Not so persuasive after all …

In a marginal note to Missing Link the other day, I expressed the view that Jason Soon and Helen Dale’s advocacy for the LDP’s Negative Income Tax + abolition of minimum wage policy was “persuasive”.  And so it was at first glance.  Despite my frequently scathing remarks about extreme libertarians who think taxation is theft, the state is evil and property rights (however ill-gotten) are sacrosanct, my own instincts are moderately libertarian or classical liberal at the very least.

Alas, as with most tax policies, the devil with the LDP’s proposals is hidden in the detail.  I examined them fairly closely today and here’s what I discovered:

  • The LDP’s $9000 minimum income/NIT represents a reduction in current levels of unemployed Newstart Allowance of between $2400 (22%) and $5000 (36%) depending on whether the recipient is currently eligible for rent allowance (as most other than those still partly supported by parents are).  In either case $9000 is significantly less than a subsistence income in just about any part of Australia, and much less in the larger capital cities where rents are high.  LDP apologists blithely suggest that these mendicant unemployed could rely on charity to make up the shortfall.
  • For those in partial or full employment earning up to $30,000, the LDP’s policy provides substantial effective tax cuts (albeit on a sliding diminishing scale).  However, the Party’s policies also involve abolition of any minimum wage. Since people earning less than $30,000 are almost by definition low paid and mostly lacking in bargaining power in the employment market, they are highly vulnerable to wage cuts in a completely deregulated market, which would certainly occur as soon as the minimum wage was abolished.  Thus the LDP’s tax cuts for this group will mostly be more than offset by wage cuts.  Its effect (no doubt deliberate) would be to create a large class of US-style working poor whose earnings are at or below subsistence levels.
  • For working families with incomes above $30,000, the picture is slightly more mixed.  Between $30,001 and $75,000 the LDP’s 30% flat tax rate amounts to an effective cut in total tax for an individual of $3600, however that’s eroded by the fact that all current tax deductions are to be abolished.  For a couple where both spouses are working, the benefits may be slightly larger, though again eroded by removal of all current tax deductions.  For most families (those eligible only for the current basic rate of Family Tax Benefit Part A) the LDP’s effective tax cut is in the “sandwich plus a milkshake per day” range because the loss of the Family Tax Benefit Part A is almost exactly counterbalanced by the LDP’s policy of increasing the $30,000 tax-free allowance by $6000 for each child.  However, poorer families eligible for more than the basic rate of FTB Part A, and even more so for those eligible for FTB Part B and/or childcare allowance (neither of which is available under the LDP’s proposals) may well actually be slightly worse off under the LDP’s policies than at present.
  • For single individuals earning between $30,001 and $75,000, the LDP’s tax policies are also worth $3600 per year, but again reduced by removal of all current tax deductions.  Again it’s “sandwich plus a milkshake per day” territory.
  • At an annual individual income of $75,001 or more (i.e approximately the top 10% of income earners), however, the LDP’s tax cut would be worth a considerably more worthwhile $7,600, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation.
  • At an annual individual income of $100,000 or more (i.e approximately the top 5% of income earners), the LDP’s tax cut would be worth $11,200, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation.  However, for families in this income range the picture is even more attractive because they still get the LDP’s $6000 increase in tax-free threshold per child (because it wouldn’t be means-tested, unlike the current FTB Part A).
  • At an annual individual income of $150,000 or more (i.e approximately the top 2% of income earners), the LDP’s tax cut would be worth $16,200, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation. Again as with the $100,000 bracket, for families in this income range the picture is even more attractive because they also still get the LDP’s $6000 increase in (non means-tested) tax-free threshold per child.

The bottom line?  Only the top 10% of income earners would benefit substantially from the LDP’s policies.  Middle income earners would get little or nothing, and the unemployed and low income earners would be substantially poorer and in many cases unable to support themselves without charity.

All this might be justifiable if Australia had a high unemployment rate and if there was a reasonable expectation that forcing down real wages for the poor through abolishing minimum wages would lead to a substantial increase in total employment (albeit at sub-subsistence levels).  However, we actually have historically low levels of unemployment.  Moreover, the current rigorous work test for Newstart Allowance means that the implicit assumption in the LDP’s policies, that there are substantial numbers of dole bludgers who could be forced back into the workforce by effectively slashing dole payments by between 22 and 36%, is clearly nonsense.  It’s conceivable that abolishing the minimum wage might create some additional low paid jobs, in cleaning, nannying and waitering in restaurants for the top 10% of income earners who will be further enriched by the LDP’s policies, but it seems quite unlikely that enough new jobs will be created in that way to justify the associated drastic increase in inequality, insecurity and loss of basic dignity.   Certainly it won’t force down real wages enough for Australia to compete with China and India as a base for cheap, dirty, badly regulated manufacturing industries or telephone call centres, even if we actually aspired to such a future.  Once you examine the LDP’s policies in detail, Jason and Helen’s “let them surf” propaganda line is revealed as a fantasy akin to Marie Antoinette’s apocryphal “let them eat cake”.

Why would anyone think such policies would be a good idea?  There are three obvious possibilities:

  1. Self-centred, short-sighted greed (a sin of which I wouldn’t accuse either Jason or Helen, I might add);
  2. The conviction that success in a market capitalist system equates closely with merit and hard work, and that failure is equally deserved in some moral sense;
  3. Even if that isn’t true, that the market capitalist system provides human needs for goods and services more efficiently and abundantly than any other economic system so far tried, and is dependent for its survival or cotinued success on the sort of grossly unequal distribution of wealth that the LDP’s policies advocate (the “can’t make an omelette without breaking a few eggs” approach).

Let’s examine each of those possibilities in turn.  The 90% of Australians who won’t benefit from the LDP’s policies are unlikely to be impressed by the first explanation, nor should they be.  As for the second, even the libertarians’ hero Hayek conceded that any connection between merit and wealth/success in the capitalist system was a rather loose one, certainly not close enough to serve as a justification for anyone with even a passing concern for values of fairness.  Wealth and success quite often flow from sheer dumb luck (being in the right place at the right time, winning the lottery) or the equally dumb luck of financial or genetic inheritance.  Mind you it seems that, while many people think the latter sort of luck is unfair in the abstract, very few resent at least genetic dumb luck once it’s reduced to concrete situations.  Even socialists mostly don’t think it’s unfair that ugly people can’t be fashion models, stupid ones neurosurgeons or slow runners sprint champions.((Note that I agree with Sinclair Davidson that there’s at least enough correlation between merit, hard work and capitalist success that both they and successful risk-taking need to be tangibly rewarded. ~ KP))

Hayek rightly conceded that the merit principle couldn’t justify the sort of seriously unequal distribution of wealth it actually creates in the absence of competition and other regulation and state-engineered income redistribution.  Consequently, Hayek was prepared to countenance some redistributive taxation and a welfare safety net, as Don Arthur has pointed out in a series of recent posts.  Nevertheless, Hayek envisaged only a very limited degree of restribution or safety net.    He called in aid the third justification above to reach the conclusion that redistributive taxation and welfare policies needed to be severely limited: the sort of entrepreneurial spirit that he and others like Schumpeter saw as the primary engine of capitalism would seize up if subjected to anything resembling socialist or even strong social democratic redistributive policies.  The omelette would unscramble itself.  Why would entrepreneurs bother to take big risks unless they had sufficient freedom to innovate and a reasonable expectation of big rewards for risk?

It sounds fairly plausible; after all market capitalism is the best economic system human beings have so far discovered, and the “creative destruction” of entrepreneurial innovation is a primary engine of its extraordinary success.  But what do the facts tell us?

First, modern Denmark and Finland have consistently shown up in The Economist newspaper’s surveys as among the very best countries to do business, despite total tax takes much higher per head than Australia. They rank first and second respectively in the most recent survey.  Other Scandinavian nations also do quite well.  All have total tax takes around 50% where Australia’s is around 32%  They also rank among the most prosperous nations in the world per head on a PPP basis, though Denmark and Finland are slightly below Australia on the most recent measure (Norway OTO is higher).  At the very least we can say that somewhat higher levels of redistributive taxation than Australia (we’re one of the lowest taxing western countries in the world) are equally consistent with capitalist success and do not seem of themselves to stifle innovation or the entrepreneurial spirit.((I don’t in fact suggest that Australia could or should adopt Scandinavian levels of taxation.  For a start we lack quite a few of the attributes that I suspect make it sustainable for them: compact size; existing highly developed infrastructure; proximity to the huge wealthy markets of the rest of Europe and North America.  However, we don’t need those sorts of tax levels to fund a better targetted social safety net or better health, education and material public infrastructure.  Possibly we don’t even need higher levels at all if we spend the current large surpluses wisely and reduce some “middle class welfare” measures. ~ KP))

Moreover, lots of research about entrepreneurship has been done since the times of Schumpeter and Hayek:

Cooper also says that entrepreneurs see failure as confirming their inner fears but following failure they do not give up; they just get started again to try and prove that they can get it right a second time. Cooper also observes that being an entrepreneur has negative aspects to it. They tend to be unable to have and miss out on close relationships and the family life that others have. Their focus is only on the business to an obsessional degree, which can be likened to a drug. Only a few entrepreneurs actually set out to build big businesses and to attain wealth and, interestingly, money is not a prime motivator.

Cooper has classified entrepreneurs into two categories; those who are functional and those who are real. He suggests that functional types are not genuine entrepreneurs. They tend to have one success and subsequently live off that success and need to show to people that they have been successful. They like to be seen with their money as they have little drive to establish another success. This varies significantly from the real entrepreneur. They keep coming up with new ideas to prove to themselves and to their peers that they are capable to doing so. Their main driver is a fear of failure and not for tangible wealth benefits. A real entrepreneur never stops.

Clearly, entrepreneurs need a flexible, supportive, innovation-friendly business environment, but that need not include the lowest conceivable taxation regime. Although few if any Australian voters bothered to examine the LDP’s policies in 2007, indeed hardly anyone even knew the LDP existed, ignoring the LDP was certainly the right decision.

Ironically, examining all these data critically does give us useful information about an optimal public policy mix. It tells us that, at least in theory, the sort of “progressive fusionism” that Don Arthur and Andrew Leigh have been advocating in the blogosphere recently could actually work well. The egalitarian impulses of moderate social democrats could be satisfied by slightly higher (or better targetted) levels of redistributive taxation than Australia currently enjoys, providing a fair social safety net with “equal dignity/respect”; while entrepreneurial innovation could be nurtured by more flexible regulatory regimes with lower compliance burdens.

Even a Negative Income Tax and abolition of minimum wage could work provided that the NIT base level doesn’t involve slashing the incomes of the poorest Australians, and if it was introduced at a time other than one of historically (over)full employment. Wrongful dismissal laws could also be abolished completely, allowing businesses to respond to competitive pressures more quickly and flexibly, as long as the state provides an adequate safety net for income maintenance, retraining and a limited mortgage repayment holiday for displaced workers. Broader deregulation of the labour market might even be feasible and saleable, without a Howard-style AWA “no disadvantage” red tape nightmare, as long as true rights of freedom of association are safeguarded, including laws prohibiting any form of discrimination against workers who choose to bargain collectively.  Howard’s policies had much more to do with his career-long obsession with smashing unionism than with rational market-oriented reform.

However, none of this will ever occur unless libertarians get a lot smarter than they currently show any sign of being capable. They need to discover that success in a market capitalist system is not the same thing as merit, that the poor are not inherently undeserving, and that entrepreneurial innovation can be nurtured without screwing workers or awarding large tax cuts to the rich in an already low-taxing country. Conversely, “progressives” will only ever sign up to this sort of policy agenda if they genuinely accept that market capitalism is the best and most efficient system we’re likely to find in the foreseeable future, that profit isn’t a dirty word and that anything closely resembling equal outcomes is neither possible nor desirable nor does equal dignity require it.((A proposition perhaps best illustrated by Ronald Dworkin’s rather bizarre “luck egalitarian” hypothetical life lotteries. ~ KP))

It would be unwise to hold your breath waiting for a blinding flash of realisation from either group. Political “progressive fusionism” is probably at least as distant as its nuclear energy namesake.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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398 Responses to Not so persuasive after all …

  1. James A says:

    How to Promote Startups considers some of the above and other ways help entrepreneurs, although the comments go downhill a bit.

  2. conrad says:

    “At the very least we can say that somewhat higher levels of redistributive taxation than Australia …”

    And probably at the very most too, if you want to add all those countries in Europe that no-one mentions with high tax rates rather than just cherry picking the most successful ones or add the successful countries with a low tax rate. In addition, since those countries also have some form of cultural protection that stops their professional workers moving overseas in a way that places like Australia don’t (not speaking English as a first language is probably a big factor), they don’t need to worry about their workforce moving to places like the US for more money in the type of way Australia would and NZ does.

  3. Ken Parish says:

    conrad

    I don’t think I’m “cherrypicking” in any meaningful sense (i.e. merely arbitrarily picking the succes stories in Europe). Numerous authors, not least Troppo’s Fred Argy e.g. here, have analysed the factors leading to the success of Scandinavian countries by comparison with other parts of Europe that do much less well with high tax rates. Fred, however, emphasises social policies especially labour market training and strong mutual obligation, whereas I think I would want to emphasise (or at least explore) the suggestions drawn from The Economist surveys that their broader policy settings (but for tax rates) are very pro-business. That said, I agree (as I said in the primary post) that the Scandinavians have some peculiar advantages that Australia doesn’t, and that includes not having quite as readily mobile a professional workforce with English as first language. However you shouldn’t overstate it because many professionals in Europe have very serviceable English.

  4. NPOV says:

    Except Conrad, in most Scandinavian countries, professionals in the current generation almost all seem to speak English quite fluently, so I’m not sure that protection exists any more.

    Having said that, it is a reasonable point that if Australia’s taxation levels were too high, it would inevitably push away more of our best talent. I often wonder why it is that so many talented enterprenerial types do remain in Australia, and I suspect the reason is the weather and generally easy-going lifestyle as much as anything else (plus of course that people generally prefer to remain near family). But as it is, if anything makes Australia financially unattractive currently, it’s surely housing prices far more than tax levels.

    What’s attractive about the 30/30 plan is a) the simplicity – most taxpayers shouldn’t need to bother with tax returns, the cost of administration and compliance enforcement should be able to be slashes considerably and b) the lack of high EMTR’s. However, I think these advantages could be maintained while having a far more sophisticated mathematical model for calculating taxes: my preference is something like a gradually rising EMTR that goes from, say, 25% for the lowest-paid jobs up to 50% for those on over $150K. As for the minimum wage, I’d agree that throwing it out entirely would be a big mistake, but I also accept that there’s a need for better flexibility: there are parts of Australia where requiring employers to fork out $13.74 an hour is unnecessarily preventing jobs from being available, and there other parts where paying them any less would be sheer exploitation, a likely poverty trap, and encourage employers to skimp on investing in training and equipment necessary to ensure that employee productivity was kept high. However, exactly how inflexible is the current arrangement? Can somebody tell me, with the current laws the way they are, if, out there, there is an employer happy to pay somebody, say, $12 an hour while providing training, and an employee who has been out of work for a considerable time and keen for the job, is there really no way in which some sort of temporary arrangement can be negotiated as a special case?

  5. The key is to keep EMTRs low for the poorest people, and – as both Jason and I argued – liberalise the economy sufficiently so that mutual obligation could go (it really is quite perverse in its effects, and hits the poor and disabled hardest). I’m afraid the Peter Saunders article Jason linked to really did sound awfully Victorian to me – of the ‘people need to be hassled to get off their arses’ variety. No, they don’t, that’s just petty.

    Interestingly, some of the Scandinavian countries do an interesting dance with aspects of libertarian policy – Denmark, for example, has the most liberal hire, wage & fire policies you’re ever likely to see, but relatively generous welfare, which means (a) it’s easy to get work, but also (b) easy to leave if the job turns out to be really awful.

  6. JC says:

    Despite my frequently scathing remarks about extreme libertarians who think taxation is theft, the state is evil and property rights (however ill-gotten) are sacrosanct,

    Don’t hold anything back, Ken. Tell us how you really feel :-)

    Excellent post, KenP.

    Why would entrepreneurs bother to take big risks unless they had sufficient freedom to innovate and a reasonable expectation of big rewards for risk?

    I actually see this as a sort of fallacy that we all seem to fall into. Entrepreneurs are actually risk adverse. A good entrepreneur abhors risk and tries to reduce it as much as s/he can. You can accrue risk by simply going racetrack. This is an important distinction because we sometimes hear that we ought to reward those that take risk, which is an argument that I see as intellectually incorrect. If we reward risk we ought to reward betting at the racetrack or simple gambling. What we shouldnt be doing is impeding the ability of those that see opportunity in putting together the three factors of production to create goods and services. The market will ultimately judge the final result by either rewarding the enterprise or sending it down the river.

    Entrepreneurs are looking to squeeze a margin out of an enterprise and reduce, hedge or eliminate risk as much as s/he can. In other words they see an opportunity to arbitrage a gain and if its big enough will try to marshal the factors of production to bring this to the final conclusion I think this is a very important distinction that invariably gets to wages and wage levels. Entrepreneurs are not so much worried about the absolute wage but rather the cost of the marginal input (in of itself). The factor that would limit the wage rate is the final price s/he can achieve in the market for the final product after adding together all the inputs. In other words the entrepreneur is really an aggregator and risk taking is a potential adversity.
    ———

    There are some, but really few libertarians that would support a total elimination of Welfare. A large number seem to support Friedmans view of a welfare state- a much skinnier welfare state while still maintaining social safety net. I actually believe that after a time this would become obvious in a state that is more attuned to libertarian ideals and we would begin to see the dark side of a rampant welfare state we have created. Bad policy such as churn would be seen for what it is dead weight loss.

    There are also many other important things that the LDP advocates such as Voucherizing education; particularly at the primary and high school level that would highlight the benefits of introducing market based outcomes. Vouchers would also apply to health care as well that help move away from the present command and control system.

    Moving some way to strengthening property rights would also be greatly beneficial. The Islamic school issue we recently discussed is the outcome of loosened property rights.

    The LDPs environmental policy is without question the soundest policy of any political party in Australia at the present time and its worth taking a look at.

    Many libertarians support the open borders policy. Catallaxy or John Hs site has also toyed with the idea of setting up an open borders policy for immigration that could be supported by demanding an entry fee and a slightly higher tax structure from the newly arrived immigrants. Very high levels of immigration are problematic when associated with a welfare sate.

    As for the fusion idea.

    As I see it the rump of libertarian support would come from two factions of the two political parties: Labor right and the centre small L liberal groups. There is next to no chance of ever seeing a fusion with the left IMHO.

    The DailyKos tried that In the US in the 04 elections as he saw an opportunity there seeing around 10% of the US voting population actually show strong libertarian leanings and weak two party affiliations. That date didnt make it to the starters let alone the first drinks. Theres never a chance of a fusion with the left IMHO as economic policy and social policy of the two groupings are mortal enemies.

    People see libertarians and the left having similar policies in such areas as drug policy and gay marriage and conclude there is a case for fusion. The outcome may be similar but the way both arrive at these policies to my mind highlights the differences rather than the similarities. Libertarians see the individual right to privacy etc. as paramount and the state has no right to interfere in a persons private life whether in cases of self harm or ones bedroom. So the libertarian case for gay marriage derives from the argument that the state should not be in the business of recognizing personal relationships and therefore marriage is very much a private affair. The left approaches this from the angle of discrimination with the state very much still in control in what relationships it does recognize.

  7. Ken Parish says:

    According to this recent NATSEM report, high EMTRs (defined as over 50%) affect only 7.5% of Australians, overwhelmingly families in middle income groups being hit by withdrawal of Family tax Allowances:

    Do affluent or poorer Australians face the highest effective marginal tax rates? To look at this issue, we have ranked all Australians by their family income (or just by their own income if they are single). We have then divided them into 10 equally sized groups, called deciles. The average EMTR faced by those within each income decile generally increases as income rises. As Figure 2 shows, the poorest working age Australians in the bottom decile on average face an EMTR of only two percent. This is in sharp contrast to the average EMTR of about 31 to 35 percent experienced by those in the top 60 percent of the income spectrum (deciles 4 to 10). It should be emphasised that the slight dips in the average EMTRs between the sixth and subsequent deciles do not mean that the top deciles pay less tax than the other deciles. This is because we are only looking here at the effective rate of tax paid on the next dollar of private income, not at the tax paid on all income.

    As Figure 2 shows, across the bottom half of the income spectrum, average EMTRs increase steadily as income rises, peaking at 35 percent for individuals in the fifth and sixth income deciles. Around 14 to 15 percent of working age Australians in each of the middle three income deciles also face high EMTRs (defined here and throughout this report as being EMTRs of more than 50 percent). Almost one in every seven adult Australians in the fourth, fifth and sixth income deciles stands to lose more than half of the next dollar that they earn. The average gross incomes of the families and singles in these deciles range from about $40,000 to $75,000 (Table 1), so many are in the income ranges where Family Tax Benefit Part A is being withdrawn.

    There is also a notable increase in the proportion of individuals facing high EMTRs in the eighth income decile, with the average gross income of families and singles in that decile being about $87,000. Around one in every 10 working age individuals in this decile will lose more than half of the next dollar of income earned. Most of these are likely to be parents in couple with children families affected by the top end withdrawal of Family Tax Benefit Part A, as the average gross income of couple with children families in the eighth decile is $115,000 (bottom row, in Table 1).

    Once income is high enough to catapult families and singles to the top of the income spectrum, almost no working age individuals face EMTRs above 50 percent (final two right-hand bars in Figure 2).

    Thus, high EMTRs do not significantly affect low income earners and do not provide a convincing pretext for imposing punitive LDP-style abolition of minimum wage on them. If high EMTRs were genuinely the reason for the LDP’s policies, they could tackle them effectively by concentrating solely on abolishing Family Allowances and replacing them with their proposed increase in the tax-free threshold of $6000 per child. The rest of their policies don’t attack high EMTRs at all, they just pointlessly punish the unemployed and low income earners and award generous tax cuts to high income earners.

  8. Jason Soon says:

    Ken I think you missed two rather important points in my piece which wasn’t simply about promoting the 30/30 and which also render your criticisms rather redundant. In fact I’m quite aware of your criticisms of the 30/30 plan and think it imperfect too.

    I had 2 points, one of which went to the philosophy of welfarism and the other of which went to political economy
    1) I tried to transcend the ‘welfare is a right’ line of the left and ‘welfare is a positive right and therefore not really a right’ line of the right by arguing that insofar as governments were contributing to unemployment, at least part of the welfare payment can be seen not merely an entitlement but a form of restitution. I suggested various ways in which governments crowded out employment opportunities and not all of them had to do with the labour market, I also mentioned product market regulations (e.g. licensing of various kinds).

    2) I was making the political economy argument that libertarians would be perceived as being two-faced if on the one hand they argued that deregulating labour markets was fine since the redistributive element of labour market regulations would be better addressed by transfers if they then turned around and put caveats on transfers. I argued that the political capital of libertarians would be better spent on arguing for liberalisation and quarantining the welfare system (not middle class welfare but genuine redistribution) – insofar as they had reason to believe that further gains from liberalisation were potentially pareto-optimal (i.e. gains would dwarf losses) then even in quarantining the welfare system the reforms would pay for themselves in the long run. This is perfectly consistent with the Rawlsekian- progressive fusionism line being promoted by Don Arthur i.e. quarantine genuine income transfers and only attack the regulatory state which in economics is an imperfect tool anyway since regulating prices and quantities is generally less efficient than making transfers.

    In addition I also think there is a genuine classical liberal argument for some level of unconditional welfare both on the grounds of pure transparency and simplicity as well as because insofar as it can be regarded as a public good like defence (which it can – defence is collective insurance against physical insecurity, a safety net is collective insurance against economic volatility). In addition, some stable and transparent level of unconditional welfare will mean that the population is less likely to demand regulations to protect themselves against economic volatility which may be far more economically destructive e.g. the reintroduction of tariff barriers and various restrictions on competition.

    Your discussion of the market system not being perfecly meritocratic is completely irrelevant as this is a premise I share with you – indeed it those who are in favour of mutual obligation who are more likely to not share these premises.

    I do not believe any of these criticisms are dependent on the 30/30 scheme, I have simply made an argument for why unconditional welfare is more conductive to classical liberal political economy in the long run than mutual obligation.

  9. JC says:

    Numerous authors, not least Troppos Fred Argy e.g. here, have analysed the factors leading to the success of Scandinavian countries by comparison with other parts of Europe that do much less well with high tax rates.

    I hope Fred’s well enough to take a look through this link as the case for the Scandinavian model really doesn’t look so rosy.

    (hope you’re getting well Fred, by the way)

    This is as good a case as i have seen why we should not adopt the Scandinavian system and maintain the free(er) market oriented Anglo system.

    The Scandinavian model isn’t socialist so much as it’s highly interventionist, which is an important distinction.

    http://www.fee.org/publications/the-freeman/article.asp?aid=8152

  10. Ken Parish says:

    Jason

    Yes I was undoubtedly conflating your argument with Helen D, who clearly WAS advocating the LDP 30/30 recipe. I don’t have any real argument with what you’re saying, in fact it mostly looks quite consistent with my above much longer post.

  11. They appear not to have considered disability support pensioners. The DSP is higher than the dole (and thus considerably higher than the tax free threshold). The situation of the unemployed (towards the end of the report) isn’t too rosy, either.

  12. To be fair, Ken, I advocated the LDP policy as an example of a fully costed regime applied to Australian conditions. I don’t think it’s perfect either (and nor does John Humphreys, who originally developed it). I do think it’s better than what we currently have. This is what I actually said:

    Another issue worth adding to Jasons discussion of the plethora of regulations that actually inhibit workforce participation is the problem of high effective marginal tax rates. These penalise the poor – especially the disabled – more than any other income group. In the case of a disability benefits recipient, for example, above a paltry sum (

  13. JC says:

    The link offer the most graphic contrast of all argments that i have seen and literally trounces the idea that the Scandi model is somehow superior on an outcomes basis to the Anglo free(er) market model. The reason is that we have had the wonderful experience of both models tried and tested at approximately the same time in both the same regional location with a fairly similar population a political systems (the Irish troubles were actually a headwind.

    Ireland was the backwater of Europe until 20 odd years ago. In fact Boston was fast becoming the capital of Ireland as the young and the energetic were leaving by the plane load for a better life in America and elsewhere. At around time Ireland began to reform the Scandis decided to go interventionist. Let’s see what the link says about this:

    2a. Between 1970 and 2003, in OECD rankings of economies: Denmark declined from third to seventh place; Sweden Finland rose from 17th place in 1970 to ninth in 1989, then fell back to 15th in 2003. fell from fifth to 14th.

    2b. Over the same period (19702003) Ireland shot up from 22nd to fourth. In 1989 Irish taxes and government spending equaled 53 percent of its GDP. In 2006 this had fallen to 35 percent.

    2c. In 2004: Irish productivity per working hour was nearly 26 percent higher than in Finland, just over 29 percent greater than in Sweden, and a whopping 43.2 percent above the Danes.

    Ireland is now one of the richest areas in Europe.

    There’s more too.

  14. Ken Parish says:

    SL

    Just to clarify, I think I’d be happy with the following elements of the LDP policies:

    • A NIT pitched at a level so that the current real value of Newstart is effectively preserved;
    • Some significant increase in flexibility of the minimum wage, but not total abolition (haven’t worked out the detail). Some shyster restaurant proprietor paid my daughter Bec $6 per hour when she first moved to Melbourne early this year. It’s totally unlawful of course under current law, but she can’t independently prove the hours she worked so it’s her word against the employer. However it DOES suggest that there are plenty of employers out there more than willing to screw more powerless workers if they get half a chance;
    • Higher tax-free threshold, but not as high as $30,000 (that would probably be unaffordable in the absence of the sort of countervailing “screw the uenmployed” budgetary savings John Humphreys’ scheme proposed);
    • Abolition of family tax benefits and their replacement with a higher tax-free threshold per child – it’s blatant middle class welfare in the absence of a means test, but it at least avoids high EMTRs and still encourages families to have children;
    • The current marginal tax rate steps should remain. A somewhat higher bottom tax-free threshold would deliver reasonable tax cuts across the board without any necessity for a flat rate of tax which can’t be justified IMO;
    • I’d rather see significant cuts in company tax, because the Irish experience suggests that that really DOES deliver significant economic growth and greater innovation.
  15. Mark Hill says:

    Ken,

    A comprehensive critique of the best welfare policy on offer. However, I think you should be more specific. The LDP is working to further change its welfare reform to make further improvements.

    I think some of your criticisms are so broad however they could be applied to any welfare (or economic) system, as Jason says.

    The Scandinavians have success in spite of their sceleoretic paradigm (may I remind you a labour official was recently quoted saying the real rate of unemployment in Sweden was more like 25% as opposed to 13%) due to high levels of openness with trade and capital flows. Here they are doing better than us and we should immediately follow their lead and better them. As for international business, this all comes back to human factors. These countries do not have an advantage over us (both countries share charactersitics of high levels of firm internationalisation, our migration policies might help us in the long run), but they have had a very long headstart before Australia had an open international market. The change in Australian international business and entrepreneurship since 1983 is remarkable.

    The real problem with the 30/30 plan is that it is welfare for all. I think this is a reasonable tradeoff, but if this problem can be eliminated whilst retainin the advantages, then it is an improvement.

    You are somewhat right about parsimony. The policy isn’t new – John came up with it a long time ago. Effectively tax cuts and inflation have taken the atractiveness away from the policy. Firstly, at the time this was not parsomonius, secondly, with the reduction or abolition of taxes such as tariffs and excise taxes, there may not have been a decrease in real income. It is important to acknowledge we have a 17.5% tax on clothing in Australia, before the effects of effective rates of tariff protection kick in. May I ask you what percentage of income a minimum wage earner or welfare recipient pays in excise taxes and effective rates of protection?

    (Perhaps more importantly – what are the EMTRs after all taxes are paid in Australia, and how much deadweight loss do we pay? Clearly here we see job destruction through careless plucking of the goose). The tax system is so bad it reduces the demand for labour significatnly, increasing unempoloyment and decreasing real wages.

    These problems identified in the tax system and our own policy have led a move towards favouring a consumption tax with no change, reduced income tax (and no other taxes) and a basic income with a higher (real) base and removing welfare for all without reimposing kinked or higher real EMTRs. Abolishing regressive taxes like excise and tariffs has to be part of the overall policy. It will be difficult but we are working on it.

    (As for equity of a carbon tax, the LDP would remove all subsidies to carbon producing industries and simply impose a flat rate on all emissions – keep in mind that our excise tax on fuel already prices carbon at over $100 per tonne. LDP policy would simply to have a non distortionary tax, no counterproductive subsidies and compensate with tax cuts and upping welfare payments).

    Another problem with your critique is that you are implying that minimum wages and labour market rigidites help the poor. They don’t and the econometric evidence says so. The often quoted and abused work by Card and Kreuger was found to be flawed and is no even rejected by the authors.

    As for your idea that EMTRs “only” impact on 7.5% of the population, the high, segmented and often inefficient myriad of taxes we pay, levied on each stage of production is highly counter productive and has a heavy toll. Australia has a problem in keeping and attracting knowledge workers and those left behind work overtime to pay off their mortgages which consist highly of the capitalisation of many inefficient taxes (land development fees, stamp duty) paid out after already paying high income tax rates where thresholds kick in far too early.

    Tax reform and welfare reform are both highly important and should not be shelved for trivial matters like wowserism and small town political bullying that are all the rage at the moment.

  16. I think the LDP’s going to be the first Oz political party to thrash out its policies on blogs ;)

    That apart, I want to know how you did those nifty bullet points and lines in the middle of a comment, Ken.

    Off to bed for me, Evidence to be studied for the rest of this week! (Exam on June 26).

  17. Tim Quilty says:

    And to add to what Jason and Helen said – the NIT stands independent of the LDP 30/30. I think it should be clear from every post made in favour of the NIT in the previous thread that this was the case being argued. Insert your NIT brackets and rebates of choice, but don’t dismiss the idea, because it is good policy.

    And secondly the 30/30 policy is decidedly long in the tooth, and due for serious revamp. It was John’s thesis back in 2001 or so and times have moved on. Just that fully costing a new polcy is dificult for a little party. The charity angle for disability was dropped at the last LDP national conference as being unsaleable, probably to be replaced with an additional suplement. Whether it simply becomes 45/30 or gets more radically revamped we’ll see.

    Moving from a progressive tax system to a flat one is always going to in theory benefit high income earners. Of course these high income earners are not currently employing a wide range of tax minimisation schemes. Like using trusts to shift taxable income around and companies to limit tax paid to 30%. And taking advantage of every loophole that highly paid tax planners can find. So clearly they will get the full beneft of the tax cut that the low income earners will not.

  18. Ken Parish says:

    Joe

    It would be good to get to the bottom of the evident discrepancy between the article you found on the Scandinavian record and the graph I linked to in my primary post (http://oecdfactbook.wordpress.com/2008/05/02/gdp-per-capita-of-oecd-countries/). The latter shows Norway at no. 2 in the OECD on GDP per capita, Denmark and Sweden and 12 and 13 respectively and Finland at 15. It purports to show the situation as at 2006. Australia is one place above Denmark, the US is no. 3 and Ireland no. 4. Also note that nos. 6 to 13 (which includes Denmark, Sweden, Australia, Canada etc) are very tightly grouped, with no. 5 Canada at 36.8 and no. 13 Sweden at 34.9. Thus relative changes in position between this group probably aren’t all that significant in terms of making definitive comparative judgments about the desirability of their specific economic policy settings.

  19. Tim Quilty says:

    Ken (#14) Instead of cutting company taxes, how about only imposing then on distributed profits. So profit may be reinvested in the business tax free. That will lead to signifigant growth. Though you’d need to keep CGT to tax profits when companies are sold.

  20. JC says:

    Tim

    This should read?

    Of course these high income earners are currently employing a wide range of tax minimisation schemes.

  21. Tim Quilty says:

    No, JC, because it is sarcastic. Though there were another two paragraphs under that I lost somewhere that made the comment a little more rounded and pointful…

  22. Ken Parish says:

    Tim

    I agree that high income earner tax minimisation schemes (especially trusts) opens up a whole additional area for debate, as does the treatment of superannuation. There might well be some scope for a degree of flattening of the tax scales in the context of eliminating the favourable treatment of trusts (and enhancing the benefits of companies through lower company tax) and carefully re-examining superannuation policy to continue encouraging high levels of self-provision for retirement while not disproportionately benefiting high income earners (as at present).

    Tim at #19

    I don’t think I’d have a problem in principle with your suggestion of taxing only distributed company profits (obviously still with dividend imputation), although I haven’t really thought it through. However, you’d then need an extensive regulatory regime to restrict people from using companies mostly to fund their personal lifestyle e.g. the company owns the family home etc. Still, I guess a tight Fringe Benefits Tax regime could deal with that effectively.

  23. NPOV says:

    JC, if “Sweden rose from 17th place in 1970 to ninth in 1989”, then fell afterwards – that would seem to be case *for* a more inventionist, high-taxing state, seeing as, at least as I understand it, that was the period in which interventionism and the welfare state grew substantially (though the process began even earlier of course). It was only in the 90’s and since that more right-leaning governments have attempted more economic liberalisation.

    I’ve said this before, but ultimately I don’t think there any objective way of determining what degree of government intervention into the economy is “best”. Some people value freedom and independence highly – other’s value solidarity and equality. I think Australia has generally got the balance pretty good – though my personal bias is towards a system that values solidarity and equality slightly more highly, simply because I look at countries like Norway and Sweden and don’t see any real indication that that anyone there has noticeably less freedom, whereas there isn’t a country in the world that has implemented a policy of truly small government that I can see as example of something I’d like to see Australia become more like.

