
Read More »

The post-mortem

John Quiggin9 Comments

The Labor Party has released a report on the Queensland election debacle. As far as it goes, it’s quite sensible, dismissing silly chatter about the election strategy and other trivia. The main causes of the disaster are identified as
* Too long in office
* Problems in the health system, particularly the payroll fiasco
* The asset sales

The first two of these can be dealt with pretty quickly. Obviously governments can’t last for ever, but reaching your fifth term is the kind of problem you want. As regards the health bungles, I’m reminded of the PM’s observation in The Dish. It’s accurate, but unhelpful to say that bungles like this are to be avoided if possible.

Finally, there’s the asset sales. The committee, probably wisely, avoids judgement on the merits of the issue, but concludes correctly that the decision to announce the asset sales, shortly after the successful conclusion of an election campaign based on a commitment to public investment was a disaster from which the Bligh government never recovered. The Committee also observes that the government’s defeat was made even worse by the hostile reaction from the party base, including unions. I’m not part of the Labor party base, but I certainly made strong public criticisms of the government’s case for asset sales. Given the scale of the resulting defeat, and the appalling policy decisions being made by the Newman government, it’s worth reassessing that course of action.

As an economist, I try to call the issues as I see them, rather than calculating the political consequences. So, I would certainly have expressed the same views on the bogus case advanced by Andrew Fraseer and the Treasury, even if I thought the result would be to reduce the government’s chances of re-election. But, in other capacities, as a blogger for example, I took a political stance against the government. Was this justified?

At this point, we need to push the analysis a bit further. The announcement of the asset sales was a political disaster for the government (as well as being bad policy in most respects), but it could have been recouped if, at any time in 2009 or 2010, Bligh had changed course and admitted that the policy had not attracted the necessary public support. Under these circumstances, her post-flood surge in popularity might well have been sustained. So, those who attacked the government in this period were in fact throwing a lifeline that, if grasped, could have saved it, or at least, allowed for a respectable showing and a strong basis for attacking the LNP. But that didn’t happen, and there was no way to unsay the valid criticisms that had been made of the government. So, the end result was to turn what would have been a thrashing in any case into a wipeout. Still, I can’t see that there was any reasonable alternative. At least now, there is some basis for a critique of the LNP, which there would not have been if I and others had given the Bligh government a free pass.

Disruption

Jacques ChesterLeave a comment

Hello all, your friendly Ozblogistan Tyrant here.

This weekend I will be performing one of the biggest changes made to Ozblogistan in several years.

I am moving the site from its current home to a new one.

The new service is a company specialising in WordPress hosting. They will be taking responsibility for all the scut-work of making the site go.

Once the move is finalised, I expect that Ozblogistan will be snappier than it is now. I also won’t have to worry about fixing security problems, doing backups, finding out why plugin X has stopped working, working out why the site has suddenly died and so on. These will now be responsibilities I can delegate to the providers.

This has been in the works for some time. While I was a student I could afford the time it takes to keep Ozblogistan working relatively smoothly. As a professional I no longer have that time. So it makes sense to hire other professionals to do it for me.

The security problem we had a few weeks ago (and which is still causing false positives) was the straw that broke the camel’s back.

Moving providers is never pretty. Things are going to break this weekend. And various things will probably appear broken into the new week. It’s all for the good. Ozblogistan will shine out ever brighter.

Update Saturday 2:17PM WST: Failure. I will probably have to try again on Monday night. I’ve re-enabled comments.

How feasible is a guaranteed minimum income (crosspost from CT)

John Quiggin19 Comments

We were talking at CT not long ago about universal basic income policy, and there were a variety of opinions about the desirability, political sustainability and implications of such a policy. But, before arguing about those issues, it’s useful to consider whether a basic income is feasible at all and, if so, what kinds of tax policies, and adjustments to other welfare policies, would be required to support it. I’ve considered the relatively easy case of a guaranteed minimum income, rather than a universal basic income paid to everyone, as advocated by Philippe von Parijs and others.

Read More »

Spoke too soon

John Quiggin22 Comments

Having just given a relatively optimistic view of US policy on climate change, I’ve seen a string of signals that the Obama Administration is set to sell out on this vital issue, presumably on the advice of the same political experts who persuaded him to ignore the unemployment problem for most of his first term in office. The bad news

* An Obama ad attacking Romney for saying (correctly) in 2003, that dirty coal-fired power plants kill people.

* Partial approval of the Keystone pipeline

and, worst of all, the apparent abandonment of the 2 degree target announced by U.S. Special Envoy for Climate Change Todd Stern

The radio is deplorable, but not significant in the greater scheme of things. Whatever the ad might say, the EPA regulations introduced under Obama are closing down lots of the worst coal-fired power stations. As regards the other two points, the best we can say is that nothing is locked in yet. Still, it’s more depressing stuff from someone who once promised Hope.

Must try harder, Part 2

John Quiggin32 Comments

According to standard economic theory, the least distorting of all taxes is a land tax. This point can be pushed too far – for example, most land is improved to some extent, and that may be capitalized into land values. Nevertheless, given the financial difficulties of state governments, their failure to make use of this revenue source is an indictment, especially since they impose much more distortionary taxes on transactions involving land, such as transfer duties. All states exempt owner-occupied homes and primary producers from land tax, while taxing land sales and purchases across the board. The effect is to benefit existing landowners (except owners of rental housing) at the expense of new home-buyers and tenants.

It appears to be beyond the realm of political possibility to change this, but a government facing a supposed financial crisis, and looking for luxury items to cut, could start with land tax exemptions. As you might expect, Queensland has both a high threshold ($600 000) and a low rate (1 per cent increasing gradually).

None of the usual justifications for Queensland’s low tax effort apply here. Land tax exemptions do nothing to attract business to Queensland. They are a straightforward handout to landowners, mostly wealthy households with investment properties.

Unsurprisingly, this handout attracts zero critical attention from the Commission of Audit which states “Queensland has historically maintained a competitive taxation environment compared to other states.” This is entirely wrong as it applies to land tax. Since land is immobile, there is nothing competitive about low rates of land tax.