Club Troppo

According to this article, Apple is aiming at converting computer users to using Apple’s servers to store their files instead of their own computer’s hard drive.

It would certainly simplify mobile computing and eliminate problems with syncing between hardware platforms so you can see why Steve Jobs likes the idea.  It might even be OK for users who only ever work with relatively small files.  But what about those who frequently create and edit video or audio files (or large files of any sort)?  You’d be consuming ISP monthly bandwidth allowances every single time you saved or opened a file.  Hefty excess use charges or “shaping” down to dialup speeds would be monthly occurrences for many.   No doubt Jobs will warn potential customers about this major risk, and help them to pay those huge ISP bills. Won’t he?

ALAN JONES: Look, it’s a harsh thing to say on these matters of carbon tax and global warming and carbon dioxide that your national government is telling you lies.

But The Australian newspaper leads today with a story that no major coal-producing country currently imposes a direct charge on greenhouse gas emissions from coal mines. Yet there was Wayne Swan announcing that a Productivity Commission report into international climate regimes would show that seven of Australia’s top 10 trading partners had adopted major policies to reduce pollution.

Well, the Australian Coal Association have had a gutful. They’re going to raise money to attack all of this argument by the government. And they are saying that not one of Australia’s top four competitors in the 13 key commodities – we’re talking about iron ore, gold, nickel, aluminium, coal – not one of them has a carbon pricing scheme except Poland which exempts emissions from coal mining processes.

But, you see, these people simply tell lies in order to try to win their case. They’re desperate.
Only the other night on television Wayne Swan was asked, what was the government’s greatest investment in productivity. He was rabbiting on about productivity. His answer: the National Broadband Network.
[Laughter]

It’ll be obsolete – yeah, people are just laughing here. It is laughable isn’t it? It’s laughable. It’ll be obsolete before it’s built. It’s a bureaucratic nightmare. It’s costing taxpayers a fortune. It’s become a gravy train to be exploited by greedy unions. It’ll hardly improve business efficiency beyond what could have been done for a fraction of the cost. And this is his greatest productivity reform. (Continued)

The survey on economic opinions run by the Economic Society Australia is running to a close. It is your chance to register your opinions on the ERA journal rankings, the status of economists, carbon taxation, etc. The response rate so far has been surprisingly high – with about 30% of all ESA members registering their opinions, which is damn good for an internet-based survey.

A reminder on the rules of the survey: you need to be invited. Economic society members are automatically invited and merely have to click on a link in an email that is sent to them to reach the survey. Nearly all academic economists have been sent an email that invites them indirectly: they have to send an email to the main person organising the survey, Richard Hayes (r.hayes@mbs.edu) , who then sends a personalised link. Yet, basically any economist in Australia who is keen to have their say should feel themselves invited to mail Richard and ask to be included. This for instance goes for economists in ministries, banks, and regulatory institutions.

Big Tobacco has been bullying and blustering for some time about federal government plans to legislate for plain packaging of cigarettes (i.e. devoid of all branding, trademarks etc).  They’ve threatened to challenge such legislation in the High Court as an acquisition of property on unjust terms (and therefore contrary to Constitution s 51(xxxi).   No doubt they will launch a challenge too. After all they have plenty of money harvested from their addicted customer base, and they certainly won’t want to allow a precedent to stand that will be copied by other countries if it succeeds in reducing smoking levels (as it probably will).

But will Big Tobacco’s legal arguments succeed?  Probably not.  Senior UNSW constitutional academic George Williams says probably not, and I agree.  However Williams does not clearly explain the key reason why Big Tobacco will probably fail.

(Continued)

A lot of research confirms one’s priors.  Sometimes it refutes them – or at least undermines them. Guessing what the outcome would be before I read the abstract, I would have guessed the opposite of what they found.  But – hindsight being the powerful tool that it is – I can certainly see how the result could go the other way – which it seems it has.

Do Natural Disasters Affect Trust/Trustworthiness? Evidence from the 2010 Chilean Earthquake
By: Fleming, David A
Chong, Alberto E.
Bejarano, Hernan D.