    On the other hand, outside of economic policy, Australia has a long way to go. The restrictions that still exist on our personal lives, in areas such a euthanasia, recreational drugs, marriage, access to pornographic material etc. all seem very difficult to justify. And while I’m enormously grateful that Australia is not riddled by the gun culture of the U.S., there is some evidence that many of the gun controls we have here are either overkill, insufficiently flexible, or in some cases counterproductive. We might be the 4th most economically liberal nation in the world (only Singapore and Hong Kong significantly outrank us there – we pretty much share equal 3rd place with Ireland), but we’re still a long way from being a truly liberal nation. Unfortunately it seems that this is what the populace largely wants – seeing as the two major political parties are both very socially conservative (in fact, there’s very little about the ALP that isn’t conservative), and I doubt that the Greens get all that much of their vote largely because they are seen as being more socially liberal.

  24. JC says:

    I didn’t look at your link Ken until now.

    I think it’s safe to look at where Ireland was before the reforms and where it is now. The point that blows everything off the charts is that Ireland was essentially a backwater. It was where you were born and quickly left as soon as you could afford a plane ticket even on vendor terms as soon as you could.

    I don’t have the figures but could go looking for them later… the net return migration -the return of the diaspora- also should be examined as this has been quite material over the past decade.

    I don’t have the figures to compare but countries like Sweden, Denmark were quite high on the European economic wealth ladder in the early 70’s and early 80’s. In fact Sweden at one stage before its own interventionist reforms was in the top three per cap wealthiest in the world.

    The CIA fact book now has Sweden at $US36,500, Ireland $US43,100 both 2007 est.

    I think this is an astounding statistic. It’s all the more so when one takes into the account the catch up by Ireland in reaching this remarkable achievement.

    However not all is bad with the Scandis. The headwinds they created through heavy duty interventionism is mitigated by its open trade policies and the fact that in some Scandi countries job benefits may be guaranteed but hire and fire is basically unrestricted.

    Another example is Britain itself and it would be wroth comparing where it was compared to the Scandis before the Thatcher reforms to where it is now. But Ireland presents the best economic case study I’ve seen.

    London may very well be the wealthiest capital in the world primarily because of its strong international financial services business that really didn’t exist prior to the reforms and has been carefully nurtured by new Labor.

  25. JC says:

    access to pornographic material etc.

    That’s very high on your list, N?

    No, no I’m not being judgmental, just curious.

  26. Jason Soon says:

    access to pornographic material etc.

    Trying using Google – just a thought :-)

  27. NPOV says:

    Actually I have zero interest in using recreational drugs, buying a gun, accessing x-rated pornographic videos, marrying a guy, or committing euthanasia any time soon. But I have a very strong interest in living in a country that allows people to make their own decisions in such matters.

  28. JC says:

    Actually I have zero interest in using recreational drugs, buying a gun, accessing x-rated pornographic videos, marrying a guy, or committing euthanasia any time soon. But I have a very strong interest in living in a country that allows people to make their own decisions in such matters.

    Yep. Agree with all you say. Not knowing I was just curious if you thought the quality of porn here wasn’t up to scratch, that’s all.

  29. FDB says:

    “Actually I have zero interest in using recreational drugs, buying a gun, accessing x-rated pornographic videos, marrying a guy, or committing euthanasia any time soon. But I have a very strong interest in living in a country that allows people to make their own decisions in such matters.”

    Thanks NPOV, as a big fan of both porn and drugs, for your support.

  30. Jono says:

    Why should we really entertain such a discussion which is based on some weak attack on capitalism and market systems because of the correlation between success and merit ?

    This is entirely beside the point. And anyway, which alternate system provides a superior matching of merit and success ? I certainly don’t think that a government Department of Merit would do any better. I certainly don’t see how our income tax and welfare system achieve this. All it does is punish success and reward need.

    The bottom line? Only the top 10% of income earners would benefit substantially from the LDPs policies. Middle income earners would get little or nothing, and the unemployed and low income earners would be substantially poorer and in many cases unable to support themselves without charity.

    This is not a decent attempt at dismissing the merits of the 30/30 tax system. Firstly, the savings in administrative and red-tape cutting would be nothing less than astronomical. The simplification would be revolutionary.

    Secondly, whats wrong if the middle and lower income earners are hardly affected, and the top 10% are substantially better off ? The merit of the 30/30 system has absolutely nothing to do with its comparison to the status quo. The current system is a completeky unsustainable failure that will result in massive government liabilities is fiscally irresponsible. The number of people who receive welfare payments continues to skyrocket. and should not serve as a benchmark or reference point for future tax systems.

  31. Jacques Chester says:

    Ken;

    As you know I ran on this policy and I think you are arguing with straw men and straw women. I liked the 30/30 plan because it was a low-hanging fruit, a simple plan, simple to sell, with a long term positive impact for almost all Australians.

    One thing that has changed since Humphrey’s paper was first written is the mining boom. I imagine the numbers need more massaging.

    I was particularly struck by your aside: “Possibly we dont even need higher levels at all if we spend the current large surpluses wisely and reduce some middle class welfare measures.”

    Funnily enough, this is one of the purposes of the plan — to rationalise the current madness of interaction between welfare and tax.

  32. Ken Parish says:

    Jacques

    30/30 wouldn’t be/wasn’t simple to sell at all, nor should it have been. Its fatal defect, which you ignore and Jono blatantly misrepresents (“lower income earners are hardly affected”) is that it drastically punishes the unemployed and lower income earners while awarding generous tax cuts to high income earners and giving virtually nothing to the middle class, as my post demonstrated. That is an unsaleable mess.

    My purpose here is an entirely benevolent/constructive one as far as moderate libertarians are concerned: to explore how the best elements of the LDP’s policies from the last election could be turned into something more workable and saleable. Have a look at my comment #14 above and you’ll see what I’m getting at. I don’t have a problem with a NIT or even simplification (but not abolition) of minimum wages. Moreover, I think the idea of abolishing complex tax deductions and family tax benefits and compensating with a significant increase in the tax-free threshold (say $20,000 or even $25,000 with additional increases for people with young kids) is a great idea. I even think there is probably some scope for a degree of flattening of top rates in the context of eliminating rorts like trusts (see my comment #22 above).

    What I don’t think is either fair, workable or saleable is the reverse Robin Hood of LDP’s 30/30 in the form it went to the 2007 election i.e. robbing the poor to give to the rich. Australians will never cop it, nor should they.

    I’d like to see the LDP come up with some workable attractive policies, because I think there’s a need for a genuinely liberal, sensible “balance of power” party in Australian politics, in some respects like the Democrats once were before they lurched to the left and blew themselves apart in internecine feuding. But it won’t happen while the party remains dominated by otherworldly nerds immovably welded to silly pet schemes that have Buckley’s chance of ever winning broad popular acceptance.

  33. Actually I have zero interest in using recreational drugs, buying a gun, accessing x-rated pornographic videos, marrying a guy, or committing euthanasia any time soon. But I have a very strong interest in living in a country that allows people to make their own decisions in such matters.

    NPOV, that’s precisely the LDP’s position. You don’t have to be interested in those things, or even approve of them. You just have to prefer they are your choice rather than the government’s.

    For Pete’s sake join man. Just talking about it makes no difference.

  34. JC says:

    But it wont happen while the party remains dominated by otherworldly nerds

    Bird’s left the party, Ken.

    last time I head he’s trying to interest One nation in forming a coalition to start a gold-backed fractional reserve free banking system on Mars as well living in an established pyramid up there.

    But yes, the party has this issue with guns although the gun policy goes back to pre 1996. I also don’t see the need to own a Glock 38 cal automatic loaded with hollow point cop killers.

  35. Ken Parish says:

    JC

    I wasn’t just thinking of Bird’s weird ideas, more the few unyielding defenders of an unchanged 30/30 on this thread (e.g. Jono and Jacques).

    And I agree the LDP’s position on guns needs a bit of work (I think the current laws are too bureaucratic and punitive and an over-reaction to Port Arthur, but we do need licensing so that loonies find it hard to get guns, and some requirements for safe storage – unlike recreational drugs etc, guns have the propensity to harm others in the wrong hands, so the issues surrounding their regulation aren’t quite the same). As far as the LDP’s policies on “recreational drugs, … accessing x-rated pornographic videos, marrying a guy, or committing euthanasia” are concerned, I think they’re fine and would attract wide support from the young and the educated middle class (the prime targets for a liberal/libertarian party like the LDP).

    Of course, the other area where the LDP’s positioning needs work is on global warming, not so much on the substance but on adopting less opaque rhetoric. It appears that the LDP’s policy contemplates tradeable emissions permits (see the dot point “full cost accounting” and following) but it’s too coy to say so, probably because there are some members with a Tim Blair-like “head in the sand” denialist orientation who they don’t want to antagonise.

  36. NPOV says:

    David, while I’m firmly with the LDP on those issues, there are too many other areas where I’m simply unable to buy into the LDP’s devotion to free market causes. I also object to the tendency of those associated with the LDP to be vehemently antagonist to the Greens and even often environmental concerns in general.

  37. JC says:

    I actually take back what Ive said about a possible fusion with some factions of the left. Having read and participated in a few discussions with Jeremy- AnonLefty- I think hes truly sincere in his views on issues to do with civil rights.

    Hes a stand up guy in every way. In fact I dont really see much in the way of a contra-distinction between his views in this area and those of the LDP even in terms of their derivative origins. Hes always been absolutely consistent on this issue all the way down the line.

    I also think his concerns for the less well to do citizens is admirable although I believe hes 100% wrong in the way he wants to solve them. Bleeding heart righties(yes there some) and lefties are a possible source of membership and support.

    However even if he doesnt come round to a libertarian way of thinking Im sure there are numerous other lefties like Anon who could be persuaded that the outcomes from a more libertarian society offer a better alternative.

  38. it wont happen while the party remains dominated by otherworldly nerds immovably welded to silly pet schemes that have Buckleys chance of ever winning broad popular acceptance.

    I don’t believe you have a clue who dominates the party Ken. And given that, I also question if you’d know what would win broad popular acceptance. You are not the public, and vice versa.

    Your conclusion that low income earners will be worse off under 30/30 is only valid if incomes fall, as you predict. Yet this is simply an unsupported assertion. Our assertion is that the economy will benefit from the lower and simpler tax environment, and incomes will not fall. Equally unsupported.

    I acknowledge the unemployed will be a little worse off if they remain unemployed, but our assumption is most will seek to work because of the low EMTR. They will not lose the Negative Income Tax until their total income reaches $30K.

    You say you are a moderate libertarian, but point to high tax countries as potential examples for Australia. The essence of libertarianism is to control what you own, including your money. It is irrelevant whether Denmark has a higher average income nothwithstanding higher taxes. Low taxes are inherently preferable. And I’m not aware of anyone in the LDP who thinks taxation is theft.

  39. Ken Parish says:

    “You say you are a moderate libertarian, but point to high tax countries as potential examples for Australia.”

    David, you simply haven’t been reading what I said. I pointed to the Scandinavian countries only as an example showing that higher taxes weren’t necessarily completely antithetical to business, innovation or entrepreneuerial success. However, I immediately followed that by stressing that there are some very specific reasons why there are severe limits to the extent Australia could sensibly proceed down that road, and that I didn’t really think there was any need for any tax increases given the current surplus and potential for abolishing middle class welfare and simplifying aspects of the tax system to enhance attractions to entrrpeneurial activity (i.e. several aspects of current LDP policy). You appear to take the view that people must swear allegiance to every single aspect of the 2007 30/30 before they can call themselves “moderate libertarians”, despite the fct that Jason Soon’s views appear not too dissimilar to mine and that apparently even John Humphreys (the architect of 30/30) acknowledges that it needs tweaking. This somewhat authoritarian tendency is unfortunate.

  40. NPOV says:

    “The essence of libertarianism is to control what you own, including your money”

    If there were no income taxes, but employers were required to make a co-payment to the government of 50c for every dollar they paid me, would that mean I had more control over what I could do with my money?

  41. Jacques Chester says:

    Id like to see the LDP come up with some workable attractive policies, because I think theres a need for a genuinely liberal, sensible balance of power party in Australian politics, in some respects like the Democrats once were before they lurched to the left and blew themselves apart in internecine feuding.

    Sure, that’s fair. I don’t want to give the impression that I am welded to silly pet schemes with Buckley’s chance of ever winning broad popular acceptance, even if I am an otherwordly nerd.

    As it happens I have objections to the 30/30 plan of my own —

    • 30% is a higher rate of tax than I’d be comfortable with,
    • If we synchronise tax rates (which is in part why 30% was chosen), then what happens when we want to change the rates?
    • What are the costings now? The budgetary position has changed a lot since the original 2001 costings.
    • How does this interact with a proposed carbon tax?

    And so on and so forth. In practice I am an incrementalist libertarian, prepared to accept compromise and variation in policy so long as the overall direction is towards a freer and more just society.

    As it happens I barely got to talk about 30/30 during the election. I spent most of my time explaining elementary voting theory to journalists (ie, no, I was not a ‘feeder’ candidate for David Tollner) and having to say I didn’t support the LDP’s gun policy.

    And in any case I was outpolled by Maurice Foley.

  42. Tim Quilty says:

    Perhaps when Jacques talks about simple to sell, he’s also saying that it wasn’t simple to change the policy to adjust for inflation and economic growth and still keep it coherent. 39/27.5 doesn’t have quite the same ring to it.

    I suggest, contra to your original post, that the heaviest burden of the current tax system is bourne by the middle income earners. As a trainee accountant, that is what I see every day. People earning over $100,000 invariably have effective tax planning to bring their tax down. Trusts to distribute income to children, spouses and retired parents, self-managed super funds which they can jiggle to maximise deductions, a company for parking and investing excess income until a later, more convenient date. People making round $80,000 seem not to have access to much of this and pay lots of tax.

    As others have mentioned, I don’t think it is a problem to reduce the welfare benefits a little (not necessarily 36%) while providing easier access to part time unpenalised work. Perhaps there could be easing back provisions to avoid shock therapy.

    Pretty sure the LDP is moving to a carbon tax per John’s paper, rather then cap and trade. I remain skeptical rather then denialist, and guess many in the party share that view, though clearly others are fully on board the global warming bus. I don’t have the science or math to even follow the debate but I suspect the costs of global warming are massively overstated. But if we have to do something, lets make it a tax that creates the least distortion and can be easily removed again if the need is no longer there.

    Now I have to stop wasting time on the interwebs and go and study for my exam tomorrow morning…

  43. You appear to take the view that people must swear allegiance to every single aspect of the 2007 30/30 before they can call themselves moderate libertarians

    If supporting low taxes for its own sake makes me authoritarian, then so be it. Just be grateful I don’t flog you with the Tax Act.

    despite the fct that Jason Soons views appear not too dissimilar to mine and that apparently even John Humphreys (the architect of 30/30) acknowledges that it needs tweaking.

    Jason Soon is not a member of the LDP. And yes, I am well aware John Humphreys is considering revisions to 30/30. But I guarantee he’s looking for ways to lower taxes even further than 30/30. We have no aspiration to be a tidied up version of what the Liberals pretend to be.

  44. JC says:

    N says

    I also object to the tendency of those associated with the LDP to be vehemently antagonist to the Greens and even often environmental concerns in general.

    you and lefty excluded.

    I find that party’s policies to be the equivalent to a wrecking ball. They’re also dishonest in terms of what they represent while people who really take no interest in economic issues vote for them because they somehow think they represent green issues. As i see it they don’t. They are basically a far left stasist socialist party that’s does a good job of conning people into thinking they are a green party. A green party ought to some degree be almost color blind in terms of left/right ideology. They could just as easily support one the ALP’s tax policy or the Libs tax policy. I see it as basically a socialist grouping using green policies to further its cause.

    I also object to the tendency of those associated with the LDP to be vehemently antagonist to the Greens and even often environmental concerns in general.

    Okay, have a look at this discussion that went on at catallaxy. Most of us a really groping around trying to understand a really complex subject and we’re not scientists. This isn’t a bad discussion to finding a solution. Follow Mark Hill’s comments and responses about reforestation.

    http://catallaxyfiles.com/?p=3611&cp=all#comments

    I disagree that libertarians are uninterested in environmental polices. There are some who are indifferent to it, but most people want to see a a good outcomes solution. To be perfectly frank, AGW seems to me to be more of a pricing issue we need to resolve, however pricing “air” is a little difficult. We’re also lucky in being rich enough to be able to take a good look at this issue as concern for the environment is really a past time for rich societies- not poor ones.

  45. JC says:

    And Im not aware of anyone in the LDP who thinks taxation is theft.

    Met with a stony silence, looking sideways and down hoping no one’s looking.

  46. NPOV says:

    We’ve been through this before. The Greens’ policies just aren’t all that different from that of many continental European nations that are all doing just fine, thank you. I wouldn’t choose them personally, but they don’t particularly concern me, which is far more than can be said of some of the LDP’s policies.
    At worst they’ll take Australia from being the 3rd or 4th most economically liberal nation in the world to maybe the 10th (out of over 150!). I’d consider that an acceptable price to pay for becoming a far more socially liberal nation, and one that is actually prepared to make some tough choices for the sake of reducing our fossil fuel dependency.

  47. Vee says:

    What if the LDP policy largely went ahead and was supplemented by a UBI of $20K? That is what a friend of mine often proposes.

    Other than that sometime ago after taking a liking to the 30/30 policy I too ended up dismissing it for largely the same reasons Ken just outlined, particularly the first two points.

  48. Mark Hill says:

    NPOV,

    You don’t have to make that sacrifice. The Democrats were always more centrist economically and the LDP is more lasseiz faire. It isn’t because we are a cheer squad for business. It is because mucking about with these things hurts everyone when bad policies go belly up.

    Being dependent on fossil fuel has no costs. Anthropogenic warming might have costs. A flat, non distortionary tax will mitigate and see the industry based changes. The tax would be compensated by a cut income tax (perhaps GST) or upping welfare. There is a possibility we can mitigate at an even lower cost though aforestation. The specific tax should then be lowered to fund this programme.

    Vee – your idea sounds good. I would prefer States to levy income tax and the Federal GST (no other taxes at all perhaps other than the carbon tax) to stay and replace the NIT with a BI. I don’t know if we need the BI that high though. Remember that real incomes would be much higher if we abolished tariffs and excise taxes. Finally we need to work out how to get rid of welfare for all without creating EMTRs.

    Yes I am optimistic about the final point. But before Freidman came up with the NIT, not many people envisiaged EMTRs could be tackled.

  49. derrida derider says:

    Vee, a UBI of $20k would require about $420b (ie 21m times 20k), assuming we give it to kids too. Compare that with current welfare of $102b. So you’d need to raise about an extra $29k (($420b – $102b) / 11m)) per taxpayer. That’s not a trivial public finance problem.

    Discussions of tax and benefit systems that don’t include at least back-of-the-envelope calculations of numbers are a waste of time.

  50. derrida derider says:

    Oh, and Mark, the NIT can be found in JS Mill, and was widely popularised in Britain in WWII by Lady Rhys Williams as an alternative to the Beveridge proposals for contributory social insurance. Attributing its invention to Uncle Milton is just showing how little notice Americans take of the rest of the world.

  51. Mark Hill says:

    ..or simply a good reason to take up the challenge of designing a system that does not have welfare for all and also to keep the EMTR advantages of a NIT.

    That way the back of the envelope calculations are a lot more affordable.

  52. Mark Hill says:

    Yes derrida that is totally noteworthy but were they as well designed as say John’s 30/30 system?

  53. NPOV says:

    “Being dependent on fossil fuel has no costs”

    Mark, I would dispute that strongly. Even leaving AGW out of the picture, burning fossil fuels will always create pollution and health risks, and further, sending increasly large amounts of money to some rather unstable parts of the world is hardly a sensible formula, especially when if those parts of the world decide to start wanting to keep what remains to themselves. If net oil exports start to drop at anything close to the rate that some analysts have predicted, a lot of Australians are going to find their lifestyles ripped from under their feet. Our fossil fuel dependency has been pretty much systemically engineered and subsidised by decades of government policy. I don’t see much alternative than government making some substantial changes to help us move away from it.

  54. Mark Hill says:

    …but building solar cells has environmental costs. Reprocessing waste paper has environmental costs. Smelting of recycled aluminium may be subject to (coal fired) electricity subsidies. Eliminating subsidies and allocating property rights where possible will help the most.

    Please tell me how if rising prices will cause “Australians are going to find their lifestyles ripped from under their feet”, then how will levying a tax make us any better off?

    “Our fossil fuel dependency has been pretty much systemically engineered and subsidised by decades of government policy.”

    Indeed. Smash the state.

  55. fatfingers says:

    Ken, $9,000 is a reduction from Newstart, but it’s almost exactly what the Youth Allowance pays (last time I checked). It’s not “less than subsistence”. Your point about the geographical differences in the cost of living isn’t a good argument against the NIT level, for several reasons. One, jobs are more abundant in capital cities, so people can earn more than the bare NIT. Two, the high cost of living will encourage unemployed people to move to where it is lower, which increases the population (and likely decreases the average age) of regional areas, makes those areas more attractive to businesses, increasing jobs and services available, and decreases pressure on house prices and infrastructure in the big cities. What’s not to like?

    “Thus the LDPs tax cuts for this group will mostly be more than offset by wage cuts.”

    Talk about blithe! Where is your evidence or at least back-of-the-envelope reasoning for this?

    “Only the top 10% of income earners would benefit substantially from the LDPs policies.”

    This summation of the rest of your bullet points considers the tax reform in isolation, ignoring the structural benefits that will eventuate from it, as well as the tariff reductions the LDP wants. Mark makes this point, how do you respond?

    “the sort of grossly unequal distribution of wealth that the LDPs policies advocate”

    Ignoring the unsubstantiated slur on the LDP, your implicit assumption is that inequality of wealth is a bad thing. Not the lack of wealth that is poverty, but just the difference between people’s wealth. Why is that?

    “However it DOES suggest that there are plenty of employers out there more than willing to screw more powerless workers if they get half a chance”

    I was one of those screwed-over workers for a while. Too proud for the dole (at that stage), I got a job for $3 an hour, 50 hours a week, later raised to $4 an hour. I took it because I was desperate, and because I thought I’d learn something useful about the business. Unfortunately my boss was a ‘shyster’ who had no intention of training me or passing on any skills. I left five weeks later. But it wasn’t all bad. I learnt a lot about myself, bad bosses, conflict resolution, and gained (bizarrely) a good dollop of confidence that has done me a lot of good subsequently. I’m telling you this because I wanted to emphasise that I’m not advocating tax/welfare reform from a ignorant/privileged/silver-spoon position.

  56. fatfingers says:

    Just realised that I forgot to mention the $3 an hour was only 10 years ago.

  57. Ken Parish says:

    fatfingers

    Youth Allowance by itself equates to $9240 per year. But for kids living permanently or indefinitely away from home and self-supporting, they also get rent assistance. The combination of Youth Allowance and rent assistance amounts to $12,038. In other words, the base Youth Allowance essentially assumes that kids are still to an extent supported by their parents. It in no sense means that it’s a sufficient amount to live on at even subsistence level. It isn’t. It’s a completely inappropriate comparator for a liveable base amount for social security benefits (or equivalent) generally.

    “Talk about blithe! Where is your evidence or at least back-of-the-envelope reasoning for this?”

    – Australia has a shortage of SKILLED labour. There is a shortage of low skilled, low paid labour in some parts of regional Australia, and the federal government is talking about unskilled guest worker schemes to deal with it. However in most urban areas there is no shortage of uni and high school students, backpackers and more generally people without skills available to perform basic unskilled work.

    – In those circumstances, if you remove the minimum wage for low skilled workers with no skills and little bargaining power because they have few other options, you don’t need to be a rocket scientist to realise that wages are likely to be pushed downwards. That phenomenon clearly occurred during the WorkChoices period (although it’s likely the trade unions exaggerated its extent).

    – Lower unskilled wages might only occur temporarily if they in turn made new industries feasible that previously couldn’t compete with lower wage countries, but it’s extremely unlikely (and, most people except presumably some in the LDP would think, undesirable) that this would occur to any significant extent. Australia cannot compete with China or India for such industries.

    – It’s possible that some additional local personal services jobs might be generated, with some of the people in the top 10% of income earners (who receive large tax cuts under 30/30) opting to spend their tax cuts on a cleaner, nanny or restaurant meals they previously wouldn’t have bought/employed. However, it’s fairly unlikely that such extra demand would be so great as to keep completely unregulated low wages from falling below the current legal minimum of $13 or so per hour. Bec was paid $6 per hour even when it is illegal (i.e. this year), as was her partner Cian at a different restaurant (it appears it isn’t an isolated practice). If they do it now even when it’s illegal, what makes you think slashing minimum wages won’t occur if you make it perfectly legal?

    – In more general terms, unemployed people spend everything they receive on consumption. High income earners save or invest much more of their additional income (e.g. in superannuation, shares etc). The LDP’s policy cuts the incomes of the unemployed by 22-36% and effectively transfers it to high income earners. Conventional economic analysis would suggest that would lead to lower net consumption expenditure in the economy and hence not assist the employment prospects of the unskilled.

    – The LDP’s 30/30 would certainly have simplified the tax system and allowed for a NZ-style system where most people wouldn’t need to file tax returns. As Andrew Leigh discussed here, that might well mean savings for most people of around $300 per year, which is quite nice (and I’m certainly not knocking it) but hardly the stuff of a massive job-creating stimulus.

  58. TerjeP says:

    Both the tax and welfare landscape have changed since 30/30 was proposed. As such my comments below are in the context of what was and not what is.

    The LDPs $9000 minimum income/NIT represents a reduction in current levels of unemployed Newstart Allowance of between $2400 (22%) and $5000 (36%) depending on whether the recipient is currently eligible for rent allowance (as most other than those still partly supported by parents are). In either case $9000 is significantly less than a subsistence income in just about any part of Australia, and much less in the larger capital cities where rents are high. LDP apologists blithely suggest that these mendicant unemployed could rely on charity to make up the shortfall.

    At the time of the proposal unemployment benefits were subject to income tax. This would have closed the gap compared to the $9000 of tax free NIT. However without the minimum wage most people would be in a position to suplement this income with earned income from a real job even if the income supplement was at times modest. This is surely better the the existing work for the dole arrangement that offers nothing extra and comes with the threat of lost income rather than the opportunity of extra income.

    For those in partial or full employment earning up to $30,000, the LDPs policy provides substantial effective tax cuts (albeit on a sliding diminishing scale). However, the Partys policies also involve abolition of any minimum wage. Since people earning less than $30,000 are almost by definition low paid and mostly lacking in bargaining power in the employment market, they are highly vulnerable to wage cuts in a completely deregulated market, which would certainly occur as soon as the minimum wage was abolished. Thus the LDPs tax cuts for this group will mostly be more than offset by wage cuts.

    This assumes a lot about where the market would position wages. Denmark has no minimum wage and wage rates are not unreasonable. In any case those on under $30000 per annum would not only get tax cuts they would get a NIT supplement in addition to earned income. So they would be free from taxes and get an income supplement.

    Its effect (no doubt deliberate) would be to create a large class of US-style working poor whose earnings are at or below subsistence levels.

    Not the intent. And not the effect that would occur. The USA has not abolished the minimum wage, does not offer negative income tax and is demographically and historically very different to Australia.

    For working families with incomes above $30,000, the picture is slightly more mixed. Between $30,001 and $75,000 the LDPs 30% flat tax rate amounts to an effective cut in total tax for an individual of $3600, however thats eroded by the fact that all current tax deductions are to be abolished. For a couple where both spouses are working, the benefits may be slightly larger, though again eroded by removal of all current tax deductions. For most families (those eligible only for the current basic rate of Family Tax Benefit Part A) the LDPs effective tax cut is in the sandwich plus a milkshake per day range because the loss of the Family Tax Benefit Part A is almost exactly counterbalanced by the LDPs policy of increasing the $30,000 tax-free allowance by $6000 for each child. However, poorer families eligible for more than the basic rate of FTB Part A, and even more so for those eligible for FTB Part B and/or childcare allowance (neither of which is available under the LDPs proposals) may well actually be slightly worse off under the LDPs policies than at present.

    You can’t make serious fundamental reform with 100% of people better off. The reason the current system is a mess is that nobody in politics wants to offend anybody.

    For single individuals earning between $30,001 and $75,000, the LDPs tax policies are also worth $3600 per year, but again reduced by removal of all current tax deductions. Again its sandwich plus a milkshake per day territory.

    I would agree that these tax cuts are modest. However reasonable given the political landscape as seriously radical tax cuts don’t get much traction.

    At an annual individual income of $75,001 or more (i.e approximately the top 10% of income earners), however, the LDPs tax cut would be worth a considerably more worthwhile $7,600, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation.
    At an annual individual income of $100,000 or more (i.e approximately the top 5% of income earners), the LDPs tax cut would be worth $11,200, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation. However, for families in this income range the picture is even more attractive because they still get the LDPs $6000 increase in tax-free threshold per child (because it wouldnt be means-tested, unlike the current FTB Part A).
    At an annual individual income of $150,000 or more (i.e approximately the top 2% of income earners), the LDPs tax cut would be worth $16,200, though again somewhat reduced by abolition of current tax deductions and by a slightly less generous treatment of superannuation. Again as with the $100,000 bracket, for families in this income range the picture is even more attractive because they also still get the LDPs $6000 increase in (non means-tested) tax-free threshold per child.

    Tax cuts generally benefit those that pay the most tax. The same criticism could be leveled at the Howard tax cuts or the Rudd tax cuts. As they no doubt are. The LDP does not apologise however for believing that taxes should be lower. It is pretty core to what the LDP is about.

    During the Howard years the cost of government (ie revneue per capita in real terms) increased 34% (excluding GST revenue). We could and should have moved during those years to abolish most of personal income taxes. Instead the funds were spent and who seriously things that government services in 2007 were 34% superior to those enjoyed in 1996?

  59. TerjeP says:

    p.s. Whilst I’m happy to defend the tax policy the LDP ran at the 2007 election and whilst I was an LDP candidate at that election as well as being involved in policy formulation at that time, I don’t currently speak for the party and my current status is that of a party member only. As such the comments above are my personal comments only.

  60. TerjeP says:

    p.p.s. Regarding the opening suggestion that some libertarians defend property rights for ill gotten property I am bemused. I have never met a libertarian that advocates theft or who defends theft. And if we presume that taxes are not theft because they are democratically sanctioned or some such thing then I’d be curious to know what form of theft or otherwise Ken was actually refering to in reference to “ill gotten”. What does this slur on libertarians actually mean?

  61. Ben says:

    I would be interested to see some examples of Libertarians defending ill gotten property too. Libertarians are the first to arc up about eminent domain (resumption) abuse. Ken would you be able to site some examples?

  62. Ken Parish says:

    “Denmark has no minimum wage and wage rates are not unreasonable.”

    US State Department: “No national minimum wage is mandated legally, but national labor agreements effectively set a wage floor.” Denmark is highly unionised, so effectively there IS a minimum wage. Australia OTO is no longer a highly unmionised nation, especially in retail and similar industries where most current minimum wage jobs are found.

    “I have never met a libertarian that advocates theft or who defends theft. And if we presume that taxes are not theft …”

    Just google “taxation is theft” and have a browse. There are lots of such assertions, and nearly all of the authors label themselves as “libertarian”. The most famous libertarian who thought taxation was theft was Murray Rothbard, and there are numerous documents on the Mises Insititute website that assert taxation as theft.

    Eminent libertarian philosopher Robert Nozick had somewhat similar views though expressed in marginally less inflammatory rhetoric:

    So far this all might seem fairly uncontroversial. But what follows from it, in Nozick’s view, is the surprising and radical conclusion that taxation, of the redistributive sort in which modern states engage in order to fund the various programs of the bureaucratic welfare state, is morally illegitimate. It amounts to a kind of forced labor, for the state so structures the tax system that any time you labor at all, a certain amount of your labor time – the amount that produces the wealth taken away from you forcibly via taxation – is time you involuntarily work, in effect, for the state. Indeed, such taxation amounts to partial slavery, for in giving every citizen an entitlement to certain benefits (welfare, social security, or whatever), the state in effect gives them an entitlement, a right, to a part of the proceeds of your labor, which produces the taxes that fund the benefits; every citizen, that is, becomes in such a system a partial owner of you (since they have a partial property right in part of you, i.e. in your labor). But this is flatly inconsistent with the principle of self-ownership.

    The various programs of the modern liberal welfare state are thus immoral, not only because they are inefficient and incompetently administered, but because they make slaves of the citizens of such a state. Indeed, the only sort of state that can be morally justified is what Nozick calls a minimal state or “night-watchman” state, a government which protects individuals, via police and military forces, from force, fraud, and theft, and administers courts of law, but does nothing else.

    “Id be curious to know what form of theft or otherwise Ken was actually refering to in reference to ill gotten. What does this slur on libertarians actually mean?”

    See above in relation to Nozick. It flows from Nozick’s notions of self-ownership that private property is also sacrosanct. However, Nozick like John Locke much earlier placed the caveat on this proposition that the property must have been justly acquired or transferred in the first place (i.e. in a voluntary exchange transaction, not taken by force):

    A more adequate theory of justice would in Nozick’s view enumerate three principles of justice in holdings. The first would be a principle of justice in acquisition, that is, the appropriation of natural resources that no one has ever owned before. The best-known such principle, some version of which Nozick seems to endorse, is the one enshrined in Locke’s theory of property, according to which a person (being a self-owner) owns his labor, and by “mixing his labor” with a previously unowned part of the natural world (e.g. by whittling a stick found in a forest into a spear) thereby comes to own it. The second principle would be a principle of justice in transfer, governing the manner in which one might justly come to own something previously owned by another. Here Nozick endorses the principle that a transfer of holdings is just if and only if it is voluntary, a principle that would seem to follow from respect for a person’s right to use the fruits of the exercise of his self-owned talents, abilities, and labor as he sees fit. The final principle would be a principle of justice in rectification, governing the proper means of setting right past injustices in acquisition and transfer.

    The problem is that you don’t need to trace back all that far in many countries including Australia to find title to much if not most land was originally acquired by force not consensual transfer: in the UK by the Enclosure Movement of the 17th century; in the US and Canada by taking from Indians and Inuit in many cases in breach of treaties and in just about all cases by force; and in Australia from the Aborigines again by force. Hence my reference to “ill-gotten”. I’m not running a Peter Garrett/ Midnight Oil “it belongs to them let’s give it back” argument, that would be silly. What I’m saying is that the common libertartian argument for inalienable property rights is grounded in circumstances that even its strongest theorist proponent concedes in theory can’t sustain any aboslutist moral claim of right to property (especially immunity to property taxes which is the context in which such assertions are commonly made).

    If you refer back to my primary post where I made the remarks about “taxation is theft” etc, you’ll see that I made clear I was referring only to “extreme libertarians” not to their more numerous moderate brethren with whose views I have much sympathy (though obviously not complete agreement as is clear from this thread). You can clearly see that such extreme libertarians do actually exist. I’m pleased to hear that you’re one of the moderate ones.

  63. Many Nozickians do argue for fairly considerable compensation (or at the very least a much better regime than current native title laws) for indigenous peoples who lost their land. What they don’t support is ongoing welfare provision designed to allow people to live wherever they choose.

  64. Peter Whiteford says:

    Without wanting to be too rude to many people, the idea that the 30/30 proposal is an example of a fully costed regime applied to Australian conditions would last about 5 minutes in a Parliamentary debate or a pre-election debate in which the Government had Treasury briefings on winners and losers and costs.

    The 30/30 proposal for example estimates the cost of increasing the tax threshold to $30,000 would have been around $26 billion. The source for this appears to be Malcolm Turnbulls tax reform proposal, which notes that at the time a $10,000 tax free threshold would cost about $6 billion and a $15,000 tax free threshold cost about $12 billion, and if I read the Annex properly, a $20,000 threshold would cost about $17.4 billion. http://www.malcolmturnbull.com.au/Pages/Downloads.aspx

    So I assume that the 30/30 proposal gets to $26 billion by extrapolating that every extra $1000 on the threshold costs roughly $1 billion. Even on this basis $26 billion looks low to me (Id calculate closer to $29 billion), but the point is that the cost of raising the threshold increases as you goes up the income scale because the average tax rate on income between $20,000 and $30,000 is higher than the average tax rate on income under $20,000. I would be very surprised if the threshold increase cost only $26 billion, but one would need to see a lot more detail than is in John Humphreys paper to confirm what the real cost would be.

