Plug libertarian article:

http://alsblog.wordpress.com/2008/07/11/generous-americans/

people need more than boots, overalls and Governemnt run kitchens.

Yes they do, these were merely examples to illustrate the basic concept of non-financial direct welfare, not intended to be an exhaustive list. You can re-apply the general principle to various other items until you have a reasonable package for people at the bottom of the social ladder, but typing the complete inventory would make my fingers tired.

No one in Australia is starving.

A group calling themselves “foodbank” take grocery items that are below par and not profitable for sale (they are sponsored by a large number of the major grocery labels) and they redistribute this to smaller charity groups who in turn get it into the community (direct non-financial welfare). I don’t know what selection criteria they employ for distribution. The Foodbank website does not contain many details, maybe some of the information is considered sensitive. The Kellogs website claims:

Foodbank aims to ensure that surplus food, donated by the food and grocery industry, is made accessible to welfare agencies for distribution to people in need.

Foodbanks across Australia provide food to over 1500 welfare agencies. Last year Foodbank distributed 10 million kgs of food, which fed 30 000 people a day – that’s 12 million meals a year!

Kellogg is committed to assisting Foodbank and last year donated over 100 tonnes of cereal and convenience food to Foodbank.

By my count 12M meals is 16k people eating two meals a day who presumably would go hungry without this support. It might be providing one meal a day for 32k people and they catch up the rest themselves. At any rate, more Australians than you think depend on direct food handouts. Yes, Foodbank is a private NFP with donations coming from both government and industry.

As an aside, I’ll just take this opportunity to say how very bad the official federal budget web page is. Never have I seen a breakdown so badly presented with payable and receivable arbitrarily mixed, zig-zag jumps between the delta figures (change since last year) and the actual figures, no consistent topical layout and impossible to cross total anything anywhere to reconcile against anything.

Here’s the only bit I found useful: http://www.budget.gov.au//2008-09/content/overview/html/overview_40.htm

So the federal government (somewhere this figure popped up, can’t find it now) provides direct financial welfare to 1 in 10 Australians or 2M people. That costs $100G (from the above budget pie which averages down to $50k per person (roughly the average wage). I have no idea exactly where the $100G goes, the budget is too confusingly laid out, hopefully some of that money does get to the people on welfare, and hopefully they spend it on something useful… still there are tens of thousands of people needing food handouts.

Let’s presume that the Foodbank meals have a market value of $15 each, then 12M meals would be equivalent to $180M and that probably helps approx 16k people, averaging down to $11k per person in equivalent value. However, Foodbank’s total actual cost is far less than the $180M market equivalent. That’s because it uses material that was going the be thrown away anyhow and the big grocery chains know that they are pushing their unsalable stock down into the lower echelons of the community such that it does not deplete their regular market (people at this level don’t have much money to spend at the supermarket). Also Foodbank depends on existing charities to do the final stage of distribution (so there are heaps of hidden costs of labour in there, I accept that).

These are all rough calculations, but it looks to me like Foodbank comes out looking highly efficient. Finish up with a quote from their website:

There are many reasons for waste in even the most efficiently run organisation: changed labelling regulations, end of season excess stock, production line changeover items, out-dated competition packaging, discontinued products, as well as the merest label or weight inaccuracies which render a product legally unsaleable. Tonnes of cans or packets are disposed of every week. The main recipient of these products is landfill !

You’re right, more stability can be achieved by a different targeting regime.

You need to elaborate your model more with an example.

You need to look at the EMS crawling band. If you want this to go to equilibrium (and it will, financial markets are very efficient) but you want the Government have set prices or quantities on the exchange rate? The central bank will effectively be giving seingorage to currency traders when other currencies move.

I’ve said it many times but I’ll say it once again, I made no provision for the central bank to participate in the currency trade so it simply cannot give money. The only proposal I made is that the central bank adjust interest rates by a different target function. How does the money leave the central bank and get to the currency traders?

I think these people are well intentioned but probably wrong. The general level of prosperity determines housing conditions for most people and insurance can impose a more flexible system of standards and code. Having standards isn’t necessarily a bad idea - but their inflexibility and the possibility of rent seeking can make them burdensome. Insurance mandated standards would be flexible and be less subject to rent seeking and require more effort to be circumvented. We already have insurance - let it take the dominant role.

