I just got an automated message from my hosting service saying my bandwidth limit had been exceeded. I’m not sure what this means, but it’s possible the blog will go off air without warning. In the meantime, please don’t download any big files, and use the RSS feed if you want to check the site regularly. I will see if I can get the comments feed working again.
If the site goes down, I’ll post directly to Posterous
Chris Bertram’s CT post on the Browne reforms[1] in UK Higher Education has prompted me to write a post I’d half-planned a while ago, after seeing this familiar (to Australian eyes) claim.
Too many universities simply state a desire to “achieve excellence in teaching and research” and appear unable to carve out a market niche, Professor Beer said.
The idea that a pseudo-market system (centralised control but with sharper price incentives) will generate diversity is one of many illusions that were exposed during the Australian reform era of the 1990s. Faced with pressure to find a market niche and select a “flagship” program, 37 Australian universities (out of 37) decided that business education and a multitude of specifically labelled vocational degrees were the right niche and that an MBA would be a good flagship. This is scarcely surprising: given the incentives, business degrees were the obvious profit centre. It’s only as the reform program has faded from memory that we are seeing serious attempts at diversity like the “Melbourne model”
However, similar choices didn’t produce a homogenous outcome. Rather, the historical hierarchy (century-old sandstones at the top, former teachers colleges at the bottom) which had been somewhat muted when funding flowed a little more freely, re-emerged stronger than ever. At the top, there was enough surplus to maintain, more or less, the full range of disciplines as well as the long-established professional schools (law, pharmacy and so on). The further down the scale you went the less of the arts, humanities and sciences survived. This apparently came as a surprise to the Australian equivalents of Professor Beer.
Even more bizarre was the shock expressed by some market advocates when they discovered that, with a customer base consisting of 18-year olds (who understood their own preferences), and parents (who mostly knew very little about units), the market produced very little demand for anything that was hard and didn’t purport to offer training for a well-paid job. Some of them seriously appeared to think that the market would kill off critical theory in favor of good old-fashioned classical education. In fact, provided the pill was sugar-coated with film studies and pop culture, critical theory didn’t do too badly, at least relative to old-style humanities. I myself am affiliated with the QUT Centre for Creative Industries, which derives much more from crit theory than from lit crit.
Australia has a long history of importing policies that have already failed in the UK. It’s a source of mild schadenfreude to see the trade going in the opposite direction for once.
fn1. As always, I use “reform” to mean “change in structure” with no implication of approval or disapproval. Given the history of C20, most reforms consist, in large measure, of undoing some previous reform.
The bailout of the US financial sector through the Troubled Assets Recovery Program (TARP) looks to have been fairly successful on its own terms – the banks have become profitable again and the final estimated loss to the government is relatively small. That doesn’t change the fact that the government took on huge risks for negative returns, without any reason to expect that the future behavior of the banks will change.
But all of that was based on assumptions of an orderly resolution of the mortgage crisis. Those assumptions now look very dubious, as the legal consequences of the practices of the financial sector during the bubble, ranging from sloppiness to outright fraud, manifest themselves.
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I just did an interview with ABC Radio Lismore about the latest proposal to divert water from the Clarence River to the Murray Darling Basin. Apart from the environmental effects (disastrous according to the studies I’ve seen) proponents of ideas like this seem to be unaware of a crucial fact. Water is heavy. A megalitre of water (worth maybe $200 as bulk supply to irrigators) weighs 1000 tonnes. Pumping that much mass over even a low mountain range is prohibitively expensive. You can overcome that with tunnels if the gradients are steep enough, but the Great Dividing Range is pretty broad in Northern NSW.
And, don’t get me started on the really crazy projects like Colin’s Canal.
Apparently the Mont Pelerin Society is meeting in Sydney. The proceedings are apparently unpublished, which is a pity, since I would be interested to see how, if at all, members have adjusted their views in response to the Global Financial Crisis. In the absence of this, we can all think about the maxim “bad things come in threes”.
The last meeting of which I heard anything[1] was in Reykjavik, at which time the MPS was happy to share in the glory of its proteges such as David Oddson. There was also a meeting in Chile in 1981, notable for producing an endorsement of the Pinochet regime from Hayek The Chilean economy ran into a severe crisis shortly thereafter. So, let’s hope that this meeting passes off uneventfully, and without any nasty aftershocks.
fn1. Google suggests there have been plenty of other meetings, but these are the only ones I heard anything about.