    Even more seriously, the 30/30 proposal assumes that you get an additional $30 billion (page 19) to $35 billion (page 20) by abolishing tax expenditures. Now the problem with this is that the cost of tax expenditures is based on the benchmark of the current tax system (and the current social security system), so that when you change the tax system and the social security system the “cost” of tax expenditures change.

    Using figures for 2004-2005 from the latest Tax Expenditure Statement give some of the following tax expenditures as being very large – $400 million on the exemption of low income earners from the Medicare Levy, $100 million for the exemption of maternity payments, $1.1 billion for pensioner and beneficiary tax offsets, $1.9 billion for the Seniors tax offset, $670 million for low income earners tax offset, $990 million for the tax exemption of social security payments like disability pensions, $2.4 billion for the exemption of Family Tax Benefits and $380 million for the exemption of child care benefits from tax.

    Take the first example – the Medicare levy exemptions. This means that the Government didn’t exempt low income earners it would collect an extra $400 million in Medicare levy collections. But the 30/30 proposal abolishes the Medicare levy. Now strangely enough you dont get any extra tax revenue from abolishing tax exemptions on other tax and social security provisions which you have already abolished, so none of these assumed savings are real, which leaves you about $8 billion down.

    But the really big tax expenditure is for superannuation tax concession – about $16.4 billion in 2004-2005, and a lot more now. Now Im willing to be as critical of aspects of superannuation tax concessions as anyone, but I think we need to ask ourselves what abolishing the concessions overnight would mean. Would you tax superannuation lump sums as income received in the year of retirement? So someone retiring with a lump sum of $300,000 say would pay 30% on everything over $30,000?

    Now there are plenty of ways of getting around some of the nasty political consequences of this, but there is no way of getting around these and still collecting an extra $16.4 billion in revenue.

    So apart from the fact that 30/30 proposal would make poor people worse off and rich people better off, the costings are likely to be off by somewhere between $20 billion and $40 billion.

  65. NPOV says:

    Or was the 30/30 proposal costed on the basis of abolishing Medicare?
    I’ve yet to hear a libertarian make an argument for universal healthcare. And I’m pretty sure at least a few in the LDP would even prefer to see state education funding abolished.

  66. Tim Quilty says:

    What individuals in the LDP would prefer to see happen doesn’t have all that much to do with the party policy. I, for example, would like to see all government abolished and everyone live happy, productive, fulfilling lives in anarcho-capitalism. Oddly, this didn’t make it into the party platform. Still, I’m hopeful that after we take government, with 100-200 years of incremental reform, we might not be able to tell the difference.

    I think pretty much every LDP policy position is a sensible, moderate reform toward slightly smaller government and slightly greater freedom.

  67. Mark Hill says:

    Peter,

    Do you accept that there are supply side benefits of tax reform or increased aggregate demand when revenue is no longer churned on welfare and actually spent on goods in the economy?

    That is the effect of rationalising our tax and welfare system. There will be overall macroeconomic gains. Hence the tax base will be larger. Hence the system would have been fully costed.

  68. Peter Whiteford says:

    Mark

    Certainly I accept that they exist but the 30/30 proposal already allows for $25 billion in higher tax collections due to increased economic activity (i.e. taxable income expands by more than $80 billion). So if you get the tax costings wrong by more than $25 billion – and I think the policy probably does on the tax expenditure side alone – you then have to assume that the expansion in the economy is twice as large as originally estimated.

  69. Ken Parish says:

    “Many Nozickians do argue for fairly considerable compensation (or at the very least a much better regime than current native title laws) for indigenous peoples who lost their land.”

    That isn’t the point I was making. My point is that the (extreme) libertarians who argue that coercive government actions concerning private property (e.g. taxes, building and planning laws) are morally illegitimate are on rather weak logical and moral ground when they ignore the fact that their own claims to that property are ultimately equally grounded in coercive non-consensual acquisition. You can really only ground such arguments in utilitarian considerations (respecting private property rights is an essential element of a functional market economy system) and once in that territory governments have some fairly persuasive arguments themselves to the effect that they provide services like law and order, roads, water, sewerage etc which enhance the value of private land and which therefore give them some fairly strong utilitarian arguments as well.

    “What they dont support is ongoing welfare provision designed to allow people to live wherever they choose.”

    Yes I agree with some caveats, and a post on that topic is on my “To Do” list (especially in light of the post by Geoff Robinson cocnerning Craig Emerson’s statements highlighted in today’s Missing Link).

  70. TerjeP (say tay-a) says:

    Ken,

    I did not refute that many libertarians regard taxation as theft and nor did I attempt to. I accept that the term “taxation is theft” is common enough in libertarian circles and when being provocative I have used the term myself. What I questioned was the assertion that libertarians of any ilk claim that ill gotten property is sacrosanct along side property acquired via personal creation and/or free trade. This is a spurious and inaccurate claim on your part and would seem to be part of a campaign to malign those that you disagree with.

    and in Australia from the Aborigines again by force. Hence my reference to ill-gotten.

    If you examine history I think you will find that the land was in general taken by the decree of the British government and it’s agents and that this is the form of behaviour that libertarians would in general like an end to. It is not something libertarian philosophy argues in favour of. And in any case given that taxation is not theft (by your own definition) then why is land taken by government decree any different?

    Personally I agree that taking land from aboriginies by force was wrong and that where the government still owns what they took they should seriously examine the case for giving it back. However even if some libertarians disagree this hardly makes their case unusual or characteristic of what libertarian philosophy is about. Lots of people support governments taking things. To be sure libertarians should know better but like other humans some of them are not yet perfect.

    Regards,
    Terje.

  71. Ken Parish says:

    “This is a spurious and inaccurate claim on your part and would seem to be part of a campaign to malign those that you disagree with.”

    Not in the slightest. I specifically said that I was referrring only to the extreme libertarians who subscribed to such views. Moreover, my observations were shorthand for bloggers who participated in earlier rounds of discussion on these issues, especially Jason Soon. The arguments about Nozick, property etc are a well ploughed blogosphere field, and participants like Jason immediately understand what I’m referring to when I mention them in shorthand fashion. In part my post was directed to Jason and Helen specifically, as it responded to their posts on this topic. I overlooked the fact that others who never participated in earlier debates would lack the context to interpret my remarks as I intended.

    “If you examine history I think you will find that the land was in general taken by the decree of the British government and its agents and that this is the form of behaviour that libertarians would in general like an end to.”

    In fact British authorities to a considerable extent attempted to restrain the more violent and self-interested activities of the colonial squattocracy. To a considerable extent they tried unsuccessfully to stop the worst manifestations of land grab, and various letters patent and instructions to successive governors document this. However they were ultimately prevailed on to sanction it after the event because Australia was so far away and they had neither the will nor capacity to reverse it.

  72. Mark Hill says:

    Peter,

    We used Treasury costings. I don’t see how Treasury would then say they were poor estimates of taxable income.

  73. TerjeP (say tay-a) says:

    Well I don’t typically like extreme anybodies that subscribe to really stupid stuff. But why mischaracterise libertarianism in this manner? Do you introduce every discussion about Christians or Muslims or Environmentalists or Americans by first stating that you don’t agree with the extremists within their ranks? It is not as if the extremism that you object to is even a characteristic of the libertarian philosophy. I have never read anything in the way of libertarian philosophy that says stolen (ill gotten) property should be treated the same as property that is acquired by hard work and free exchange. Quite the opposite in fact.

    I overlooked the fact that others who never participated in earlier debates would lack the context to interpret my remarks as I intended.

    I’m still struggling.

  74. I wasn’t stirring, Ken – just that many people aren’t aware of that aspect of Nozick’s position. A good half of the people in my Oxford jurisprudence tutorial weren’t aware of it, for example.

    With regards to Nozick’s point about taxation being ‘partial slavery’, I think he’s over-egging the pudding rather (something he was inclined to do for effect), but that – philosophically – his basic argument is sound. My response to Nozickians who run the ‘taxation is theft’ line is to respond in a rather utilitarian way – well, okay, I grant you it’s theft (or at least a form of involuntary unpaid labour). What then? Where there is a natural monopoly, even Nozick (and he is at the extreme end) conceded that there were fairly persuasive arguments for some sort of government provision. Hayek – as you point out above – went much further. As Jason points out above, I think there is a serious classical liberal argument for some form of unconditional welfare on public good grounds.

    What I think Nozick’s rather neat little argument is good for is to remind governments (and government boosters) that they’d better do the tax-funded utilitarian bits of their job (law & order, sewerage, infrastructure etc) well if they are going to justify taking money off people. Of course we can all argue over the substantive content of those utilitarian bits (the essence of much political debate, natch), but remembering where the money comes and how it is collected is definitely a useful thing.

    FWIW I find Rothbard just silly on this point, although he can be a very entertaining writer.

  75. Jacques Chester says:

    I think I can take the blame for turning libertarians into Ken’s whipping boy ever since I airily mentioned Rothbardian anarcho-capitalism in a tutorial one day.

  76. Ken Parish says:

    “Do you introduce every discussion about Christians or Muslims or Environmentalists or Americans by first stating that you dont agree with the extremists within their ranks?”

    No, but I was taking the opportunity of explaining and contextualising several recent blog comments/posts where I made snarky comments about “libertarians” without making it clear that I was only referring to the extremist fringe, or that in many respects I am sympathetic to lots of aspects of the mainstream libertarian agenda and would like to see the LDP get its act together.

    It’s interesting that you mention christians in this context. I’ve also made more than a few snarky comments about Catholicism over the last year or two, to the extent that some readers have actually accused me of anti-religious/anti-catholic beliefs. In fact I’m a Catholic myself, and acted for the Church in the NT as its solicitor for years. I’m disillusioned with the state of the Church after two successive ultra-conservative popes, and especially disappointed with its inadequate responses to priestly child abuse. But I’m still a Catholic, albeit one with some mighty unorthodox private views about God and other aspects of catholic theology. One of these days I’ll latch onto a suitable current issue to explain where I’m coming from in a more fulsome way, to the extent anyone is interested. That’s what I was doing with this post in relation to libertarianism.

  77. Ben says:

    …coercive government actions concerning private property (e.g. taxes, building and planning laws) are morally illegitimate are on rather weak logical and moral ground when they ignore the fact that their own claims to that property are ultimately equally grounded in coercive non-consensual acquisition.

    Two wrongs don’t make a right. By this logic you would allow offences just because the same offences happened in the past and went unpunished. Unless of course you are saying the property I own and paid for is somehow directly illegitimate (IE force by my own action)?

    The argument that Tax = Theft is not a Libertarian argument. It’s an Anarcho-Capitalist argument; Lysander Spooner not Ludwig Von Mises. That’s like attacking Democratic Socialists for Communist ideas.

  78. TerjeP (say tay-a) says:

    My response to Nozickians who run the taxation is theft line is to respond in a rather utilitarian way – well, okay, I grant you its theft (or at least a form of involuntary unpaid labour). What then?

    That is the intelligent response. The hours of argument about how taxation is not theft because of X, Y or Z seems to me to be a vain attempt to avoid the bleeding obvious. I think taxation is theft. I don’t advocate zero taxation. As Humphreys likes to say, “freedom is good but so is utility”.

  79. People clearly are interested, Ken. This has been a great discussion. Bravo to Club Troppo :)

  80. TerjeP (say tay-a) says:

    But Im still a Catholic, albeit one with some mighty unorthodox private views about God and other aspects of catholic theology.

    Well I’m still a libertarian even if a lot of people have kooky ideas about what that means.

  81. Peter Whiteford says:

    Mak

    When you say you used Treasury costings, what precisely do you mean? Do you mean that (A) that you requested Treasury do the full costings of the proposals, in which case you have a document with a Treasury letterhead that gives the numbers you use?

    Or (B) did the LDP estimate the costings on the basis of public documents? In which case, you could make mistakes?

    My point about the tax expenditures is that the 30/30 costings are based on a fundamental conceptual misunderstanding (which is why I would think that the Treasury didn’t do your costings for you, as in A.) Take the case of the $2.4 billion in tax expenditures on family tax benefit. This is a calculation of how much additional tax people would pay under the current tax system if payments were taxable (rather than being non-taxable as they currently are). If the 30/30 proposal abolishes Family Tax Benefit then you cannot get an additional $2.4 billion in Tax revenues from making non-existent payments taxable. And so on …

  82. Peter Whiteford says:

    Sorry – that should be Mark!

  83. Mark Hill says:

    B. We used Treasury costings.

    No we didn’t make mistakes.

    Speak to John Humphreys about this.

  84. Peter Whiteford says:

    Allowing for all of tax expenditures to be abolished as part of financing the tax cuts is a mistake.

  85. melaleuca says:

    SL says:

    “Im afraid the Peter Saunders article Jason linked to really did sound awfully Victorian to me – of the people need to be hassled to get off their arses variety. No, they dont, thats just petty.”

    A close family member is a social worker and does Centrelink assessments of people on a range of benefits including long term dole recipients and partially abled disability pensioners. From the many discussions I’ve had with said person on the issue, it seems clear to me that there is practically an army of welfare recipients who are rotting away but who could be made job ready through appropriate interventions. You aren’t doing people in this situation any favours by eschewing genuine mutual obligation.

  86. TerjeP (say tay-a) says:

    unless libertarians get a lot smarter than they currently show any sign of being capable. They need to discover that success in a market capitalist system is not the same thing as merit,

    Have they being denying this?

    that the poor are not inherently undeserving,

    Where have libertarians ever said this?

    and that entrepreneurial innovation can be nurtured without screwing workers

    Ken, you must have met some weird libertarians in your travels. Your characterisation is simply foreign to my own experience of libertarians. However if you can back some of these up with examples I’m prepared to distance myself from the culprits.

  87. TerjeP (say tay-a) says:

    oops – sorry about the formating. Take 2;

    unless libertarians get a lot smarter than they currently show any sign of being capable. They need to discover that success in a market capitalist system is not the same thing as merit,

    Have they being denying this?

    that the poor are not inherently undeserving,

    Where have libertarians ever said this?

    and that entrepreneurial innovation can be nurtured without screwing workers

    Ken, you must have met some weird libertarians in your travels. Your characterisation is simply foreign to my own experience of libertarians. However if you can back some of these up with examples Im prepared to distance myself from the culprits.

  88. Ken Parish says:

    Terje

    You need to read my post again. These statements flow directly and logically from the 3 numbered statements about possible justifications for 30/30 policies that punish the poor (and I recognise that libertarians no doubt including yourself dispute that that is a fair characterisation of 30/30 – I disagree, and argue that I’ve made good my criticisms in that respect). There are only 3 possible logical reasons for screwing the poor and rewarding the rich in the way 30/30 proposed, and the summary reference at the end of the post to “the poor are not inherently undeserving” was a reference to logical possibility 2 while “entrepreneurial innovation can be nurtured without screwing workers” was a reference to logical possibility 3. Logical possibility 1 was not one I felt any need to negate.

  89. melaleuca says:

    “LDP apologists blithely suggest that these mendicant unemployed could rely on charity to make up the shortfall.”

    What the LDP types refuse to acknowledge is that the upshot of such a mean welfare policy will be the development of a large lawless and drug addled lumpenproletariat. We can then look forward to a prison population that is per capita on par with that of the United Sates and massive police numbers and overburdened courts. Thanks but no thanks.

  90. TerjeP (say tay-a) says:

    I am reading your post again. However please help me out with some of the logic. How do you get from libertarians believing that:-

    the market capitalist system provides human needs for goods and services more efficiently and abundantly than any other economic system so far tried

    to the idea that libertarians believe success in a capitalist system equates purely to merit? And even if one does believe the latter why is it relevant when the former is sufficient to explain motive.

    I personally think success in a capitalist system (and in fact in most any other system) is a combination of factors of which personal merit (defined narrowly) only plays a bit part. However I still believe that market capitalism provides goods and services more efficiently and abundantly than any other economic system.

    Success in life is not generally based on merit that you might measure on an IQ test. It is based on a combination of factors. In my view the dominant factors including circumstance, personal beliefs and emotional conditioning. Luck is also relevant. As is your definition of success.

    Whilst on the topic of creating abundance I would also like to say that it would be a serious mistake in my view to equate libertarianism with materialism. I don’t personally despise the extent and breadth of the welfare state due to concerns about materialism and who is worthy of getting stuff. I despise it because I think it destroys communities and makes people suffer lives of needless despair about their own significance and self worth. And I see it’s corrosive effect first hand amoungst those that I love.

  91. TerjeP (say tay-a) says:

    What the LDP types refuse to acknowledge is that the upshot of such a mean welfare policy will be the development of a large lawless and drug addled lumpenproletariat.

    You are correct in your observation that I don’t acknowledge this upshot. However if is not really about refusal.

  92. Wow — that was long. And a bit late. The paper was published a few years ago.

    At the time the paper was published, the recomended $9000 base was only slightly below the dole. It is quite misleading for Ken to compare an old paper with current statistics.

    It’s also strange that Ken read about the idea so closely, but failed to realise there was an appendix to the original paper which discussed how to address the issues of disability support, parenting support & the aged-pension.

    But the general thrust of the critique is misguided anyway. Specifically the conclusion is totally back-to-front. Ken thinks only the top 10% will win. In contrast, the biggest winners will clearly be the unemployed and under-employed. In contrast to Ken, I actually care about the unemployed & underemployed. (I feel justified making this slight in response to Ken’s silly comment that I want to create an under-class.)

    The unemployed will be helped by getting jobs. Note to big-government apologists… employment is a good thing. People with jobs are upwardly moble. The unemployed aren’t. The under-employed will be helped by getting *more* welfare. Yep. There’s a part of the story Ken forgot to tell you. The idea behind 30/30 is to give less to people who do nothing (to increase their incentive to get a job) and give more to people who make an effort (to increase their incentive to have a job). And also to make it easier to find jobs. It’s the best anti-poverty policy being offered in Australian politics. Which only matters if you care about poverty.

    Ken’s approach is to reward unemployment and punish employment. The only reason you would promote that approach is if you hated the poor. Ken wants to keep the poverty-cycle in place, keeping the poor down, and slowing down our economy, and justifying big government. Evidently it is he who wants to maintain an under-class.

    As for the crap about not being able to live on $9000 — bullshit. I lived on a lot less than that for a long time. I’m living on only slightly more than that now as I travel the world. And when I get back to Australia I will be living on less than that again (for a while… until I decide what I’m doing next).

    Sure — I don’t drive a new car, nor do I go to expensive restaurants or buy the latest clothes or jump on all the trends. I guess I’m “disadvantaged” and you should all feel sorry for me. Please send cheques to… :)

    And if there is anybody in Australia unable to get a part-time job to suplement their welfare-check (sans labour market regulations), then I will employ them. Seriously — you have to be retarded not to be able to look after yourself in Australia. Isn’t anybody else sick of the whingers? Go and live in Cambodia (who manage to find food & accomodation — surely impossible in Ken-thought) and then come back and tell me your sob stories.

    And it is equally repulsive for Ken to dismiss private charity as somehow a bad thing. Australia’s give huge amounts to charity — far more than is necessary to look after the 12 non-disabled people who couldn’t get a job.

    Finally — the idea that less welfare leads to more crime is simply untrue and a very unfair slight against all poor people. Why do the left hate the poor? Places with lower incomes & lower welfare do not generally have more crime. I don’t get knived, robbed nor attacked walking around rural China. But be careful were you tread in some areas of welfare-helped Paris.

  93. David Rubie says:

    Well, there’s some irony for you. Everybody who turned up to argue for the 30/30 plan used good manners and a genuine expression of good will.

    Except the bloke who wrote it.

    It’s a funny old world.

  94. Tim Quilty says:

    I actually think John’s reply was more in tune with the tone of the original post. Only this tune was moderated a lot in the comments section as (most) people engaged in good faith. Probably when John gets to the end of the comments, he’ll be more amenable too. Plus, he’s probably having a bad day in India. As you do…

  95. Tim Quilty says:

    “the upshot of such a mean welfare policy”

    I have trouble understanding why anyone would think a big government, one size fits all, top down approach to welfare is warm and cuddly, while community based sction by those who can see individual problems and address them one-on-one in a needs based situation would be “mean”, heartless and generally naughty. Oh yeah, because governments care, and individuals just suck.

  96. melaleuca says:

    “Finally the idea that less welfare leads to more crime is simply untrue and a very unfair slight against all poor people. Why do the left hate the poor? Places with lower incomes & lower welfare do not generally have more crime. I dont get knived, robbed nor attacked walking around rural China.”

    You are directly comparing a part of China that is still emerging from feudalism with a post-industrial society, namely Australia.

    This is from Canada but I imagine Australia is roughly the same:

    “Research in criminology reveals that certain social characteristics are linked with a greater likelihood of involvement in criminal activity. As Sacco and Kennedy (2002, p.39) explain, it has been well documented that most offenders tend to be young, disadvantaged males. In fact, in Canada in 1999, 86 percent of all adult offenders and 75 percent of all youth offenders (aged 12 to 17) were males. Social and economic disadvantage has been found to be strongly associated with crime, particularly the most serious offences including assault, robbery and homicide. Data collected on offenders shows that they tend to be unemployed or employed in low-paying, unskilled jobs. There is also an association between offenders and minority groups, particularly African-Americans in the United States and Aboriginal people in Canada (Short, 1997, p. 26; Sacco and Kennedy 2002, p. 40).

    The social characteristics of victims of crime are similar to those of offenders. According to the 1999 General Social Survey (GSS), young people in Canada between the ages of 15 and 24 experienced the highest rates of violent and property crimes. The GSS also found that rates of personal victimization were highest in urban areas and among single people and those living in households with low incomes (below $30,000). In his study of Canada’s 24 largest cities, Mata (2003) found that higher rates of crime were linked to the presence of groups at risk including Aboriginals, women and lone parents. However, with respect to certain property related crimes such as break and enter, auto-theft and vandalism, studies have shown that rates of victimization in Canada are greater for households with higher incomes (Sacco and Kennedy 2002, p. 48).”

    http://www.justice.gc.ca/eng/pi/rs/rep-rap/2006/rr06_6/p2.html

  97. NPOV says:

    skepticlawyer, governments had “better do the tax-funded utilitarian bits of their job (law & order, sewerage, infrastructure etc) well” if they want to get re-elected. Indeed, there’s not such a huge difference between the democratic pressure on governments for them to do their jobs well as the market pressure on private companies to do their jobs well.

    John, there is good statistical evidence that welfare levels are linked to crime levels, just as there’s evidence that minimum wage levels are linked to crime levels. Now, it may well be that there are better ways to reduce crime than generous welfare and high minimum wages, but you can’t just pretend that they don’t work at all.

    As for your rant against the left hating the poor etc. etc. – what exactly do you hope to achieve by making such silly accusations? Even if I accepted that many left-wing types are attracted to economic solutions that would inevitably be bad for the poor, most are so out of ignorance, and actually the fact of the matter is that far more knowledgeable and experienced economists and social commentators than yourself have put forth persuasive arguments for maintaining the welfare state and minimum wage etc. As it is, I think many on the left could be persuaded that there are significant benefits in the NIT idea, however you’re not going to do it by telling them that they “hate the poor”, and you’re not going to do it with a solution that clearly makes people on already very high incomes instantly and substantially better off. I’m happy to stand by this as a purely subjective judgement – I’m already uncomfortable with the amount of income inequality in Australia, and I certainly don’t want to see it increased.

  98. NPOV says:

    Tim, a “big government, one size fits all, top down approach to welfare” is warm and cuddly because everybody knows that it’s there. I can live my life in the knowledge that should the worst happen to me – I lose my house, my job, my ability to work etc. etc., that there will be something there to bounce off again.
    In earlier times, this would have been my local community, where everybody knew everybody else, but when you live in a city of 4 million people and don’t even know your next door neighbour’s name, there is, unfortunately, nothing that most people can assuredly rely on in hard times other than state-based welfare.

    I would also suggest relatively few people need “one-on-one” attention and “needs-based solutions” to help them out of such situations.

  99. TerjeP says:

    NPOV – the evidence would seem to suggest that the left hate the poor. Although I suppose it is a somewhat subjective observation.

    Indeed, theres not such a huge difference between the democratic pressure on governments for them to do their jobs well as the market pressure on private companies to do their jobs well.

    Melaleuca – actually there is a huge difference. When people shop there is a significant personal cost, whilst when people vote there is no comparable personal cost. As such shopping is more grounded in the reality of capacity constraints and competing alternatives whilst voting tends to be an expression of aspiration and is frequently based on the fantacy that we might be able to have it all.

  100. Tim Quilty says:

    “I would also suggest relatively few people need one-on-one attention and needs-based solutions to help them out of such situations.”

    You say that now. Wait till they’re making you jump through the mutual obligation hoops. They don’t care if you have a PHD in computing, it will be remedial Word skills for you. For 6 weeks. Everything that is wrong with government welfare is what is wrong with government programs in general. They are big, inflexible, wasteful and bureaucratic, and don’t really care about results, just in making sure the right boxes are ticked.

    Once the institutional barriers to employment are removed and fkexibility put back into the market, far fewer people will be forced to rely on welfare. I’m all in favour of maintaining safety nets till this state of affairs is achieved, but to dismiss the idea that when the demand is much lower that these services can be provided cheaper, more efficiciently and much more caringly by private charity strikes me as strange. Almost a religious faith in government.

  101. NPOV says:

    Ah but I agree with you there Tim – there’s obviously a lot wrong with the current work-for-the-dole type schemes, and there is an argument that the state isn’t the best tool for the job here. I’m primarily talking about the availability of cash payments.

    As for “Once the institutional barriers to employment are removed and flexibility put back into the market, far fewer people will be forced to rely on welfare”…if you’re going to make such a claim, back it up with facts and figures. And then tell me that you’re 100% confident that all those who are currently “forced to rely on welfare” that will be able to find jobs with a less regulated labour market will actually be moved into meaningful jobs where they are not exploited or trapped in a job that gives them no opportunity or time to improve their skills and future job prospects.

    Terje – it was me making the point about democratic pressure vs market pressure.
    The fact that there is low personal cost to voting differently surely makes democratic pressure stronger relative to market pressure, as there’s no ‘captive’ market problem. But of course, while there might be a low personal cost, most people don’t vote all that rationally, and tend to stick to the devil they know regardless of the situation. And while there might be many people that vote on the basis of a “fantasy that we might be able to have it all”, there’s a lot of people that shop that way too!

  102. Mark Hill says:

    NPOV,

    You accept there is something better than work for the dole without any evidence, but then want evidence and citations to show you that minimum wages and other barriers keep people out of work.

    Low brow:

    http://www.theaustralian.news.com.au/story/0,20867,20599337-31478,00.html

    High brow:

    http://www.cis.org.au/Policy/spring05/polspr05-3.htm

    As for:

    “And then tell me that youre 100% confident that all those who are currently forced to rely on welfare that will be able to find jobs with a less regulated labour market will actually be moved into meaningful jobs where they are not exploited or trapped in a job that gives them no opportunity or time to improve their skills and future job prospects.”

    The best chance for career advancement is simply to have a job, any job. The labour market relies heavily on signalling.

  103. melaleuca says:

    “As for the crap about not being able to live on $9000.”

    The rent for a modest one bedroom flat in Melbourne that is accessible by public transport is $160 per week bare minimum. Folk currently get by because they have health care cards and can claim rent assistance. If I understand correctly you will do away with these supports.

    TerjeP says:

    “the evidence would seem to suggest that the left hate the poor”

    Don’t be dishonest. I’d much prefer to be poor in one of the European welfare states than in the more libertarian USA and so would you if you had to make a real choice.

    This comment by John Humphreys is the pure politics of hate:

    “Seriously you have to be retarded not to be able to look after yourself in Australia. Isnt anybody else sick of the whingers?”

    Let’s hope my prediction is wrong and Libertarians don’t turn out to be the Marxists of the 21st century.

  104. David Rubie says:

    Melaleuca said:

    Lets hope my prediction is wrong and Libertarians dont turn out to be the Marxists of the 21st century.

    I’ve said it before and I’ll say it again: Libertarians are just Marxists without the implementation plan.

    Nice to see Terje and Humphreys revert to hissing and spitting though, it restored balance to the universe.

  105. Mark Hill says:

    David,

    You’re hysterical. There are virtually no similarities other than those you and Steve wish to imagine exist.

  106. Jono says:

    I’m going to repeat myself because the point didn’t sink in the first time.

    The 30/30 system doesn’t “punish” or “reward” certain groups. You cannot punish low income earners by cutting their transfer payments, considering that they never had any property rights over the unearned income in the first place.

    You cannot reward high income earners by letting them maintain a greater degree of property rights over their rightfully earned income.

    Reducing taxes and transfer payments will reduce the artificial subsidy towards “need” that currently exists.

    You are simply bringing about justice by a partial restoration of property rights and freedom.

  107. NPOV says:

    Mark, re “you accept there is something better than work for the dole without any evidence”. There is almost always “something” better, the question is working out what it is. I’ve read the evidence of the way people have been treated by our *current* work-for-the-dole scheme, and I can’t see how anybody can argue that the crap Centrelink has been known to put people through is a good thing.

    And sure, there’s evidence that a too-high minimum wage drives up unemployment. But that hardly proves that abolishing the minimum wage is the best way to ensure useful and meaningful employment for everybody.

    As for…”The best chance for career advancement is simply to have a job, any job.”, is it? You seriously believe that a 60-hour a week job at $5/hour where no serious training is provided by the employer is preferable to studying at TAFE full-time while relying on welfare payments?

  108. NPOV says:

    Jono, I’ll repeat the question I made to David earlier: if instead of income tax, we had a system whereby employers were required to make co-payments to the state for every dollar they paid employees, then would that satisfy you that income earners now have fully property rights over their rightfully earned income?

  109. FDB says:

    Shorter Jono:

    Taxation is theft.

  110. David Rubie says:

    Mark, end state Marxism involves a utopian ideal with little or no government – small enterprise anarchy, where do you think the Libertarians got the idea?

    The big difference is that Marxism is supposed to transition through social democracy.

    Fundamentally, the two philosophies in their final states are the same damn thing, it’s little wonder that modern internet Libertarians are usually ex-Marxists like Humphreys – like every “first principles” thinker, there was nowhere for them to go once Marxism finished, as social democracy is just too imperfect. Some ended up as fully fledged conservatives, some as libertarians, but you couldn’t fit a playing card between their attitudes to the “undeserving” – see Humphreys above who regards these people as retarded.

  111. Mark Hill says:

    “And sure, theres evidence that a too-high minimum wage drives up unemployment. But that hardly proves that abolishing the minimum wage is the best way to ensure useful and meaningful employment for everybody.”

    Well it does actually. If the minimum wage doesn’t cause unemployment, it is below all market clearing rates. Having a minimum wage of $3 per hour would be like virtually having no minimum wage. Everyone with a job has nothing to fear about being paid less than current minimum wages, otherwise you’d be paid the minimum wage now or unemployed. (Please refute this statement. It points out that minimum wages do not protect standards or raise anyone’s wages). There are only benefits to the unempoloyed to accrue.

    “As forThe best chance for career advancement is simply to have a job, any job., is it? You seriously believe that a 60-hour a week job at $5/hour where no serious training is provided by the employer is preferable to studying at TAFE full-time while relying on welfare payments?”

    You’d be far more likely to get a job than someone who has never worked. Having a job of any kind is a form of training. Also, many firms, large and small, and those with high technical skills use unrecognised training for a large proportion of their training. Working for a charity or for no money but experience is an advantage over people with no or less work experience (although it needs often to be job specific).

    Though why you would work for less than welfare (assuming only Newstart anyway, no rent assistance etc) is beyond me. I wouldn’t do it and I suspect you wouldn’t do it for long. Just because I am showing you that minimum wages are job destroying doesn’t mean that reservation wages don’t exist. Of course they do.

  112. NPOV says:

    David, that’s a bit unfair on John. I’m not sure what got into him that post, but having read of the work he’s doing in Cambodia and elsewhere, there’s no question that he has a genuine concern for the less fortunate, and of course the fact that he’s actually living on the sort of income that gives one a sense of genuine perspective on the state of being poor is worth something. I can’t but admire him for that.
    I tend to think his problem is that he believes everybody is like him: if he can take up smoking for a month and give it up “just like that”, then so can everybody, right? If he can live on less than $9000 a day, then so can everybody.
    And indeed, if everybody in the world was John Humphreys, there’d be no need for a welfare state or a minimum wage and barely much need for a government at all.

  113. Mark Hill says:

    “Mark, end state Marxism involves a utopian ideal with little or no government – small enterprise anarchy, where do you think the Libertarians got the idea?”

    Certainly not from Marxists or de Saint Simon. Basistat opposed de Saint Simon from the get go. Jefferson, Locke, Smith were not inspired by de Saint Simon or Marx. America in 1900 was basically libertarian, but with some stupid old fashioned social conservatism. Hong Kong was before it was handed back to China etc. Moderate libertarian countires have existed. Communism never has.

    “The big difference is that Marxism is supposed to transition through social democracy.”

    No. You wish. Australia is arguably a social democracy. Germany is.

    Marx never argued this. If you wish to criticise Libertarians for being “the same” as Marxists, please be more familiar with Marx.

  114. NPOV says:

    Mark, but you’re assuming that the “market clearing rate” isn’t something that can’t be adjusted. I’ve no doubt that there are employers out there currently paying their workers $13.74 an hour that if the minimum wage was dropped would quickly adjust their salaries downwards. A company can be perfectly profitable paying workers at $13.74 an hour, but it would be far more profitable paying them only $12 or $10 an hour. Workers in that sort of situation rarely have a great deal of bargaining power, or much of an option to move elsewhere, so inevitably a significant percentage of those on that sort of wage are going to be worse off – at least until they re-unionise and unions partially take back the role of government in establish minimum working conditions. Indeed, on that basis, I’m not sure why unions don’t argue for abolishing (or significantly lowering) the minimum wage, because it’s surely a pretty good way of ensuring that unions will become more powerful (as per many European nations).

  115. melaleuca says:

    Jason Soon even employs Marx’s maxim about the withering away of the state.

    “I will enjoy the freedoms I have and treat politics with the scorn it deserves. People will continue being people and not grasping the long-term effects of the policies they vote for but it doesnt matter because the long term process of globalisation and technology and creative destruction will wither down the State to more rational boundaries as mobile capital and skilled labour practice their freedom to exit to more encouraging jurisdictions and force competition between governments and simply render some socialistic policies unsustainable in the long run.

    That is why economic openness is so important and more important than any other measure because the inexorable progress of globalisation will achieve more (and has achieved more Labor were *forced* to deregulate what they did in the 1980s) than any amateur activism. So practice what you believe. As long as people are selfish, liberty will progress.”

    http://alsblog.wordpress.com/2007/05/31/lets-change-the-world/

    Note how selfishness is viewed as a prerequisite for liberty.

    Gentlemen, we’ve stumbled upon a plantation of psychotic pineapples.

  116. Jacques Chester says:

    If he can live on less than $9000 a day, then so can everybody.

    $9000 a day you reckon? In the interests of science I could try living like that. :)

    And indeed, if everybody in the world was John Humphreys, thered be no need for a welfare state or a minimum wage and barely much need for a government at all.

    Not much to look at down the nightclub however.

  117. NPOV says:

    Mark, I would ask – you say America in 1900 was basically libertarian, but would you seriously argue that the average American citizen in 1900 had more freedom they than do today? And I’m not talking about the freedom brought about by technology or economic prosperity – I mean the actual freedom to make whatever lifestyle choices you wished without strong pressure to conform by the church, your family, society in general, and the government?

  118. NPOV says:

    That’s 9000 Zimbabwean dollars, duh.

  119. Mark Hill says:

    Mel, David,

    How on earth is a wide range of libertarian proposals (planned, thought through and costed) such as further microeconomic reform or allowing marriage to be part of private law (thus allowing gay marriage) and so on anything like Marx’s fantastic leap from Soviet style state socialism to utopian communism?

    Again, I say “you wish”.

    NPOV,

    “A company can be perfectly profitable paying workers at $13.74 an hour, but it would be far more profitable paying them only $12 or $10 an hour.”