A series of trust games were conducted in Chile to analyze whether the past 2010 earthquake affected trust and trustworthiness in rural communities. Results show that trust levels are invariant between villages affected by the earthquake and villages not affected by this shock (control group). However, we find statistical evidence that trustworthiness has diminished in areas affected by the earthquake. Results are relevant for policy regarding aid and recovery of communities affected by these types of disasters.

The role of local government in Australia’s federal constitutional system is one I’ve been thinking about while working up the People’s Northern Territory Constitutional Convention wiki.  Constitutional recognition of local government was one of several seemingly innocuous and positive constitutional amendments rejected by the Australian people at the 1988 referendum (mindless obstructionism by the Coalition?).

The draft NT State Constitution I’ve posted on the wiki adopts the very strong provisions of the Queensland Constitution recognising and protecting local government.  It also further strengthens those provisions by requiring the executive government and legislature to take account of the principle of  “subsidiarity” when enacting laws or making administrative decisions. This principle holds that “an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority, and indeed that a central authority should have a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate or local level” should be the main guiding principle in allocating functions and powers between tiers of government.

In a very real sense this principle is the antithesis of the centralising tendency that is dominant in modern Australian political discourse. More than a century of rule by a remote “colonial” power, first SA and then the Commonwealth, has taught Territorians (at least those who have lived here for a long time) that even a very mediocre local government is better than a remote one. Direct Canberra rule (from 1911 to 1978) tended to oscillate between complete disinterest and heavy-handed, dictatorial interference, usually involving imposition of inappropriate measures through failure to consult locals.

Also see A J Brown, ‘Subsidiarity or Subterfuge? Resolving the Future of Local Government in the Australian Federal System’ (2002) 61 Australian Journal of Public Administration 24. The article includes discussion of public opinion about local government reform, constitutional recognition thereof and the role of the States. It makes the rather surprising finding that around 50% of respondents appear to favour abolition of existing States in favour of a 2 tiered system consisting of  just the Commonwealth and local government.  Brown concludes that there has been “a slump, if not collapse, in the presumed legitimacy of the ‘state’ as a unit of self-determination within the federation”.

I disagree strongly with abolition of existing States.  Apart from anything else, local government lacks the size and clout to stand up to the federal government when needed.  Having just two tiers of government where the lower one consists of smallish local government bodies would be a weakening of the democratic checks and balances which help to “keep the bastards honest”.

But how would a “beefed up” local government sector fit into Australia’s federal structure?  That’s potentially a really interesting question whose answer could help reshape Australian federalism in a fairly fundamental way (albeit picking up and formalising developments that are already happening).

(Continued)

In the Sydney Morning Herald of 1 June, Julie Novak of the Institute of Public Affairs criticised an article by Gavin Mooney and Alex Wodak, writing in the previous day’s Herald, which argued for higher taxes , in part based on arguments developed by Richard Wilkinson and Kate Pickett in The Spirit Level arguing that Wilkinson and Pickett’s analysis should be taken with a grain of salt.

Now being an international comparisons pedant, I also have a lot of problems with aspects of the Spirit Level (mainly related to the fact that Japan is assumed to be a low inequality country and shouldn’t be).

But we’ll put that to one side, because along the way she raises an argument that is even less well founded than anything in “The Spirit Level”.

In particular, she asserts that “the primary beneficiaries of big welfare are the middle-class bureaucrats who administer the welfare state in fine detail. To get a sense of how much welfare-state funding is being misdirected, consider this: based on an upper estimate of 13 per cent of Australians living in poverty, the Commonwealth’s social security and welfare budget of $117 billion could have been evenly shared among the poverty stricken with a $40,817 payment.”
But let us stop for a minute to have a reality check. A payment of more than $40,000 per person means that we could pay a family of four more than $160,000 per year out of the current welfare budget; but only a small minority of families make this much in earnings. Is this possible? Well the answer must be “Sadly, No”.

Now if you divide $117 billion among 13% of the Australian population, it is arithmetically correct that you come up with about $40,000. This calculation is simple, straightforward and completely misleading.

People I have a lot of respect for criticise the estimates that the poverty rate in Australia is 13%, but let’s accept for the moment that Australia’s welfare system is not sufficiently generous to raise everyone out of poverty, and leaves 13% of the population below the poverty line.

