Club Troppo

With miners and tobacco companies running well-funded campaigns against perectly reasonable government policies, it’s hardly surprising that the licensed clubs industry is looking at similar measures to combat imposition of compulsory pre-commitment settings on poker machines for all players.  They’re already cranking up threats to influence the gullible:

Clubs in NSW must spend 1.5 per cent of poker machine revenue over $1 million on community programs, and they have warned that their sponsorship of local sports teams and charities will be slashed if mandatory poker machine restrictions are introduced. …

The marketing manager of Bankstown Sports Club, Chris Passanah,  … said the club’s charity funding would be slashed if the poker machine legislation was passed and revenue dropped. ”It will kill us – the mandatory nature and getting people to sign up to a form. We will have to pull back from the community.”

In fact there’s scant basis for this scare campaign, as South Australian field trials of the technology last year demonstrated:

(Continued)

Hello all, your friendly Ozblogistan tyrant here.

To perform some important maintenance on the site, it will be necessary to deactivate all Ozblogistan blogs temporarily on Sunday afternoon. I am expecting to take the site down around 2pm, central standard time, for up to two hours.

Fairfax columnist John Birmingham’s column raises some interesting issues about the practice of tipping for provision of goods and services, especially the aggressive way tipping is pursued in the US where restaurant tips of up to 20% of the bill appear to be the norm.  In Australia tipping is nowhere near as ubiquitous, and anyone who tips much more than 10% of the bill in a restaurant is a grandstanding wanker.

Birmingham observes:

Here in Oz, despite the best efforts of some in the hospitality industry, we remain feckless and lackadaisical tipsters. Is it because we’re all just tight bastards with a dollar, or because we assume people are properly paid here?

Are they?

I gotta confess I wouldn’t have a clue.

Clearly research isn’t Birmingham’s specialty. It took me only a couple of minutes Googling to find the answer. The minimum wage in Australia is currently $15 per hour, and our dollar and cost of living are roughly equivalent to the US.  According to Wikipedia anyway, the US situation is very different:

As of July 24, 2009, the federal minimum wage in the United States is $7.25 per hour. Some states and municipalities have set minimum wages higher than the federal level (see List of U.S. minimum wages), with the highest state minimum wage being $8.67 in Washington. Some U.S. territories (such as American Samoa) are exempt. Some types of labor are also exempt, and tipped labor must be paid a minimum of $2.13 per hour, as long as the hourly wage plus tipped income result in a minimum of $7.25 per hour.

You can see why American service industry employees are so aggressively insistent on coercing customers to tip.  They’d starve to death if they didn’t.

Given this effective legal compulsion underpinning tipping in the US, it occurs to me that it bears most of the attributes of a consumption tax on goods and services, and a very heavy one at that, with the proceeds instantly distributed to the low-paid by market forces. ¹1. KP: In the Blank Tapes Case in 1993, the High Court held the Keating government’s proposed royalty on blank cassette tapes to be a tax, even though it was collected by tape retailers and sent straight to copyright collection societies for distribution to copyright holders.  That is, the revenue was not collected by government nor did it ever pass through government coffers (which is part of the reason why the Court found the tax was unconstitutional).  US-style tipping is more efficient, in that the intended recipients collect the “tax” for themselves. [↩]   Of course there’s no legal compulsion to tip so it isn’t formally a tax on the classic Australian legal definition.  However, anyone who has forgotten to tip in the US would know exactly how ‘voluntary’ the practice actually is.

If one regards tipping as taxation, I strongly suspect that the ostensibly low US total tax take wouldn’t look anywhere near as impressive by comparison with the supposedly high-taxing socialist Europeans.  I wonder if any economist has crunched the numbers based on some reasonable estimate of the total value of tips in the US compared with Europe or Australia?  Of course, to be fair you’d also need to measure the extent to which tipping operates as an income-redistribution mechanism.  Presumably that adjustment would also show US income inequality to be not quite as radically different from the Europeans as it seems (unless Gini and similar measures already adjust for this, which I’m hoping someone might be able to tell me).