    1. Why employ them in the first place?

    2. Won’t they look for work elsewhere?

    3. Why isn’t everyone paid the minimum wage only now, even without union representation?

  120. NPOV says:

    Hmm, according to http://www.oanda.com/convert/classic

    1 Australian Dollar = 4,023,521,824 Zimbabwe Dollar

    So 9000 Zimbabwean dollars a day is the equivalent of 0.08c a year…

  121. NPOV says:

    Mark, not sure what you’re getting at but

    1. Um, because they can generate at least that much company income an hour?
    2. Some will, but there are lots of reasons that make it difficult for people in such situations to find work elsewhere.
    3. What do you mean? Who isn’t paid the minimum wage now, other than juveniles?

  122. FDB says:

    4 billion Zim bucks to one Oz now? Jaysus.

    Maybe I should pick up a cool trillion and wait for some deflation in five years or so.

  123. Mark Hill says:

    NPOV,

    Social pressure isn’t compulsion. It might lead to dumb laws. I suggest you look at the number of pages of legislation and regulation at the time comapred to now as well as Government expenditure as a share of GDP. Like I said, they were freer albeit with some dopey social conservatism.

    Back then they didn’t have the Kelo decision, the counterproductive war on drugs, Mc Carthyism or “border patrols”.

  124. Mark Hill says:

    NPOV,

    1. If they can generate that much marginal product they will get paid that much. Why can I say this? Because in the industry where employers have the most market power, the mining industry, wages are highest and are closest to marginal product.

    There is also a simple decision: if it is cheaper to use machinery or foreign or outsourced labour, you would do so anyway without the abolition of minimum wages.

    2. Conversely, employers don’t liek staff turnover as well.

    3. If you predict wages would fall with the abolition of the minimum wage, then why isn’t the minimum wage the maximum everyone is paid now?

  125. JC says:

    Oh no, Mel is now going with the libertarianism is communisum routine?

    But wait so is david r

    M

    elaleuca said:

    Lets hope my prediction is wrong and Libertarians dont turn out to be the Marxists of the 21st century.

    Ive said it before and Ill say it again: Libertarians are just Marxists without the implementation plan.

    Nice to see Terje and Humphreys revert to hissing and spitting though, it restored balance to the universe.

    libertarianism is about reducing compulsion and the power of the state over individuals so how on earth can you dudes even make that suggestion. It’s like saying a bicycle and a rock are similar because they are composed of atoms. You gotta do better than this.

  126. David Rubie says:

    Mark Hill wrote:

    Certainly not from Marxists or de Saint Simon. Basistat opposed de Saint Simon from the get go. Jefferson, Locke, Smith were not inspired by de Saint Simon or Marx.

    Lots of people disagree Mark, I’m far from the first person to make that assertion. Different means to the same end (but like I said, missing the implementation plan).

    Sample here

  127. NPOV says:

    Mark, I’d argue the threat of rejection by society is no less powerful than the threat of being fined or jailed by the government. In fact there’s probably far more things that we don’t do even though we’d like to just because they’d be “frowned upon” by others than things that we don’t do even though we’d like to because we’d be fined or thrown in jail for doing so. Looking at smoking rates: they’ve plummetted in the last few decades due largely to the fact that smoking is now far less socially acceptable. Whereas tougher and tougher penalties for using other drugs have done virtually nothing to dent their popularity.

    1. Why would you say that the mining industry is the one where employers have the most market power? I would think it’s the one where employees have the most market power. At any rate, there’s lots of reasons that not all industries are alike. As far as minimum wages leading to outsourcing – I agree that this would seem to be an obvious risk, though I’m not sure what studies have been done. But here we get into the “race to the bottom” argument.

    2. Sure – but if I’m an employer and suddenly I have the opportunity to increase my own salary by $10 an hour at the expense of my 10 minimum wage employees, if I decided the risk of losing one of them was worth it, what’s to stop me lowering their salaries each by $1 an hour?

    3. The maximum everyone is paid now? What do you mean by that?

  128. Mark Hill says:

    David,

    “Lots of people disagree Mark, Im far from the first person to make that assertion. Different means to the same end (but like I said, missing the implementation plan).”

    “Lots of people” are wrong. Your history and philosophy were totally confused. The end is not the same. Utopian communism doesn’t even consider a role for law and order or defence, even privately paid for or voluntarily organised. As for an “implenetation plan”, removing state control of the economy and our private lives has been done recently if not commonly. It simply has not gone far enough or has been coupled with different, new regulations we do not need.

    Libertarians are not obsessed with an “implementation plan” like you because we are not utopians. yes of course you need to implement policy, but it has been done before. You are obsessing over great leaps forward, not us.

    NPOV,

    “Mark, Id argue the threat of rejection by society is no less powerful than the threat of being fined or jailed by the government.” I wouldn’t.

    Name one time solely through non coercive measures, your family or friends have been able to kill you for a transgression. Just one.

    “Looking at smoking rates: theyve plummetted in the last few decades due largely to the fact that smoking is now far less socially acceptable.”

    …and this would be good. Information exists on cancer and so on. But so do nicotine patches etc. Ultimately people make decisions for themselves. If they can pressure people into making decisions they can also make the decisions themselves.

    “1. Why would you say that the mining industry is the one where employers have the most market power?”

    Because it is. Yes empoloyees may have market power. According to the “market power” explanation of wages, there should be a “bilateral monopoly” and the Government needs to set wages othewrwise there will be persistent industrial action AND exploitation. Before and after workchoices, where did any of this exist?

    “(2.) As far as minimum wages leading to outsourcing – I agree that this would seem to be an obvious risk, though Im not sure what studies have been done.”

    Any study that shows minimum wages cause unemployment prove the point.

    “…But here we get into the race to the bottom argument.”

    No we don’t. I keep on arguing in 3. and 1. that minimum wages do not protect anyone’s wages and in 2. that they merely cause unemployment, if they have any effect.

    “3. The maximum everyone is paid now? What do you mean by that?”

    If you suppose that we scrapped the minimum wage and everyone’s wages would then drop, you should be also able to explain why everyone isn’t paid the MW now, and no higher. As in both cases employers are assumed to pay “as little as possible” for labour.

  129. NPOV says:

    I will say, it is interesting that a policy that seems to be generally frowned up by economists across the political spectrum (though in a U.S. survey, only 46% fully agreed that minimum wages were bad for unemployment) is still basically universal across all first-world countries.

    Regarding the LDP 30/30 policy – by my rough calculations, someone currently earning the minimum wage full-time would be taking home $26616 a year, paying $3,335 in tax. Under 30/30, if they kept the same salary, they’d now be getting $1000+ in benefits, making them $4300 better off. Their salary would have to drop to under $20397, or about $10.3 an hour for them to be worse.

    Having said, as I understand it, very few people in Australia earning $26K are actually paying any net tax. What benefits are actually available to single able-bodied person living alone earning the minimum wage?

  130. Jono says:

    NPOV. Its still essentially a flat 50% income tax. Who on earth would be happy with that ?

  131. NPOV says:

    Mark, I’ve no idea what your point about family and friends being able to kill me is. And at any rate, in Australia, the government is probably the one organisation I can be competely confident won’t try to kill me. Not that I’m at all concerned that others will.

    “If you suppose that we scrapped the minimum wage and everyones wages would then drop”

    I don’t suppose such a thing at all. The only people whose wages would drop are those whose employers are only paying them as much as they currently because they have to, even though they could otherwise get away with paying them less, due to various imperfections in the labour market.

    At any rate, you’re arguing with the wrong person. I don’t have an issue with replacing a centrally-set minimum wage with a more flexible means of insuring that our lowest-skilled workers still get paid decently and have realisitic opportunities to improve their productivity. I just dispute that a minimum wage is necessarily a bad thing.

  132. NPOV says:

    Jono, I never said it was dollar for dollar, and at any rate, that’s not my point. I’m simply asking if you would feel that under such a system, all workers would be able to exercise complete propery rights over their incomes?

  133. Mark Hill says:

    “I will say, it is interesting that a policy that seems to be generally frowned up by economists across the political spectrum (though in a U.S. survey, only 46% fully agreed that minimum wages were bad for unemployment) is still basically universal across all first-world countries.”

    No, it is more like 90-95%, like I quoted above in the Australian article.

    “Having said, as I understand it, very few people in Australia earning $26K are actually paying any net tax. What benefits are actually available to single able-bodied person living alone earning the minimum wage?”

    I am quite sure a lot are solely on income taxes. I am also entirely sure they pay a lot of direct and indirect taxes on top of income tax.

    Like Ken you are looking at things piecemeal then combining the criticism. Part of the 30/30 and whole tax reform policy would be to get rid of tariffs and excise tax. Why do we have a regressive tax on fuel and a 17.5% tax on clothing?

    It sounds medieval to me.

  134. David Rubie says:

    Mark Hill wrote:

    Libertarians are not obsessed with an implementation plan like you because we are not utopians. yes of course you need to implement policy, but it has been done before. You are obsessing over great leaps forward, not us.

    Mark, I’m not a Marxist, I don’t believe in utopias and I don’t believe in great leaps forward.

  135. Mark Hill says:

    “Mark, Ive no idea what your point about family and friends being able to kill me is.”

    Likewise I’ve got no idea how my friends and family can coerce me without violence or the threat thereof. If I don’t pay club fees I am no longer a member of the club. If I don’t pay taxes I will be hounded relentlessly and possibly incarcerated.

    “If you suppose that we scrapped the minimum wage and everyones wages would then drop

    I dont suppose such a thing at all. The only people whose wages would drop are those whose employers are only paying them as much as they currently because they have to, even though they could otherwise get away with paying them less, due to various imperfections in the labour market.”

    Why bother employing them at all then? If you are not worth $13 an hour, only $8 an hour but must be paid $13 an hour why not use capital that costs no more than $8 an hour with the same output instead and fire your employees? Also, if they were making a loss, why bother employing anyone?

    BTW imperfections in the labour market typically refer to sources of market power for firms. This will not force firms to employ people at higher wages. How can imperfections give workers more market power?

  136. JC says:

    W

    hy do we have a regressive tax on fuel and a 17.5% tax on clothing?

    the tariff on clothing is truly barbaric in terms of its regressive effects.

  137. NPOV says:

    Um, I was pointing out that the 30/30 policy seemed to be a pretty good deal for those currenly on the minimum wage, not criticising it.

    The fuel excise is presumably intended to be sufficient to cover the costs of providing the costs of roadworks etc., and as I understand it, fuel for non-road usage (e.g. for farmers and boats) is hence exempt. I’m not sure how it could be anything other than regressive, unless you expect everybody to carry around a card identifying their income when paying at the pump.

    17.5% tax on clothing is silly – though mind you the sort of profit margins clothing retails here charge seems to indicate something very odd about Australian shoppers. They wouldn’t get away with it in the U.S. (where we buy a good percentage of our clothes, especially kid’s clothes).

  138. Mark Hill says:

    “Mark, Im not a Marxist, I dont believe in utopias and I dont believe in great leaps forward.”

    Then why bother about them? Libertarians don’t believe in them either. You can cherry pick rabid supporters of anything and make their cause look bad. Your idea that libertarians are like communists is simply garbage and Mc Carthyist smearing.

    Please stay on topic next time David.

  139. Jono says:

    It takes some pretty twisted logic to compare libertarians to Marxists.. really, there are an infinite number of differences between the two.

    There are an infinite number of human behaviours that Marxists will bring under the control of the state, and libertarians will free from control of the state.

  140. JC says:

    David

    Lots of libertarians believe in a constitutional republic that would protect against the ravages of majoritarian rule. This supports freedoms rather than hinders so it becomes a real stretch of credulity to suggest that Marxists and libertarian have similarities.

    Feel free to apologize any time for this huge error of yours.

  141. NPOV says:

    Jono…why not? Workers are all able to keep 100% of their incomes.

    Accepted, companies don’t have full property rights on how they distribute company profits to employees, but it’s actually hard to see how you could allow a company as a whole to distribute its profits any way it liked. Indeed, I believe in the U.S. at least, there are essentially laws compelling companies to distribute as much of their profits as possible to shareholders (which I don’t believe there is any possible justification for. Employees investe just as much in companies as do shareholders – except that they invest time and energy rather than money).

  142. JC says:

    I believe in the U.S. at least, there are essentially laws compelling companies to distribute as much of their profits as possible to shareholders (which I dont believe there is any possible justification for.

    no there isn’t.

  143. NPOV says:

    Well the Corporations Act might not be written quite that starkly, but it often seems to be interpreted in such a way, not least of all by company directors.

  144. JC says:

    Well the Corporations Act might not be written quite that starkly, but it often seems to be interpreted in such a way, not least of all by company directors.

    US statutes dealing with Corporations laws forces numerous obligations of the board of directors and various executives but it does not in any way promote or express if profits are to be distributed or can be retained.

    If you’re suggesting that, Warren buffet would have been in jail long ago as Berkshire, unless that’s changed from a few years ago, had never paid a dividend.

  145. David Rubie says:

    JC wrote:

    Feel free to apologize any time for this huge error of yours.

    Apologise for what exactly? I think you guys are protesting just a little too much given the numbers of ex-marxists in your ranks. You ought to acknowledge the similarities (the adherence to axiomatic/first principles thinking, the idea that there’s some “great wrong” extant that requires dismantling, the pure hearted belief in a set of iron clad ideals). For starters, it’s not a criticism, just an observation. Secondly, it isn’t a new one and actually started with the conservative right. I wasn’t suggesting that communism as it happened is libertarianism, I was suggesting that end-state communism as it was envisaged isn’t that far from an anarchic state and indeed the two traditions have common roots (i.e. Proudhon).

    I didn’t impugn the motives of all libertarians, and in fact I see a lot to admire in the defenses of liberty that libertarians say they support.

    OK, in the end it’s a cheap shot, that I’ll grant you, but can you really defend Humphreys statement about “retarded”? Or Terjes “the left hate the poor”?

  146. NPOV says:

    JC, I certainly didn’t mean to imply that a company must return its profits as dividends to shareholders, but companies are generally expected to maximise shareholder value, and I’m fairly certain it would be illegal to deliberately run a public company with the intention of maximising employee salaries while barely remaining solvent.

  147. NPOV says:

    BTW, what’s interesting is that employers in Norway have been calling for statuory minimum wages.

    http://www.eurofound.europa.eu/eiro/2007/09/articles/no0709019i.htm

    (What I was actually trying to find information about was a rumour that Norway was considering laws that limited employer:employee salary ratios. I’m sure I read about this some time back, but haven’t managed to find any information about it).

  148. Mark Hill says:

    “I think you guys are protesting just a little too much given the numbers of ex-marxists in your ranks.”

    Like who? As opposed to the Parliamentary left?

    If the left love the poor, they have an odd way of showing it. Job destroying wage regulation and regressive taxes on fuel and clothing, as I said is just plain old medieval.

  149. JC says:

    I think you guys are protesting just a little too much given the numbers of ex-marxists in your ranks.

    Where are these ex-Marxists in the libertarian movement, Dave? Under which med are they hiding. Lets smoke these bastards out. You first, Dave. Get the DDT gun.

    Look , Mel has been trying on this crap about libertarians resembling Marxists for a long time. It’s not always a good idea following Mel footsteps as he usually ends up an intellectual cul de sac.

    (

    What I was actually trying to find information about was a rumour that Norway was considering laws that limited employer:employee salary ratios. Im sure I read about this some time back, but havent managed to find any information about it).

    I guess there will be a lot of janitors earning big bucks then if they’re going to legislate equality laws such as these. The best way of getting round those laws would be to push up the wage of the lowest employee. If they pass those laws please let me know as I’ll trying to move to Norway and get a job as a janitor on a million bucks a year + bonus.

    These laws are stupid and all they do is promote stasis rather than meritocracy. It would ensure that heritage would trump merit. Way to way Norway. No wonder the Swedes laugh at them for being “stoopid”.

  150. Ben says:

    David: I know many people migrate from marxist to libertarian ideas because they have a genuine concern for the welfare of humanity but no longer simply wish to be party to pure tokenism. They become libertarians because they want to advocate ideas that actually work. Reason’s Ronald Bailey cites this as the reason he became a libertarian.

    I don’t believe (as some above have stated) that the left hate the poor. I just feel they are either too lazy or too ignorant to differentiate between intentions and outcomes.

  151. fatfingers says:

    Ken: “you dont need to be a rocket scientist to realise that wages are likely to be pushed downwards.”

    Fair enough. But you made the call that they would largely (or even entirely) wipe out the gains from an NIT, and you are yet to back that up.

    “No national minimum wage is mandated legally, but national labor agreements effectively set a wage floor. Denmark is highly unionised, so effectively there IS a minimum wage.”

    As someone else pointed out, there’s no reason to think the same can’t happen in Australia. Unions would suddenly become useful to more people. Those in unions will get their de facto minimum wage, and those who are willing to work for less still can. It supports one of the fundamentals of utilitarian libertarianism – blanket approaches are not as good as the sum of individual choices.

    David Rubie: “Nice to see Terje and Humphreys revert to hissing and spitting though”

    Oh, please. Terje’s one of the most polite commenters on any blog you care to name. And John’s reply was pretty much in keeping with the original post.

    And what ex-Marxists?

    melaleuca: “Note how selfishness is viewed as a prerequisite for liberty”

    Not a prerequisite, merely a contributing factor. As for renting costs (re the $9,000 NIT), ever heard of share houses?

  152. David Rubie says:

    JC wrote:

    Where are these ex-Marxists in the libertarian movement, Dave? Under which med are they hiding. Lets smoke these bastards out. You first, Dave. Get the DDT gun.

    What about an actual gun JC? The long march from Marxist to libertarian is a long followed and deeply undistinguished tradition:

    Irving Kristol is not a bad example.

  153. Mark Hill says:

    Most if not all libertarians would not self identify with Kristol:

    http://en.wikipedia.org/wiki/Irving_Kristol#Background

    “Since 1988, he has been John M. Olin Distinguished Fellow at the American Enterprise Institute. He has used these positions and publications to animate the neo-conservative movement, arguing for low taxes, a well-funded and internationally active military, conservative social policy, and a minimalist interpretation of First Amendment rights. For example, he once stated that “I dont think the advocacy of homosexuality really falls under the First Amendment any more than the advocacy or publication of pornography does.””

    “Low taxes” is about the only admirable thing there. No mention of low spending. An “active military” for the sake of it is unprincipled.

    You should really learn the difference between libertarians and those who are not.

  154. Ben says:

    Irving Kristol? Do you really conflate Libertarian and Neoconservative thought? Can you tell the difference David?

  155. NPOV says:

    JC, I don’t think anyone would take a law that suggested something like “the ratio behind the highest paid employer salary and the lowest paid employee salary of any company may not exceed 50:1” seriously, but I can’t see how it would be a bad thing to prevent a company director deciding that of a company’s 10 million-dollar profit, half of it should go to himself, and the remaining half to his 200 employees.

  156. JC says:

    Kristol was not a libertarian, Dave.

  157. Mark Hill says:

    Huh! Ask the shareholders what they think!

  158. David Rubie says:

    Do you really conflate Libertarian and Neoconservative thought? Can you tell the difference David?

    Can anybody?

  159. fatfingers says:

    Wage ratios are interesting. I heard that the US Army uses an unofficial one of roughly 10:1, but I don’t know if that’s accurate. Anyone else know?

  160. Mark Hill says:

    “Can anybody?”

    This is called wilful or perhaps rational ignorance David. We’re all hoping you success on your path to self improvement.

  161. NPOV says:

    Mark, and if the director himself, perhaps along with a couple of his mates, owns the vast majority (if not all) of the shares?

  162. NPOV says:

    At any rate, it’s surely unethical. 200 employees would surely responsible for creating a good deal more than half of such the company’s profits. In other words, it isn’t the employer’s money to decide that he’s to keep half of it himself.

  163. Ben says:

    Can anybody?

    Anyone with a passing familiarity with the principles behind both schools of thought can.

    Just to help you out:
    The Neocons want free markets but don’t want people to make free choices about lifestyle: recreational drugs use, gay marriage etc.

    The Lefties want people to be free socially but don’t want them to make free choices with their money: Free Markets, Choice in health care, Schools etc.

    The Libertarians think grown ups should be allowed to make free choices in both of these areas and think the government should butt out of as much as is possible.

    To give you a hint: Neocons don’t support decriminalizing marijuana or support the Camden Muslim school. Libertarians do.

    Perhaps it’s best not to critique something you can’t define?

  164. Ben says:

    You were right about one thing David: It is instructive that Kristol became a neocon by way of the radical left. In the same way that it is instructive that Mosley was a socialist before becoming Britain’s number one fascist. Totalitarianism and Socialism are essentially cousins and socialism is a stepping stone to more authoritarian schools of thought.

    Libertarianism is by definition anti-coercion of any stripe.

  165. NPOV says:

    Actually Ben, most lefties I know want people to be able to make free choices with their money – but don’t accept that freedom should be contigent on wealth: even the poorest should be able to choose which school to attend or hospital to be treated at, which obviously requires that there’s at least two schools or two hospitals that they could afford. I don’t even care too much how this is achieved – whether through public provision or consumer-end subsidies, as long as the choice is there.

  166. Mark Hill says:

    “At any rate, its surely unethical. 200 employees would surely responsible for creating a good deal more than half of such the companys profits. In other words, it isnt the employers money to decide that hes to keep half of it himself.”

    You don’t know that. They might create 7% or 70%. Ultimately, abuse of market power by employers and employees is rare and when it occurs, is not significant.

    “Actually Ben, most lefties I know want people to be able to make free choices with their money”

    Why the medieval economic policies that destory jobs, tax clothes and tax fuel? None of these help equity.

  167. JC says:

    JC, I dont think anyone would take a law that suggested something like the ratio behind the highest paid employer salary and the lowest paid employee salary of any company may not exceed 50:1

    There has been, numerous times. I thought you were making that suggestion.

    seriously, but I cant see how it would be a bad thing to prevent a company director deciding that of a companys 10 million-dollar profit, half of it should go to himself, and the remaining half to his 200 employees.

    It’s not the CEO who decides, the board does. The shareholders decide on the election of the board.

    The ex-ceo of Macca took the stock from about 4 bucks to 95 as its high at one times. So what’s the problem?

  168. David Rubie says:

    Perhaps its best not to critique something you cant define?

    Perhaps. Although the similarities outweigh the differences by miles. Consider the various obsessions of the AEI:

    School Vouchers? Check.
    General opposition to public schools? check.
    Anti welfare? Check.
    Anti trade unions? Check.
    Anti government regulation? Check.
    Critical of the expansion of government (yes, even Bush): check.
    Removal of gun control? Check.
    Opposition to public health: check.
    Removal of the minimum wage: check.

    How about some of the staff? Charles Murray “What it means to be libertarian” ring any bells?

    Social conservatism: I’d bet libertarians are split about 50/50 on issues like homosexuality and religion judging by the ALS and Catallaxy blogs, as being a social conservative doesn’t exclude you from being a libertarian it would seem (and there’s plenty of ’em on the left too).

    Kristols zeal for a US military induced spread of democracy is about the only real point of difference. That stupidity was shared by a lot of people across the political spectrum until the tide went out.

  169. Ben says:

    NPOV the school choice voucher movement is all about giving poor people choice of schools to send their kids to. It is also pro-competition as it forces schools to be competitive or they lose their funding.

    On Health choice Terje at the ALSblog has proposed that Medicare be like HECS. This would remove the tragic trap of the commons yet give everyone access to the healthcare they need all the while bolstering competition.

  170. fatfingers says:

    “Anti trade unions? Check.”

    Not a libertarian position. Freedom of association is an imporatant part of libertarian thought, including banding together to get better wages and conditions.

    And here’s a newsflash – hardly any of Catallaxy’s commenters are libertarian, and a large minority of ALS’s are not, so any conclusions you draw on the basis that they are will be erroneous.

  171. melaleuca says:

    “Not a libertarian position. Freedom of association is an imporatant part of libertarian thought, including banding together to get better wages and conditions.”

    Not so fast, fatfingers. Libertarians would allow employers to refuse to engage in collective bargaining and to sack any worker who joins a union.

  172. Mark Hill says:

    I don’t think that conservatives are entirely in agreement, even if libertarians have influenced them.

    School vouchers are a libertarian idea. If conservatives adopt it, good, we’ve been influential. Conservatives like public schools, as long as they contol the cirricula.

    Anti-welfare? No, see Charles Murray. Welfare should be minimised and rationalised anyway. Encouraging people not to work or punishing them for looking for work are very bad ideas.

    Libertarians are not anti-trade union and consistently pointed out that Howard was obsessed with unions rather than interested in genuine labour market reform. Libertarian economists also note the role unions play in society, since Coase was the father of new insistutionalists, essentially.

    Anti regulation? Yep. Why is this so bad? Why shouldn’t Government regulation be justified on moral or utilitarian grounds, not “feel good” promises? There is a lot of social regulation conservatives support that no libertarian would consider justifiable.

    Anti Government expansion? Why not? Why shouldn’t Government programmes have a clear and demonstratable net benefit? Since you brought up Kristol – he, as a neconservative would not be opposed to this as long as it encouraged conservative social aims.

    Removal of gun control? Yep. Australian gun laws simply go too far and have been critcised by the NFA architects. Howard, as a conservative, had no worries about implementing a stupid, knee jerk law with no identifiable benefits.

    Opposition to public health? It is more expensive with poorer outcomes. There are so many regulations which make our health system sub optimal. If you wish to help the poor, standard neoclassical (as supported by centre left and right) economics agrees with libertarians that direct cash subsidies are better than centrally planned economies. I suspect conservative support from this arises partly due to opposition to abortion, which libertarians do not oppose.

    Removal of the minimum wage? Yes, it destroys jobs.

    “How about some of the staff? Charles Murray What it means to be libertarian ring any bells?”

    Poor bloke was like a cross dresser. You cannot say “anti welfare” and bring up Murray. For someone with a knowledge of who’s who, you don’t know much about what they believe or propose as policy.

    “Social conservatism: Id bet libertarians are split about 50/50 on issues like homosexuality and religion judging by the ALS and Catallaxy blogs, as being a social conservative doesnt exclude you from being a libertarian it would seem (and theres plenty of em on the left too).”

    No, that is just plain wrong. There is no such thing as a libertarian socialist or a libertarian conservative. They are simply socialists and conservatives. It is a saving grace they respect civil and economic liberties respectively.

    Now this has been explained to you, can we get back to discussing the NIT as proposed by the LDP?

  173. David Rubie says:

    fatfingers wrote:

    hardly any of Catallaxys commenters are libertarian

    What are they then? More importantly, what do they say they are?

  174. Ben says:

    Anti-Welfare? This topic is about a Libertarian proposal for a non-means tested guaranteed minimum income. Where is the anti-welfare stance of libertarians?

    And where are these socially conservative Libertarians? I’ll certainly take that 50/50 bet as gay rights are not even close to being 50/50 in libertarian circles. If you don’t support gay marriage you are not a libertarian.

  175. JC says:

    P

    erhaps. Although the similarities outweigh the differences by miles. Consider the various obsessions of the AEI:

    Obsessions? Dude.

    Policies prescriptions are now considered obsessions? Dude, what are you saying?

    Anti trade unions? Check.

    I cant recall any self-described libertarian as being anti-union. What they dont want is laws favoring unions.

    Anti government regulation? Check.

    Really? You see as Bush anti-reg? He ran on a big government platform. Compassionate conservatism There was never an attempt by Bush to lower the size of government and he never even made a pretense of that.

    Critical of the expansion of government (yes, even Bush): check.
    Removal of gun control? Check.

    No.

    Opposition to public health: check.

    Nonsense.

    Social conservatism: Id bet libertarians are split about 50/50 on issues like homosexuality and religion judging by the ALS and Catallaxy blogs, as being a social conservative doesnt exclude you from being a libertarian it would seem (and theres plenty of em on the left too).

    You shouldnt confuse all the people making comments at these sites being libertarians. Currency lad isnt and wouldnt even pretend he is, yet he comments there.

  176. Jason Soon says:

    Interesting, you know the other side has lost when they manage to divert the argument into an irrelevant exegesis of the demographics of a small blog.

    Here are the active commenters on catallaxy off the top of my head

    Currency Lad – ridicules libertarians as ‘weirdos’ because they don’t support MCain for President

    FDB – regular at LP

    JC – libertarian

    Sinclair Davidson – libertarian

    fatfingers – moderate libertarian

    JohnZ – moderate libertarian

    Homer – we all know and love homer but libertarian he ain’t

    Nanuestalker – conservative Hilary lover

    yobbo – libertarian

    John Humphreys – travelling lately but pops in occasionally – libertarian

    Tillman – Obama lover and centrist far as I can tell

    Mark Hill -libertarian

    Jono – libertaran

    Some libertarians like Terje, DavidL pop in occasionally
    So tell us Rube, which one of these that I have identified as libertarians hates gays and goes to Sunday school?

  177. Jason Soon says:

    Oh yeah I left out

    John Hasenkam – only political involvement has been with the greens. centrist

    dover beach -conservative oakeshottian

    adrianswords – unorthodox lefty

    But I don’t think any of them are religious nuts either.

  178. fatfingers says:

    melaleuca, how is that evidence of libertarians being anti-union?

    David Rubie, Catallaxians are a varied bunch. Melaleuca comments there, for example. There are a few hardcore libertarians, like Mark Hill and Temujin, a handful of moderate libertarians, like me and Jason Soon and skepticlawyer, and the rest (the majority) are sprinkled across the left-right spectrum though there are more righties than lefties.

  179. TerjeP says:

    Employees investe just as much in companies as do shareholders – except that they invest time and energy rather than money

    I dispute this notion entirely. Except in extreme instances workers are paid for their time irrespective of whether the company is doing well or not. They don’t leave anything on the table and are free to withdraw their labour at any point in time if they don’t like the price they are getting for their product.

    Your logic is like saying that the builder has invested in my house so the builder is entitled to sleep in my house when it suits him. This is rubbish. He is paid for his labour and materials and at the end of the project the house is mine. Likewise with all the labour I have sold over the years. I have no claim on what I have built for others so long as they have paid what was agreed. When you sell something then it is no longer yours.

  180. David Rubie says:

    Soon the Laughing Libertarian wrote:

    Interesting, you know the other side has lost when they manage to divert the argument into an irrelevant exegesis of the demographics of a small blog.

    Jason, the argument died when Humphreys accused the poor of being retarded, and the left of hating them.

    The rest was just bait.

  181. Tim Quilty says:

    “Sinclair Davidson – libertarian”

    He’d be lucky… Liberal leaning conservative. I’d say…

  182. JC says:

    Dave

    Unless I’m mistaken, John said that you have to be retarded not to find any sort of job in oz even if it is off the books and part time.

    It’s a whole lot different from calling the poor or any claas of people retarded.

  183. fatfingers says:

    “Humphreys accused the poor of being retarded”

    No, he didn’t. He said “you have to be retarded not to be able to look after yourself in Australia”. Having heard the same thing in different words from JohnH before, it’s perhaps more evident to me than to you that he meant – you won’t be destitute/starve to death in (a welfare-less) Australia unless you have serious physical or psychological problems (unlike North Korea, for example). He didn’t and never has called the relatively poor ‘retarded’.

    As for the left hating the poor, Ken himself made similar accusations about the LDP, though not in such blunt language. I think we should all continue the discussion with the assumption that we all care about the poor, and merely disagree as to what will help them the most.

  184. Tim Quilty says:

    David, you might as well say that the argument died when Ken wrote:

    “Its effect (no doubt deliberate) would be to create a large class of US-style working poor whose earnings are at or below subsistence levels.”

    Except it wasn’t. It was just beginning.

    Here’s an idea. Why don’t YOU engage constructively? I realise you made a couple of half hearted attempts early on, but you backed away pretty smartly and slipped into snark mode. Probably something to do with the failure of your argument on wage rates dropping by the full $9000 to hold water?

  185. NPOV says:

    JC: “the ex-ceo of Macca took the stock from about 4 bucks to 95 as its high at one times”…how can you prove this? Indeed, in general terms there is no real way of calculating to what degree a CEO is responsible for growing the wealth of a company, vs the contribution of his employees, or potentially any number of external factors. Now I accept that in sheer practical terms the responsibility for deciding this has to be given to the board of directors, but as long as they are dealing with company profits, which employees have played a significant role in generating, then they are under an ethical obligation to assign a fair percentage of those profits to the employees. And while Mark you may claim that abuse of market forces is rare, this really depends on what you consider “abuse”. I would argue that there are many corporations out there currently that don’t reward employee reasonably for their efforts.

  186. Ben says:

    NPOV: Could you please define reasonable reward for us?

  187. Sinclair Davidson says:

    Is that nice? “Liberal leaning conservative”.

  188. JC says:

    People , please excuse fatfingers as he is a libertarian in training at the moment, so if he gets anything wrong experience it to “yoothful” exuberance. He up for his first libertarian exam soon so he’s very nervous at the moment and is trying to impress me

    Fats, please don’t always repeat what i just said. Thanks.

    N says:

    JC: the ex-ceo of Macca took the stock from about 4 bucks to 95 as its high at one timeshow can you prove this?

    He set the objectives,

    decides the businesses to be in ,

    decides the senior hires,

    approves senior hires

    allocates capital to the businesses

    Indeed, in general terms there is no real way of calculating to what degree a CEO is responsible for growing the wealth of a company, vs the contribution of his employees, or potentially any number of external factors.

    See what a bad CEO can do to a firm. Most fail by the way which is why the price of a good CEO is very high. His firm produced close to a 30% compound return.

    Now I accept that in sheer practical terms the responsibility for deciding this has to be given to the board of directors, but as long as they are dealing with company profits, which employees have played a significant role in generating, then they are under an ethical obligation to assign a fair percentage of those profits to the employees.

    I don’t know of many unhappy campers from macca, do you?

    And while Mark you may claim that abuse of market forces is rare, this really depends on what you consider abuse. I would argue that there are many corporations out there currently that dont reward employee reasonably for their efforts.

    And eventually they end up being trounced because good people leave the second they can find a better job. Fosters is a good example of that.

  189. NPOV says:

    Terje, I’d accept “just as much” is an exaggeration, and obviously as you point out, most employees have less on the line regarding a business than major shareholders: but it’s hardly the case that should the business fold they’d likely end up better off than the CEOs. As for comparing the situation of contracting a couple of builders to build you a house and that of employees working to build a business, I suppose I could accept that some employers might see the arrangement in a similar way: “I’m paying you $x an hour to help build my business, after which it (still) belongs to me”, but I question that it’s a productive or reasonable way of looking at it, as to grow a business effectively it usually does require that the employees have some sense of ownership of the business’s success. And of course there’s the simple fact that not everybody is capable of being a shareholder, and I don’t accept it’s ok to suggest the only alternative choice they have is to a be a pure wage slave.

    Personally, I’ve never been anything other than well rewarded for my contributions as employee – and if I thought my experience was typical, I wouldn’t be concerned about the state of affairs as they exist currently. But my wife has worked for two large multi-national companies in the last 5 years, and in both cases, the wages they paid were little short of shocking, especially in the context of the profits that the companies generated as a whole. I’m not entirely comfortable with the idea of using statutory regulation to ensure that such workers are more fairly rewarded, mainly because there would seem to be substantial scope for nasty unintended consequences, but I’m not sure what other options exist.

  190. NPOV says:

    Ben, I can only judge “reasonable reward” on a case by case basis. But I know what I’m paid for the work I do, and I see other people with equal or better talents, working often a good deal harder than I, but getting paid a quarter of what I do. Now I’d accept I might be capable of, say, double their productivity, due to experience etc., but not 4 times.

  191. NPOV says:

    JC: “I dont know of many unhappy campers from macca, do you?” – not sure what you mean by this, but I would like to see exactly how salaries are allocated to workers at various levels across the company.

    And look, I don’t dispute that CEOs have an enormous impact on a company’s profitability. But CEO : worker salary ratios have spiralled from something like 20 : 1 40 years ago to over 300 : 1 today. What’s changed in the last 40 years that means CEOs have increased their productivity at 15 times the rate of the average employee? And moreover, what are the likely upshots of allowing such a trend to continue?

