Productivity Commission super report: Apply the Medicare approach to super

Today’s Fin Review column

What would Abraham Lincoln think of the Productivity Commission’s report into Australia’s super system? A funny question I know, but amongst his charms those eight-score years ago was a lively interest in economics and an original mind – seriously.

He had his head screwed on when he said that government should “do for the people what needs to be done, but which they cannot, by individual effort, do at all, or do so well, for themselves”.

In this spirit, Lateral Economics made a submission to the Commission proposing to ideologically ‘complete’ the idea of competitive neutrality – a term first coined right here in Australia when we led the world in competition policy reform from the early 1990s.

Competitive neutrality as currently understood requires that, if they compete with private firms, government enterprises should compete on a ‘level playing field’ with any unfair advantages – for instance in tax and planning – neutralised.

But as I proposed over two decades ago we should also take the converse idea seriously – that where governments are invested in providing services exclusively to some special group, anyone should have (unsubsidised) access to them.

So, given governments provide employee super schemes, we should all be able to access them. With super compulsory and the sector pervaded with market failure, this solves lots of problems.

Just as Medicare is an ‘informed purchaser’ and supervisor of sophisticated medical services, so government owned super schemes — like the Future Fund — can be informed purchasers of investment management services on our behalf. This interdicts many of the channels through which private financiers would otherwise feed their avarice – at our cost. Continue reading

Posted in Economics and public policy | 1 Comment

“SMSF regulation is appropriate” Productivity Commission SHOCK you won’t believe!!

Yes folks, the PC’s Final Report on Super tells us that the regulation of self managed super funds (SMSFs) is “appropriate” and plumps for more attention to ‘advice’ in setting up SMSFs. Verily, my gob was truly smacked and smacked again. In any event, there’s not much more to say other than to hoist an old column from the archives – below.

(In other news the PC has backed off its in-principle objection to allowing Australians access to government super funds – though its reasoning remains somewhat obscure given that much of the text opposing the idea from the Draft Report remains undisturbed in its Final Report.)

Regulation review: superannuation edition – the column

Here’s this Wednesday’s Age and SMH column.

Illustration: John Spooner.

In the last fortnight, the Government has ticked one of its boxes for next year’s election, launching policies to tackle over-regulation. And Treasury Secretary Martin Parkinson was reported as intimating that more regulation was needed to address risks posed by Australia’s DIY super.

The contrast between minimising regulation ‘in general’ while expanding it in particular illustrates Lord Acton’s dictum about rowing as a preparation for public life – enabling one to face in one direction while travelling in the other.

The Government is imposing stronger disciplines for regulators to perform regulatory impact analysis (RIA) before regulating. But we’ve been strengthening compliance on RIAs for two decades now. And it doesn’t work. Years ago the British Chambers of Commerce diagnosed the problem in its publication “Deregulation or Déjà Vu?”

Both Conservative and Labour administrations approach deregulation with apparent enthusiasm, learn little or nothing from previous efforts and have little if anything to show from each initiative.

Continue reading

Posted in Economics and public policy | 2 Comments

Why I’m not reading Steven Pinker’s latest

So You Want Enlightenment Now? - YouTubeI’m afraid this post won’t live up to the title above. It has its genesis in a long email I wrote someone who told me I just had to read Jeremy Lend’s critique of ‘Enlightenment Now’. I’ve mainly just topped and tailed it and stuck it up here – very much FWIW.

I’ll pass I’m afraid.

I’ve passed on Pinker whose optimism seems crude and tendentious to me. My decision not to read him is strengthened by the quote in the review of him describing certain environmental claims as “quasi-religious ideology… laced with misanthropy, including an indifference to starvation, an indulgence in ghoulish fantasies of a depopulated planet, and Nazi-like comparisons of human beings to vermin, pathogens, and cancer.”

I don’t know who Pinker is arguing against there, so his description may be accurate, but that raises the question as to why he isn’t addressing himself to the best such arguments, not the worst. I find people focusing on those who irritate them the most .… well .… I have to say I find them irritating ;). It’s one of the things I noticed when I was last in the UK as people had started doing this in a Big Way around Brexit.

And then we have his opponent who accuses Pinker of “a neoliberal, technocratic belief that a combination of market-based solutions and technological fixes will magically resolve all ecological problems”.

Why is the word “magical” in there? Does he take his readers for fools – we won’t notice him smuggling it into his argument? Is that really an accurate reflection of Pinker’s position? If he’s into magic, or even allowing for that slip into poetic licence, if he thinks some things will “resolve all ecological problems” why are we even discussing him?

