Club Troppo

For years policy experts from free market think tanks have been arguing that charter schools and vouchers boost test scores. Last year Julie Novack’s report for the Institute of Public Affairs insisted that: "Voucher programs around the world have been shown to improve the academic performance of students" (pdf). But recent evaluation findings from Milwaukee have shifted the debate in the US. Faced with disappointing results, supporters of parental choice are now arguing that other things matter more. The Heritage Foundation’s Jason Richwine writes that sensible parents aren’t obsessing about test scores, instead what they really want are "schools that are safe, that cultivate a positive attitude about learning, and that best fit their children’s abilities and interests."

The American Enterprise Institute’s Charles Murray argues that test scores are a poor measure of school performance because schools are unable to control most of the things that drive children’s performance on standarised tests. In the New York Times he writes:

The evaluation by the School Choice Demonstration Project, a national research group that matched more than 3,000 students from the choice program and from regular public schools, found that pupils in the choice program generally had “achievement growth rates that are comparable” to similar Milwaukee public-school students. This is just one of several evaluations of school choice programs that have failed to show major improvements in test scores, but the size and age of the Milwaukee program, combined with the rigor of the study, make these results hard to explain away.

So let’s not try to explain them away. Why not instead finally acknowledge that standardized test scores are a terrible way to decide whether one school is better than another? This is true whether the reform in question is vouchers, charter schools, increased school accountability, smaller class sizes, better pay for all teachers, bonuses for good teachers, firing of bad teachers — measured by changes in test scores, each has failed to live up to its hype.

In the absense of data like Milwaukee’s, the debate in Australia is different. Here it’s right wing columnists like Janet Albrechtsen who are most excited by testing. In a 2008 blog post Albrechtsen praised New York City education chancellor Joel Klein’s approach of encouraging parents to "raise hell" if their children’s test scores came up short and suggested that public schools should face competition like they do in New York City. But back in the US the American Enterprise Institute’s Rick Hess writes that "choice enthusiasts have been overselling the miracle, restorative powers of choice for years." He acknowledges that, on its own, testing and offering parents choice probably doesn’t do much to improve children’s test scores.

The Henry Review is an ambitious document, conceived early in the life of a new government at a time when budget surpluses stretched as far as the eye could see, surpluses which could be used to ease the tensions between winners and losers that are the inevitable consequence of any tax reforms worthy of the name.

Hence the Review aspires to a tax system which ‘is oriented towards supporting strong and sustainable economic growth’, one which has regard to the pressure which strong population and economic growth will put on our ‘increasingly fragile ecosystems’, and one which ‘fully exploits the opportunities of the new digital age’.

More specifically, it proposes that Australia’s tax system should rely primarily on four revenue sources – personal income, business income, private consumption, and ‘economic rents’ from natural resources and land – with all of these tax bases being as broad and comprehensive as possible. Apart from taxes which ‘efficiently address social or economic costs’ (such as those on tobacco, alcohol and gambling, environmental taxes and ‘efficient road user charges’), it suggests that other taxes (including payroll and insurance taxes, and stamp duties) should be abolished. And it recommends that all pensions and benefits should be comprehensively means-tested, but tax-free.

In contrast, the Government’s response to the Henry Review comes at a time when those budget surpluses have disappeared, and when, with around six months (at most) until the next election, vaulting ambitions inevitably take second place to ‘political realities’.

(Continued)

“I’ve just felt I was living and breathing a George Orwell novel…”

Update: JQ lists the pros (several) and cons (none).

The reporting of the resource rent tax plan has been poor, and last night’s ABC television coverage was a good example. In his ‘Finance’ segment of the News, Alan Kohler revealed that share prices for mining companies have fallen, as if this wasn’t exactly what one would expect; and as if, by ‘wiping out wealth’, the policy has already had a negative affect on the economy. The strangest bit was at the end, when Kohler noted — with that meaningful twinkle of his eye that he affects when he’s reporting some fact whose significance speaks for itself, at least to the cognoscenti (so thank goodness he doesn’t have to explain it) — that the reduction in shareholder value was about equal to all the revenue the tax will raise ‘in the first few years’.