  192. JC says:

    N

    The higher up the wages scale one goes it becomes slightly more difficult to figure out the appropriate wage. However you seem to know within a whisker what you are paid compared to other people. Why do you think others wouldn’t know and why do you think they are not motivated to negotiate a better deal when the opportunity presents itself?

    minimum wage jobs are about 14 to 17 bucks an hour. It’s pretty transparent and most people would know.

    What should an actor be paid who has had a string of successes but his last movie was considered to be a failure?

    And if you want to contain people’s earnings… The Rolling Stones earned $500 mill on their last world tour. Please explain why you would or wouldn’t contain their earnings but you think Macca’s CEO should be contained?

  193. Tim Quilty says:

    “the simple fact that not everybody is capable of being a shareholder”

    Pretty much anyone with a job is capable of being a shareholder, and not only through their super funds – which is all of us – but simply by investing either in the sharemarket or an investment fund. For some it might involve taking beer off the menu for a while, but, their choice. In fact, the only people in Australia at the moment not capable of becomeing shareholders are pretty much the one’s we’re talking about trying to help with the NIT.

  194. fatfingers says:

    JC, I was interrupted when composing my last comment, so it took about 20 minutes to eventually press Submit, so I had no idea you had replied already. Besides, I said it much better than you did. As usual.

    NPOV: “they are under an ethical obligation to assign a fair percentage of those profits to the employees.”

    Even assuming that was true, who’s to say the wages are not a fair percentage? Presumably if the workers felt it wasn’t a fair percentage, they wouldn’t keep working there.

    What’s actually happening is that both worker and employer have different ideas about what’s ‘fair’, and have to come to a compromise figure acceptable to both.

  195. JC says:

    Whats changed in the last 40 years that means CEOs have increased their productivity at 15 times the rate of the average employee?

    Lots of things. It’s a meritocracy these days especially with globalization. You don’t make earnings and the pension funds absolutely crucify the stock. You end up being fired.

    I recall the head of a mining company. We all know who it is without having to mention his name. The fucker was absolutely useless. Dad ran the firm before and so did the grandfather. A takeover bid came for the firm and he walked away from it despite being a terrific deal. He ran the firm to the ground during his time. He eventually got whacked when it became obvious the world had changed.

    These days , you can’t get away with that sort of crap. In the old days you had the same old school tie and the same clubs running the large firms and it was a closed shop. thank god for the new world.

    And moreover, what are the likely upshots of allowing such a trend to continue?

  196. JC says:

    Juuustt kidding fats. Notice your still a few seconds behind, hey? :-)

  197. fatfingers says:

    “But CEO : worker salary ratios have spiralled from something like 20 : 1 40 years ago to over 300 : 1 today.”

    Just found this on digg:
    http://graphics8.nytimes.com/images/2006/04/08/business/pay.graphic.jpg

    The median has doubled since 1940, quadrupled since the low of 1970, though as recently as 1990 it was the same as 1940. The graph doesn’t say, but I assume it is US executives only. And what’s happening at the NY Times that they commit apostrophe crimes?

    “Whats changed in the last 40 years”

    How CEOs are recruited and paid, decrease in CEO turnover time, financial market innovations, increase in size of companies, increase in size of markets. And perhaps a bit of a ratchet effect as boards decide to pay a little more, which becomes a standard that then has to be topped to get the best, and so on.

    JC, if you want to make bad jokes, tell the wife, not us. If you still insist on making them here, add a smiley so we know it’s a joke and not you being an asshole. :-)

  198. JC says:

    You’re right fats I should always let you know when something is said in jest. Silly me for thinking otherwise..

    But CEO : worker salary ratios have spiralled from something like 20 : 1 40 years ago to over 300 : 1 today.

    they’re US figrues of course.

    1. Stock market has zoomed , which is where the buk of compensation comes from

    2. The big elephant in the US tub are the 11 million illegals that have placed a tremendous strain on the real earnings of the bottom (ish) rung of the US wage levels. There are approx. 100 million workers in the US. 11 million illegal is a big nut to crack without expecting it an have some effect.

    3. it would be interesting to see where the level of compensation is if we stripped out stock option compensation.

  199. NPOV says:

    I don’t care how much “The Rolling Stones” as a corporation make – they’ve collected that money from willing customers. But it does concern me how the money is distributed between those that have contributed towards their success as employees.

    fatfingers: “Presumably if the workers felt it wasnt a fair percentage, they wouldnt keep working there.” That’s the problem though – the workers often do feel it’s “not fair”, but don’t think they have much power to do anything about it. And they’re often not all that aware of just how much profitability the company gains from paying them so little. Back when I was paid 45K/yr as a junior programmer, it seemed pretty good to me, until I read that the average programmer writing 10 lines a code of day was generally capable of developing software that generated as much as 90K profit for a well-run company. And, in all modesty, even as a junior programmer I knew I was capable of above-average productivity. So I was probably arguably being somewhat underpaid even then, but I also knew that my boss wasn’t really taking home a great deal more than me (it was a startup), so I could hardly complain.

    Tim – by “capable of a being a shareholder”, I mean in a significant sense. Owning 0.001% of Telstra doesn’t count.

  200. TerjeP (say tay-a) says:

    It is worth noting that 50% of Australians in the non agricultural sector work for a company which employs less than 25 people.

  201. NPOV says:

    As for the list of “what’s changed in 40 years” – sure, but do any those reasonably justify CEO’s being so much better off relative to average workers?

    I agree about the stock-option problem – and commented on it earlier: it may well be that when a company first starts out, the CEO is responsible for at least 50% of a company’s profits (and has personally invested that much in shares), but 10 years later when the company is 5 times the size, it seems unlikely that such is still the case – yet he still owns 50% of the shares. I’m not sure what the solution is here.

  202. JC says:

    I dont care how much The Rolling Stones as a corporation make – theyve collected that money from willing customers.

    Well you should other wise your argument falls in a heap. You have argued that that it’s not CEOS that make all the money for the firm.

    Well the Stones hardly set up their own equipment , organize the venue or serve the drinks after a show. The roadies etc. do that. Shouldn’t they get most of the spoils from the concert. It was the organizers after all who made the concert possible, right? In point of fact in terms of time taken and ‘ collective ‘ effort Mick and the other old geezers hardly did a thing.

    So are the Stones earning too much money from their frequent last world tour or not.

  203. JC says:

    theyve collected that money from willing customers.

    So has the condom manufacturer I bet. Moreover it’s no different than willing customers buying a ticket to see the stones.

  204. Ben says:

    NPOV what is wrong with the situation you mention and how would you remedy it? Information about average salaries for different positions is readily available for anyone who wants it. I don’t quite get what the problem is here. Can you let us know exactly what the issue is and what we need to change to rectify it?

  205. NPOV says:

    JC – yes, I probably would argue that the actual band members take away a disproportionate fraction of the profits from the their tours.

    Ben, there are a whole bunch of reasons why I’m uncomfortable with employees being underpaid, that aren’t all that much different to the reasons that social democrats have been traditionally be concerned about exploitation of workers etc.

    Ultimately though I think the world would be a “nicer” and happier place if there weren’t such wide disparities in incomes. I can’t prove this, and don’t pretend to be capable of doing so. It’s a subjective judgement and I don’t expect to be able to convince you via rational argument that it’s a “correct” one.

    I would say though that if we could figure out a way of solving the problem at the level of how employee salaries were determined, then I’d have litle or no objection to a NIT+flat tax.

  206. David Rubie says:

    Tim Quilty wrote:

    Probably something to do with the failure of your argument on wage rates dropping by the full $9000 to hold water?

    Since you didn’t give an argument as to why they won’t, I assumed you conceded that point. What mechanism will stop it happening?

  207. fatfingers says:

    “employees being underpaid”

    Unless you’re talking about rorts and fraud, there isn’t any way employees can be ‘underpaid’ if they agreed to the job in the first place. If you mean they produce more value for the business than they receive, that’s not being underpaid either – they have to produce more, or there’s no point hiring them in the first place.

    “exploitation of workers”

    In the absence of contractual crimes (like hiring a mentally disabled person and paying them in lollipops) and coercion (like hiring Romanian women to be ‘nannies’ and forcing them into prostitution), exploitation in your apparent sense of the word doesn’t happen.* Again, if you mean workers produce more value for the business than they receive, that’s not exploitation, unless you acknowledge that workers exploit employers by asking for more for their time at work than their time is worth at home. In which case ‘exploitation’ is meaningless.

    * High information asymmetry could lead to exploitation – eg buying the land on which grows the plant that cures cancer from the local stone-agish tribe for 50 cents worth of mirrors and beads. But that is hardly the likely scenario for developed countries like Australia, the basis for this discussion.

  208. NPOV says:

    “there isnt any way employees can be underpaid if they agreed to the job in the first place”

    That’s hopelessly simplistic though. People agree to jobs that under-reward their efforts for all sorts of reasons. By that argument nobody has ever been ever underpaid in the whole history of capitalism.

    And yes, of course employees need to produce more value than they receive, but at some point if employees are producing hugely more value that is reflected in their pay cheques, then they are being exploited: employers are basically taking advantage of either the ignorance or circumstances of employees who aren’t capable of bargaining for a better deal.

  209. TerjeP (say tay-a) says:

    or circumstances of employees who arent capable of bargaining for a better deal

    Such as when wages regulations ensure that there is a queue of jobless people waiting at the door to fill their spot.

  210. TerjeP (say tay-a) says:

    p.s. wage regulations tend to hurt minorities the most. So they aren’t even good for social equity.

  211. fatfingers says:

    “People agree to jobs that under-reward their efforts for all sorts of reasons”

    The point being that I’m disputing they are under-rewarded.

    “By that argument nobody has ever been ever underpaid in the whole history of capitalism.”

    And by your argument, no-one has ever been paid ‘fairly’ in the whole history of capitalism.

    Remember, value is created by labour, but value isn’t measured in labour. Unless you’re a Marxist.

    “if employees are producing hugely more value that is reflected in their pay cheques, then they are being exploited”

    Then, like I mentioned above, you have to say that workers are exploiting employers, because they are getting paid more than their time is worth fending for themselves.

    And if the value discrepancy is so huge, then there is scope for the workers to go into business for themselves to capture more of that value, perhaps alone, perhaps as a cooperative, perhaps as absent shareholder.

    Not to mention asking or agitating for higher pay!

  212. NPOV says:

    Terje: re “wage regulations tend to hurt minorities the most”, I wouldn’t dispute that there is always this risk. But I also think it’s folly to assume it’s not possible to design wage and labour regulations that avoid such pitfalls.

    ff: “they are getting paid more than their time is worth fending for themselves”?
    Can you give a realistic example of what you mean by this?

    Regarding employees being under-rewarded – sure, there’s a subjective value judgement here. But I’m willing to stand by it. There are many people out there contributing far more to society than I am, but getting paid a lot less of it.
    Interestingly though some of the most obvious examples tend to be ones paid by the government – scientists, teachers, nurses etc. So while I might argue that private enterprise often undervalues employee contributions, I readily accept that the government is far worse.

  213. JC says:

    Regarding employees being under-rewarded – sure, theres a subjective value judgement here.

    Well yes, it is subjective and until that changes your really don’t have much of an argument. Simply because you believe it to be so doesn’t change things.

    There are many people out there contributing far more to society than I am, but getting paid a lot less of it.

    You are making subjective comments again.

    Interestingly though some of the most obvious examples tend to be ones paid by the government – scientists, teachers, nurses etc.

    take that up with the government.

  214. TerjeP (say tay-a) says:

    NPOV – it’s not just a risk, it’s been a recurring reality.

  215. I didn’t read the comments… but if I’ve been the least civil, then I’m sorry. I was a little annoyed at the blatent and dishonest representation of my motivation (saying that I wanted to create an under-class), and policy (suggesting it would be bad for the poor, when the exact opposite is true). It’s also annoying to see Ken consistently misrepresent what libertarians believe. He is certain he disagrees with us… but unfortunately he hasn’t worked out what we actually think.

    NPOV — I don’t really think the left hate the poor. At least not all of them. This comment was in response to my similar accusation towards me. The entire debate would do better if the “left” stopped their assumption of moral superiority and simply discussed which policies will lead to the long-term benefits of society (and in this case, specifically the poorest people in society).

    Rubie — I have never suggested that poor people are retarded. I am 200% sure that all non-disabled people in Australia would be able to look after themselves without government. It is the left that seems to assume they are retarded by insisting that they will self-destruct without the significant help of a large and growing welfare state. I think the left is wrong to assume poor people are retarded. The overwhelming evidence from around the world shows that the non-disabled (and many disabled) are able to look after themselves without government help.

    NPOV — you seem to think that without labour market restrictions, some people will be paid peanuts. This is extremely unlikely. If we are going to base policy on life-boat examples then we’ll have to ban everything.

    Hong Kong doesn’t have an effective minimum wage. Some people start their working life on what we would consider a harsh low income… just $4 or $5/hour (still a lot more than the average for most poor countries). But the vaste majority then work their way up to higher incomes. You don’t have the same opportunity if you are being kept out of the workforce by well-intentioned leftists making your first job illegal.

    The vaste majority of Australians aren’t effected by the minimum wage. And given the current elasticity of labour demand, wages for low-skilled jobs would not have to drop much before we reached effectively full-employment. The tendency of the labour market to trend towards the marginal productivity of labour is well known and perhaps more reliable than most market prices.

    I don’t have the time to read all the comments here, but if somebody does have direct questions/comments/criticisms of my original paper, please feel free to e-mail me (without accusations of moral inferiority) and I’ll give you a friendly reply. My e-mail is [email protected]

  216. NPOV — I think that good nurses and teachers would be paid more currently if we had private health & education systems. Bad nurses and teachers would be paid less. The incentives to enter the professions would be higher (most people assume they’re going to be good at their job). Schools & hospitals would achieve greater efficiency improvements (like every private sector of the economy has been experiencing).

    But of course, health & education privatisation is nowhere near the agenda… and even the LDP (the most libertarian party in Australia) doesn’t suggest a free-market in health & education. It would be nice if our political options covered this base as well (it covers the fully socialist option) but there simply isn’t enough political interest in a radical libertarian alternative.

    As a personal aside… if a radical libertarian party did exist in Australia, I would remain with the moderate libertarian party.

  217. Ken Parish says:

    All very interesting. But I don’t think anyone here “hates the poor”. In fact that’s a pretty juvenile and unworthy argument, possibly equivalent to the Godwin’s Law of economic argument.

    And I don’t really understand how anyone could confuse neocons with libertarians. Moreover, I don’t think corporate executives are under any duty to pay “reasonable” wages in the absence of a legally prescribed or contractually established standard. Any system that relies on people’s innate generosity of spirit is a system bound to fail. Adam Smith had it right. Federal ALP Minister (and economics PhD) Craig Emerson summed it up well in yesterday’s Oz:

    As Bob Hawke was teaching me the intricacies of betting on horseracing, when I was a fresh recruit to his staff in 1986, he said: “Son, in any race, back the horse called Self-Interest because you know it will be trying.”

    The LDP endorses genuine freedom of association, and strong trade unions are perfectly capable of ensuring that workers get paid reasonable wages.

    Nevertheless, in a modern society like Australia, where people are still used to fairness being mandated by a central wage-fixing system, I think there’s a need for a minimum wage for the lowest paid, least skilled workers. Ironically, in our system they’re the least likely to be unionised and therefore the most vulnerable to gross exploitation. But that isn’t to say it can’t be finessed to result in a much more flexible, market-based and innovation-friendly system that nevertheless is able to deliver fairness. That was the whole point of my post i.e. fairness and libertarian market solutions aren’t incompatible if we’re prepared to listen to each other. I don’t think the LDP’s 2007 30/30 policy actually delivered that but it was a good faith effort containing lots of good ideas worth persevering with.

    30/30’s main defect was its insistence on effectively cutting the dole rate on the good faith but almost certainly erroneous assumption that it would deliver enough low paid jobs that the unemployed could readily take to supplement their NIT payment, allied with an insistence on completely abolishing the minimum wage (combined with a stubborn refusal to acknowledge the obvious reality that this would lead to lower wage rates. You don’t need to be Einstein to know this. We’re talking about the least marketable, least skilled part of the workforce for whom excess demand doesn’t exist in most places. And we’re talking about employers who, like everyone else, can reliably be expected to exhibit self-interest. The genius of capitalism is that it doesn’t expect or require anything else, and indeed self-interest is its primary engine. Thus, if you abolish the minimum wage in that situation, wage rates for the unskilled will fall. Nor is this just an assertion of idle theory. I’ve already mentioned the experiences earlier this year of my own daughter and her partner ($6 per hour at Melbourne restaurants). Nor is that an isolated experience:

    NEARLY 60% of international students in Victoria could be receiving below minimum wage rates, a study by Monash and Melbourne university academics has revealed.

    Interviews with 200 international students drawn from nine universities across Victoria revealed that up to 58.1% of students surveyed were paid below $15 an hour, with 33.9% receiving less than $10 an hour.

    That might not be so bad if the 30/30 actually resulted in a significant increase in the actual number of available low paid jobs, because the operation of the NIT would mean that even more meagre low wages than at present would be supplemented by the NIT payment. But that would only be true if lots more such jobs were actually created, and if they were jobs suitable to (especially) the long term unemployed. Neither assumption is maintainable. Most economists would agree that, in theory, abolishing the minimum wage should have some job creating effect. It’s basic economics, albeit that most analyses I’ve read suggest the effect is not likely to be huge. Moreover, the net effect of the LDP’s 30/30 policy is to dampen whatever employment-generating effect abolition of the minimum wage might have. It transfers income from the unemployed and existing low paid workers to high income earners, something which basic economics tells us will reduce consumption spending and therefore job creation effects.

    Nevertheless, I think lots of elements of the LDP 30/30 are worth persvering with, albeit with tweaking. I certainly think a Negative Income Tax is a great idea, as is an increase in the tax-free threshold for families in place of the current Family Tax Benefits. How can these elements be made to work both fairly and flexibly?

    First, I don’t think it’s either appropriate or necessary to (effectively) slash the base rate of dole payment by setting the NIT at $2500-5000 below the current level. The vast majority of unemployed people don’t want to be unemployed and need no additional incentive to find a job. Most stay on Newstart for as short a time as possible. Moreover, while there are no doubt some genuine bludgers among the long-term unemployed, most of them cycle between uenmployement and low paid insecure jobs because of severe lack of skills and either serous drug or alcohol addiction or borderline psychological/personality disorders that will not respond to the metaphorical “cut of the birch” that 30/30 represents. The current system is itself fairly punitive and doesn’t work with the long-term uenmployed for the same reasons. These people need more than just economic incentives, whereas most unemployed don’t need any additional incentive at all and would just be pointlessly penalised by the LDP’s policy (as would existing low paid workers whose wages will be forced down). It’s surplus repression for no useful result.

    Nevertheless, there may be SOME useful purpose in having more flexible wage rates for the long-term unemployed (although my own experience as an employer for 15 years was that such people are usually more trouble than they’re worth irrespective of wage rates, whch is no doubt why most of them can’t hold down a job for any length of time despite the current punitive system). I would countenance a trial of a system which allowed a significantly lower minimum wage to be paid to the long-term unemployed (e.g. $8-10 per hour) along with a NIT for everyone that would introduce much more flexibility and incentive into the system. That way, the wages of the least employable would be priced much closer to natural “clearing” rates, but existing low paid workers and the ordinary unemployed who both want and are capable of finding another job fairly quickly, would not be needlessly penalised. IMO such a system is potentially superior to the current one (which any honest observer would have to admit doesn’t work well), whereas the 2007 30/30 was a brave attempt that didn’t quite get all the elements right.

  218. David Rubie says:

    John Humphreys wrote:

    Rubie I have never suggested that poor people are retarded. I am 200% sure that all non-disabled people in Australia would be able to look after themselves without government. It is the left that seems to assume they are retarded by insisting that they will self-destruct without the significant help of a large and growing welfare state. I think the left is wrong to assume poor people are retarded. The overwhelming evidence from around the world shows that the non-disabled (and many disabled) are able to look after themselves without government help.

    Yes John, I misquoted you. You said whiny retards (“Isn’t everyone sick of the whining?”).

    Sorry about that.

  219. A final note to make up for my absence from most of this debate, I agree that some people are under-paid. The market isn’t perfect. The “equilibrium wage” for most people is constantly changing and there is a degree of hysteresis in all market (and government) actions. This means it is extremely unlikely that any market is perfect at any point in time.

    The virtue of the market (including the labour market) is that it trends towards the correct value.

    The government tends to adjust more slowly than the market, and it also has the wrong incentives to reach market-clearing prices (which in the case of the labour market would lead to wages = marginal productivity of labour). It is possible that the government could accidently get it right occasionally… but this doesn’t justify the other 99 times it gets things wrong, and the consequences of those (often difficult to remove) mistakes.

    It is also true that luck plays a big part in life… which leads to outcomes that are often seen as unfair. However, (1) we all accept some role of luck in life, or we would be offended by the idea of the lottery; (2) the govt can’t remove luck, just switch it around; and (3) the govt is often bad at managing luck, and the consequences of them trying can be quite harmful.

    Anyway — my point was that while some people may be under-rewarded at any point in time… that is insufficient to justify the anti-poor policies of labour market regulation.

    And while this isn’t popular to say in polite company — I also think that nearly everybody on the left is vastly underestimating the importance and value of civil society. It is not a bad thing that we have billions of dollars of aid being voluntarily distributed. It is not a bad thing that the vaste majority of australians would help anybody in their extended networks without expecting repayment. There are millions of people working on thousands of ideas to voluntarily deal with parts of society they would like to improve. These solutions are often more effective, more efficient and more flexible … and are being undermined by government policy and leftist attitudes of dependence, victimhood and automatic-handouts.

  220. Ken — you say that I refuse to accept that 30/30 would lead to lower wages. I directly say that 30/30 would lead to lower wages. I’m trying to work out a basis for this discussion, but it’s difficult if you insist on constantly misrepresenting me. What is the reason for the misrepresentation?

    If you don’t like my assumptions about the employment response from abolishing the minimum wage, perhaps you could provide your critique of the labour demand elasticities I used. And if you don’t want to use the best available evidence for estimating the outcomes of policies… then on what basis should we proceed?

    The intention of 30/30 was to cut the dole by about $1000 (not $5000). I accept that time has moved on, which would require slightly different numbers. Do you really think it would be impossible for the unemployed to find a casual job paying $1000/year? Seriously? I could easily set up a charity to look after these 6 people who are unable to work at Maccas for 2 hours/week.

    And let’s check the other side of the coin — how about the thousands of people helped into a job, and the upward mobility that involves? These are potentially significant benefits helping some of the most needy in Australia. Unemployment isn’t funny (sometimes I think the left underestimate the social costs from unemployment) and anything that helps people gain employment is hugely beneficial not only to the economy (and therefore to future generations)… but especially to those families and the people around them.

    I admit in my paper that some people will lose. I wish that wasn’t the case. But the benefits of effectively removing unemployment (and all the associated costs) is worth it.

    Further, it’s worth noting that the $9000 came originally from my honours thesis, which worked out what the Henderson Poverty Index (the most famous poverty measure in Australia) would have been if indexed to inflation instead of average wages. There is no rationale for indexing a “poverty” measure to average wages. Such an activity is worthwhile, but it is a measure of inequality — not poverty. It’s also fair to have different poverty levels if you like… but it’s not appropriate to pretend it’s the same poverty level while indexing it to wages.

    Rubie — the whinging I’m referring to is from people like you. It had nothing to do with the relative wealth of the person. This is fairly obvious. What is the reason for your misrepresentation?

  221. David Rubie says:

    John Humphreys wrote:

    Seriously you have to be retarded not to be able to look after yourself in Australia. Isnt anybody else sick of the whingers? Go and live in Cambodia (who manage to find food & accomodation surely impossible in Ken-thought) and then come back and tell me your sob stories.

    Don’t try to get out of it Humphreys – the imputation is absolutely, crystal clear:

    – can’t live on $9000, you “have to be retarded”, and “Isn’t anybody else sick of the whingers” has NO OTHER subject other than the previous sentence.

    Why don’t you tell us what you really think? I know you’re itching to do it.

  222. NPOV says:

    John, you really do infuriate me with the way I find myself mostly agreeing with you for 80% of what you write, then aghast at the last paragraph.

    What “leftist attitudes of dependence, victimhood and automatic-handouts” are you talking about? For a start, the LDP’s 30/30 policy is surely more of an automatic-handout than current the Newstart program.

    And how exactly do the left vastly underestimate the importancce of “civil society”, or think it’s a “bad thing that we have billions of dollars of aid being voluntarilty distributed”? I would actually like to see stats on the political leanings of people involved in private charities: I would be highly surprised if it indicated a majority of people that believe in economically libertarian policies.

    This whole discussion has tended to re-inforce what I’ve gradually been observing: that economically liberatarian types tend to be all so sure that all problems of unemployment or poverty are caused by government meddling, and
    that there’s no possible way that government policy could improve on an otherwise unregulated labour market. But why should we accept that? Ok, the problem is difficult, but I’d much rather see governments making a genuine effort to try, admit it when it makes mistakes, and then try alternative measures, than simply sitting back and saying “sorry, we know that dodgy employers are paying workers $5/hour under inhumane conditions, but any attempt to intervene in the labour market is bound to lead to unintended consequences and make matters worse”. If we took that attitude for every decision we made in life nothing would ever get achieved.

  223. Me again. Sorry.

    I should point out that I don’t think 30/30 is a silver bullet. There are lots of ways to approach the remaining problems in the Australian economy and I’m certainly not claiming the last work in that discussion. Indeed, I have a new paper coming out soon with a different approach (which doesn’t involve cutting the dole).

    If we could get 30/30 put in place… but with a slightly higher dole payment and a still existent (but lower) minimum wage, then that would be good too.

    Though I must also respond to this sentence: It transfers income from the unemployed and existing low paid workers to high income earners, something which basic economics tells us will reduce consumption spending and therefore job creation effects.

    Even if the assumption about money transfer is true (questionable — more jobs for the poor could mean that all benefit) the conclusion is wrong. In a simplified model, income is split between consumption and investment. It is investment (not consumption) that drives long run growth by increasing/improving the stock of capital. So the higher savings rate of higher income people would actually provide a long-term benefit to the economy (and therefore future generations). However, I think this impact is dwarfed by the benefits that 30/30 provide to today’s poor.

  224. Ken Parish says:

    “What is the reason for the misrepresentation?”

    John, you’ve only just joined the discussion. If you scan back through the comment thread, you’ll see that several of your colleagues argued that no wage rate reductions would occur and challenged me to explain why I thought they would!! I was responding to them not you.

    “The intention of 30/30 was to cut the dole by about $1000 (not $5000).”

    Fair enough. But the effect on current rates is exactly what I said: – $2400-5000 depending on whether the person qualifies for rent assistance. Moreover, I’m fairly sure that the figures weren’t all that different in 2007 when you ran on $9000 as the LDP’s election policy. I wouldn’t have a problem with a base NIT rate $1000 below dole rates (though you’d need to deal with the rent allowance issue somehow).

    “And lets check the other side of the coin how about the thousands of people helped into a job, and the upward mobility that involves?”

    My last long comment at #218 explained this in some detail. I simply don’t accept tht the 30/30 as it stood would have had a large employment-generating effect, and even to the extent it would have created jobs I doubt that most of the long-term unemployed (who are the only ones needing any “incentivising”) would mostly have been capable of filling them. As I said, economic incentives are necessary but not sufficient to get these people into sustainable employment. I’d be happy to try lower minimum wages for those people, but even happier with meaningful job-training and other programs to address the underlying problems that make most of them effectively unemployable at just about any price.

  225. fatfingers says:

    NPOV: “Can you give a realistic example of what you mean by this?”

    It’s a self-evident reality, not something I have to search for examples of. Perhaps I’m explaining it badly. Let me try again, borrowing from David Friedman.

    My employer benefits from my work – that is, they get more out of me than they put in. But simultaneously, I benefit from working – I get more out of my employer than I would get out of myself (say by growing my own food and writing haikus for utilities money).

    It’s tied in with the division of labour, and all the benefits that brings.

    I’ll give you a real example, if it helps. While I was a manager, I had to fight on behalf of my staff to stop senior management from implementing some 4-hour shifts (instead of the usual 6-, 7- and 8-hour shifts). Why did the workers object? Because they got more value out of working an extra two hours (if they were already working that day) than they would get from two extra hours of free time. Obviously there is diminishing returns in both directions, but that is secondary (and different for each individual).

  226. Rubie — it’s quite clear what I think. I think that non-disabled people will be able to look after themselves fine in Australia without the government. You would have to be retarded not to — but I think everybody can. You think they can’t. Therefore it is you who thinks the poor are retarded.

    And it is the whingers I’m sick of… whether poor or rich. Specifically — people like you.

  227. NPOV says:

    John: “sometimes I think the left underestimate the social costs from unemployment”. Correct me if I’m wrong, but wasn’t it right-wing governments that moved from unemployment-targeting policies to inflation-targeting policies?

    FWIW, I could just as well argue that “the right underestimate the social costs from being locked into low-paying jobs that fail to provide training and skills growth”.

    Also, interestingly enough, the Norwegian Labour and Welfare Organisation is busy worrying that unemployment in Norway might get too low, though I’m a little confused about there reasoning: http://www.aftenposten.no/english/business/article1570184.ece

    At any rate, if solving the unemployment problem was as easy as you suggest, some country out there would have surely done so by now. Even Hong Kong with its lack of any effective minimum wage has had unemployment has high as 7.9% in recent years (it’s been higher than Australia’s rate for at least the last 5 years).

  228. JC says:

    I would actually like to see stats on the political leanings of people involved in private charities: I would be highly surprised if it indicated a majority of people that believe in economically libertarian policies.

    I once recall reading most charitable giving and party affiliation showed a skew to GOP supporters. Admittedly without looking at any evidence my hunch is that has to do with GOP’ers tending to be more church going in the US so the skew may not not carry here in Australia as we’re not as we’re not early risers on Sundays.

  229. NPOV says:

    ff – fine, but I still don’t understand why that implies that in a case where, for instance, an employee is directly responsible for generating about 100K in company profit every year but is only getting paid 30K in salary, would be an example of the worker “exploiting” the employer.

    As for the idea that self-sufficiency is a realistic alternative to working a salaried job, do you really need me to go into why that might not be the case in a country like Australia? Like…requiring access to land on which to support yourself for a start!

  230. Ken — the biggest part of our disagreement seems to be about the elasticity of labour demand. I understand you disagree with the estimates I used… I just don’t understand why you disagree with them. I didn’t make them up. One of the studies I used was Andrew Leigh’s study regarding the labour demand elasticity to minimum wage changes (though that section of my paper was removed by an editor who didn’t seem to understand it). Other studies were done by equally reputable Australian economists over a number of years.

    But even if we take a more moderate estimate of elasticity… say half what I used… we’re still talking about hundreds of thousands of new jobs. Even if we take an elasticity 1/10th I used, we have an extra 50,000ish jobs. While that makes my argument less overwhelming, it is still a benefit worth pursuing. Especially when you consider the long-term effects of changing the dynamics so that fewer people become long-term unemployed in the first place… and the higher growth rates that will lead to higher wages for all in the future.

    I admit I didn’t read most of the previous comments. Sorry if I’ve jumped the gun on some things. I got defensive after reading the original post (which I thought was a bit narky) but your subsequent comments have been in good spirit.

    (The best solution to rent-allowance would be relaxing the zoning law restrictions… but that’s a different issue.)

  231. JC says:

    John: sometimes I think the left underestimate the social costs from unemployment. Correct me if Im wrong, but wasnt it right-wing governments that moved from unemployment-targeting policies to inflation-targeting policies?

    You can’t run long term monetary policy on an employment target as it will invariably give you the opposite of what you intended. easy monetary policy will not give you a free lunch.

  232. NPOV says:

    JC, which is why I specifically said “people that believe in economically libertarian policies”. It may well be that there is a slight skew to those who vote for more socially/religiously conservative parties.

    Of course, it’s slighly unfair, as arguably a very small percentage of people truly in believe in economically libertarian policies anyway.

  233. NPOV: Correct me if Im wrong, but wasnt it right-wing governments that moved from unemployment-targeting policies to inflation-targeting policies?

    You are wrong — it was Hawke/Keating. And it was the correct thing to do. The RBA can say they are targeting unemployment, but they can’t actually change it. All they do by trying is create market distortions (leading to boom-bust cycles) and increase inflation (which hurts poor people).

    You might be right that the free-market side (I don’t consider myself “right-wing”) underestimate the costs of low-paid jobs. I certainly consider the social costs of low-paid jobs as lower than the social costs of unemployment. And I think a lot of reality backs me up on that point. The upward/downward mobility of the employed is quite significant — certainly more so that admitted by the “left”.

    I don’t think there is such a thing as “unemployment too low”. However this is a difficult issue dependent on a number of other policies… and I don’t want to get into it now.

  234. JC says:

    You could calculate it.

    I believe 10% of people identify as libertarian in the US. I think I recall 70% of those who self identified as such in the past voted GOP. By those stats you could assert that libertarians are bigger donors than Dems.

  235. Regarding charity — the most consistent correlation is between wealth and generosity (as a percentage of income)… and libertarians (except me) tend to be more wealthy than average.

    I only have anecdotal evidence to go on. Mohammad Yunnus (Grameen bank guy) is a libertarian. The people funding my Human Capital Project (funding education in cambodia) are mostly libertarian. The head of the social entrepreneurs network in Melbourne used to be a moderate libertarian. Most libertarians people I know contribute to charities.

    But I have no real evidence, so my best guess would be to fall back on the wealth-generosity correlation.

  236. JC says:

    Wall street has an interesting employment condition (that isn’t written into the contract) at most firms. Every year come bonus time, you received your bonus letter and it came with another sheet that contained the suggested list of charities or a series of lines for those that weren’t listed. You were expected to donate 5% of your gross bonus to charity. It wasn’t an issue for discussion.

    Everyone above a certain level of income should do that each year.

  237. As for NPOV’s point about charity… it doesn’t actually matter if it is being donated by libertarians or not. All that matters is that it exists in fairly large quantities in Australia. It is hard for me to accept that this is insufficient to cover most real hardships, or that it is about to break a 200 year trend and suddenly disappear.

    I don’t think that “leftists” actually think about civil society and conclude, “oh, that’s bad”. I just think they haven’t thought through how effective these can be and haven’t given careful consideration to whether private charity actually is insufficient.

    If all the people lobbying govt for help turned their attention to actually thinking up and implementing voluntary solutions to the real problems that we still face I think we would be amazed at our progress. If the government didn’t then crowd out and stifle civil society, I think we would see a “charity revolution” in style, substance and quantity.

    These options are often dismissed too quickly as “insufficient” and just a dream. That’s a pity.

    ============

    I agree that poverty isn’t necessarily caused by government… though I do believe that unemployment generally is. If all labour market restrictions are removed I will personally employ every able-bodied working Australian the next day for $1/day. Of course, you would be correct to say that $1/day is pathetically low and you’re not happy with that outcome. Neither am I. I don’t actually think it would come about (other people would bid up the price)… but even if it was a real problem, it is a problem of low wages (therefore low productivity) and not unemployment. We need to correctly identify the problem before we can solve it.

    The government doesn’t cause poverty… but it slows down the greatest cure to poverty that the world has ever seen — economic growth.

    As for other solutions to unemployment. What? Training beyond the appropriate amount of training provides a reduction in productivity and long-term wages (as resources are taken away from where they would have been better employed). Job subsidies have consistently been shown to be a waste of money… and are introduced now simply because they play well politically. Government employment? Well — it provides jobs. But it costs much more than it creates (the old story about employing people to dig holes and fill them in again).

    As for sitting back and accepting what we don’t like. Don’t do it. Work hard to make a positive difference in the world. But you don’t need the government for that. And if you check their track record (and think carefully about the previous consequences of their failure) then you should develop a health skepticism of the “the gummint outa” mentality.

    I’m not saying we should never consider government action. But I would prefer people to think more about how they can help solve a problem, rather than always turning over the problem to bureaucrats (who are neither more skilled, nor more philanthropic than normal people). And when we do consider government action, I think it appropriate to approach their proposals with skepticism (inspired by our understanding of public choice theory, and the history of govt policy failures) and put the burden of proof on them. If we had done that with Iraq… we would never have invaded.

