Club Troppo

Around here at Troppo we’ve been musing for a while about how Labor in general and Julia Gillard in particular need to connect the government’s derailed policy agenda to some overarching vision or set of values likely to inspire  commitment and enthusiasm from the erstwhile supporters who seem to be deserting to the Greens in droves.

The other day our PM essayed what seems to be her version of Chifley’s “Light on the Hill” speech.  So what are the values to inspire us through the dog days of minority government?  Are they right up there with Martin Luther King’s immortal “I had a dream” rhetoric?   Not quite. More like the sort of fatuous homily your grandad might give the kids at the annual family Christmas party after he gets pissed and maudlin on Nanna’s cooking sherry:

Driven by our values and our vision. Hard work. A fair go through education. Respect. Opportunity for all. And always keeping our economy strong.

God help us all.  Anyway, at least it’s an excuse to embed Aretha Franklin’s immortal soul anthem R-E-S-P-E-C-T.  But more seriously, it’s an opportunity to pose a creative challenge to Troppo readers.  Let’s see who can write the best “Light on the Hill” speech for Julia.  It’s pretty obvious that neither she nor her spin doctors have the faintest clue about it, so they clearly need our help.  I have in mind something embodying familiar but noble values like liberty, equality and fraternity, perhaps with environment thrown in as a fourth pillar, all linked to Labor’s policy agenda in a way that explains how it’s actually coherent, considered and principled rather than a series of  bullshit ad hoc responses to focus group soundings.  But it’s up to you.  Keep it to 1500 words or less and post your efforts in the comment box.

There’s been a lot written about what’s wrong with modern macro. But this quite quiet methodological discussion by Colander is well worth the read – including I think for non-economists. It’s quite rich in descriptive detail about what policy economics was like – and still is like in Australia. And how the ‘new-macro’ is coming to colonise policy making – which is a disaster for reasons he eloquently explains.

Now, I am sure some will argue that the DSGE model is not only a useful model for advancing the science of macroeconomics (and I agree; the DSGE model is a much better scientific model than is the IS/LM model); it is also the more useful model for policy guidance. I find that suggestion hard to swallow for two reasons. The first reason the DSGE model is such a poor guide for policy is the same reason that it is a better foundation for a serious scientific model than is the IS/LM model. It is such a highly abstract model that is so far removed from reality that the thought that it could shed much direct light on reality is almost beyond comprehension. Somehow a model of a representative agent, who is infinitely rational and who faces no model uncertainty, is supposed to shed light of something as complex as the macro economy is on the face of it absurd. It is that absurdity that underlies Solow’s “rhetorical swindle” comment at the beginning of this paper. The absurdity is, however, not the model—the model is reasonable; the absurdity is its direct use for guiding policy, rather than just a background information for guiding policy. The DSGE model does pass even a low level common sense hurdle as a guide for policy. Yet, with the development of computer software, such as DYNARE, the DSGE model’s influence is spreading.

Anyway, like I said, well worth reading. One thing I would say is that it’s a bit of a pity that Keynes’ name is used so liberally. It’s true that he pioneered macro, and had particularly perspicacious views about method in the context of complexity, but the point of the essay is really that Keynes was practising economics in the way that the classicals did. He disagreed with ‘classical macro’ and came up with some new theory, but his method was self-consciously in the spirit of people like his teacher Marshall, and saw itself as in the spirit of the discipline that grew up through the classical economists of the nineteenth century. Anyway, the essay is not particularly ‘Keynesian’ in the sense that that’s sometimes understood as arguing for expansionary fiscal policy.

PS: This article by Colander was also of interest I thought but a bit less for the general reader -unless they’re interested in the dynamics of academia. Can European Economics Compete with U.S. Economics? And Should It? .