But the point overlooked in this calculation is that in the absence of our welfare system a lot more people would be poor. So, the relevant figure is not how many people are in poverty after receiving social security benefits, but how many people are poor before they receive benefits.

OECD figures for around 2005 estimate that 12.4% of Australians were poor after taking account of taxes paid and benefits received, a figure a little lower than Julie Novak’s estimate. But 28.6% of the population would have been poor in the absence of welfare benefits. So if we divided all of the current welfare spending of $117 billion dollars equally among all pre-transfer poor people rather than giving them a payment of more than $40,800, we would only be able to give them a payment of $17,700.

If we completely abolished Centrelink and were somehow able to pay people benefits without actually having anyone to administer the system, then we would have about $3 billion to add in, which would give all poor people an extra $450 a year.

The combined amount is actually less than the current single rate of age and disability pension of around $19,000 (including supplements) – although it would be a big improvement on the rate of payments for the unemployed of around $12,400.

Of course to use up all of the welfare budget in this way would mean that we would no longer be paying for child care support, nursing homes, services for people with disability or support for the homeless.
Julie Novak also argues that “An insidious effect of progressive income taxation is to substitute leisure for work and, combined with a large welfare state, to impose high effective marginal tax rates that punish individuals financially for supplying more labour.”

It is not entirely clear what withdrawal rate she has in mind, but if you only wanted to give welfare payments to the poor, then you would probably be talking about a 100% withdrawal rate, which would make our current effective marginal tax rates look pretty low.

There’s something of interest in this piece by Cass Sunstein, Obama’s chief of regulation (It has become common to call him ‘Regulatory Czar’ for some reason – not ‘Regulatory Strongman’ or ‘Regulatory Hulk Hogan’, but ‘Regulatory Czar’).  It speaks not just of the costs of regulation but also of benefits. As part of summarising what’s good about the regulatory policy that he is ‘Czar’ of he quotes not only the extent to which they’ve been able to cut the cost of regulation (if you pay close attention to the numbers quoted they’re pitifully small by the way), but also the benefits of regulation.

This insistence on pragmatic, evidence-based, cost-effective rules is what has informed our regulatory approach over the past two and a half years. We have helped to bring highway deaths down to their lowest level in 60 years; promoted airline safety while protecting passengers from tarmac delays, overbooking and hidden charges; sharply reduced the risk of salmonella from eggs; dramatically increased the fuel economy of cars and trucks, promoting energy independence while saving consumers money; and curbed air pollution that kills thousands of people each year. At the same time, we are eliminating unnecessary regulatory burdens and tens of millions of hours in annual red tape.

So there you have it: a social democratic approach to talking about regulation.  The other thing is that Sunstein talks about lowering the costs of overregulation and bad regulation not just for businesses and organisations generally (which is where we focus our energies on regulation review), but also on individuals.

We are taking immediate steps to save individuals, businesses, and state and local governments hundreds of millions of dollars every year in regulatory burdens.

Very sensible too.  It’s hard to see the downside.

In recent years, there have been many reforms to the incentive system that social science academics (those in the fields of economics, finance, psychology, management, health, marketing, etc.) live under in Australia. There was the Research Quality Framework, then the ERA, and now something based on expert panels that is perhaps closer to the ERA in Britain. There have also been fluctuations in the amount of money pumped out to academics via the ARC, the NHMRC, local state funding, and many direct research outfits (like CSIRO). I first want to make some observations on the changed incentives for academics, before going into actual recommendation as to how we could get our top academics to do more work on Australian policy matters. In short, if you want more of the top academics to write on Australian policy issues, I would recommend setting up specialised PhD institutes like the European Institutes, and I would recommend a more relaxed attitude to privacy when it comes to the use of Australian datasets by academics.

Observations:

1.       At the top end, it has been publish or perish long before the government got into the game of assessment exercises. Good young budding academics knew that in order to be seen as a top academic they had to do well in the international publication game. Like it or loathe it, that game is dominated by Europeans and Americans. This doesn’t mean that it is impossible to do work on Australian issues and get into the top journals, but it does mean that one ultimately has to work on the things that interest European and American editors and referees. Hence a cute Australian experiment with a policy that might also be introduced elsewhere (say, the baby bonus or HECS) has a shot. An analysis of the labour market dynamics in Australia has no chance. As a result, many of the top academics have told their best students in the last 30 years or so not to work with Australian data and to preferably go and study somewhere else. It is a form of cultural cringe in that one has an insufficient degree of pride in ones’ own country, but many felt this was the honest advice they owed their students. Australia is not alone in this. We interviewed job market candidates from Britain this year whose supervisor had told all his students to work with American data in order to have more chance of top publications.