His attack on GDP is ignorant I’m afraid. He says this “An oil spill, for example, increases GDP because of the cost of cleaning it up: the bigger the spill, the better it is for GDP.”

That’s true only if you ignore the economic impact of the oil spill, which is to generate losses including for the companies responsible for the spill and widespread economic and environmental damage – all of the former of which is captured in GDP and some of the latter of which will turn up as a cost in lost output and/or remediation. If he was right, Queensland’s GDP would have risen as a result of the floods but the opposite happened.

Then he mentions GPI. If you’re interested, I wrote about GPI here and here. Soft-left schlock I’m afraid. Silently left on the shelf by the Australia Institute and not maintained after I critiqued it – though the two things are probably unconnected. I never got any serious engagement from them on the shortcomings of the index they’d been promoting.

So I don’t trust either of these guys and that means reading them would leave me wondering where they were trying to pull the wool over my eyes. And given both are in deadly earnest, it’s clear they’re both adept at pulling the wool over their own eyes as a preparatory manoeuvre.

Posted in Climate Change, Cultural Critique, Political theory | 17 Comments

To overcome commonsense, and at the same time, to be wrong

As Orwell put it “there are some ideas so absurd that only an intellectual could believe them.” At least in economics one of the things that sets up intellectuals for this is the way so much of their discipline seeks to get ‘below’ the level of immediate intuition to something deeper. As my Dad once said, no doubt reciting some bon mot he learned at Chicago “there’s only one way to destroy a city more reliably than bombing and that’s rent control”. 

Certainly economists revel in their role as scolds of commonsense fallacy. As John Hewson is quoted as saying in Christine Wallace’s biography of him when he was Leader of the Liberal Party “As soon as you get an equilibrium approach to life, suddenly you realise that a lot of what you’d thought was wrong”. Everyone knows that trade restrictions create jobs. It’s a complicated subject of course, but most economists don’t think it does, or if it does, it does so at the cost of living standards and there are much better ways to create jobs. And, generally they’re right.

Still, you can be right in puncturing a common fallacy and still be wrong. This was Keynes case in the General Theory.

you can build a system out of some refutation of the the public’s commonsense, which, even though the refutation is correct, is still wrong. In a favourite passage of mine he reflects on mercantilism which his new theory had drawn him back to:

The mercantilists perceived the existence of the problem [of overcapacity and depression in an economy] without being able to push their analysis to the point of solving it. But the classical school ignored the problem, as a consequence of introducing into their premises conditions which involved its non-existence; with the result of creating a cleavage between the conclusions of economic theory and those of common sense. The extraordinary achievement of the classical theory was to overcome the beliefs of the “natural man” and, at the same time, to be wrong.

There are other examples of the same phenomenon. Continue reading

Posted in Cultural Critique, Democracy, Economics and public policy, Environment, History, Humour | 14 Comments

What a description can say: by JOHN BURNHEIM

There are so many pitfalls here. Mathematics enables us to construct moving pictures of almost any possible state of affairs. But no picture can say that there is a real state of affairs corresponding to it in the real world. Much less can it say the picture explains or predicts some future state of affairs. It is equally meaningful whatever relationship it has to reality. There is no place for explanations within it of how we can assess it as true or false or having some other relation to anything else .

Explanation depends on counterfactual conditionals: if this had not happened that would not have happened, and mathematical logics cannot even depict what counterfactuals purport to say. So Wittgenstein in the Tractatus asserted that causality is a superstition, in the knowledge that if he was right, it was impossible to say that and many other things he wanted to say. He concluded that science (physics) contained all that could be known, and that it was utterly irrelevant to anything that mattered to us.

This conclusion was congenial to him because he was dominated, like so many others, by Spengler’s Decline of the West, and more generally by Back to Nature thinking, like Heidegger. He never shook off this conviction, continuing to think that scientism was a pandemic disease. It is, of course if we take the content of the pictures science constructs as all there is to science. But science is primarily a search for explanations, especially causal relations, knowledge of which is expressed in counterfactuals. Mathematical constructions are of great use in getting the components of those counterfactuals precise, but as tools in the process of enquiry and discovery, not as information about the composition of what the picture depicts. It is absurd to conclude from the fact that a portrait that gives a good picture of a person consists of pigments on canvas that the person depicted must consist of then too. But that is exactly what philosophers and most of us tend to do. Pictures resemble what they depict only in very limited respects.

The remedy lies in the sophisticated pragmatism of the later Wittgenstein, which cannot be reduced to a formula, but needs to be a practice of detecting and remedying the various ways in which we are misled by language and our quest for generality and simplicity.