Apart from the issues canvassed in my previous post about yesterday’s  High Court judgment on the validity of aspects of the Commonwealth’s offshore “boat people” asylum seeker processes, the sixty four million dollar question now is whether it will affect any attempt by the Gillard government to recreate a Nauru or Timor offshore processing solution to stem the flow of boat people.  Coalition Immigration shadow Minister Scott Morrison predictably thinks the Nauru Solution was fine and the Labor government were mugs to abandon it. Refugee advocate David Manne equally predictably asserts the opposite.

It’s unlikely the government could cure the fundamentally flawed process, as identified by the High Court, by sending people to Timor or Nauru.

The reality is that no-one knows because the previous Howard government system wasn’t under challenge per se in the M61/M69 proceedings.  However I’ll attempt to make some educated guesses, although whether I’ll be able to explain them in a way that is accessible and interesting to a non-specialist audience is another question.  Still it’s worth a try.

(Continued)

It’s Friday. And that means it’s time for another Missing Link Friday. This week Bill Muelenberg explains why letting teenage girls bring other girls to school formals may encourage bestiality, an Australian conservative argues that female empowerment is a plot to disempower men, and Frances from Corpulent lets it all hang out at the beach.

And that’s just for starters …

(Continued)

I was pleased to be asked to speak at the Queensland’s Right Information Day. In my speech I wanted to speak a little against the grain. The language used by Web 2.0, Gov 2.0 aficionados has a particular quality of groovyness. There are a bunch of things that are groovy. The environment, being more democratic, being more participatory and so on. Web 2.0 can definitely deliver loads more participation. And I’m a big supporter of that. Allowing the people who know to participate can inject a lot of additional intelligence into a conversation, and even wisdom.

But as anyone in the blogosphere knows, it need not. It might just involve a descent into trolldom. One of my pet hates is the ‘vox pop’ where they stick a microphone in front of someone at a shopping centre and ask them what they think of (let’s see . . . pretty much anything). Engangered species (we should save them – indeed we should, but what if they’re not endangered, we’re just having our heartstrings pulled), bank interest rate rises (well the latest round happen to be unjustified but most people in shopping centres wouldn’t have the foggiest as to whether that’s true or not.) And most people in shopping centres think we should have higher tariffs on imports because it would increase employment (which it wouldn’t).

Me? I’m a democrat. I think the people should decide. I really do. But I also think that democracy doesn’t work without structures, without institutions. And in addition to such structures and institutions – the rule of law, separation of powers a free press and all that stuff – there’s also elites. I think a society thrives when a democracy is well served by its elites, when they are chosen meritocratically. And of course meritocracy is a tricky business. Do we have the best leaders we could have? Well it’s unlikely. It’s not a very easy business choosing elites. And I think that Web 2.0 and Gov 2.0 are miracles not just on account of their ramping up the possibilities of participation by all and sundry, but also – perhaps more so – because they enable elites to form – much faster than they can form using other methods and usually more meritocratically.

Web 2.0, when you think about it, is built not just on the participation of everyone who wishes to participate, but also on meritocratically selected elites. The thing is the elites have no power to compel, only the power to influence. If Linus Torvalds doesn’t want to accept your code for Linux, that’s kind of it. You can’t get it into Linux. But you can fork the project. Other web 2.0 projects operate with their elites too, as power volunteers have more – well . . . power.

So that was my theme in this talk.

There are (at least) two egregious factual errors in the talk which was just given from notes. (I’m afraid I was giving another talk the night before and should have checked the second one out – the first was just dim stupidity at the lecturn. President Obama’s brainstorming exercise happened at the beginning of 2009, not 2008. And ancient Athens had a population which was quite a bit larger than modern day Goulburn. I should have said that ancient Athens had about half as citizens as modern day Albury Woodonga.

Anyway, if you can be bothered playing it to yourself, I hope you like the talk. Unfortunately the camera doesn’t follow the screen when I occasionally talk about my slides, so I’ve attached them in powerpoint here.

Like David Marr, I’ve been waiting for a while for the High Court’s decision in the M61 and M69 case.  The applicant’s arguments challenge on various constitutional and statutory interpretation grounds the legal validity of the current asylum seeker processing regime, and in particular its effect of putting protection visa decisions for “boat people” effectively beyond judicial review.