2.       The research assessment exercises have made the reality above visible to everyone. In particular, it has made it visible who has not played the international game at all and who has. Even though it was only in place shortly, it has lead to major changes in the power structure inside academic schools, and now that that genie is out of the bottle it wont go back in. Those who publish a lot in leading journals were promoted much faster than they would have been otherwise, whilst those who didn’t do any visible research had to become administrators if they still wanted to have a chance of being called professor. This was both good and bad. It was good for the highly talented who felt frustrated that there was no clear way in which they could outperform others, whilst it also, at a stroke, stigmatised individuals who made different, but still worthy, investments, such as in teaching quality or local research groups oriented towards Australian policy. At a stroke they were visibly designated as second rate, whereas before they could at least with some probability get away with saying they were world-class (which, in a local sense, they were). The recent demise of the ERA changes nothing about this reality, so don’t expect any tweaked version of the ERA to make much difference. The real losers from the recent change in the ERA are those who only look good on an A/A* publication schedule, but whose work is not cited, who have few grants, who teach small classes, who do little service, and who basically play no other game than the international publication game. And they do not really lose any of their reputation, but their desirability for institutions looking to do well in ERA rankings is slightly reduced, which might cost them some of their loadings.

3.       Even though teaching is the core business of the tertiary sector, the assessment exercises have contributed to the gradual marginalisation of teaching that has happened the last 20 years. Teaching in academia is now considered a second-rate activity, one that is actively avoided by the up-and-coming. In fact, the reduction in the status  of teaching in academia has gone so far that teachers are now at the very bottom of the university hierarchy, behind administrators who can boss them around and pester them with forms; behind junior researchers who know nothing about real life but who play the journal game better; and even behind contract workers. It is no wonder that the academic teaching profession is not attracting good youngsters and has to rely heavily on migrants who will by design know less about Australian policy issues and will have less interest in it.

4.       The advent of the internet has increased the possibilities of academics to move into the market for Australian economic issues. Blogs, tweets, homepages, and virtual centers have reduced the costs of speaking to the general public and to the policy makers. This has made the returns to Australian policy work more direct and higher, though paradoxically it tends to reward fairly shallow commentary rather than real understanding (I say this as a blogger). This trend is still continuing.

5.       The government bureaucracy has had an increasing appetite for academic involvement. Hence there has been an explosion of groups loosely affiliated with universities that essentially do work for the ministries. They write reports on poverty, Aboriginal issues, health, urbanisation, transport, tourism, etc. They evaluate proposals by industry and other ministries. They set up courses for the bureaucracy and in almost every other way provide intellectual services to ministries that seem to treat academia as a substitute for in-house expert knowledge.

In short, it has been a mixed bag for the incentives to do work on Australian policy. At the top research end, all the incentives are not to bother and the best students who could be interested in it are actively dissuaded from pursuing Australian issues. At the bottom teaching end, the reduced status of teaching has lead to a large reduction in the amount of local content that will be taught to the next generation, just by virtue of who teaches it. But elsewhere, work on Australian issues has blossomed like never before. There are thus more than enough report-writers, too few teachers, and  perhaps too few top academics involved in Australian economic and social policy issues.

(Continued)

Odd that a country like Oz in which economic reform has been such a buzzword, in which economists have, over the last generation had so much influence, have had so little impact on doing something so obviously sensible, which is to move as far as possible from the taxation of ‘goods’ to the taxation of ‘bads’.

It’s hard to detect any ideological patterns here. The Nordics do a bit better than the Anglosphere, if you correct for their larger than usual tax take (which would mean their green tax revenue would be a substantially higher proportion of GDP than suggested in the graph to the left).

There’s also a few of the more newly industrialising economies on the right hand (good) side of the graph – like Turkey and Korea and the Eastern European countries.  Perhaps they’ve got more advice from economists. Who knows?

But I wish we scored better than we do.