  238. lol — I just noticed that Rubie called me an “ex-Marxist” in comment #110. Just in case anybody took this seriously, I will quickly correct the record.

    I started as a conservative… then went moderate libertarian… then went radical libertarian… and have only started to appreciate the “left-anarchists” in recent years.

  239. fatfingers says:

    Ken: “a stubborn refusal to acknowledge the obvious reality that this would lead to lower wage rates”

    On the contrary, an implicit assumption of minimum wage (MW) abolition is that some wages will fall for some people, that’s the whole point – that wages reach a market-clearing level. Some can’t contribute enough value to a business to be worth the MW, but shouldn’t be excluded from the job market just because of that. The NIT is there to ensure that people aren’t reduced to a less-than-subsistence level. As acknowledged by JohnH, this could do with some tweaking after seven years (maybe 40 TFT/30 tax rate?), but it’s hardly the death knell for the policy.

    “youll see that several of your colleagues argued that no wage rate reductions would occur”

    Who? I didn’t see that. Several?

    “and challenged me to explain why I thought they would!!”

    If you mean me, that is a misrepresentation of what I actually asked, which was for you to substantiate your claim that “the LDPs tax cuts for this group will mostly be more than offset by wage cuts.” I even generously assumed by “tax cuts” you were including the low-wage subsidy inherent in an NIT, so stop trying to extract the most negative interpretation possible from my comments, since I don’t do the same for you.

    I note that you have yet to come good on that challenge.

    “It transfers income from the unemployed and existing low paid workers to high income earners, something which basic economics tells us will reduce consumption spending and therefore job creation effects.”

    You are forgetting (or deliberately omitting the fact) that tax reduction and simplification reduces deadweight loss and the sub-optimal allocation of resources, thus improving macroeconomic outcomes and stimulating job creation. Then there’s the simultaneous actions advocated by the LDP to enhance job creation and reduce costs, which you steadfastly ignore in your analysis.

    “most unemployed dont need any additional incentive at all and would just be pointlessly penalised by the LDPs policy”

    Not so. If they aren’t unemployable because of medical or psychological reasons, then they benefit from the LDP’s policy, because there would be no barriers to employment anymore. The biggest problem for the employable unemployed (and I know, I was one) is that there aren’t enough jobs. The reason there aren’t enough jobs is because there are artificial barriers to entry like the MW (and awards and anti-discrimination laws and red tape, all of which the LDP addresses in conjunction with tax/welfare reform).

    A little anecdote for you – I used to deal with a charitable firm that employed Down syndrome workers for basic letter-stuffing contracts. They had to exclude a lot of willing unfortunates because their abilities weren’t up to MW marginal value. Please feel free to visit them and explain how they should be denied work and an income and a measure of self-respect and independence because they can only do 1,000 envelopes a day instead of 2,000.

  240. fatfingers says:

    “I still dont understand why that implies that in a case where, for instance, an employee is directly responsible for generating about 100K in company profit every year but is only getting paid 30K in salary, would be an example of the worker exploiting the employer.”

    Because the 30K salary is more than they could make otherwise.

    OK, once more unto the breach…

    How much would you pay to get off work an hour early tomorrow? If it is less than your hourly wage, then you are exploiting your employer – your valuation of one of your hours is less than you are getting paid. That is, the employer is paying you more for an hour than that hour is worth to you, just like they are paying you less than your hour is worth to them. Mutual ‘exploitation’, by your reckoning.

    If it is more than your hourly wage, then your revealed preference is to work less, but I bet you a motza that you would pay less for each additional hour (the diminishing returns problem) – after all, you wouldn’t pay eg 80% of your wage to avoid work altogether.

    “As for the idea that self-sufficiency is a realistic alternative to working a salaried job”

    No, no, no. I was trying to illustrate the point, not provide you with the recipe to the lifestyle you always wanted.

    Imagine you are kicking back on the front verandah on the weekend, pondering whether to mow the lawn or crack open another beer and pay the next door kid $20 to do the mowing instead. Then the opposite neighbour walks past and offers you $50 to mow their identical lawn. They do this because they could get $100 of benefit from avoiding the mowing. Are they exploiting you because their benefit exceeds your pay? Or are you exploiting them because you value the lawn mowing (or free time with beer in hand) at only $20? Are you exploiting the next door kid, or does he exploit you because he has nothing to do for an hour anyway and might as well earn $20 which otherwise he would not get?

  241. NPOV says:

    Well John that last post of yours I agree with nearly 100%. There is too much expectation among the general public that the government can and should try to fix everything, as we’ve seen with the latest kerfuffle over petrol prices (though here I actually do believe the government has a big role to play, as its very much government policies that have led to the situation of most voters being heavily dependent on petrol for their lifestyles and having few alternatives but to drive everywhere, and hence pretty much the only way to reverse the situation is better government policies that help reverse the trend).

    However, in general I don’t necessarily believe the solution is “less government”, just “better government”. There are certainly areas where it makes sense for the government to step out of the way entirely, but there’s little point if there’s going to be constant democratic pressure for them to step back in again.

    ff – I think you have a strange definition of “exploit”. Exploitation pretty much by definition can only happen when one person who has more power than other takes advantage of that power imbalance.

  242. Ken Parish says:

    John re #231

    The papers by Andrew Leigh that I’ve seen on minimum wages and labour market elasticity deal with the effects of an increased minimum wage rather than abolishing it. Nevertheless, how does the elasticity your paper assumed (before editing) compare with the figures Andrew has used? Your ready concession of a much lower elasticity suggests you used rather more generous numbers than Andrew in the first place.

    Just as importantly, I’ve read research suggesting that lower elasticity applies when you’re reducing or abolishing minimum wages than when you’re increasing them. I could probably find it again if pushed but you’re probably already aware of it given that this is your area rather than mine. I can’t remember all the reasons why that was suggested, but it may include fairly obvious factors like the phenomenon I’ve been discussing. If you increase minimum wages you’re pricing out lots of perfectly serviceable employees who paid their way under the old minimum wage but don’t under the new one. However, if you reduce or abolish minimum wages you’re not thereby making employable the long-term unemployed who are unemployable at any price through drug or alcohol addiction or psychological/personality disorders (the “retarded” as you bluntly put it). If you had worked with the long-term unemployed for long (as I did many years ago now) you would realise that there are a lot more of these people than you seem to think. It’s one of the main reasons why we have a seemingly irreduceable unemployment number of around 4% despite prolonged boom conditions.

    Nevertheless, and despite those observations, I’m happy to accept your base estimate of 50,000 new (casual?) low paid jobs as being created by 30/30. In fact let’s be generous and assume 100,000. That still isn’t anywhere near enough to provide significant additional employment opportunity to the real numbers of long-term unemployed. There are around 100,000 long-term unemployed as defined by ABS (from memory), and that has been a persistent number over a long period of time. However several well accepted studies (e.g. ACOSS 2004) indicate a much higher level of around 400,000 for the real number of long-term unemployed. That’s because the ABS definition is very narrow and rigid and excludes lots of people who are unemployed most of the time over a long period but who cycle in and out of low paid, low skill casual jobs often enough to be excluded from the ABS definition. That is, they are people who are ALREADY doing what your 30/30 policy aims to achieve, namely taking low paid casual work as and when available and supplementing it with the dole/NIT when it isn’t. What happens to these people under 30/30?

    At present they’re getting the minimum wage of $13.70 or thereabouts per hour, because they’re usually being placed in these jobs by Mission Australia or some other official job agency. If we assume that these people when employed are working 24 hours per week at minimum wage casual rates (they’d be earning less than the current dole if they worked significantly less hours than that – which I concede is an advantage of 30/30 – people could work a relatively small number of casual hours without losing their base dole/NIT), then they are earning about $325 per week while in work or $16,900 per year. When they’re not in work they’re earning the dole + rent allowance of $272 per week or $14,100 (approx).

    By comparison, let’s see what happens to such a person under 30/30. As you concede, their hourly rate of pay will fall with abolition of the minimum wage. It could well fall to $6 per hour or less (the amount my daughter and her partner were both being paid recently). But let’s be slightly less pessimistic and assume $8 per hour. Note that it appears that 33.9% of foreign students are already being paid at less than $10 per hour right now despite the fact that it’s illegal, so this hardly seems an unreasonable assumption. On that basis our unemployed person will now receive $192 per week for their 24 hours of casual low paid work or $9,884 per year. They then get a NIT of $6035 making a total of $15,919. That is around $1000 less per year than they receive under the current system when they’re employed. When they’re unemployed, of course, they’re even worse off again under 30/30 because they only get paid at the fortnightly equivalent of $9000 per year ($2,400-5000 less than the current dole rates).

    Thus, as I’ve been saying all along, the result of the 2007 30/30 would have been to make the unemployed and low paid workers significantly poorer than they are now, while giving large tax cuts to high income earners.

    However, most of these negative/unfair/unsaleable aspects could be removed by the “tweaking” measures I suggested earlier:

    (1) NIT level no more than $1000 below current dole rates (and indexed to inflation);
    (2) Minimum wage rates remain in place as now for most unemployed who find jobs;
    (3) However, long term unemployed as defined by ABS may be paid at a lower minimum wage of (say) $8-10 per hour.

    That would result in a much more flexible labour market with the sort of incentives to find work that you say you want, but without making the unemployed and low paid workers poorer than they are now.

  243. NPOV says:

    Ken, I take it then the “large tax cuts to high income earners” part doesn’t bother you?

    I would still prefer to see a sliding scale of EMTRs – e.g. 30% for those earning under $30000, 35% for those between 30 and 100K, and 40% for those over.
    Either that, or raise the tax-free threshold far higher (say, 50K), and then look to carbon taxes to make up the lost revenue. And every time carbon taxes are raised in the future, the tax-free threshold can be moved still higher (effectively making the tax system more progressive to counter-act the regressive effect of carbon taxes).

  244. Jason Soon says:

    Most of the ex-Marxists tend to be on the neoconservative luvvie-bashing side -Keith Windschuttle and John Greenfield being obvious examples. I can’t off the top of my head think of any libertarians who are ex-marxists though there were two who used to be involved in Labor (myself for one, and David Lejonhyelm I believe campaigned for Whitlam back in the day).

  245. JC says:

    Jason
    We’ve seen one go the other way. Bird could be now seen as a Marxist with a sprinkling of One Nation.

    N says:

    However, in general I dont necessarily believe the solution is less government, just better government.

    It doesn’t work, N. Bush was supposed to be a better big government conservative, meanwhile New Labor had the “third way”. Both failed. These attempts always end up hitting the bottom because the price mechanism and the response isn’t functioning.

  246. Patrick says:

    (1) NIT level no more than $1000 below current dole rates (and indexed to inflation);
    (2) Minimum wage rates remain in place as now for most unemployed who find jobs;
    (3) However, long term unemployed as defined by ABS may be paid at a lower minimum wage of (say) $8-10 per hour.

    That would result in a much more flexible labour market with the sort of incentives to find work that you say you want, but without making the unemployed and low paid workers poorer than they are now.

    I agree with that, I think that’s a pretty sensible compromise and one that should still result in substantial savings to the Treasury.

    I would, however, regard an essential ‘pay-off’ being easier sacking – my understanding of the literature (which I haven’t really looked at for about 2-3 years now) and practical experience is that this is much more significant than minimum wages.

  247. Ken Parish says:

    “I would, however, regard an essential pay-off being easier sacking – my understanding of the literature (which I havent really looked at for about 2-3 years now) and practical experience is that this is much more significant than minimum wages.”

    Yes I agree, and that’s what I started out arguing in the primary post (and proposed safeguards so that sacked workers have a reasonable safety net for retraining etc). i.e. I was arguing (like Jason, I think) that there are lots of much more important labour market flexibility issues than minmum wage. Nevertheless I’ve ended up being dragged into a prolonged discussion on the latter topic anyway, which tends to suggest that Jason’s chances of ever getting the LDP to take up his ideas are fairly poor.

    NPOV

    Yes I agree with that too. I argued much earlier that we shouldn’t adopt a flat tax system, but that there was probably scope for at least some lowering of the top rate in the context of addressing rorts like family trusts. I haven’t abandoned that position, just moved on to focusing on the minimum wage issue, because for whatever weird reason that’s what the LDP chappies seem to want to talk about.

  248. Jason Soon says:

    Ken

    One does not exclude the other. I agree with the LDP stance on the minimum wage but basically freezing it as it is would have the same effect over the long term and not scare the public as much. But yes there are other things which contribute to unemployment and slow job creation such as licensing and compliance cost issues and even town planning issues but I’m sure the LDP have policies for these too.

  249. NPOV says:

    JC, you may well believe that that striving for “better government” doesn’t work, but I think striving for “smaller government” is far less likely to be successful – and indeed there’s very few cases of it having been successfully pulled off. OTOH, I’ve read several times about how globally, government policymaking on the economic front is worlds more sophisticated now than it was, say, 50 years ago.

    Interestingly I was just reading about Hong Kong, a supposed poster child of “small government”, and it turns out that when you look at the revenue the government collects from land rent (it owns all the land), Hong Kong’s government size isn’t so different other first world nations. And even Singapore has recently been making noises about the need to increase the size of government (e.g. increasing GDP from 5% to 7%), partly to deal with an ageing population.

  250. Tim Quilty says:

    David,

    “Probably something to do with the failure of your argument on wage rates dropping by the full $9000 to hold water?”

    “Since you didnt give an argument as to why they wont, I assumed you conceded that point. What mechanism will stop it happening?”

    I believe I actually said it wouldn’t, (the reason for being elasticities of demand and supply of labour, which the real economists here are now talking about) but that even if they did, the results would be for the market to lift them back up again fairly smartly. This is all addressed by others more qualified to comment in the thread now, so I will refrain from it further. Plus, finished my exams so no longer have the pressing need to waste hours stoushing on the interwebs instead of stydying.

  251. NPOV says:

    I do have to ask, for those generally leery of labour and workplace regulation, where exactly do you draw the line? Can I assume you would agree that this sort of thing should be illegal: Men forced to work with broken hands, arms?

  252. JC says:

    I do have to ask, for those generally leery of labour and workplace regulation, where exactly do you draw the line? Can I assume you would agree that this sort of thing should be illegal: Men forced to work with broken hands, arms?

    Well of course not, N. Libertarians would assume that if those two guys are able to work, they can even with plastered up limbs. Our real, secret mission is to empty the cancer wards of terminal patients and get them out to work on days they weren’t receiving radiation treatment.

  253. NPOV says:

    It’s easy to be be glib. But I’d like to see an argument that there’s any advantage in allowing employers to so obviously take advantage of their employees, to the point that the employee’s life and limb become significantly endangered. And if you’re prepared to accept that that’s not the sort of work practices we want occurring in our country, then how exactly do you suggest preventing them from doing so?

  254. JC says:

    N:

    You deregulate labor rates while maintaining work safety laws. I’m not sure many libertarians would have a problem with that.

    Sorry if I was glib, but that example doesn’t present as reasonable argument.

  255. NPOV says:

    Ok, but then I would argue we’re just drawing lines in different places.
    You accept that work safety laws are justified because there are employers that will coerce employees into working in obviously unsafe and unhealthy conditions, and I’d accept that wage regulations are justified because there are employers that will coerce employees into working for obviously unfair and unsatisficatory wages (the long-term society-wide consequences of which can potentially be just as bad as breaking bones).

  256. Ben says:

    NPOV:

    Id like to see an argument that theres any advantage in allowing employers to so obviously take advantage of their employees

    It has nothing at all to do with taking advantage. It has to do with allowing the people who are most effected by the employment contract, the employer and the employee, to set the price at a mutually agreed amount. (incidentally employers cannot “coerce” employees to work for them, they can only entice with money. Your language shows that you see employment as some sort of zero sum game with winners and losers.)

    There are also many other reasons why a minimum wage is a bad idea. Setting the minimum wage causes low wages by keeping unemployment artificially high. Because there is a minimum wage there is a minimum productivity level to every job. If the job doesn’t meet that level then the job will not be created. If an NIT is introduced then people will not be forced to work the minimum wage jobs with no prospects: They would be able to pick up piece meal work to supplement their income and employers would have to entice them in with other benefits: discounts on products, training for better skilled jobs etc. It’s as simple as supply and demand.

  257. NPOV says:

    Ben, employers may no coerce employees to work for them in the first place, but once inside a job, employers can most definitely take advantage of the power imbalance between an employer and employee to coerce them into all sorts of behaviour. You’d agree that the government coerces us into paying taxes, by threat of being fined or jailed if we don’t. But the threat of losing one’s job can be just as coercive to many people.

  258. Mark Hill says:

    No, it isn’t.

    Many more people choose to engage in behaviour that will get them fired by any reasonable boss than people who risk going to gaol. I also bet the ratio of people who risk getting fired to risk going to gaol is fairly large.

    If there is an “imbalance”, strikes would not work. Employers and employees are interdependent. Smart firms recognise this and try to get employees to be more creative and be entreprenuerial.

  259. NPOV says:

    “Many more people choose to engage in behaviour that will get them fired by any reasonable boss than people who risk going to gaol”

    a) I don’t believe you can prove this and b) I don’t believe it refutes my claim that “the threat of losing one’s job can be just as coercive [as the threat of being fined or jailed] to many people”.

    I never said anything about strikes. As far as your “smart firms” claim – of course, and probably 99% of employers needn’t worry about work place or wage regulation because they’re sensible employers that realise the benefits of paying workers well and ensuring a safe, humane work environment. It’s the 1% like Lakeside Packaging that gives employers in general a bad name, and that the regulations are there to catch. Indeed, often it’s employers themselves arguing for more regulations, because everyone benefits from an industry where 100% of employers do the right thing.

  260. Mark Hill says:

    I don’t think you are being realistic. Being unemployed sucks. Now talk to someone different to me, someone who has been to gaol. You need a reality check.

    No you never said anything about strikes but if what you said was true, then strikes would have no impact. But they do.

    1% of employers? I’d say it would be lower. Is it a good idea to catch out 1% of employers where people may seek another job in a high employment scenario (more competition for labour between firms, higher wages) so that we end up in a situation where 1.5% of workers (or more, considering disillusioned workers) are permamently put out of work?

  261. NPOV says:

    You’re forgetting that a) the risk of getting caught when doing something that would result in a fine or jail term is usually pretty low and b) most of the things that would result in a fine or jail term are things that most people don’t really want to do anyway.

    I’m certainly far more concerned about losing my job than winding up in jail. If my boss insisted that I work 2 hours overtime every day for the next 2 weeks or I’d lose my job, I’d probably do it, although I’d certainly also start looking around for a better boss. However, I’m in a position where my skills and experience give me very good bargaining power. Many aren’t.

    And yes, there’s probably less than 1% of employers that would ever demand that employees work with broken limbs. But there’s surely 1% that would make more unreasonable demands on their employees than they do now if it weren’t for the threat of being taken to court for doing so. As for who decides what’s “unreasonable”, well that’s pretty much what the job of workplace regulators is, and they of course are ultimately answerable to the public at the polls.

  262. NPOV says:

    Oh and strikes work because while there’s an inherent imbalance between one employer and one employee, between one employer and 10 employees it’s a very different story.

  263. Mark Hill says:

    “If my boss insisted that I work 2 hours overtime every day for the next 2 weeks or Id lose my job, Id probably do it, although Id certainly also start looking around for a better boss.”

    1. Maybe you should, maybe you’ve been slack previously.

    2. Maybe everyone at the firm does it to keep the firm solvent and everyone employed.

    3. You can’t just demand this unless it is allowed in the contract. Unless it was a case of 1. or 2., it just wouldn’t happen.

    Yes sure most people don’t want to commit robbery etc…but reality check being on the dole is not as scary as gaol.

    The regulators are not accountable. They are bureacrats. 1.5% of the employment pool equates to 180 000 people. Keeping these people unemployed because of a perceived unfairness of 1% of employers is simply dopey. Broken limbs don’t always mean you can’t work. If you can’t then it is currently statutorily illegal and under common law frustration of the contract. The boss has no leg to stand on if it is unreasonable with or without job destroying laws.

  264. Mark Hill says:

    “an inherent inblance”…

    please explain. With 100 workers, more are inclined to be scabs, thus limiting the effectiveness of strikes. What you’re positing is merely speculation.

  265. NPOV says:

    Of course, there may well be circumstances in which an employer has a justified reason for wishing his employees to put in extra hours, and I certainly wouldn’t suggest there needs to be statutory regulation preventing employers from requiring over-time from their employees from time to time. But threatening to sack workers “or else” is stand-over tactics, and there are cases where employees need protection from that sort of behaviour from employers.

    I said “indirectly accountable”. If regulators under one government are consistently putting in place regulations that lead to employment arrangements that the majority are significantly unhappy with, then that government is likely to lose office. Which one could argue is precisely what occurred with WorkChoices.

    You brought up strikes. When has a strike ever been successful with just a single employee? And sure, with 100, some will defect, but the employer is still in a position where some significant percentage of his workforce is refusing to work, which shifts the power balance considerably.

  266. Tim Quilty says:

    Moving on, I was thinking this morning of ways to top up NIT payments for the unemployed, as this seemed to be a major concern. And yet again, the idea of a HECS like loan scheme pops up. Supposing you are getting your $1000 less then current unemployment benefits NIT distribution, but need more money for one-off expenses associated with getting a new job. HECS loan to be paid back with your tax returns when working… Although maybe that starts increasing the EMTRs again, reducing incentives to get employment….

  267. Tim Quilty says:

    NPOV – by increasing employment and demand for employment (via NIT, NMW) you increase the chances that people in shitty jobs with shitty employers can just change jobs. There is a local employer in my industry who can’t understand why she can’t hold onto staff for more then 12 months at the most. Hint: she’s evil and incompetent at employee relationships, though aparently her technical skills are “frighteningly” good. This is an industry with high demand for employees with the skills, and people can pack up and move at will. And they do.

    The reason your broken armed chaps had to keep working for that boss is because of the status of their visas, and that they had no option to move jobs. Creating freedom and flexibility will distroy this kind of workplace abuse in a way that Government legislation never will manage.

  268. Ben says:

    What nonsense. Government owns the monopoly on coercion. There is no coercion without the threat of violence behind it. My employer can certainly offer me things to get me to accept conditions I don’t normally like but they can’t force them upon me. Only a Government can do that. Do you really not comprehend the difference between coercion and incentives?

    As Tim says above Reform 30/30 would go a long way towards filling up employment and therefore giving employees more bargaining power. If employers don’t have the pick of who they want at the bottom end of the employment market then they are forced to offer better conditions to workers.

  269. Ben says:

    NPOV your post at 266 is a tad confused. You mention Employers threatening to sack their workers if they don’t work weekends. If this situation arises it’s the fault of both the employee and the employer for not nutting the details of expected work hours in the employment contract.

    I’ve worked jobs where I needed to work some weekends and this was mentioned in explicit language in my contract. I read the contract and made sure that the demands of the employer were to fine by me. If they employer expects more from me I can just point to the contract and tell them no thanks. Why are mutually agreed upon terms not the best way to handle this?

    In my experience when the government steps in it causes problems. The example I’ll give is rental law. In order to save rental tenants from nasty land lords we have the Rental Tenancy Act 1987. In order to make both parties happy it legislates some leeway; using the terms “reasonable” and “reasonably” a whopping 47 times, it manages to mandate vagueness into every rental contract.

    The outcome of this is a hazy melange which puts the tenant very much on the back foot. As Real Estate agents know what to expect from this legislation through experience the tenants end up getting trampled on. I experienced this recently when the owner of a place I was renting ended up wanting to sell. We were left with no recourse to “quiet enjoyment of the property” (as guaranteed in the legislation) because the legislation stated “reasonable access” as long as there was “reasonable notification” given. There is no guidance of what is considered reasonable so nobody ever bothers to take their grievance to court. It’s a stinking load of legislation that gelds the tenant and should be replaced with individual contractual agreements on fair terms and conditions.

    The same thing applies in employment law. There is a case to be made for the government to use it’s position to make people more aware of what goes into their employment contracts. I feel that is the best way for the government to help us get a better deal from our employers. By locking down part of the employment contract all they end up bashing square pegs into round holes.

  270. NPOV says:

    Tim, sure, you increase those chances, and I’d argue that’s an important benefit. But most of the government legislation we have today was introduced exactly to address particular instances of real workplace abuse that occurred in the past. And countries where workplace abuse is still a real problem are exactly the ones with minimal regulation to contain it.

    Ben – no, the idea the government owns a “monopoly on coercion” truly is the most absurd part of libertarian dogma. Employers can (and occasionally do) threaten violence, and at any rate, why is violence so special? Sure, it’s something that we prefer to avoid, because very few people enjoy pain, but that’s also true of humiliation, or being jobless, or any number of other potential threats can be used to achieve coercion. Of course, you can even coerce people through hynoposis or drug spiking. Sure, doing so puts you at risk of having the government then exercise force against you, but a) the government clearly can’t catch every case of coercion and b) it still doesn’t stop it being coercion.

  271. NPOV says:

    Ben, sure, I’d agree “mutually agreed upon terms” are the best way to handle 99% of employment arrangements. But what do you think were the “mutally agree upon terms” of the 457 Visa workers and Lakeside Packaging?

    “In my experience when the government steps in it causes problems” – so therefore that means that government intervention is never capable of solving more problems than it solves? Because your personal experience says so?

    Even 1000 examples of government intervention going wrong doesn’t prove that the world would be a better place with no government intervention at all.

  272. NPOV says:

    …er, “than it creates”, not solves.

  273. Mark Hill says:

    NPOV, please stop mutilating the most beautiful langauge on earth (English).

    An industrial dispute is not violent. “We demand better pay” “we expect more sales” are not coercive or threats of coercion. Do you think Sharon Burows or Geoff Dixon should be locked up? Maybe if they didn’t communicate at all they would be better off…

    You’re off the planet with the next one.

    Management does not drink spike or use hypnosis to coerce workers. Neither do unions. Nor do individual employees or sole traders.

    Yet you want us to believe the idea that the Government has or should have a monopoly on coercion is “absurd dogma”?

    Your criticism of the 30/30 plan is we can’t get rid of minimum wages because of drink spiking and hypnosis. You’ve jumped the shark.

    The NIT is a sound policy and the 30/30 plan needs some refinement and updating.

  274. melaleuca says:

    It is possibly worth remembering that we had something very near ideal libertarian labour laws and tenancy laws combined with a weak central government in the first 100 years or so of industrialisation and accordingly we already know what a libertaraian world looks like. Here’s a sprinkling of the gifts of libertarianism:

    -Kids spending 14 hours a day in damp, rat infested mine shafts with nothing but a candle and a few slices of bread

    -Families holed up in dark, damp hovels that reeked of sewage and disease

    -workers in many occupations having a life expectancy in the mid-twenties due to the lack of basic safety regulations

    -workers bashed and sometimes killed by thugs hired by their employers for the crime of contemplating any form of organisation

    -rampant child sex slavery

    We know the future of libertarianism will look like its past because the proponents have attitudes like this:

    “People will continue being people and not grasping the long-term effects of the policies they vote for but it doesnt matter because the long term process of globalisation and technology and creative destruction will wither down the State… So practice what you believe. As long as people are selfish, liberty will progress. (Jason Soon)

    http://alsblog.wordpress.com/2007/05/31/lets-change-the-world/

    Libertarianism, like Ingsoc in Orwell’s 1984, is a jackboot that forever stomps on a human face.

  275. NPOV says:

    Mark, please stop mutilating the meaning of my posts.

    I never said industrial disputes are inherently violent. But it is an examples of workers trying to coerce a response from their employers by the threat of refusing to continue working.

    And, please, where on earth did I suggest that employers spike drinks or use hypnosis to coerce workers? They’re pretty obviously simply examples of coercion that doesn’t involve violence.

    And BTW I have never said we can’t get of minimum wages. I already posted that according to some fairly rough calculations, those currently on the minimum wage
    would have to have their pay cut to below $10 an hour for them to be worse off.
    If some basic measures can be put in place (which needn’t necessarily be undertaken by government – unions may be a better alternative) to ensure that this doesn’t occur, then I’m comfortable with it.

    I do like the idea of an NIT, and I’d certainly like to see it tried out somewhere – though I suspect it’s unlikely to be Australia, for historical and political reasons more than anything.

    The only part of the 30/30 policy I can’t in all conscience support is the idea that those earning over $100K will go from paying roughly 30% of their income in tax to somewhere around 20%. This will significantly reduce income inequality in Australia, and it’s not something I want to see happen here. It means I personally would be about 14K a year better off, while many others who work a great deal harder than I but earning considerably less would either be no better off, or potentially worse off, as the increasing spending power of those in my income bracket potentially drives up inflation.

  276. Ben says:

    Uh-huh. And what was like life pre-industrial revolution mel? Was it a medieval paradise? Did the kids not have to work prior to the industrial revolution?

    What rot. The industrial revolution saved kids from the yoke or toil and allowed us to afford to send every child to school. Your post is ignorant of the facts at best and willfully misleading at worst.

    How apt that you would quote Orwell. Although he had strong Libertarian instincts he was economically illiterate. Although even he wouldn’t have the gall to liken allowing people to freely interact with a totalitarian state as he was a smart man and knew the difference between a boot to the head and a handshake.

  277. Ben says:

    If you don’t understand Jason’s quote perhaps you should familiarize yourself with the utilitarian arguments for Capitalism as set out in Theory of Moral Sentiments and The Wealth of Nations by Adam Smith. If you are familiar with these could you please stop misrepresenting his quote as part of some hate speech.

  278. Mark Hill says:

    Mel, stop polluting the thread with easy to debunk nonsense that simply ties people up from debating the issue over if the 30/30 plan woud work or if it is a good idea.

    Third parties: Mel is simply lying about libertarianism because he doesn’t like it but cannot honestly argue about it on ethical or empirical grounds.

    Libertarianism has a few basic tenents: sound minded adults should be free to make their own decisions and freely associate. You do not initiate violence. As a sound minded adult, you are responsible for your own actions.

    Mr Mel must have found Dr Munn’s potion.

    Those child working conditions were due to puritannical and class worldviews, not libertarian views. Adults should be free to make their own decisions. Children must be cared for by their parents. Similarly, adults had similar working conditions too. Capital growth and technological innovation got rid of dangerous jobs. Even if they were mandated, the economic growth made this possible without society becoming poorer – to which they were moot. Child labour isn’t cut and dry, in 3rd world countries, children do very hard work so the family doesn’t starve. However, it generally isn’t child exploitation.

    Housing again is a function of technology. Most “stately” homes would not be considered safe these days.

    All work was difficult back then. It was harder before then too. Mel has a distorted view that William Blake had – that life was better before the industrial revolution. Wrong. It was worse. Longer hours. Even lower life expectancy.

    “-workers bashed and sometimes killed by thugs hired by their employers for the crime of contemplating any form of organisation”

    That’s murder for financial gain and conspiracy to murder. Personally I think you should be executed for such behaviour. If there is a libertarian creed, it begins “do not initiate violence”…yet Mel doesn’t understand this…or pretends he is much stupider than he sounds. Maybe you would like to explain what other unionists did to Doug Cameron and his car a few years ago?

    “-rampant child sex slavery”

    I don’t think so. You can’t quantify this. I am sure Georgian England had harder punishments for any perversions, and let me say again – you are lying about libertarianism again. Adults should be able to make decisions for themselves. Slavery is banned. So is sex with children. You are an idiot.

    “People will continue being people and not grasping the long-term effects of the policies they vote for but it doesnt matter because the long term process of globalisation and technology and creative destruction will wither down the State So practice what you believe. As long as people are selfish, liberty will progress. (Jason Soon)”

    That’s right. It lead to the agricultural revlution, the industrial revolution, the end of slavery, democracy, women’s suffrage and the modern age.

    Nevertheless, continue arguing your naive Blakeian idiocy that we were better off in feudal times.

  279. NPOV says:

    Ack, make that “reduce income equality” not “inequality”.

    I really should start proofreading before posting!

  280. NPOV says:

    Ben, perhaps what you’re thinking of is the state having a monopoly on the legitimate use of physical force.

    But to extrapolate that to suggest that the state has a “monopoly on coercion” is pretty damn silly.

  281. Mark Hill says:

    NPOV you are constantly abusing the Queen’s English. Raising an industrial greviance is not coercive. Coercion is dependent upon violence or the credible threat of violence. You therefore implied that such words (discussing a greviance) was violent (or implied violence). Please buy or borrow a dictionary from your local bookshop or library.

    “And BTW I have never said we cant get of minimum wages. I already posted that according to some fairly rough calculations, those currently on the minimum wage would have to have their pay cut to below $10 an hour for them to be worse off. If some basic measures can be put in place (which neednt necessarily be undertaken by government – unions may be a better alternative) to ensure that this doesnt occur, then Im comfortable with it.”

    Err, it won’t happen. If their boss could save 5.79 per hour, they would have fired them in the first place or never have employed them and bought more machinery to replace them.

    “The only part of the 30/30 policy I cant in all conscience support is the idea that those earning over $100K will go from paying roughly 30% of their income in tax to somewhere around 20%. This will significantly reduce income inequality in Australia, and its not something I want to see happen here. It means I personally would be about 14K a year better off, while many others who work a great deal harder than I but earning considerably less would either be no better off, or potentially worse off, as the increasing spending power of those in my income bracket potentially drives up inflation.”

    # Everyone would be better off.

    # Income equality is good, why? It doesn’t make people better off. It is based on envy, not welfare.

    # Stop feeling guilty and demand to get paid your market value. This would have important macroeconomic effects like stopping the much talked about “brain drain”.

    # John says there are winners and losers but the winners outweight the losers. I think utilitarian outcomes are a good policy critera. I don’t see how theer would be losers, however.

    # Budget balanced tax cuts (which the 30/30 plan and LDP policy involve) never, ever lead to inflation without a simeltaneous monetary expansion. You have been fed BS by Governments who are addicted to high taxes and the political electorial cycle in marginal electorates.

  282. NPOV says:

    Wikipedia: “Coercion is the practice of compelling a person to behave in an involuntary way (whether through action or inaction) by use of threats, intimidation or some other form of pressure or force”

    If you want to define the word “coercion” to mean “dependent upon violence or the credible threat of violence”, then let’s just use another other.

    I’ve yet to meet anyone that supports income equality on the basis of envy.
    Indeed, most people who support income equality tend, if anything, to have pity for people whose lives are built around accruing millions of dollars of wealth.

  283. Ken — you’re being very dishonest now.

    Just because I was willing to let you consider a smaller employment benefit does NOT mean that I think my number was too high. If it gives you that impression, then I take-back my offer to consider lower numbers.

    Of course Andrew’s paper used the experience of increasing minimum wages because that’s the only data available in Australia (they have never been decreased). But the elasticity (about 0.1) works for both increases and decreases. However, it is true that the elasticity would get lower as the minimum wage decreased. According to Leigh’s estimate, strictly (ie incorrectly) interpreted, a 100% decrease in the minimum wage would lead to 1 million new jobs. It is not possible to know exactly how much the elasticity would change… but I thought that halving his estimate was reasonably conservative. And (by strange coincidence) aligned with the estimates made using the labour demand elasticity of wage changes (Leigh was studying the labour demand elasticity of minimum wage changes — which is a different thing).

    In conclusion, my estimate (before “editing” as you unfairly call it) was broadly consistent with Leigh’s estimate — though obviously it’s impossible to be exact. It is strange, inappropriate and (if intentional, rather than a stupid mistake) simply dishonest for you to say that I have made “concessions” in letting you think of lower numbers or that my numbers are “rather more generous”. My numbers are robust and your strongest objection so far has been “i don’t like it”, which isn’t a good argument.

    But I wanted us to follow the thought experiment of considering a lower elasticity to show that 30/30 still provided significant benefits worth pursuing when you are unduly negative.

    (You mention that a lower elasticity applies when reducing the minimum wage. First, we need to be clear that we’re talking about the labour demand elasticity of the minimum wage… not the elasticity of total wages. At the margin, this doesn’t really apply. But when you make large changes, this is certainly true, as I mention above. The reason is that as you decrease the minimum wage, it applies to fewer and fewer people. As you increase the minimum wage, it applies to more and more people. The more people you effect, the bigger the total price change, and therefore the bigger the negative effect on employment. You are certainly correct to note this… but you are wrong to think that I haven’t already factored it into my thinking.)