I read the hearing transcripts a couple of months ago and formed the view that the case had a fighting chance of success.  Anyway, the decision is being handed down this morning so watch this space.  If the applicants succeed it will not only restore a measure of fairness to the system but, rather more equivocally, increase the incentives for asylum seekers to take their chances with the people smugglers and further increase the political pressures on the Gillard government to do a deal with East Timor quickly or swallow their pride and revert to the Nauruan Pacific Solution.

Update - The Commonwealth suffered a major loss in today’s unanimous High Court decision. What the High Court essentially decided in Plaintiff M61/2010E v Commonwealth of Australia; Plaintiff M69 of 2010 v Commonwealth of Australia was that the processing and merits review bodies were obliged to give applicants natural justice because the Minister’s decision to establish them constituted the commencement of his consideration of whether to exercise a statutory power under the Migration Act to grant protection visas.  In that sense the whole process is grounded in statute and therefore attracts an obligation to provide natural justice.  The “non-statutory” regime for processing offshore (illegal arrival) asylum seekers was not struck down as such.

It’s important to understand in general terms that what the Howard and Rudd governments did was to try to put processing of offshore boat arrival asylum seekers beyond judicial review by outsourcing or privatising the assessment and merits review processes!  The Rudd government took that notion to the extreme of contracting out the merits review process to a private company rather perversely called Wizard People Pty Ltd.  By outsourcing the process, making it purely recommendatory and divorcing it from the Minister’s ultimate statutory decision, successive governments clearly hoped that the processes would be immune from public law judicial review because the processing bodies were private rather than public and weren’t even making any operative decisions.  Today’s decision represents a comprehensive failure of that cynical strategy.

The IMR reviewer in both cases was held to have breached natural justice by failing to disclose potentially adverse general “country information” to the applicants, thereby denying them an opportunity to explain or rebut that material.  In the case of M61 the IMR reviewer also failed to consider an entire ground of the applicant’s claim to refugee status (namely that he was a member of a particular social class being “Tamil business owners” or “Tamils who are perceived to be wealthy”).  And in both cases the Court held that the IMR reviewer had committed a judicially reviewable error of law by treating the Migration Act and decided cases as no more than guides to decision making when in law they were binding on him.

The Court rejected M69′s principal constitutional argument, namely that section 46A of the Migration Act was constitutionally invalid as conferring an arbitrary and unreviewable power on the Minister.  Section 46A confers a discretion on the Minister to grant a protection visa to an offshore arriving asylum seeker, and just as importantly does not even oblige the Minister to consider whether to exercise that power.  This formulation puts the Minister’s function largely beyond effective judicial review, especially given that matters are not even put before the Minister for consideration of whether to exercise the power unless the RSA delegate or IMR reviewer has recommended grant of a visa.  The Court held that there was nothing necessarily unconstitutional about conferring a discretion on a Minister that he was under no legal obligation even to consider exercising. Thus the Minister’s exercise of power remains beyond effective judicial review.

However, the Court’s conclusion that both the “non-statutory” initial RSA assessment and any IMR review process are subject to judicial review both for natural justice and error of law means that the legal rights to judicial review of asylum seekers who arrive by boat are now restored to approximately the same position as that of onshore asylum seeker applicants.   In fact in one important respect they are better.  Because of specific provisions in the Migration Act (namely s 424A(3)(a)), onshore applicants need not be informed of general country information that may be taken into account to their detriment.  The Act reduces the applicant’s common law procedural fairness rights to that rather significant extent.  However, and somewhat ironically, the Court held that this reduction in natural justice rights does not apply to offshore boat arrival applicants: to that extent at least the government’s attempt to cast the whole process as a “non-statutory” one has been successful!