News of the Grog’s Gamut debacle has reached my former home of Townsville, where the appalling Townsville Bulletin (aka Bully) publishes a splendid piece of invective against cowardly bloggers “who hide under the veil of anonymity, taking cheap shots to satisfy their trendy social agenda”. The author of this marvellous diatribe deserves some recognition, but sadly …
(H/T The Political Sword
… but we still can’t water the lawn. As I predicted more than a year ago, the gates have been opened at Wivenhoe Dam, and water saved at substantial cost last year is now flooding down the Brisbane River. Yet, anyone who wanted, for whatever crazy reason, to water their lawn today would be breaching Brisbane’s permanent water restrictions, which forbid watering on Mondays (why Monday? – I have no idea). And watering the lawn between 10 am and 4 pm is never allowed.
It makes sense to require water-efficient sprinklers, taps and so on – investment in such measures now will pay off in a drought. But, when water is plentiful, there should be no restrictions on when and how it is used. That way, restrictions will have more bite when they are actually needed.
It’s time again, once again, for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpit, please.
Presumably relying on his Queensland government sources to get their sums right, ABC business reporter Peter Ryan writes
The biggest public share offer in more than a decade is expected to raise more than $5 billion for the Queensland Government … The Government will retain between 25 and 40 per cent of QR and will sell up to 1.68 million shares at between $2.50 and $3.00 a share. Individual investors will pay no more than $2.80 a share.
It’s a good thing all that money will be used to build new schools [1], since some arithmetic lessons are clearly in order. Unless all the shares are sold to institutions at the maximum price, there is no way the revenue can reach $5 billion.
fn1. I’m joking of course. As I and other economists have explained at tiresome length in the past, the sale of income-earning assets cannot, in any meaningful sense, finance social investments like schools and hospitals. The taxes that would (in the absence of asset sales) be required to finance debt for additional investments must be used instead to replace the income lost from the assets that have been sold.
The problems of the Murray Darling Basin have been developing for more than a century. I’ve been working on this issue for 30 years, during which, despite a series of policy initiatives too long to list, the situation in the Basin has got worse in most (not all) respects. So, it’s not surprising that the attempt to provide a comprehensive plan for the future involves a drawn-out process. The big question (which the Risk and Sustainable Management Group at UQ will be addressing in a workshop later this month) is: Have we finally got it right?
My general view is optimistic. If the politics can be negotiated, and if the government is willing to spend around $5 billion on buying back overallocated water rights, we can probably reach a solution that is economically, environmentally and socially sustainable.
The Draft Plan proposes a reduction in water use for irrigation of between 3000 and 4000 Gigalitres (GL). That range reflects two fairly tight constraints. Anything less than 3000 GL won’t achieve environmental sustainability. Anything more would imply unacceptably large impacts on irrigated agriculture.
Here’s the rough arithmetic on the irrigation side, which is broadly consistent with the modelling done by my Group, some of which was used along with research by ABARE in preparing the draft plan. A 30 per cent cut in water use will result in a 15 per cent reduction in the gross value of agricultural output, and a smaller reduction in net returns to farmers.
The big change required to achieve this kind of reduction in water use is a shift from irrigated rice production to dryland agriculture. Since yields on irrigated lands are much higher that will imply a reduction in our total grains output. Still the impact is much smaller than, for example, the effect of the current overvaluation (relative to long-run value) of the Australian dollar.
Importantly, although the changes in the Draft Plan have been referred to as “cuts in allocations” this is incorrect. Although the National Water Initiative proposed cuts where water resources had been over-allocated in the past, the Draft Plan calls for the entire reduction in water use to be treated as a change in government policy, meaning that the Commonwealth will bear the cost. It’s already been made clear that this reduction will be achieved entirely by voluntary buybacks and conservation measures.
While there are some opportunities for conservation, the most cost-effective mechanism in most case is buying back entitlements. Now that the drought has broken, I’d guess the likely price for entitlements will be around $1500/ML suggesting a cost of buyback (or similarly cost-effective conservation) of between $4.5 billion and $6 billion. It’s not clear whether buybacks that have already taken place will be counted towards this. There’s enough money allocated to the National Water Plan/Water for the Future to cover this cost, though most of it is currently earmarked for on-farm works.
John Quiggin 