    I haven’t suggested 50,000. My best estimate was a range of 400,000 to 600,000. If you accept 100,000 you are still using a drastically low elasticity. You are not being (as you say) generous. Indeed — without labour market regulations, I’ll offer employment to every person in Australia.

    I agree that ABS definitions are rigid. But ACOSS is notorious for not factoring churn into their stats. They incorrectly assume a lot of people are consistently poor… when the reality is that some of those statistics are multiple people who are temporarily poor (and over their lifetime, not poor at all).

    You ask about the people who are in-and-out of low-paid work under 30/30. These people would benefit as (1) it would be relatively easier to retain jobs & get new jobs; and (2) they would lose less welfare when they get a job. Low-paid workers would receive more under 30/30.

    You assumption of $6/hour for a person currently employed at $14 is very radical and strange. What happened to the $14/hour job? Does it still exist? The employee must have been producing $14/hour of value to the business… so for the marginal value of that worker to have fallen so dramatically, there must have been a huge increase in the amount of employment. Which you don’t believe.

    You can’t have it both ways. Either there is a big employment effect (with a relatively big wage effect) or a small employment effect (with a relatively small wage effect). Either that, or the government has magically set the minimum wage at exactly the same level as a mystical equilibrium where the marginal productivity of employment plummets at an exponential rate. If you have a reason for the latter theory, you could be in for a nobel prize.

    People who have a marginal productivity well below the minimum wage (say $6/hour) aren’t getting minimum-wage jobs today. So if you want to consider a counter-factual with such a wage rate, the most likely “status quo” situation is the dole and no work ($12-$14k). If this person works 20h/week @ $6/hour then they will get about $4200/year (after tax) plus $9000 NIT (or probably $10k if adjusted) which is about $14k. Doesn’t look very exciting so far. But!!

    Then, as their skills/confidence increases they will go to a job with $8/hour… then $10/hour… then $12/hour — with a take-home income of $18,000. Then more. The social problems associated with unemployment have been reduced. Social capital is increased. The person’s children grow up in a working family with confidence and hope. Economic growth has increased, leading to higher wages for everybody in the future. The other people who otherwise would have fallen into a cycle of unemployment and poverty avoids the trap. Tax are lower for everybody else, leading to flow-on benefits for other people in society and more businesses (more jobs, higher wages). The sun is shining… birds are singing… and the buddha is happy.

    Another counter-factual: a person has a free-market marginal productivity of $13/hour and the min wage is $14/hour. Their friend in the same situation is unemployed (and perhaps losing self-confidence) but the person in question is lucky enough to get a job… because the labour restrictions has meant that his industry has reduced production, so that the marginal productivity of the last worker is now up to $14/hour!

    (minimum wage advocates have to celebrate when industries reduce production compared to the free-market level, because that’s the only way the marginal productivity of the last worker can increase.)

    After 30/30 is introduced, the industry expands a bit and the wage comes down to the free-market marginal productivity of $13. The poor guy gets a pay cut (though his friend gets employed). However, even here he may be better off under 30/30. If he worked enough hours to be a net tax payer, he received a nice bit tax cut to compensate him. If he didn’t work enough hours to be a net tax payer, then under 30/30 he will receive more welfare than under the status quo.

    I’ve already agreed that there are some people who will be worse off. But the most likely scenarios are (1) marginal wage reductions linked to tax cuts/welfare increases for that person; or (2) new low-income jobs which go to people who otherwise wouldn’t have a job.

    You mention that plenty of people are already working at illegal rates. Do you think these people will be (1) helped; or (2) hurt if we strictly enforce the minimum wage rates? If you told these people that you woule make $8/hour jobs illegal, do you think they would (1) thank you; or (2) hit you?

    In your examples, you forget to consider the 500,000 (opps — 100,000) people who got a new job. Surely you should factor them into your thinking.

    Having said all of that — your “Parish 30/30” is a worthwhile contribution to the debate. In the name of creating a “Parish-Humphreys 30/30” let’s haggle. How about a $10,000 NIT (plus rent-assistance) indexed to inflation… a freeze on the nominal minimum wage for 2 years… and an option for the long-term unemployed (say 6 months) to sign a special contract with the govt which exempts them from labour market regulation for the next 6 months.

  284. Ben says:

    I am happy with Wikis definition of coercion. Now show me how an employer can coerce an employee without the backing of the government.

  285. NPOV says:

    I should also clarify that believing in “income equality” in this context doesn’t mean believing in “complete equality”. My own position, shared probably by most social democrats, is that Australia’s trend of rising income equality is a worrying one, and one that I would hope to see reversed slightly – something that 30/30 as it stands now would do the opposite of.

  286. NPOV says:

    Ben, as far as I’m concerned, any time an employer threatens an employee with firing, he’s using a form of coercion. Now, coercion isn’t *always* a bad thing, and sometimes workers need that sort of incentivising, but it’s still a form of coercion, not *in principle* different to the government coercing us to pay our taxes.

    John: “minimum wage advocates have to celebrate when industries reduce production compared to the free-market level, because thats the only way the marginal productivity of the last worker can increase”

    Why can’t the “marginal productivity” (at least as I understand the term) increase simply by employers taking a pay cut in order to pay their employees more?

  287. NPOV says:

    I’d also say that in the context of aiming for progressive fusionism – progressives generally see the need to keep income inequality small as a central tenet in the way that libertarians see the need to keep government small.
    So if we’re talking about progressive fusionism, then the NIT idea only stands a chance if it can be shown to keep income inequality small.

  288. JC says:

    My own position, shared probably by most social democrats, is that Australias trend of rising income equality is a worrying one,

    are you sure you’re not confusing income with wealth creation? A lot of ‘income’ is created with the rise of the stock market in terms of executive compensation.

    If you really want to ” equalize ” that aspect you could make sure the stock market doesn’t rise by tailoring polices to stop it doing so. Is that what you rally wish to do?

  289. Peter Whiteford says:

    Apologies for a long post, but Mark Hill says (at 282): John says there are winners and losers but the winners outweigh the losers. I think utilitarian outcomes are good policy criteria. I don’t see how there would be losers, however. Budget balanced tax cuts (which the 30/30 plan and LDP policy involve) …

    Hmm budget balanced tax cuts with no losers?

    Well to calculate if there are losers go to http://www.oecd.org/document/29/0,3343,en_2649_33933_39618653_1_1_1_1,00.html
    And download the 2005 file for Australia (excel). Reading 30/30 its not entirely clear which year is being referred to but it looks like 2005 parameters to me, but 2004 or even 2003 parameters are not going to make a substantive difference.

    This gives you calculations of income tax, benefits, marginal tax rates and gross and disposable incomes for different family types with incomes up 200% of the average wage, for individuals and families who are private renters. Its fairly straightforward to calculate the effects of the 30/30 plan just pop in a column with the NIT for each family type decreasing by 30% to zero and then tax at 30% afterwards, and you can then calculate disposable incomes (NIT + private income minus tax) and you can then compare who wins and loses. You can take out rent assistance from the existing figures if you want.

    Now when you do this and I can send my calculations to anyone who wants you find lot of losers. Single people with private incomes under $10,000 are all losers if they are renters and they are losers with private incomes up to $5,000 a year if they are not receiving rent assistance. The losses start at close to $4,000 a year and then increase a bit since the 30/30 plan doesnt have a free area, unlike the current benefit system. A single person at twice the average wage gains about $13,600 and this increases with higher incomes.

    A lone parent with two children gets $9,000 NIT plus child additions of $3,000 per child for a total of $15,000 and this is the more generous option canvassed in 30/30. Now in 2005 this family was getting just under $27,000 a year in total benefits so the benefit cut is close to $12,000 a year, and there are losers with private incomes up to $45,000 year which for lone parents is just about everyone.

    One earner couples with two children lose a maximum of around $8,000 a year and everyone with current private incomes below $20,000 a year are losers.

    Two earner couples are probably all winners, but single earner couples and lone parents with more than two children lose even more.

    Now these are static comparisons and obviously you would want to argue for a dynamic approach so people work their way out of these losses. Now for a lone parent with two children who currently has no private earnings could get the same disposable income as they had pre 30/30 if afterwards they earned one-third of the average wage except it would have to be more than this because 30/30 also abolishes child care assistance so it would be closer to half the average wage (and more for those with more children). Also I suspect that these are the people whose wages are more likely to go down once you abolish the minimum wage.

    But on Day 1 post-reform and for quite a few months afterwards I think youd find lots of people who consider themselves to have lost substantially.

    In addition, as I pointed out earlier I doubt that 30/30 is Budget neutral as it counts $8 billion worth of extra revenue from abolishing tax expenditures which no longer exist once 30/30 is introduced (this is usually called double counting in budget assessments). Also it requires the abolition of superannuation tax expenditures worth about $16.5 billion. While this is real money and it can be done, it involves wiping out up to 25-30% of peoples lump sums when they retire, so you have another large group of losers.

  290. NPOV says:

    JC, no, it’s a more a matter of ensuring more of the wealth that is created goes to the bottom 99%, rather than the top 1%.

  291. JC says:

    Well how do you distribute large stock market gains, which is where the largest portion of senior executive pay comes from.

  292. NPOV says:

    Well tax and transfer is *probably* the only realistic means, but I’m open to other options.

  293. JC says:

    So you think taxes at the top are too low? They ought to be higher? You’d tax stock market gains at a higher rate? You realize the shock that would create, right?

  294. melaleuca says:

    “A lone parent with two children gets $9,000 NIT plus child additions of $3,000 per child for a total of $15,000 and this is the more generous option canvassed in 30/30. Now in 2005 this family was getting just under $27,000 a year in total benefits so the benefit cut is close to $12,000 a year, and there are losers with private incomes up to $45,000 year which for lone parents is just about everyone.”

    Exactly. Libertarians hate people, it is the only thing that makes them tick.

  295. NPOV says:

    JC – no, I’m sorry, I don’t believe it would create a “shock”. And note I didn’t suggest that stock market gains needed to be taxed at a higher rate than income – but perhaps CGT could be made more progressive than it is currently.
    In general, I’m quite confident that the long-term economic growth resulting from a policies that reduce (after-tax) income inequality would be equal or better than that resulting from policies that don’t. But even if the economic growth was slightly lower, I would still argue in favour of such a goal.

  296. JC says:

    In general, Im quite confident that the long-term economic growth resulting from a policies that reduce (after-tax) income inequality would be equal or better than that resulting from policies that dont.

    So in raw economic terms, what you are talking about then is a transfer from savings to consumption forced through the hammer of the tax laws.

    please explain then how you will be able to maintain levels of investment capital that avoids pulling down parts of the house to burn for fire wood.

  297. NPOV says:

    Well if nothing else, giving more money to consumers should surely give more incentive to businesses to invest (and borrow) capital. But there’s actually lots of reasons that increased equality can help boost economic growth: this article covers some of them.
    Realistically, there’s no simple calculation we can make that determines exactly what the effect on economic growth would be making taxes less or more progressive, but I’m certainly comfortable that Australia would prosper economically just as well with less income inequality (and further, the prosperity would be enjoyed by a greater percentage of the population), and our society as a whole would benefit considerably. Not, of course, that libertarians believe in society ;-)

  298. Mark Hill says:

    Peter – can you do a calculation for real incomes (i.e including tariff & excise tax abolition and all other tax cuts)? You say you are talking about real money but you are really talking about nominal money. But like we said it needs work.

    “Exactly. Libertarians hate people, it is the only thing that makes them tick.”

    Yeah sure. Why are we the only party/pressure group advocating the abolition pf the downright medieval 17.5% tax on clothes and regressive excise taxes? You never answer questions when you find the crazy potion and fire off your bile. Your comments here are not worthy of much more than an offhand jibe.

    NPOV, you have to take capital markets seriously. The global cost of capital goes up 1.5% and the US almost craps out. All of those little WA companies that a are giants now like FMG and MAK wouldn’t exist without capital markets.

    The 30/30 plan treats all income equally and then it has an element of progressivtiy as technically it is a linear tax, not a flat tax.

    Reducing after tax income inequality will almost always reduce economic growth. A few policies are worthwhile, like removing regressive taxes, such as excise. A Gini coefficient is not a measure of welfare or happiness. What you are proposing is envious, even if you don’t want to admit to such thoughts.

  299. Mark Hill says:

    Geez NPOV.

    A few things about your article.

    The 1970s debunked Keynes.

    If the paradox of thrift is true, explain the economic growth of SG and HK.

    I already pointed out there are a few policies which can alleviate inequality and are pro growth – get rid of inefficient and regressive taxation.

    Their idea of a “inequality trap” is Marxist bunkum. Nobuo Okishio disproved this nonsense: http://en.wikipedia.org/wiki/Okishio%27s_theorem

    “For this reason the theorem, first proposed in 1961, excited great interest and controversy because, according to Okishio, it contradicts Marx’s law of the tendency of the rate of profit to fall. Marx had claimed that the new general rate of profit, after a new technique has spread throughout the branch where it has been introduced, would be lower than before. In modern words, the capitalists would be caught in a rationality trap or prisoner’s dilemma: that which is rational from the point of view of a single capitalist, turns out to be irrational for the system as a whole, for the collective of all capitalists. This result was widely understood, including by Marx himself, as establishing that capitalism contained inherent limits to its own success. Okishio’s theorem was therefore received in the West as establishing that Marx’s proof of this fundamental result was inconsistent.”

    Although note, the article also blames massive Government spending and rent seeking from special interests. Which Bush ahs indulged in and libertarians have railed against.

    Of course libertarians believe in society. Government is not society, just our servant. The servants sleep downstairs.

  300. NPOV says:

    Mark, I’m not going to get into an argument over whether Keynes has been debunked, but you can’t simply dismiss every economist out there that accepts excessive income inequality has potential negative effects on economic growth out of hand.

    I don’t see why a more progressive taxation scheme would increase the “cost of capital by 1.5%”. As far as the US crapping out goes – it has done so after massive tax *cuts* to the wealthiest.

  301. JC says:

    As far as the US crapping out goes – it has done so after massive tax *cuts* to the wealthiest.

    How so?

  302. Patrick says:

    The only part of the 30/30 policy I cant in all conscience support is the idea that those earning over $100K will go from paying roughly 30% of their income in tax to somewhere around 20%.

    Will it cheer you up to know that, if that $100k includes super, it is less than 27 per cent already and barely more than 25 per cent next year?

    In fact you have to earn around $130k without deductions to pay an average rate of thirty percent next year.

  303. NPOV says:

    J.C. – they may have been a while ago, but as I understand it Bush has pushed through significant tax cuts for the top income brackets in the last 5 years.
    And yet troubles in the U.S. economy started brewing not longer after. I’m not claiming there’s a link, but there seems to be me no good cause for assuming that re-raising taxes would cause any “crapping out”.

    Patrick – er, not really. It was a rough estimate of the average gain for everybody earning over 100K, not including super.

  304. NPOV says:

    Oh and J.C., I also meant to point out that we have historical precedent here – there are a number of cases in the last 20 years in various nations where taxes at the top level have been raised, followed by significant economic recovery.

  305. JC says:

    J.C. – they may have been a while ago, but as I understand it Bush has pushed through significant tax cuts for the top income brackets in the last 5 years.

    That’s not true.

    So i guess we ought to tax ourselves 100%, that way it wouldn’t just be a “significant economic recovery”, we would literally boom to eternity.

  306. NPOV says:

    Right JC…perfectly logical argument – because a small dose of something is good, a huge does must be better. And what do you mean “it’s not true”? From what I can find in Wikipedia, the top marginal rate was lowered from 39.5% to 35% in 2003 – other brackets were lowered too, but other than the lowest bracket, not by as much.

    Having said all that, I actually never suggested that there was a need to increase the top marginal tax rate in Australia. If we can achieve a more progressive tax scale simply by lowering the tax paid by those earning less than the average wage more than any adjustment made for those earning greater than it, then that’s obviously preferable to any need to raise taxes.

  307. JC says:

    I thought Bush’s tax cuts were made earlier than 03. Time flies.

    You also seem to forget that it is inaccurate to simply look at the US federal tax rates in of themselves. A large number of states also carry income taxes. NY has a state tax and city tax that can amount to 11%.

    it is pure nonsense to think that lowering tax rates caused the US’s current problems when it is more than well understood that lax monetary policy in the earlier part of the decade was responsible.

    I actually never suggested that there was a need to increase the top marginal tax rate in Australia.

    but you said this.

    there are a number of cases in the last 20 years in various nations where taxes at the top level have been raised, followed by significant economic recovery.

    I really can’t see how raising taxes can lead to economic expansion and if it did all we need to do is raise taxes every time we have a slow down. That’s what happens when reach the conclusion you’re suggesting.

    Mark Hill has already explained to you how to make things less regressive which is by removing tariffs on clothes.

  308. JC says:

    If we can achieve a more progressive tax scale simply by lowering the tax paid by those earning less than the average wage more than any adjustment made for those earning greater than it, then thats obviously preferable to any need to raise taxes.

    You’re then not really talking about raising taxes at all. It’s the opposite in fact.

  309. NPOV says:

    Look, to summarise:

    a) I don’t believe that raising taxes on the wealthiest necessarily leads to economic slowdown, and there are cases of it preceding economic recovery

    2) I don’t currently believe that Australia needs to raise taxes on the wealthiest. If there are to be tax cuts to the wealthiest, there should be bigger tax cuts for the less wealthy.

    And sure, I agree that the tax on clothes is horribly regressive. For a start, as a relatively wealthy family, we can afford to avoid it by buying clothes while overseas (though to be honest even 5 years ago when the exchange rate made clothes in the U.S. about as expensive as here, my wife preferred to buy clothes there, as she complains she generally can’t find clothes that match her taste here). But there will always be effectively regressive taxes of some sort of another – they can usually be justified on the basis of economic efficiency, although in the case of the petrol excise they’re justified on the basis that the amount of road wear & tear (and other externalities) generated by the use of a car is the same regardless of your income. Realistically income taxes are the only way we have currently to introduce workable progressivity – so every time a new regressive tax is introduced (e.g. a carbon tax), income taxes need to be made more progressive to adjust for this.

  310. Michael Kalecki says:

    the 70’s stagflation had nothing to do with what Keynes advocated and hence did not debunk his writings at all.

    There was no depression and thus no liquidity trap.

    Keynes only advocated the dominance of fiscal policy where monetary policy could not work i.e. in a depression where there was a liquidity trap

  311. JC says:

    so every time a new regressive tax is introduced (e.g. a carbon tax), income taxes need to be made more progressive to adjust for this.

    John Humphreys has been advocating a carbon tax with income tax offsets.

  312. Mark Hill says:

    You may think so Kalecki. You may rationalise it off as the failure of vulgar Keynesianism. Sure, I’ll agree to that. Whatever it is was, it didn’t work and Keynes couldn’t explain the success of yet to come HK and SG. His model was simply too domestic. The New Keynesians are fine representatives of his tradition.

    NPOV,

    “but you cant simply dismiss every economist out there that accepts excessive income inequality has potential negative effects on economic growth out of hand.”

    There are a minority. They argue suspiciously like cranks. Furthermore, what they propose, as Okishio has shown, is mathematically impossible.

    While you may be able to argue descriptive economics, I don’t recommend you start rewriting the properties of matrix mathematics. Your PC may stop working.

    “I dont see why a more progressive taxation scheme would increase the cost of capital by 1.5%. As far as the US crapping out goes – it has done so after massive tax *cuts* to the wealthiest.”

    That was not what I said. You implied capital markets didn’t matter. I showed you why they did. You are not being specific. Your plan to make taxes more progressive attacks the higher cost of capital investments that are arguably keeping the Australian economy in positive growth. The 30/30 plan treats all income equally and applies a linear tax. It is fairer than now or soaking the rich.

    The US isn’t in a recession yet but near zero growth is caused by the sub prime crisis (rooted in a regulatory decision to make lending “non discriminatory” and the implied backing of the US on non performing loans) and a very expensive war that could either be funded explicitly through low productivity or through crowding out private investment.

    Taxes directly affect risky initial capital investment and reinvestment in high cash flow companies. No matter what the other factors are (openness, demand for goods, foreign income growth) taxes will always affect growth rates.

    “a) I dont believe that raising taxes on the wealthiest necessarily leads to economic slowdown, and there are cases of it preceding economic recovery”

    Ah yes but correlation is not causation. What happened to money supply? Government expenditure? Microeconomic reform?

    “2) I dont currently believe that Australia needs to raise taxes on the wealthiest. If there are to be tax cuts to the wealthiest, there should be bigger tax cuts for the less wealthy.”

    The 30/30 would provide that. Those in poverty traps can pay over 100% in effective marginal tax rates when they transition from welfare to work. This is stupid and immoral of society to keep on imposing this.

    “Realistically income taxes are the only way we have currently to introduce workable progressivity – so every time a new regressive tax is introduced (e.g. a carbon tax), income taxes need to be made more progressive to adjust for this.”

    No, they need to compensated people by at least what they lose in carbon taxes. Since we’ve been through Okishio again, you shouldn’t keep on bringing up progressivity as a goal or a policy tool. Making the income taxes more progressive doesn’t necessarily make the poor better off in real terms now or with a carbon tax and it severely punishes those who work overtime and commute.

    I think the community is better served if people can pay off their mortgages and doctors are more willing to work longer hours.

  313. Michael Kalecki says:

    whatever Governments deemed they were doing in the 70s it had nothing to do with the writings of Keynes vulgar or smooth

  314. Yobbo says:

    What is taxation then? Ken? Any input?

    It is either theft or slavery – take your pick.

    Most people tend to defend taxation in terms of a “social contract”. But it is not a contract.

    – You are given no choice but to join or go to prison.
    – You cannot leave the contract except by emigrating, and that is not always possible because you can’t just waltz into another country and be granted citizenship.
    – There is no fair consideration. Many people pay orders of magnitude more in tax than what they receive back.

    You are born. You are required to give a percentage of your labor to your lord every year. When your service is fulfilled, you may keep the fruits of the rest of your labor for yourself.

    Income taxation is just Serfdom by any other name. They changed the name to make it sound less like a throwback to the dark ages. Doesn’t change the fact that it is, in fact, a form of servitude that can only be escaped through death.

    To make it easier for the unimaginative to see the similarities to serfdom, some bright spark came up with “Tax Free Day”. That is, the day in the year when you service to your lord is finished, and the rest of your year’s labor belongs to you.

    http://www.taxfoundation.org/taxfreedomday/

    Just because the lord hands you some bread and puts on a Jousting display every now and then doesn’t mean you aren’t a serf.

  315. David Rubie says:

    What is food then? Yobbo? Any input?

    It is either theft or slavery – take your pick.

    Most people tend to defend food in terms of a body contract. But it is not a contract.

    – You are given no choice but to eat or die.
    – You cannot leave the contract except by transferring to a less hungry body, and that is not always possible because you cant just waltz into another body and be granted the controls.
    – There is no fair consideration. Many people pay orders of magnitude more for food than what they receive back.

    You are born. You are required to give a percentage of your labor to food every year. When your service is fulfilled, you may keep the fruits of the rest of your labor for plasma tellys and boob jobs.

    Food is just Serfdom by any other name. They changed the name to make it sound less like a throwback to the African Savannah. Doesnt change the fact that it is, in fact, a form of servitude that can only be escaped through death.

    To make it easier for the unimaginative to see the similarities to serfdom, some bright spark came up with Starvation. That is, what happens in societies that can no longer support an agrarian lifestyle on a big population:

    We don’t pay taxes

    Just because the lord gave you a peener and eyeballs for entertainment doesnt mean you arent a serf. To food. Damn you nature!!

  316. JC says:

    in case anyone is wondering, Michael Kalecki is Homer of course.

  317. Mark Hill says:

    David,

    I suppose you proved a point – Yobbo’s definition was too vague.

    But,

    1. If Government spending is unjustified, then is the taxation required (explicit or implicit) required to fund it theft or robbery? If not legally, then are they morally equivalent?

    2. Ethiopians do pay taxes. You are probably thinking of Somalia. Ethipoians at one stage paid 85% tax on incomes over 4000 USD p.a. Ouch.

    3. The absence of taxes is not congruent to “chaos” or the “failure” of the market to provide public goods. Civil society will provide pure public goods. Property rights emerged as a convention on the Californian goldfields (Umbeck, 1977, 1981), lighthouses often charged tolls which, contrary to popular opinion, were possible to be charged against indivdual ships (Coase, 1974) [note, also actually a profit making venture] and early infrastructure was paid for in post colonial America though social pressure in shareholder subscription in break even firms (Klein, 1990).

  318. David Rubie says:

    Mark Hill wrote:

    If Government spending is unjustified, then is the taxation required (explicit or implicit) required to fund it theft or robbery?

    False dichotomy. Who exactly is the spending unjustified to? Why? Was it justified at some point in the past? It might be the unlikely duo you bring up (theft and robbery), it might be simply be that overtaxing one bit of society is easier than other bits, but on the whole, over time, government spending more or less hits the spot (usually less, judging by the amount of demands people make of government vs. the practical consideration of providing everything people say they want).

    In addition to that, “theft and robbery” imply intent. You seriously wish to contend that all government wishes nothing but harm on it’s citizenry?

    Ethiopia was just part of the humour. There’s a more important point though – the assumption that a civil society could (a) spontaneously generate all necessary public goods without reasonable taxation and (b) you’d want to live there.

    I don’t doubt some public goods would be spontaneously generated, doubt remains whether they would be sufficient, widely enough spread or affordable enough to generate further development off their back.

    You gotta serve somebody, even if it is your own stomach or enough of a government to look after road building.

  319. melaleuca says:

    I stand by my claim that Homo libertarianius is a grim and mean beast.

    Jason Soon confirms it on his own blog here: http://catallaxyfiles.com/?p=2151&cp=1#comments

  320. FDB says:

    “theft and robbery”

    To be charitable, the intent behind theft is rarely to deprive the rightful owner, rather to enrich oneself.

  321. David Rubie says:

    melaleuca said:

    I stand by my claim that Homo libertarianius is a grim and mean beast.

    I can’t agree melaleuca. However, I think their ranks are peppered with genuine crypto-fascists (thanks Gore Vidal) whose intent was layed out very clearly in this thread, despite the pathetic attempts to rephrase and/or re-contextualise the original remarks. Absolute, solid, gold.

    However, the upside is that the crypto-fascists are also completely gutless, rendering them useless as even figures of fun. It’s a pity that the movement is circling the drain in this fashion.

  322. Mark Hill says:

    Not a false dichotomy David. I am not talking about cross subsidisation of the poor by the rich, although that is arguably so. I am talking about spending that makes everyone worse off – even globally. The simplest criteria is that spending is justified if it increases the welfare of the citizens.

    An example of unjustified spending is then the $70 mln gift to Toyota. They were going to build a hybrid anyway.

    Lefty A:

    “In addition to that, theft and robbery imply intent. You seriously wish to contend that all government wishes nothing but harm on its citizenry?”

    Lefty B:

    “To be charitable, the intent behind theft is rarely to deprive the rightful owner, rather to enrich oneself”

    I prefer this explanation:

    “Never attribute to malice that which can be adequately explained by stupidity.”

    Observe the wasteful failure of Bush’s “compassionate conservativism”. Clinton’s spendthrift left liberalism was much better.

    “I dont doubt some public goods would be spontaneously generated, doubt remains whether they would be sufficient, widely enough spread or affordable enough to generate further development off their back.”

    It is good to see you understand the argument over public goods is about underprovision (essentially a positive externality argument) and not the non-provision of goods. Those case studies showed there was adequete if not benchmark level provision of the good in question. In those cases there wasn’t underprovision and lighthouses were also supplied by the profit seeking market, not by voluntary cooperation.

    More formally, roads are not pure public goods. They simply don’t qualify for debate over if they would be underprovided or not, but it has been shown they can be without a profit motive and without taxation. The lack of a profit motive does not necessarily predicate “market failure”.

  323. Mark Hill says:

    Make up your mind David. Ex Marxists, now crypto fascists?

    Please reconcile either of these with well known libertarian ideas or LDP policy.

    This is trite, but it shows you clearly have been miseducated along the way:

    http://en.wikipedia.org/wiki/Fascism

    “Fascism is a term used to describe authoritarian nationalist political ideologies or mass movements that are concerned with notions of cultural decline or decadence and seek to achieve a millenarian national rebirth by exalting the nation or race, and promoting cults of unity, strength and purity.[1][2][3][4][5]

    Fascists promote a type of national unity that is usually based on (but not limited to) ethnic, cultural, national, racial, and/or religious attributes. Various scholars attribute different characteristics to fascism, but the following elements are usually seen as among its integral parts: nationalism, militarism, anti-communism, totalitarianism, statism, dictatorship, economic planning (including corporatism and autarky), populism, collectivism, autocracy and opposition to classic political and economic liberalism.”

    I can’t understand why you could be so confused in our so called “information age”.

  324. David Rubie says:

    Mark Hill wrote:

    I prefer this explanation:

    Never attribute to malice that which can be adequately explained by stupidity.

    Why then, would you bother conflating excess taxation with emotive terms like “robbery and theft” when “waste” would suffice?

    I agree on the Toyota thing though.

  325. Mark Hill says:

    Then why would you agree if it is conflation?

  326. David Rubie says:

    Mark Hill wrote:

    Make up your mind David. Ex Marxists, now crypto fascists?

    Y’know, I got the original wrong as I had Humphreys confused with somebody else from a discussion quite a long time ago, so I had him pegged wrong on being an ex-Marxist (although I’d also contend that extreme personalities, such as those attracted to Marxism in the latter half of the 20th century tend to swing in extremes).

    Crypto-fascist is I think a perfectly accurate way to describe some of the strange actions of some members of the LDP as it is currently managed. (Crypto-fascist being a term more like “secret” in this case, as Vidal once described William F. Buckley).

    Consider how these things are perceived by outsiders:

    – The strange membership drive in the ACT covered by parliament in unflattering terms. If a major party had been caught doing that, somebody would be in jail.

    – Flirtation with the more extreme ends of the gun nut fraternity.

    – The outright fringe/strangeness of parliamentary candidates for the last election.

    – The preference swapping deals which overwhelmingly favoured the nuttier far right end of the political spectrum.

    – Humphreys mask slippage right here in this thread, “the left hate the poor” etc.

    – The generally combative stance of “you’re either with us, or against us” as if the 30/30 plan was some perfectly formed thing, when in reality it’s a typical small party, not-quite-costed framework.

    I’m not accusing the LDP as a whole, or all the members of being fascists, but to an outsider the shenanigans are at best baffling and at worst something to be worried about.

  327. David Rubie says:

    Mark Hill wrote:

    Then why would you agree if it is conflation?

    I don’t agree. It’s just as silly to tell your kid, after not finishing his greens, that he just “stole food from a starving african” as it is to say government waste is theft.

    It’s emotive for no purpose, other than to stir up emotion. It’s not a useful description to base a rational argument on.

  328. Mark Hill says:

    1. What is strange about market segmentation and targeting? We didn’t lie and the AEC let us get registered (under their silly rule about name changes designed to shaft liberals for forests). Are you accusing the AEC of “shennanigans”?

    2. The “gun nut” fraternity don’t like us because we like gays. Read the Australian Hunting Net forums and see if the comments from some of us are still up. I tried to convince them that gun rights would be more palatable if they found common ground with gays – that is they are minorities with a lifestyle choice that gets unfair treatment. They disagreed.

    3. You can cherry pick any organisation all you want to get the desired effect. Unless you’ve had media training, watchout.

    4. Strange that the CDP called Family First “unChristian” for preferencing us. Channel Nine called us left wing! The ASP didn’t give us preferences because they have a personal beef with David Leyonhjelm. David put Howard last and we generally put sitting members last. The Libs were in power, remember. Though I don’t know how big a bow you need to draw to conclude preferencing against centre right to centre left makes you “crypto fascist”.

    5. “The left hate the poor” doesn’t prove anything. But I’ll add the right also hate the poor with their pointless mutual obligation, etc.

    6. That’s not true. I’ve said quite a few times, “yeah, I disagree about x and y, but z shows it needs work”. We wish to revise the policy. Please re read the whole thread.

    7. I feel sorry for you if you wake up in a cold sweat fearing a penniless hippie like John Humphreys will lord over you like Salazar or Batista.

  329. Mark Hill says:

    “Its emotive for no purpose, other than to stir up emotion. Its not a useful description to base a rational argument on.”

    Yes it is. Someone was forced to fund that wastefulness. They didn’t voluntarily give it away. That wastefulness decreased society’s well being by more than the financial value of the revenue collected. It means someone found it harder to pay off their mortgage, a doctor or engineer considered going overseas to work and a firm reinvested less income to employ less people.

    Theft is not emotive. Calling someone a “thieving c**t” is.

    Economic vandalism might be a more accurate term.

  330. David Rubie says:

    Mark Hill wrote:

    I feel sorry for you if you wake up in a cold sweat fearing a penniless hippie like John Humphreys will lord over you like Salazar or Batista.

    Unlikely. See “gutless” above. Just because the organisation has failed to recruit the requisite brownshirts doesn’t mean it doesn’t look like it hasn’t been trying. I wouldn’t trust the ASP as far as I could kick them and I wouldn’t trust anyone who tried to recruit their members for any cause, for anything.

    Theft is not emotive. Calling someone a thieving c**t is.

    Economic vandalism might be a more accurate term.

    That’s even worse! Is there spittle on your monitor now?

  331. JC says:

    Dave

    Just because Mel goes off the rails with his name calling doesn’t mean you have to follow his lead.

    Mel can’t make an argument so he resorts to abusive slogans. There’s no need for you to do that.

    Get yourself clued up on issues and what the LDP really stands for.

  332. Mark Hill says:

    So, in summary, you believe:

    1. John is “gutless”?

    – I guess the man can defend himself. Please point out how he is gutless.

    2. The LDP has been trying to recruit “Brownshirts”?

    – Please show how we are trying to recruit a small militia of Neo Nazi thugs, for a purpose we have not yet decided upon. We’d be interested in how we financed that!

    3. The compulsury financing of privilege, waste and largesse that is economically destructive isn’t morally equivalent to vandalism, robbery or theft?

    – Please show me a better phrase or word in common use for such ruinous behaviour.

    Your replies are becoming progressively unhinged.

  333. David Rubie says:

    JC wrote:

    Get yourself clued up on issues and what the LDP really stands for.

    Why JC?

    So far the LDP policies are just a list of US Republican party talking points, and where the LDP and the GOP disagree, the LDP is about as progressive as Rudd on social issues.

    Nothing much there for anybody who’s interested in political compromise.

    Humphreys is gutless for the pathetic backpedal on this outburst:

    Seriously you have to be retarded not to be able to look after yourself in Australia. Isnt anybody else sick of the whingers? Go and live in Cambodia (who manage to find food & accomodation surely impossible in Ken-thought) and then come back and tell me your sob stories.

    Defend it, re-contextualise it, do whatever you want. It’s all the insight into the bloke I’ll ever need, thanks.

  334. Ben says:

    Q: How many progressives does it take to change a light bulb?
    A: That’s offensive!

  335. Ben says:

    melaleuca said:

    I stand by my claim that Homo libertarianius is a grim and mean beast.

    Jason Soon confirms it on his own blog here: http://catallaxyfiles.com/?p=2151&cp=1#comments

    But Mel I’ve already explained to you that you are either dishonest or ignorant on this one (at #278). Now tell everyone which you are so we can all ridicule you accordingly.

  336. David — I didn’t backpedal on anything. You misunderstood simple english, so I explained it to you again with smaller words. You still don’t understand. That doesn’t make me gutless. It makes you stupid.

    Either that, or you’re intentionally misrepresenting anything & everything you can to stir up trouble. I believe such a person is called a “troll”.

    Flicking through some back-comments I see you are also trying to link neo-cons with libertarians. That is truly strange. Contrary to what one other libertarian defender said, neo-cons aren’t even free-market — as mostly ex-Democrats, their economics is mostly centrist. The CEI is not a neo-con outfit… they are a mish-mash of various different philosophies, with the only theme being “not-left”. Perhaps they could be described as “free-market conservatives”, but that isn’t the same as “neo-con” or “libertarian”.