Lastly, the Court granted only declaratory relief, declining to grant certiorari or prohibition because mandamus was by definition not available once the Court held that s46A was valid in conferring a non-compellable discretion on the Minister.  However, there is no doubt that the Commonwealth will act in accordance with the High Court’s declaration as to natural justice and legal requirements generally.  Both M61 and M69 will certainly receive a rehearing in accordance with law.  The decision does not overturn the entire “non-statutory” assessment and review regime, and whether any other existing determination has to be re-opened will depend on whether natural justice was breached in a particular case.  However, given that I understand refusing to notify applicants of country information that may have been taken into account is the normal if not universal procedure adopted in asylum cases, it is very likely that ALL existing adverse determinations/recommendations will need to be reheard. Thus the practical effects of this decision are major.

The bottom line remains as I suggested at the beginning of this post.  It restores fairness (at least in terms of natural justice and judicial review rights) to offshore boat arrival asylum seekers, but simultaneously increases pressure on the Gillard government to find a workable political solution.

High profile constitutional law academic George Williams argues in today’s SMH that  the federal laws prohibiting self-governing Commonwealth territories (NT, ACT and Norfolk Island) from legalising voluntary euthanasia should be repealed.

As a Territorian and public law academic you’d expect me to agree, and indeed I do.  However I vehemently disagree with Williams’ principal rationale for this proposition:

As a matter of democratic principle and good governance, the Commonwealth should not remove power from a self-governing jurisdiction. Removing power is a blunt instrument that prevents the making of any laws on a subject, whether for good or ill. It also calls into question the good faith of the Commonwealth in granting self-government to the territories in the first place.

This is not to deny the role of the Commonwealth to govern for all Australians. Where issues arise in a territory or state, the Federal Parliament can be right to intervene. It should do so in the national interest by legislating for the country as a whole and not by opportunistically taking advantage of its power over the territories.

Why?  A territory is not a state and section 122 of the Constitution gives the Commonwealth almost unrestricted power to legislate for Commonwealth territories, including by granting them self-government on whatever terms the Commonwealth chooses, and by amending or even completely removing any grant of self-government.  Thus there is no doubt the Commonwealth has constitutionally conferred legislative power to restrict or remove the Territories’ power to legislate in any area including euthanasia.

Williams is instead arguing that some general political principle of democratic fairness should be regarded as making it illegitimate for the Commonwealth to treat territory legislatures differently from states.  But why?  It’s just a bald assertion.

(Continued)

for some time now, I have wanted to read a short intelligible piece telling me what the US health reforms actually were about. The problem till now has been that the reforms entail 1200 pages of unreadable legal text referring to more unreadable text, and that the issue became too politicized to be able to trust what news providers said.

Fortunately, Professors Bobbi Wolfe and Bob Haveman provided this very readable piece in a European policy journal on the recent health reforms. It is only 8 pages, but it comes highly recommended as these authors have been in the health economics business for decades and can draw upon many sources close to the fountain for their opinions.

If I had to summarise their summary, the main points of the health plan that are doable are:

1. To extend health insurance in 2014 to about half of the 20% of the Americans under 65 without current health insurance.

2. To tax the big current winners in the health industry via imposing payroll taxes on employer-provided health benefits, to fleece the big pharmaceuticals and medical equipment companies, to make increases in insurance fees subject to government approval, and to cap the amount of health cover that is reimbursed via Medicare (which is the system for the over-65).

3. To impose community ratings, i.e. to force insurers to ensure the kids of those currently insured and to insure people with pre-existing conditions. Also, there is a big move to make it impossible to kick people out of insurance who develop a long-term illness (currently you can lose your insurance if you become too ill!). Most of these changes have already been imposed, presumably to make it hard to undo the legislation.

4. To have more health services be provided by the cheaper health professionals (nurses) and less by the expensive ones (specialists), for instance by extending community care facilities and tweaking the incentives of insurers and patients.