A very reasonable request – so it seems to me – from Dave Bath who has asked me to post the guest post below. I guess there’s a message there – not just for Auditors General but for all right thinking government agencies.

It’s bleg time… for people who’d like to get all Auditor General offices to provide an RSS feed of announcements and reports.  I’m after ideas (a list of questions near the bottom of the post) and even cosignatories for a request that each audit office provide such a feed.

These days, with Gov 2.0 a buzz-word, and given the excellent work by Troppo’s own Nicholas Gruen, you would expect almost all agencies to provide RSS feeds, and preferably, like the parliament, a range of news feeds for different purposes.

You might expect that an Auditor General would provide RSS feeds, as such an agency is not responsible to the executive, but to the parliament.

Yet only the audit offices of Western Australia (http://www.audit.wa.gov.au) and the federal ANAO (http://www.anao.gov.au) provide RSS feeds.

(Continued)

Happiness and Tax Morale: an Empirical Analysis
By: Diego Lubian (Department of Economics (University of Verona)), Luca Zarri (Department of Economics (University of Verona))
This paper presents empirical evidence that “tax morale” – taxpayers’ intrinsic motivation to pay taxes – constitutes a new determinant of happiness, even after controlling for several demographic and socio-economic factors. Using data on Italian households for 2004, we assess the strength of tax morale by relying on single items as well as composite multi-item indices. Our main result that fiscal honesty generates a higher hedonic payoff than cheating is in line with Harbaugh et al. (2007)’s neuroeconomic finding. Further, it sheds light on the well-known “puzzle of compliance”, that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low: tax compliance is less puzzling once we show that not only it is materially costly, but also provides sizeable non-pecuniary benets that make it rewarding in itself.

Nice to see a journalist with a memory. Not that there’s much point in complaining about political actors acting like political actors – responding to the incentives they face. Business associations are into solidarity long before they’re into principle. The one thing Keene left out that I’d hoped he’d mention was the way the BCA sat schtum when, early in its first term the Howard Government gave the automotive industry the easy ride with tariff cuts they were after.

Here’s a major reform proposal for improving productivity in the Australian economy: Australian business shuts up about economic reform until it’s prepared to talk intelligently about it.

Business last week was out again demanding further tax reform, while representatives of the biggest polluters flagged that they needed even more compensation under a carbon price then they were scheduled to get under the CPRS.

. . . Its calls for the Henry tax review to be “back on the agenda” are particularly risible after its stone-cold silence while the Rudd government was mugged by the mining industry. The only sector that put its weight behind the RSPT reform package was the superannuation industry. The non-mining business sector, which stood to gain a significant tax cut from the RSPT package, went missing in action. Then they complained when the Prime Minister and the Treasurer cut a dodgy deal with the foreign transnationals that slashed the tax cut.

The Business Council of Australia, in particular, likes to pat itself on the back for its role in economic reform since its inception in 1983. . . .  It was, after all, the recently formed Business Council that stopped a broad-based consumption tax in 1985, when Bob White rose at the tax summit and declared that the council didn’t like any of the Hawke government’s three reform options, because it objected to proposals for a Fringe Benefits Tax and Capital Gains Tax. As a result, business got the FBT and CGT, despite an hysterical anti-Hawke campaign that labelled the FBT the “farewell Bob tax”, but Australia didn’t get a consumption tax until 15 years later.

Nor did the council back the Hawke government’s remarkable decision to wind back protectionism. The council was so internally conflicted among its membership that it couldn’t take a position on the first round of tariff cuts in 1988.

Peak business groups also tried to block the extension of superannuation beyond high income earners. In response to Accord Mark II, which featured for the first time an award-based 3% superannuation contribution, the Confederation of Australian Industry and other employer groups went to the High Court in 1986 to argue it was unconstitutional, and lost. Employer groups have consistently and bitterly opposed compulsory superannuation. . . .