NPOV - You want regulation but admit that corruption is a problem. They can never be assured of a good legal system and certainty in land simply because of the inadequecy and complexity of legal title there. There is simply no incentive to build anything worthwhile as it may get knocked down tomorrow. No investor wants to touch that let alone an owner occupier. This lack of property rights is a problem all through South America.

“Even if we are unwilling to accept that a market equilibrium can ever be reached, why does my system make the currency market substantially more unfair than our present-day situation?”

You need to look at the EMS crawling band. If you want this to go to equilibrium (and it will, financial markets are very efficient) but you want the Government have set prices or quantities on the exchange rate? The central bank will effectively be giving seingorage to currency traders when other currencies move.

Slow change in monetary policy is achievable without such drastic measures. You only need to make the long term inflation target lower and more important.

Tel - people need more than boots, overalls and Governemnt run kitchens. No one in Australia is starving. The welfare system can be improved. How will supplying three goods through tender help when welfare recipients are already to free to spend their incomes on anything they require in a global market? We would have an abundance of cheap food and clothing & footwear if we dumped tariffs on agriculture and textiles, clothing and footwear. You’re suggesting something close to industry policy which can have the same results as a tariff or a quota.

People on welfare need more than these items and everyone else doesn’t need them.

Tel, an earthquake is surely more difficult to withstand than a mudslide. And it was “only” 6000 people killed, out of an affected population of over a million. The mudslide in Venezueula pretty much wiped out everything and everybody in the area (it left 85,000 homeless on top of the 30,000 killed). Today, they’re still building shanty towns there, and its bound to happen again.

Arrow and Debreu found a result of general equilibrium modelling, the most efficient form of Government intervention was indirect flat taxes and lump sum direct cash trasnfers. This is basically a corollary of the second theorem of welfare economics.

Such a policy isn’t perfect. But all others are second best.

My feeling is that government should supply basic necessities on a non-financial per-person ration system. For example, you should be able to get one pair of government-issue boots every six months. You have to turn up in person at a depot to pick them up and they biometric scan you on the spot. If you have already picked up a pair in the last six months they politely tell you to come back later. The government-issue boots would be completely utilitarian, cheaply made, designed to last through exactly seven months of hard work and the only people barefoot would be that way by their own choice. Government would be able to put the boot manufacture up for private tender and offer three different brands of utilitarian boot, the suppliers get paid (not much) in proportion to the number of their brand boots that people want (in order to ensure a minimum standard), and the usual anti-monopoly rules would apply (suppliers can’t buy each other’s shares for example).

Same system for government overalls and government meals, you could get two meals a day, from a choice of three kitchens, none of which are much good, but good enough to get you through a days work. Thus, no one goes hungry unless by choice. This provides both a safety net and a minimum standard for all private services. If you run a restaurant and you can’t make better than a government-issue meal then you picked the wrong trade… go back and try again.

Needless to say, this system would not supply anything remotely like a luxury good, because the objective is keeping people alive and working and still leaving some market open to private enterprise.

By the way, it’s so cool the way Einstein and Newton had theories, but economists get to have theorems. I’m so good I’m even humble too

Yea, we could that that, Tel, but people would make a fortune through arbitrage. You would find that interest rates would become very volatile.

Presumably the people making a fortune would be transferring wealth from some other people who are losing a fortune (after all, the money must come from somewhere and everyone can’t make a fortune). They can’t collect on any government money, because I provide no mechanism for government to make any currency trades. Given that all the currency traders in the market have equal rights to buy and sell with the party of their choice at a mutually agreeable price, what conditions would select the winners from the losers? Let’s presume for a moment that we all believe that the principle of market equilibrium does function as advertised, why would it not function under my proposal?

Even if we are unwilling to accept that a market equilibrium can ever be reached, why does my system make the currency market substantially more unfair than our present-day situation?

I’m perfectly happy with a hard limit on the rate of change for RBA interest rates. I would say that every three months they could make a maximum shift of half a percent either direction, with the normal case being a quarter percent every three months. We are talking about LONG TERM stability as the target here, so forcing a slow rate of change is desirable.

If Chavez really cared about the poor, he’d insist of regulations that ensured such houses were built properly, and provide the money to do so.

Except he can only get the money to do so by stealing it (literally), so that’s an obstacle - is it worth stealing to build a house today for you to starve in tomorrow? I’d rather go cold now and have a reasonable shot at a future in which I can go to the shop and buy dinner!