One of the less doable aspects of the plan is the attempt to force private insurers into offering four basic insurance packages and to compete across regions in the hope that this simplification plus competition will lead to lower prices. Without offering state insurance as a means of truly providing a base case however, you are then always susceptible to collusion amongst the insurers and the limited degree to which individuals and firms have an incentive to shop around. Also, the promise to improve hospital and medical efficiency via incentives such that about 160 billion US ‘cost savings’ are made sounds a little over-the-top to me. You have to fire a lot of people to make 160 billion in savings and that kind of job cutting is not easily achieved.

Yet, in its entirety, the plan is one of immense size, virtually certain to change the allocation of something like a quarter of total expenses on health in the US. I am making this number up from the 20 million extra individuals who are going to be insured as well as another 20 million extra projected to be serviced by the expanded community centers, which in total get you some 15% of the current insured population who will be serviced completely differently. Guessing that this group is less healthy and will thus use a disproportionate amount of services and guessing that the other changes will amount to maybe half the size of the sheer expansion, gets you at least a quarter change in total health cost allocation. If you look at the money that the extra taxes are supposed to generate in order to pay for these expansions, you are also looking at around 460 billion US per year, which is a quarter of all health expenses and 4% of GDP. That money is essentially taken from the rich and mainly allocated towards the poor and the really sick.

A transfer of 4% of the nation’s wealth from the rich to the poor is a big Robin Hood reform in my book. No wonder the incumbents in the health industry in the US are squealing.

This piece suggests that the UK may implement quotas to increase the representation of women on FTSE companies. I appreciate the sentiment. Even though it’s hard to find someone who will explicitly state that women are unsuited to positions of power, the corridors of power both in government and in the corporate world are still very much a sausagefest. For those who think that there is nothing in maleness that makes a better leader, the urge to force something through is strong since apparent watersheds in the past have done little – 30 years after Thatcher was elected where are the women in UK politics for example?. Childbirth and associated gender roles may play a part, but only so much.

There’s equity reasons to desire greater representation of women of course – it’s unfair that women may be barred from these positions based on characteristics that appear to have nothing to do with the qualities we’d want in these positions, but I have a more selfish motive. Basically, if we’re excluding a large proportion of the pool of potential leaders based on arbitrary ground, we won’t get the best leaders, and the society I live in will be poorer both materially and otherwise.

This brings me to a speculation about why the glass ceiling is so resilient.  It may be to do (in part) with differing variances in narcissism.

In our society, these positions of power are in hierarchy. They’re not market derived wealth and power but positions within and at the top of pyramids where the numbers thin out as power increases. To be on a board, or to be a CEO, or an MP, you have to select yourself as being, and convince others, that you are one of the very few suited for the job.

The put another way, to want to be a member of the Federal Parliament you need to think you are better suited than the 99.99% of the population who is not in the Federal Parliament. To be a CEO you need to genuinely believe that your judgment is better than similar proportions of the population and that you output is really worth many many multiples of the average worker. If you don’t believe it yourself, how can you convince others, claim credit and self promote?

Even if you can objectively claim greater than average intelligence, judgment etc., claims of this magnitude cannot be considered rational. Only a narcissist could believe them. (Continued)

Australia’s pro- and anti-population growth advocates seem to be competing with each other to see who can produce the most glib, fact-free piece of propaganda.  Dick Smith’s entertaining anti-growth advocacy-doco Dick Smith’s Population Puzzle, screened in the lead-up to the recent federal election, deployed just about every cheap propaganda trick in the book.

Now the Centre for Independent Studies has published an even less substantive pro-growth “policy monograph” by Brown and Hartwich.  An op-ed piece by Oliver Marc Hartwich in this morning’s Oz arguably sets a new benchmark in fact-free opinion journalism.  As far as I can tell, its entire hypothesis seems to be that Paul Erlich’s doomsday predictions in the 1970s were wrong, and therefore anyone who raises any questions at all about the wisdom of unrestrained population growth is by definition a left wing fool who should be ignored.

The CIS monograph for which Hartwich’s article is a promo isn’t much better.  Its entire analysis of the environmental issues surrounding Australia’s future population growth is as follows:

(Continued)