The other consistent theme is that whenever peak business bodies talk about tax reform, they only really mean cuts in the corporate tax rate — the same sort of coded communication that means “workplace reform” only ever means making it easier to undercut employees’ wages and conditions. Heather Ridout was at that game again today in the Fin Review — in fact, a week doesn’t go by without a front page headline in the Fin along the lines of “Business demands tax reform”. In a piece ostensibly exploring the unfinished work of the Henry review, what was Ridout’s “highest priority”? Why, cutting the corporate tax rate to 25%.

This isn’t merely vested interests pleading their case. The same pattern of behaviour emerges, whether it’s Bob White in 1985 or Heather Ridout 26 years later — the pretence of commitment to the national interest and the ostensible rigour of detailed analysis, coupled with a strange inconsistency that only accepts the benefits, and never the costs, of reforms. The latter are wished away, or to be borne by taxpayers, or low-income earners or, in the case of climate change, our descendants.

There’s more behind the paywall here, if you’re a subscriber.

It always struck me how inefficient universities were with most efforts going into lectures which were inherently a broadcast medium – so much so you could go and get the tapes of the lectures. Meanwhile, tutes were usually a bit of an afterthought and a place where grad students might pick up some pennies for taking a tute. That seemed to be playing to the institution’s weaknesses rather than its strength. It seems so obvious that a physical university would concentrate on the tutorial stuff, given that the rest of the stuff can be outsourced, increasingly for nothing.  And it’s not just outsourced to lower costs, but also to raise quality. Why not take one’s lectures from the best lecturers in the world. And if they’re making videos for the world, you should be able to afford money to make them really good – if you need special effects to get across some point or some other footage, you can commission it and broadcast it to the world.

Anyway, now someone’s doing some similar rearrangement of school. Like the guy says, it’s odd that we teach units so that only the best kids really understand them, and then we move on. And it’s odd we don’t try to get kids helping each other more. And the other thing that makes great sense here is the system of rich data behind it.  Seems pretty exciting to me. And who’s funding it? Not an education department but (as I understand it) Silicon Valley philanthropy.

Thanks to Wordpress being too clever by half, I can’t work out how to embed the video, so you’ll have to click here if you want to see it.

Someone labours to fit a set of events into a ‘theory’ which is a restatement of the bleeding obvious: regulators and the regulated talk and this influences the evolution of regulation. Amazing really. Further there is “a circular and interactive relationship between the regulatory and innovation process.”

The co-evolution of sectoral regulation and technological innovation: the case of detergents industry in Europe
Date: 2011-03-29
By: Evita Paraskevopoulou
This paper contributes to research addressing interrelationships between technological and policy changes by exploring the co-evolution of sectoral regulation and technological innovation in the detergents industry in Europe. We view as regulation an endogenously created institution that evolves over time and in alignment with other socioeconomic factors, among which we focus on technological change. We argue that the innovation and regulation processes are evolutionary processes that interact overtime and their co-evolution is facilitated by knowledgeable and purposeful agents who wish to influence their institutional environment. Given our empirical context we find that the opportunity provided to private actors to participate in the policy process, share information and collaborate, contributes to the improvement of their knowledge. In turn, improved knowledge increases the innovative potential of actors while it builds their bargaining power and increases the possibilities private actors have to influence their institutional environment. Favorable institutional conditions have been recognized as a factor conductive to innovation and in this sense, we can witness a circular and interactive relationship between the regulatory and innovation process.

There’s something more general to be said here, which is that this particular waste of time is a nice illustration of one of the foibles of academia. A fairly crude idea of the relation between theory and practice is taken from various parts of natural science (particularly physics). Here there are ‘facts’ and one fits them into more general theories. So one is out there looking at regulation and there would need to be a theory of regulation. So you make one up – or usually there’s some previous article in a learned journal which proposes something like “There is a circular and interactive relationship between regulation and innovation”. And then you go out and ‘test’ it.