The barrios of Caracas, which I’ve witnessed with my own eyes, are a safety nightmare. Something like 30,000 were killed in mudslide …

Plenty were killed in Japan during the Kobe earthquake when buildings fell down, and they do have strict building codes and were built by private companies not government welfare. Corruption and sly trading ensured that many of those codes were not followed.

The barrios of Caracas, which I’ve witnessed with my own eyes, are a safety nightmare. Something like 30,000 were killed in mudslide not that long ago, because the houses have no foundations at all. If Chavez really cared about the poor, he’d insist of regulations that ensured such houses were built properly, and provide the money to do so.

Tel - if you think the regulation is overkill, then how will removing it create “slums”?

I didn’t say it was overkill, merely that I personally don’t like facing the costs of it when they come out of my pocket, and that these type of regulations do push up the supply side costs for everyone. Getting rid of the regulations would lower costs and also lower quality at the same time (although removing regulations would also increase diversity). I’ve already paid for my house. From here on in, I make a profit when prices rise, so in the bigger picture supply side costs are my retirement fund. Yay supply side costs (except for when I have to pay).

One man’s “slum” is another man’s paradise, there’s no universal standard for these things. The slanty shanty stack built on a hill in South America pictured above is built from good bricks and sawn timber. In Africa they build with rusty sheet iron and randomly shaped pieces of tree (and you can still find huts in outback Australia built the same way, some with residents). Australian city standards could drop a long long way and still be ahead of nearly the entire world. Having said that, clearly there are a significant number of Australians who believe that building standards SHOULD be kept high.

There’s no universal measure of quality housing either: one owner might decide that they want vast amounts of lighting and completely ignore load limits on their electrical circuits. Their house is a fire hazard but it looks awesome at Christmas time. Another owner might eschew electricity and build their walls from rammed earth a metre thick, with a fearsome black coal furnace in the kitchen, while yet another owner would have no house at all, finding it preferable to live in a large garage at the back of the property with a large front yard full of motor vehicles in various states of repair (he sleeps on what was once the back seat of a Holden). Which house is higher “quality” than the other? None of them are acceptable under any suburban council that I know. Australians might tolerate diversity in their food but they sure don’t appreciate diversity in their housing.

Mark, I rented in an inner city terrace for a lot of years when rents were relatively cheap compared to the cost of buying (more than 30 years rent was the price of a house). The front of the house was crumbling to the point where my wife reached in and pulled a brick right out of the wall and waved it at the owner during an inspection visit. The owner calmly leaned over to peer through the hole in the wall and said, “This is double brick, you have another wall under that one.”

You say, “if landlords never maintained their property” and I say there’s no “if”, the observable fact is that they don’t.

From the owner’s point of view, that property is rental property and the value of the rent is determined by the position and by the size, not by the condition of the building. Fixing those bricks would have cost him money but had no effect on the return. Since I was living in a house that was completely beyond my means to purchase, that segment of the rental market remains unaffected by owner occupiers.

I don’t follow your mechanism about how landlords can subsidise their competitors by NOT spending money. After all, at the end of the day the landlord still owns their property, and they still get an income off that property so they certainly will not go broke. Most likely if a time ever comes when that property is sold, it will go to a developer to be razed flat and converted into a shopping center and/or office tower. The developer only measures the land, bricks are for bulldozers.

PS: I am getting a few competitive quotes, but there’s no (legal) way around the regulation, all the old wiring has to be replaced at my cost, I can only delay the inevitable by doing nothing.

Much of the housing in HK is, AFAIK, public housing just as council flats are here.

And absolutely I accept that many alternatives to publicly provided housing may be far better. But what such alternatives are you putting forth, and what evidence is there that they can actually help alleviate the problems of class segregration, crime etc. etc.?

Basically HK doesn’t count because I don’t understand there to be any freehold on the island - much like the feudal system where people could only have interests and tenancies of various kinds over land since the fee simple was in the King.

If the highest you can put it is that ‘The alternative may well be far worse,’ well, fine. I can hardly dispute that (within the bounds of rationality)! But I insist that you accept that the alternative may well be far better.

Success!

I’m not sure how you can argue that it’s generally unsuccessful.

What if I argued that it is generally associated with class segregation, crime, poor educational outcomes, and so on? Doesn’t sound like success to me.