What was his point? That the fall in stock value cancels out the gain in revenue? In any case, the loss to shareholders is actually less than the capitalised value of all the additional tax the government will appropriate over the foreseeable future, so it could have been worse for them. (To be fair, Kohler gives generous praise to the Review in ‘The Drum’ today; but he’s more interested in the 136.25 recommendations the Government is ignoring than he is in the resource tax.) (Continued)

Anzac day is when Australians and New Zealanders remember their casualties of the first World War and other conflicts. It has become a defining event for the sense of nationhood of the Australians and solemn commemorations are held all over the country. Sharing the same background (some ancestors on the English side of my family fought alongside the Anzacs on the Western front), I find it a great tradition to remember the horrors of that war. It is also an event that is fascinating as a social scientist. Some observations:

1. A lot of the commemorations are state-sponsored via the Department of Veteran affairs. This department is running out of veterans to take care of, but has over the years increased its budget for commemorative services. It is actually quite hard to figure out just how many of the various ‘budget posts’ should be counted as commemorative, but at best guess we’re talking about half a billion dollars and rising. One of the reasons why Anzac day appears to become a bigger and bigger event as time goes by might quite simply be that it is a way for an existing ministry to spend surplus resources on its budget.
2. The ‘message of Anzac day’ has changed within Australia over the decades to suit the morals of the day. I was at the Anzac celebration of the school of my kids, with military commanders giving the assembled quiet and disciplined kids the supposed reasons for why so many young men died in WWI. The story these kids were told was that the Anzacs died ‘for tolerance’, ‘mateship’, ‘standing up to bullies’, and more of those values we hold dear today. The kids were basically told to follow the social norms of current day Australia as a means of honouring the memory of the fallen of previous wars. I don’t have an inherent problem with this, but do note as a social scientist that such statements take liberties with the truth. At the time of WWI, appeals were made on the basis of ‘God, King, and Country’. In the intervening century, God and King have been axed from the moral appeal, but ‘the Country’ is still there. Also, tolerance and anti-bullying were not really a big thing in the 1910s when Australia was still a very ethnically ‘pure’ country and bullying was an institutionalised accepted reality in schools. Anzac day is hence a bit like going to church on a Sunday: every generation reinterprets the book of yesterday to suit the moral code of today.
3. The ability of kids to imagine themselves part of a group that extends over the centuries but that they are not objectively part of is quite remarkable. At a guess, maybe 25% of the kids at the school commemoration will have had actual Australian ancestors involved in WWI, but they all somehow identified with ‘the Australians that went to war’, even if both parents were Chinese or African. It is simply an amazing thing how easily kids adopt stories of cultural continuity as their own even if that story has no real bearing on their actual personal histories. This imaginative capacity is not in any economic model I know, but clearly underlies our sense of identity and hence underlies important economic variables too, such as our willingness to pay taxes for ‘this country’.
4. The ‘message of Anzac day’ is different in different countries. Where I grew up, i.e. Western Europe, a big message of similar commemorations was the pacifist spirit of ‘J’accuse!’, which was the historic quote from Emile Zola that was also the title of a French film in 1919. It means ‘I accuse’ and one of the characters in that film explains it to mean ‘accusing the war… accusing men… accusing universal stupidity’. We were told as kids that WWI was one of history’s most stupid mistakes started by leaders who get themselves into a mess because their pride wouldn’t allow them to back down, and fought by gullible enthousiastic populations who thought of war as something exciting. The message we were told was that people should not blindly follow their leaders, but should think for themselves and question the logic of going into conflicts just because the conflict exists. Interestingly, there is almost none of this pacifist message left in Australia, though perhaps it was there and has simply been lost over the decades. Indeed, the kids at the school I went to for Anzac day were told to be silent, obedient, and to take it on faith that Australian men lost their lives in droves for a good cause. There is hardly any mention in Australian commemorations that it lost the flower of its nation to a pointless mistake on the other side of the world, lead by foreign commanders (such as Winston Churchill) and not even by one of their own. I must say that I find it curious that Australians are not far more critical about the leaders they blindly followed into WWI (as well as later on) but make excuses to exonerate the mistakes of those leaders and allies, even when the populations of those allies themselves are far less forgiving.