You can also get a bit of controversy going because there’ll be a few ‘theories’ of regulation.  So you can test them out.  Someone will have said there’s a circular relationship, and someone else will have produced a ‘theory’ of corporate capture.  So you can ‘test’ these things in your particular case study. And on the caravan rolls. Now I’m not suggesting that there are not some articles with genuine insights on corporate capture of regulators (George Stigler got the field going with some pioneering and influential studies of utilities in the 1950s and 60s).  But there’s something very unsatisfying, that is unenlightening about wandering up to one case study after another with these tools and then ‘testing’ them as if you were testing the Hubble constant.

Harry Johnson wrote about this as follows:

[T]he ‘adversary procedure’ of testing one hypothesis against another is a useful scientific procedure up to a point; but, when both hypotheses perform well and seem to be fairly evenly matched, it is not necessarily the best scientific procedure to send the challenger back to training camp with good advice on how to prepare for the next month.  In the realm of ideas, a conflict of equally well (or equally imperfectly) supported hypotheses may be more fruitfully resolved by merger into a composite hypothesis.

But even this doesn’t really capture the problem here which is that there are distinct limitations to the extent to which enlightenment can come from theorising highly complex social phenomena as if they were replicable physical phenomena and as if one were in pursuit of the kind of time invariant universal ‘laws’ that we turn up in natural science – or at least some branches of it. If ‘theories’ are used as heuristic devices to organise ideas and themes in what is then an insightful discussion of what happens, well and good. Then the article partakes mainly of the analytic tools of history – in which case the story of the regulation in the article would be told and one would judge it’s worth by the level of insight with which it told the story.

Wonderful publish. Severely, you’ve got received some excellent subject material right here and I hope to acquire again quickly to study some additional.

In the UK, the coalition government is taking an axe to spending but it hasn’t abandoned a commitment to fairness. At least that’s what Nick Clegg and Iain Duncan Smith argue in a recent opinion piece for The Telegraph:

Our welfare reforms are intended to help people get on, and to get ahead. And as a government, we have committed ourselves to promoting social mobility as the main goal of our social policy. For us, a fair society is an open society, one in which opportunities are not determined by background but by drive and ability.

According to Clegg’s new social mobility strategy: "What ought to count is how hard you work and the skills and talents you possess, not the school you went to or the jobs your parents did."

Of course the socially mobile society presupposes inequality. It’s not an egalitarian vision. The struggle for advancement is a zero sum game. What’s at stake are relative positions in a social hierarchy. So rather than attempting to improve the wellbeing of those at the bottom or raise the overall level of prosperity, supporters of the socially mobile society want to make sure that everyone rises or falls to the level they deserve.

While the rhetoric of equality of opportunity probably plays well in focus groups, some bloggers are unconvinced. At The Great Unrest Anne Archist complains that social mobility entrenches class divisions:

… the first lesson we can take from our analysis of social mobility as a concept is that it’s incompatible with an equal, classless society. Social mobility presupposes a class divide or a spectrum of inequality; equality and classlessness makes ‘mobility’ impossible because mobility means (the capability for) movement from one point to another, and an equal, classless society is one in which everyone occupies the same social position – everyone is at the same point because there is only one point.

No doubt supporters of social mobility would argue that separate classes only exist when people are unable to escape the class they’re born into — that the socially mobile society is unequal but classless.

At Stumbling and Mumbling Chris Dillow writes:

I suspect that equal opportunity is both unattainable and undesirable, and that efforts to increase social mobility are only likely to succeed at the margin. They should be seen more as an attempt to legitimate inequality than to genuinely transform the relative chances of the worst off.

Dillow also argues that a highly unequal society is unlikely to have high social mobility: "the closer the gap between high and low incomes, the easier it is to leap that gap", he writes. He also notes that the coalition government’s strategy says nothing about encouraging downwards mobility. Much inequality is due to inheritance, but the government is not proposing to increase inheritance taxes.

(Continued)