I first realised that the operating logic of our brains is not mathematical when I realised my three year old daughter was regularly using counterfactuals, as did her peers, long before thy had learned to count.

Posted in Uncategorized | 1 Comment

The Tragedy of the Commons versus the Comedy of the Parks: By JOHN BURNHEIM

In the context of my writing about public goods, John Burnheim sent me the email below. (Note his use of the word ‘comedy is intended as Dante meant it – as a story where things turn out in the end).

The park in question is the wonderful park in which I walk every day, stretching for about three kilometres from the complex of apartments in which we live on the corner so Pyrmont Bridge Road and Booth Street down to Rozelle Bay and on to the Fish Market, It is full of glorious trees and lawns and a variety of facilities. It is bordered by High-density residential buildings and well used by a variety of people and pets.

In my walks I hardly ever see a dog turd, a food or drink container, not even a sweet wrapper. People take hose things away or put them in the bins because they cherish that particular public good as part of their lives. They recognise a moral obligation to refrain from spoiling it and have sufficient self-respect to feel shame if they harm it. The situation is fragile, but is, it seems to me, part of a profound change in our vies of ourselves and of the place of morality in our lives. We no longer see morality as imposed on us. But as the framework of what we want

Morality used to be presented as some set off injunctions imposed on us to curb our natural tendencies as vitiated by original sin. Morality could have little effect on our conduct except through supernatural rewards and punishments. We have now reconstructed morality to favour all that is best in human nature.
Parks, not so long ago, invariably had prominent notices forbidding various activities and threatening to punish offenders. Now the only notices are designed to assist people, it is assumed that people know very well what to do or refrain from doing, not only because that is how they want it, but also because they enjoy being among others who are enjoying themselves.

However, calling the change in the content and status of morality profound is dangerous. It is better understood as a lot of specific changes that need to be
kept under review from different points of view. Various models like the Tragedy of the commons apply to certain activities in certain circumstances, while the Comedy of the Parks and other models apply to different situations. It is extremely dangerous to strive to give any one model such as Prisoners Dilemma the status of THE correct analysis in terms of which certain types of behaviour, say to public goods, must be explained.

Posted in Politics - international, Public and Private Goods | 6 Comments

Some New Year’s nourishment from two people I admire

Well, Happy New Year all.

Here’s a post introducing you to two people I admire. At least from the little I know of each, they lead lives that exemplify the virtues I believe in. They’re common virtues, lots of people have them – probably most people have them, though our culture obscures this from us. The core virtue is a rejection of anxiety and megalomania and a cognate embrace of all that life can be when you attend to things that seem to have value in themselves.  That ridiculously vague and basically tautological but there you go. I’ll let their achievements in living speak for themselves.

I was privileged to meet the distinguished intellectual biographer Ray Monk when he visited Australia to give the Seymore Lecture on biography for the National Library of Australia. He’s a very nice, thoughtful and, I realise on listening to the interview above, sweetly spoken guy. Ray maintains what seems to me to be the sanest social media presence of anyone I know. Followed by lots of friends he’s made in philosophy over the years, he tweets but mainly communicates via Facebook where he keeps up a steady stream of short commentary and posts the odd picture of something he’s liked and stays in touch with friends.

He’s recently become a vegan which rather took me aback as he’s not a very ideological soul, but good on him and he seems to be enjoying it and you get quite a bit of it on his Facebook posts – but never in a preachy way. Anyway, he’s a quite marvellous lecturer, particularly about his first and I think ultimate intellectual love, Ludwig Wittgenstein. If you find Wittgenstein hard to figure out, you know you’re not alone, but Ray is a revelation on him. Never more so than in the interview above, which was the immediate prompt for this post.

The other recipient of my admiration is Denis Noble who is a distinguished emeritus professor of physiology in his early eighties, still plugging away as an academic, critic of the hot breath of intellectual philistinism and reductionism – in this case in its Neo Darwinist guise (Yes, I’m look at YOU Richard Dawkins!).1 I read, greatly enjoyed and recommend his latest book, Dance to the Tune of Life. Indeed I wrote a review of it. I haven’t posted it because I’ve not finished the second part which was to draw parallels between Nobel’s critique of neo-Darwinism and a critique of neoclassical economics though if you’re interested email me and I’ll send you part one.

Continue reading

  1. Denis was an examiner on Richard Dawkins’ PhD and largely subscribed to the Neo Darwinist orthodoxy himself at the time.
Posted in Life | 1 Comment