I hence like the idea of Anzac day, but miss the pacifist message that WWI was one of the biggest f-ups of the last century and that we should think for ourselves and question the wisdom of following leaders blindly into battle.

Rudd has back-flipped on a number of government policies – the ditching of the insulation rebate scheme, junking the promise to build 260 childcare centres, the ETS decision (now postponed) and perhaps some wasteful spending on education. He has also had to toughen the asylum seeker laws and the rules to restrict foreigners buying homes.

And yet it seems to me the Opposition theme – that Rudd is “a lot of talk but no action”: he just “promises but fails to deliver” – is a mighty exaggeration.

These are some notable Rudd achievements (in the short period of 2 and 1/2 years). These may be more initiatives soon to be announced in the Budget. They include:

1. rescuing the economy from the global financial crisis;
2. commitment to limit real spending growth to 2% a year;
3. the resources rent tax;
4. greater transparency in superannuation arrangements (including inappropriate financial advice and a stop to commissions);
5. improved quality of life in our schools;
6. investment in social housing;
7. tempering the Howard Government’s workplace reform;
8. apology to aborigines and some gains in aboriginal poverty;
9. review of the qualifying age for the Age Pension to 67 years;
10. generous increases in pension payments;
11. cutbacks in salary sacrifice for superannuation e.g. reducing the cap from $100,000 to $50,000;
12. My School website;
13. implementing the Paid Parental Leave Scheme;
14. reform of bank regulation e.g. on bank capital;
15. youth allowance provision;
16. big new investment in public hospitals;
17. addressing homeless people;
18. investment in nation building infrastructure;
19. investment in jobs and training;
20. fairer and more sustainable private health insurance and incentives (admittedly, a broken promise)

Can you think of other important initiatives?

Shane Wright (reproduced by Peter Martin) weighs up pros and cons (mainly cons) of WA secession from the perspective of WA. Lets ask a natural counter question: What if the rest of Australia would be better off without WA?

Specifically, should Australia still have a single currency? If we keep worrying about the “two track economy” hypothesis maybe we should consider the idea that Australia is not a optimal currency area. The monetary policy and exchange rates we get from straddling divergent economies are optimal for neither East nor West.

My wife works in inbound tourism, catering for tour groups and corporate junkets. International tourism is experiencing difficulties and for all the rubbish that is published about Australia’s brand and bickering over successive marketing campaigns, these difficulties come down almost entirely to a simple fact : the exchange rate, pumped up by internationally high interest rates and commodity exports,  is making it expensive to visit here. Likewise this bears on manufacturing, education and other exports. Meanwhile even non exporting firms are constrained by tighter monetary policy designed to keep a lid on an economy a continent away.

Dutch Disease strikes again. But whereas the Dutch could not rid themselves of the North Sea, WA may eagerly leave. The gains from a  more optimal monetary regime would more than make up for the comparatively modest fiscal transfers that stir up resentment in the West. A separate currency hardly damages trade with New Zealand, so why should it with a nation nearly as similar and just as distant? Likewise we’d not have to consider bribes and withholding welfare to make up for the lack of the kind of labour mobility that is meant to be a hallmark of OCAs.

If we end this marriage, it’s less a case of kicking out a bludging partner than an amicable separation where everyone is better off.

Andy Foulds is obviously a clever fellow. This image of economists is not new. I don’t know when he did it but it’s been doing the rounds for ages. Yesterday I had a great lunch with an economist and was amazed to be told that he didn’t know of it. So for those who don’t know of it – click on the image through to the site – and fiddle around with it and you’ll enjoy it.

Which reminds me to ask, is there any way of lifting this onto powerpoint slides to show at a conference if there is no internet link?