    But again… it is questionable whether you really are as dumb as to be this easily confused by different philosophies. I think it more likely that you are again being a troll.

    In which case — I suggest to the others here that they stop feeding the troll. David isn’t trying to engage in intelligent debate. He’s trying to be funny. The best response is to laugh, pat him on the head and instead debate real issues with the adults.

  337. PeterW — let me be clear that I do not claim there will be no losers under 30/30. Any reform that it going to fix our tax/transfer system is going to involve losers. Nobody wants that. But I think it is more important to fix our tax/transfer system.

    The tables in my document show some of the winners & losers in a simplified table which looks at only tax/transfer payments and ignores dynamic effects. As I further explain in the document, the dynamic effects are the most important. No static analysis of tax/transfer changes is going to show the real outcomes of any reform that changes behaviour.

    NPOV — I like debating with you. You seem like a nice chap. You’ll be libertarian soon enough. :)

    You write: Why cant the marginal productivity (at least as I understand the term) increase simply by employers taking a pay cut in order to pay their employees more?

    No. Employers could take a pay cut and pay employees more, but that won’t change their marginal productivity. Such a move would be equivalent to a person simply handing over cash to another person. It’s nice, and I hope that rich employers consider doing it… but it doesn’t change the measure of productivity.

    Marginal productivity is the incremental increase in profit created by the last incremental increase in input. So if profit increases $10 with the addition of an extra hour of type-x labour… then the marginal productivity of one hour of type-x labour is $10.

    If a worker employed in type-x industry is getting paid $20/hour, then his employer could increase profits by firing him. In reality… some people keep their “over-paid” (relative to marginal productivity — no moral judgment) because the market doesn’t instantly adjust and most employers do have a heart. But in the medium-term, such people will either see the real value of their wage fall or lose their jobs.

    Likewise, if a worker employed in type-x industry is getting paid $5/hour, then another employer could increase their profits by poaching him. In reality… this may take time as the market doesn’t instantly adjust. But in medium term, such people will either get a raise or find alternative job opportunities.

    ===========

    On a different topic. You say (as I’ve heard 1000 times before) that you support “better government” and not “less government”. Nice idea. First, I wonder if you support better government with regards to the war on drugs & the war on terror. Surely all of the negatives from those interventions could be fixed if only we had the correct sort of intervention? Perhaps. But this is the excuse that every generation uses to re-try the same mistakes and burden us with never-ending government programs. Freedom isn’t so dangerous that we should never try it.

    Better govt intervention is preferable to bad govt intervention… but it is important to consider whether there are anythings with regards to the nature of voluntary behaviour and government behaviour which means that one more often leads to a better outcome. If you want theory — check public choice theory. If you want reality — check the outcome of most govt intervention through history. If you want the simple story… consider who has the better incentives — people trying to look after themselves, or politicians & bureaucrats.

    Under voluntary behaviour, charity is a good thing. Under voluntary behaviour, profit-maximising behaviour is a good thing (as it generally leads to a social benefit — see Adam Smith 101). Under government policy we have confused incentives… questionable talent… political games… super-slow adjustment times… and every-growing govt despite the fact that we’re richer than we ever have been and therefore should need *less* help.

    I think there is fair evidence to suggest we should be skeptical of government. Not totally dismissive. But skeptical. Our first instinct should be for the voluntary solution… and then we should subject proposed govt intervention to rigorous cost-benefit analysis, and preferably put a sun-set clause on the legislation. If it’s truly a good idea, it will be approved again in the future.

    For consideration… and when you become a libertarian you owe me a beer.

  338. NPOV says:

    John, I generally accept that government intervention should always be kept to a minimum – it has to be well-justified, and the benefits should be obviously worth the costs. In the case of much labour regulation, especially workplace safety laws, and progressive tax and transfer, I believe they are – despite particular examples where this might not be the case. In the case of drug laws, it seems pretty clear to me that any benefits are not worth the costs. I would certainly never claim that I believe all drugs, no matter what their potency or effects, should always be freely manufacturable, advertisable, distributable and saleable to any persons. But it seems fairly clear to me that current policy towards drugs, and most particularly the least harmful ones, is generating far more costs than benefits.

  339. NPOV — you say you want less income inequality. Many people say the same. Let’s pin this down.

    All sensible people agree that there is an appropriate amount of income inequality. We have different abilities. Different desires. Different luck. We don’t all want the same life.

    But what is the “correct” amount of inequality? That’s difficult. I don’t pretend to know. But if you “know” the current level (or the free-market level) is wrong then presumably you have a way to work out what is “right”?

    Are you sure that there is too much? Maybe there is not enough? Have you checked exactly what everybody wants? We know that moving away from the free-system distribution has costs… so what are the relative benefits of moving away from that distribution?

    It’s true that poor people tend to have a higher utility benefit from money… but that would be covered by anti-poverty measures. What is the additional rationale for making sure rich people don’t get too rich and that middle-income people get their incomes brought a bit closer together?

    If we could double everybody’s income, would that be a good thing… even if it lead to higher inequality?

    Personally — I support diversity (ie inequality). I don’t know what is the correct amount of diversity… but I have no faith that the government does, and I know their attempts at engineering a “correct amount of diversity” has real costs that hurt real people. So I prefer that they stop.

    If the government is going to do anything, they should be making sure that people have access to certain minimum requirements in life. I think those minimums will be met voluntarily… but at least this is an appropriate area for the government to *think* about action. I don’t think diversity-management is a legitimate role of government.

  340. JC says:

    JohnH

    To be honest David is actually a very nice guy. i just think he hasn’t really spent time figuring out what the LDP stands for and supports. We’ll get him on side soon enough. It just takes time.

  341. NPOV — I can taste the beer already. ;p

    Now, every time the government says they’ll fix an economic problem, I want you to first think “this is the same government *fixing* the drugs problem” and the skepticism will start to grow.

    Most libertarians still want some govt involvement. I didn’t expect you to become radical. A bit of tax & transfer and a few regulations is standard for a moderate libertarian. Now I just need to convince you that the government isn’t efficient or effective at running schools.

  342. NPOV says:

    Actually I don’t have a strong opinion on government-run vs privately run schools. As long as quality education is available to all, I’m satisfied.

  343. TerjeP (say tay-a) says:

    To be honest David is actually a very nice guy.

    Perhaps but at the moment he isn’t behaving like one. Given the brownshirts remark we could just invoke goodwins law and move on.

  344. Sinclair Davidson says:

    JC, you’re soft.

  345. Sinclair Davidson says:

    Tay-a, that crap might work at some other places you hang out, but grown-ups debate the merits.

  346. JC says:

    Perhaps but at the moment he isnt behaving like one.

    It was just a cold rush of blood to the head. Dave wasn’t thinking straight at the time.

  347. NPOV says:

    John, doubling everybody’s income doesn’t lead to higher inequality. What matters is the relative buying power of the those in the bottom half of the income spread relative to the those in the top half. So doubling the income of everybody in the bottom half while quadrupling the income of everybody in the top half would definitely concern me. Although of course the real pattern (here, and in the U.S.) has been for the top 5% of incomes to increase substantially more than those of the bottom 95%, out of which the top 1% has increased by far the greatest amount etc. etc.

  348. Tim Quilty says:

    I would have thought what matters is the absolute incomes of the lower income earners. I don’t really see why people care about relative income inequality at all. If the poor are getting richer does it really matter whether the richer are getting richer faster? Honestly, why is this not simply the politics of envy? What is the actual point of having less income inequality?

    You can spend lots of money on luxury goods, but not meaningfully live better then low income earners. A $1,000,000 car takes you from place to place. So does a $6000 second hand one. A $15,000,000 harbourside mansion provides shelter, so does a $200,000 unit in a non-trendy suburb. Over a certain basic level, minimum needs are met.

  349. NPOV says:

    Tim, there are many arguments against income inequality, and I’m sure you’ve read them all previously elsewhere. If you don’t agree with them – fine, but as I said earlier, believing in keeping income inequality small is as important to progressives as believing in keeping government small is to libertarians. Progressives would generally not have an issue with keeping government small per se (though many would object to the idea that it would be better to have more private providers of vital services), so the only libertarians that are likely to be successful in any sort of “progressive fusionism” are ones that can accept that reducing income inequality is not a bad thing.

  350. NPOV says:

    I will say, regarding “envy” – that I suppose you could argue that part of argument against excessive income inequality is general social destablisation it can cause, and part of that may be *due* to envy. But historically when the less fortunate have rebelled against the powerful elite I’m not sure that envy had a huge amount to do with it.

    And as I said earlier, many progressives who argue for less inequality do so accepting that they themselves will find their net incomes reduced relative to those not so fortunate (certainly I would expect that to be the case personally). So unless you think we’re envious of the poor, I’m not sure what you mean by “the politics of envy”.

  351. Ben says:

    NPOV why does that matter? Surely if those in the lower income can afford to buy more of the stuff they want it’s a step in the right direction? Why is slowing down the income gains of the higher ups a good thing? That seems like economic policy driven by jealousy.

    Let’s also not forget the fact that whatever the rich do with their money it leads to more money for all of us. If they decide to splash out on a mansion then builders, architects, labourers etc. all get work. If they simply leave it in their bank account then the money is used for investment in new ventures which also means more jobs. So what’s the beef?

  352. NPOV says:

    Ben, that would be like me asking you why does small government matter? I understand all the arguments in favour of it, yet I’m remain unconvinced that smaller government is going to solve anything. However, I’ll support policies that lead to it, if they also address the issues that genuinely concern me.

    “Lets also not forget the fact that whatever the rich do with their money it leads to more money for all of us.”

    Perhaps, but you can’t prove that if the less rich had more money it wouldn’t lead to the same additional amount of money for all of us. Depends if you believe there any truth to the aphorism that “Money is like manure – in big piles it stinks, but spread around it helps everything grow”.

  353. Mark Hill says:

    “Progressives would generally not have an issue with keeping government small per se (though many would object to the idea that it would be better to have more private providers of vital services), so the only libertarians that are likely to be successful in any sort of progressive fusionism are ones that can accept that reducing income inequality is not a bad thing.”

    They are socialists who are confusing progressivism with socialism and industry policy.

    NPOV, you have got to make up your mind.

    Like Ben asked:

    “Surely if those in the lower income can afford to buy more of the stuff they want its a step in the right direction? Why is slowing down the income gains of the higher ups a good thing?”

    It is almost like you don’t care about the absolute welfare of the poor, but the relative welfare of the poor. Would you rather two wages rates, $5 and $20, or two wages rates, $20 and $100?

    but you also said:

    “Perhaps, but you cant prove that if the less rich had more money it wouldnt lead to the same additional amount of money for all of us.”

    Damn that was an awkward sentence. Your characterisation of wealth and the impact of taxes is nearly artifical. How do you force such changes in equity without changing the productivity of the economy? If the less rich know they will be taxed in the future when they earn more, what incentive do they have to work harder now (and where does that leave the rest of us?) – it sounds like a socio-economic version of Ricardian equivalence.

  354. NPOV says:

    Mark, I don’t see any need to “make up my mind” about anything. The available evidence suggests to me that a country with significant income inequality is not one I’d wish to live in, for a number of reasons. If we have to sacrifice a small measure of economic growth for that to be possible, so be it.
    I certainly don’t accept we have some sort of choice between “everyone equally poor”, and “some people mindboggling rich, and everyone else doing reasonably ok”.

  355. NPOV — re: doubling income increasing inequality… that depends how you measure inequality. By many measures, it does. Even more absurdly, by some measures of “poverty”, doubling all incomes increases “poverty”. Obviously, these aren’t real measures of poverty and I hope this gives you reason to question the honesty of some in the welfare lobby.

    But my point was about the relative merits of increasing the income of the poor, as compared with decreasing the gap between rich & poor. I think it would be better to help the poor, rather than “fix” the “incorrect” level of diversity.

    I presume by your answer that you do know the “correct” level of diversity. I’d be interested to hear how you measure it. Can it change? For example, if relatively more people in society decide to “downshift” (like I have, and Clive Hamilton recommends) then would you allow the consequent increase in diversity? Or would you enforce conformity on society? If so — would you force the hard-workers to work less or would you force the downshifters to work more?

    Or would you let them have different lifestyles, but force the hard-workers to subsidise people like me? If so — what is the morality of that policy? I would argue that the downshifters have a *better* life, so you would be effectively taxing the (quality-of-life) poor to subsidise the (quality-of-life) rich. Thanks for the kind offer, but I wouldn’t feel right taking that money. Neither would many of my down-shifted friends… as we really aren’t that concerned with material wealth.

    Or perhaps you’re just against diversity caused by luck… in which case are you also against the lottery? Are you against all games of chance? Would you illegalise these games, or simply force the players to return their winnnigs at the end of each game?

    It’s a dangerous game you play. I prefer to worry about those who genuinely need help and not get the government involved in these lifestyle-controlling diversity games.

    ==========

    You make the point to Ben that poor people using money also creates wealth. You are absolutely correct. It is slightly different because rich people invest more, leading to more/better capital, which is the primary driver of economic growth (ie higher incomes for everybody). But in opposition to this it is generally accepted that poor people get more utility from their money.

    The real cost of forced redistribution is not the transfer — it is that it creates an incentive against creating money in the first place. At the static level, even getting robbed isn’t a welfare loss. You lose your wallet. But somebody else has it. Your utility decreases, but their utility increases. Ignoring for now your hurt-feelings, these two effects roughly cancel.

    But the dynamic problem of having excessive theft is the impact on your future decisions. If you know that building a car will get you $10,000 revenue with $7000 cost… but you also know there is a 50% chance of being robbed… then you won’t build the car. Likewise, forced redistribution creates the same disincentive against making the utility-maximising business/life decisions.

    I am not saying that tax is morally equivalent to theft here. These were simply examples. In both cases, the insecurity of your absolute property rights leads to dynamic changes (ie behavioural changes) which is worse for society.

    Of course, it may be necessary sometimes. In some instances, both theft (at a moral level) and tax (at a political level) may be appropriate. But we should not pretend that such activities come without a social cost.

  356. NPOV says:

    John, regarding voluntary “downsizing” – there’s no requirement that you collect transfer payments that may be available to you. Indeed, I’ve suggested to my wife that we forgo FTB payments in the past, because we don’t really need them. She had other ideas.

    Fixing the problems at the bottom end (and I think the NIT idea goes a long way to do that) is to me equally important to ensuring that Australia’s income inequality doesn’t get out of hand (which I think the 30/30 policy as it stands now would be a dangerous step towards).

    And of course there are plenty of arguments against excessive taxation. I don’t know what the ideal level is, and I don’t know what the ideal level of income inequality is either – democracy is probably the only reasonable way of determining this: providing we generally have a choice at the ballot box between one party promising to address inequality issues, and one that isn’t too concerned about them (because, in general, without government intervention, there are good reasons to support inequality will continue increasing), then voters en masse get to decide the degree to which they care about it.

    But I personally wouldn’t support a policy that would significantly increase (post-tax/transfer) income significantly given the current levels of inequality in Australia. If I was in, say, Sweden, I might feel very differently about it.

  357. NPOV says:

    That should be “…goods reasons to suppose…”

  358. David Rubie says:

    John Humphreys wrote:

    But again it is questionable whether you really are as dumb as to be this easily confused by different philosophies. I think it more likely that you are again being a troll.

    Well, not trolling exactly. Think about it more like a thought experiment, although first a couple of apologies:

    Mark Hill – for playing along.
    Humphreys (but read on).

    I had an incredibly visceral reaction to post 92, which lead to the entirely serious post at 93. The idea didn’t fully foment until perhaps 146.

    It took a few ingredients though (not all in this thread): The CEC/LaRouche youth movement and their inside takeover of the League of Rights and Mark Twain’s idea that history doesn’t repeat, but it does rhyme. Add a little conspiracy theory stuff, perhaps the propensity for blog posts to broadly group opponents in order to demonise/dismiss them that’s usual for blog stoushing, then.., well…

    The idea is this: At the end of history, how would you start a revolution?

    Most people know to avoid the extreme ends of the left/right spectrums revolutionary elements thanks to widespread education. We have no large numbers of disaffected ex-rural poor, we have stable economic conditions and governance which generally avoid recession. People simply wouldn’t be interested.

    Could you get them interested if they started to get convinced they’d been cheated? That societies broad arrow was destined to leave them behind? What would you need to start that?

    Perhaps an un-aligned political grouping that doesn’t fit the usual spectrum people know about. It has to be unaligned, otherwise it will just get dismissed in the early phase as “fascist” or “communist”. One that might have a good library of writings to refer to, with tradition to give it the overall sheen that Marxism used to have amongst intellectuals. Make participants feel special, as if they knew something nobody else did (like an esoteric religion). Then, take it over and subvert it. Why? Because the usual intellectual/political types are middle aged, fat, don’t own weapons and are too comfortable with the status quo to make change. You need thugs, the disaffected, the 1 percenters to man barricades, to frighten people. Enter links with fringe groups within (say) outlaw bikers, the really weird gun owners with boxes of weapons in oil cloth under the house. Tell them their being cheated, that welfare is stealing bread from their children, that their political overlords wish this situation to continue. Use your wordier nerdlings as urgers to write stirring prose to inspire them.

    I think the LaRouche movement is incredibly interesting in this case.

    I should probably have used a sock puppet too, but I’m just not that smart.

    Again, apologies, back to your usual transmission.

  359. NPOV says:

    BTW, does anybody know a quick way of jumping to a comment, knowing its number? I.E. won’t let you search for nubered list item text (not entirely surprisingly), and your Permalink URLs don’t seem to based on the item number.

    For anyone wanting to know, post 92 was this: http://clubtroppo.com.au/2008/06/15/not-so-persuasive-after-all/#comment-282247

  360. Jacques Chester says:

    NPOV;

    In short, it can’t be done. The theme doesn’t base #id on the comment number in the conversation. Instead it uses a globally-assigned id which is unique across all comments anywhere in the site.

    The comment “number” you see is actually created by a bog-standard <ol> list tag.

  361. Not sure, NPOV. Unless the commenter helpfully provides a link to the relevant ‘permalink’, I don’t think you can. I’m using Firefox btw, although I haven’t downloaded the latest version.

    I’m finding the discussion between you & John fascinating, btw. I think you’re a lot more libertarian than you realise, too – and I say that as someone who doesn’t care about inequality, but does care about sufficiency (Harry Frankfurt’s conceptualisation of poverty). Many countries have low GINI coefficients, but you wouldn’t want to live there. Other places have fairly high gini coefficients, and you would want to live there (like Australia).

    I think there are also definitely places where it’s easier to be poor (at least relatively speaking). Homelessness in an English winter is bleak in the extreme, yet also an artifact of choice, too. Interestingly, welfare provision often relies on the recipient having a permanent address. After talking to quite a few homeless people around Oxford, one consistent request is the ability to be able to claim payments ‘poste restante’ – without a fixed address. I haven’t thought about the issues in any depth, but it seems a reasonable request to me.

  362. NPOV says:

    Oddly skepticlawyer, the further into this discussion I go (and it’s not the first one I’ve had like it), the less libertarian I suspect I actually am.

    I do believe that social democracy is basically a successful formula, and that there are things governments can and should do to help minimize the harm people do to themselves, and to provide the maximum opportunities for them to improve their lives. However, it does concern me that in many areas Australians are far too happy to let the government determine how people should live their lives, and far too content to let it squander their tax dollars on ineffective or even counterproductive programs (I read today that Dick Smith now believes that recent governments have done such a poor job of spending public money that he intends to start minimising his tax – something he’d never bothered with before.)

  363. Peter Whiteford says:

    Skepticlawywer (362) – actually income inequality in Australia is currently below the average for OECD rich countries (according to OECD figures but not LIS figures), and most rich countries have lower Gini coefficients than most developing countries, so I’d argue that in the world context Australia is a rich but relatively equal country.

    If you want to see what high inequality countries look like go to
    http://www.columbia.edu/cu/economics/discpapr/DP0203-10.pdf and have a look at the figures from page 17 on, particularly Argentina, Brazil, Mexico, and South Africa – if a country has an income distribtion with multiple “peaks” then it is a very high ineqality country!

    John Humphrey’s at 352: “Even more absurdly, by some measures of poverty, doubling all incomes increases poverty. Obviously, these arent real measures of poverty and I hope this gives you reason to question the honesty of some in the welfare lobby.”

    I don’t think that there are any measures of either poverty or inequality where if you double all incomes, poverty and inequality would increase at all. However, if you double average (mean) incomes this is possible, but this simply means that we shouldn’t confuse average incomes with all incomes.

  364. Peter Whiteford says:

    That should be John at 356.

  365. NPOV says:

    I can see there would be *some* increase in inequality if everybody’s incomes doubled – but surely the main effect would simply be to double the price of goods and services whose supply is not easily increased – land especially.

    And yes, Australia is lucky to have below-average inequality, or at least, lucky relative to many other nations. What is telling of course is that there are very very few rich countries with very high inequality.

  366. Mark Hill says:

    Does anyone else know what the hell David Rubie is rambling on about?

    NPOV, you keep on saying things like “income equality gets out of hand” rather than “poverty gets out of hand”. If we were all equally poor, then there would be no inequality. But there would be a 100% poverty rate.

    Relative incomes are a derived outcome. Unlike poverty, they do not create any social problems (contrary to the erroneous article you linked to earlier and were misled by). If my income only increases by 10% this year and yours triples, I am not worse off, nor will this cause any calamity. Why is it such an important variable for you? What is an acceptable level of income inequality?

    The optimal level of taxation is where there are balanced budgets, the inefficiency of taxes are minimised and finances are spent on policies with a demonstrated clear net benefit. It is ethical, sustainable and the most opportunity affording policy.

  367. NPOV says:

    “Relative incomes…do not create any social problems”

    Mark, I bow to your expertise and now consider hundreds of years of evidence that suggests to me the reverse to be irrelevant.

    As for your last paragraph, who could possibly disagree with that? It is precisely an argument for “better government” and not necessarily one for “smaller government”.

  368. Mark Hill says:

    “Mark, I bow to your expertise and now consider hundreds of years of evidence that suggests to me the reverse to be irrelevant.”

    I think you should check the historical preconditions of any example you can find. Income inequality is an outcome of economic oppression arising from a system like feudalism which existed in or soon before pre revolutionary France or Russia. You will also find manegerial incompetence of an incumbent Government and a “perfect storm” of disasters before a present calamity and revolutionary ideas from abroad. Income inequality is a greviance but most often also an outcome of economic oppression. What matters is if the inequality is institutionalised and if factors can earn incomes on their output. I suggest these are have far more predictive power than income inequality which has no micro or macro level effects on the economy.

    “As for your last paragraph, who could possibly disagree with that? It is precisely an argument for better government and not necessarily one for smaller government.”

    It is when you consider the level of waste and counter productive policy we currently have and implications of tax rationalisation within the context of a highly inefficient tax system we also currently have.

  369. NPOV says:

    Well the gap between capitalism with huge income inequalities and feudalism may not be all that great in practice. But no, I’m not claiming that, for instance, America’s poor are likely to rise up and form a bloody rebellion against the rich elite any time soon – it’s a more subtle process of gradual division of society that concerns me.
    But I do agree that “what matters is if the inequality is institutionalised” – and government policies that benefit the wealthy at the expense of the poor are certainly the most damaging sort. And I wouldn’t dispute that many such policies were introduced by well-meaning social democratic governments that failed to foresee the consequences.

  370. Mark Hill says:

    “Well the gap between capitalism with huge income inequalities and feudalism may not be all that great in practice. ”

    Yes it is. People like JD Rockerfeller never existed in pre revolution France. They basically had no entrepreneurs.

    How is society going to be divided if there is a real chance for upward and downward mobility with a safety net that targets poverty?

    Tax systems do not keep wealthy people wealthy – unless like the current system they are open to manipulation. They can however destroy upward mobility. Reducing top marginal tax rates, or introducing a linear tax that eliminates poverty traps, and gives eveveryone a lower rate of tax like that proposed by the 30/30 plan will not “benefit the wealthy at the expense of the poor”. You’re thinking of subsidies, tariffs and the like.

  371. NPOV says:

    But were there huge income inequalities in the period that JD Rockerfeller got started? I can’t say I know enough about pre-revolutionary France to make a judgement on why (or even if) there were no enterpreneurs. Britain at the same time (and for centuries beforehand) seemed to have a number of them.

    Lots of things divide societies – but material wealth is indisputably one of them. Certainly in the U.S. the pattern of the extremely wealthy living in areas that are basically off-limits to the rest of the country has been developing for some time.

    I didn’t suggest that it was the tax system that keeps people wealthy – by large wealth keeps people wealthy without much help. I agree with a “linear tax” that eliminates poverty traps, but I don’t see any obvious benefit in the EMTR staying at 30% no matter what your income is (except that it sounds nice and simple).

  372. Mark Hill says:

    Simplicity has utility.

    1. We waste less on tax planning.

    2. We don’t punish upward mobility and overtime.

    These are valid points considering the TFT is generous and the changes to transfer payments eliminate poverty traps.

    What is the point of increasing the tax rate when effective tax planning can help some people keep all of their wealth and those who cannot afford such schemes, the tax system is a barrier to accumulating wealth?

    If we accumulate more wealth and more people accumulate more wealth, the chances of being born into poverty diminish. This is a worthwhile intergenerational goal.

  373. NPOV says:

    When did I say anything about increasing the tax rate?

  374. Mark Hill says:

    As compared to the 30/30 plan, yes you have.

  375. NPOV says:

    Er ok…well whatever…realistically the 30/30 plan isn’t going to happen anyway. The most likely direction that tax rates in Australia are going to go in the foreseeable future is downwards, and providing that this doesn’t occur at the expense of adequately provided services (including adequately paid public servants), I don’t have an issue with it.

  376. Ben says:

    I love the way that when a point of view runs out of tread it inevitably leads to pragmatism. When the logical points have all been weighed ad nauseum someone will inevitably say: Well that’s never going to happen anyway!

  377. Ben says:

    No offense NPOV i just find it funny.

  378. NPOV says:

    Not offended (I very rarely am).

    BTW, I worked out how to get to comment n. Type this in the address bar:

    javascript:document.getElementsByTagName(“ol”)[1].childNodes[n – 1].scrollIntoView();

  379. Mark Hill says:

    “Er okwell whateverrealistically the 30/30 plan isnt going to happen anyway.”

    You’ve spent an awful lot of time on something that is not going to happen. I take it calamities arising from income inequalities are never going to happen as well?

  380. NPOV says:

    Because I think there is a good case for the NIT idea, and it’s an interesting subject to discuss.

    As far as “calamities arising from income inequalities” – they happen all the time in other parts of the world. But we should be able to better than just calamity-avoidance in a country like Australia.

  381. Mark Hill says:

    “As far as calamities arising from income inequalities – they happen all the time in other parts of the world. ”

    No they don’t. Not without several other preconditions that effectively make inequality a result, not a causitive factor.

    Income inequality is not a valid concern of policy nor a good reason to punish high income earners.

  382. Mark Hill says:

    I bet you there is more income inequality in Zimbabwe now than in 1979.

    Zimbabwe rolled on for long enough not to blame the level of income inequality then for a crisis during the 1980s or even the 1990s.

    The crisis now is not caused by income inequality. Income inequality is a result of the hare brained kleptocracy.

    Can you actually name an example of what you asserts happens actually occuring without any of the preconditions I think are necessary?

  383. NPOV says:

    Are you seriously suggesting you don’t believe that entrenched income and power inequalities in much of the third world is a big part of the reason for the struggles faced by the bulk of their populations?
    The evidence that excessive income inequality is linked with economic stagnation is pretty overwhelming. As I said earlier, there’s not a truly prosperous country in the world with truly significant income inequality (America’s is getting close to being significant, and I think there’s reason to be concerned that its economy and society will ultimately suffer for this).
    As for “punishing high income earners” – that’s pure emotive language. I don’t feel the least bit “punished” for having to pay a significant fraction of my income in tax, and I doubt very many high income earners do either. It’s a small price to pay for living in a country where prosperity is shared by all.

  384. Mark Hill says:

    “Are you seriously suggesting you dont believe that entrenched income and power inequalities in much of the third world is a big part of the reason for the struggles faced by the bulk of their populations?”

    (No, they have far more important institutional issues. They don’t have adeuqete law and order systems. They don’t have well defined property rights. Often the Government is kleptocratic. The British Isles had very strongly entrenched inequality 400 years ago. The inequality may be even greater now, but the average Brit or Irish is better off in any comparable way. Furthermore, the motivations for political violence are more to do with tribal history and recent oppression by ex Marxists such as Mugabe. General economic problems these developing countries face include agricultural tariffs from developed nations, which are meant to be tackled by the Doha round.)

    However, you actually point out the precise difference between the West and much of Africa. Income inequalities are entrenched there in Africa. Income inequalities do not cause further economic problems or entrench themselves (as I’ve shown you before with a mathematical proof and the several failures of Keynesian economics).

    Since the industrial evolution, capital investment has boomed. In the 1800s, real wages in the UK quadrupled. Now in absilute terms the bulk of society is better off. Let’s say we’ve never seen time series data for Gini coefficients. 200+ years of economic growth either shows that: a) inequality is decreasing due to economic growth or b) increasing or stable inequality is irrelevant and non-causitive to economic growth. 200 years should be long enough to detect a trend and what your predicting doesn’t happen. Either a) or b) have to be true.

    The degree of upward and downward mobility is more important. Let’s discuss two logical extremes of your African examples.

    If there was even more income inequality but the lower classes had gotten out of poverty, these places would obviously be better places to live in with less chance of political turoil. However, you seem to dispute this point even to the stage where if Africa got to our levels of income but with an even wealthier upper class, they would be just as or more vulnerable to turmoil. Americans and the British may find this difficult to believe. You back up this assertion with your own fears, (contrary to the history of the West) which is reliant upon your misconceptions rooted in the thoroughly debunked Keynes (though empirical evidence) and Marx (through rigourous mathematical proofs).

    However, your strange focus on income inequality implies these nations would be better off and would see fantastic levels of economic growth if the upper classes would merely destroy many of their possessions, investments and productive capital they owned. The poor cannot benefit from this and may be even worse off in absolute and ultimately relative terms as capital is destroyed, their productivity (demand for their labour) would fall.

    Income inequality in Western nations is not entrenched. We have upward and downward mobility. These countries openly punish attempts to be upwardly mobile. Ethiopia used to have 85% income taxes on incomes over 4000 USD p.a. How do you go from poverty to the ruling class even in four or five generations with these constraints? When there is a three year wait to register the title on your farm you have recently bought?

    You keep on implying that income inequalities cause economic stagnation. I’ve shown you that this is incorrect. You should abandon this idea because it is completely false and not even possible to argue in the affirmative.

  385. NPOV says:

    Well, you’ll excuse me if I question your confidence that human behaviour can be so easily modelled by a few simple formulas.

    I do not believe I have a “strange focus on income inequality”. I just happen to believe than excessive income inequality is not healthy for a society, and my own real-world observations, biased and blurred as they may be, tend to bear this out.

    Anyway, I will say it again – you are about as likely to convince progressives that restraining inequality not is a worthwhile goal as progressive are likely to convince libertarians that restraining the size of government is not a worthwhile goal. If anything, your constant attempts to “prove” that income inequality is a good thing has quite put me off the idea of libertarianism, despite aspects of it that attract me significantly.

  386. Mark Hill says:

    You seem to be saying some things which are puzzling to me. Perhaps you can help me out.

    “Well, youll excuse me if I question your confidence that human behaviour can be so easily modelled by a few simple formulas.”

    Strangely, you predict social calamity and economic stangation if the ratio between high earnings and low earnings gets “too large”.

    What you should note is that Keynes has been refuted empirically for the last 30 or so years with no new support and that the Marxian assumptions you had have been shown to be mathematically impossible. It is one thing to claim human nature can’t be modelled but it is another to make predictions based on mathematically impossible foundations. Doing both is rather odd.

    “I do not believe I have a strange focus on income inequality. I just happen to believe than excessive income inequality is not healthy for a society, and my own real-world observations, biased and blurred as they may be, tend to bear this out.”

    I don’t know why you say this, plenty of others have observed the opposite or provided alternative explanations and you can’t actually name an occurence of your predictions occuring.

    PS

    Income equality is neither good or bad. That is my point. You assume it is wrong. The truth is, without other preconditions, it doesn’t actually matter.

  387. Mark Hill says:

    Should have read:

    “You assume it is bad for society and the economy. This is wrong. The truth is, without other preconditions, it doesnt actually matter.”

    Nonetheless you say:

    “If anything, your constant attempts to prove that income inequality is a good thing has quite put me off the idea of libertarianism, despite aspects of it that attract me significantly.”

    Well you should come back to the ideas of libertarianism. Because I never tried to show that income inequality was good or bad. I even showed you that economic growth has progressed for 200 years, independent of rising or falling inequality. I’ve said repeatedly that it simply doesn’t matter. More or less, it is inconsequential. I’ve said it quite a few times.

    However attempting to deal with an imagnary problem has real, deleterious consequences.

  388. NPOV — downshifting is about working less… not getting less money. While less money might be a consequence, it isn’t the goal.

    Once again you dodge the vital question of how you get your magical perfect amount of inequality. This isn’t a rhetorical question.

    To say that a certain level of inequality is wrong, you must have an idea of what is right. Personally, I don’t think there is a “correct” level of diversity, and I certainly don’t think the government can, will or should work it out. But if you know the current amount (or the free-market, or 30/30 amount) is wrong, tell us how you worked out the correct amount.

    I have a strong suspicion that you’re hidden assumption is that any move towards greater inequality is wrong. But what if the supposed “perfect” level of inequality is higher than today’s level? What makes you think the current level is right? What makes you think people will never change their lifestyle choices?

    Democracy is a totally impossible way of working out the correct answer to this question. It gives you an answer, but the answer has nothing to do with logically working out the truth. If the “correct” amount is worked out democratically — then what should you vote for? You can’t know what is correct until *after* the vote! If there is a correct amount of diversity, then there must be an objective way to work out the “correct” amount of diversity.

    What is this objective way? Is it “the vibe”? I’m not a big fan of faith-based politics. Or faith in general. It’s dangerous to trust the fate of yourself (let along other people) in the hands of sky-fairies and gut-feelings. I much prefer rational analysis… especially if you’re going to consequently impose your views involuntarily on other people.

    Surely it’s infinitely more important to address real problems that can be identified. Like poverty. War. Lack of civil liberties. Overcrowded jails. Mental health issues. These things aren’t just faith-based vibes concerning the “correct” level of human diversity. They are much more real.

  389. NPOV — I agree that public servants need to be paid properly.

    But when you say “adequate services”, I hope you mean the quality of the service… and not the quality of the government-offered service. I think the quality/quantity of health & education could go up easily with tax cuts — by making the systems more private. :)

    Health/education are only seen in contrast with tax rates when there is an assumption that the government has to do it.

    The problem with cutting spending is that everybody agrees with the idea, except for (and then they name their preferred projects). When you bundle people together in a democracy and try not to offend anybody, you end up with ever-growing government. I don’t know how to get around this problem. Except perhaps through education, insh’allah.

  390. Mark Hill says:

    Actually NPOV, let’s see if income inequality has value at all. (The alternatives is that it has no value or negative value. If it has negative value then we should all have communal property).

    Can it ever be useful? How do we attract children to study to become doctors or to save their capital and become entrepreneurs?

    I think income inequality may seem mean spirited but look at it in a more general way. It gives us a signal as to what forms of activity are highly useful to society.

    Don’t you think it is useful that the more highly valued work in society is valued properly and there is an incentive to train for, invest in and engage in these behaviours?

    I’m not saying that group based entrepreenurship or innovation in State socialism doesn’t occur. I am saying that income inequality is a useful signal to tell people what behaviour is and is more and isn’t welfare enhancing for society. At the moment we could conclude that surgeons are more useful than lawyers and accountants with programming and security analysis and maths skills are more useful than telemarketers. This is not a value judegemnt, but an observation of aggregate preferences.

    There are also implicit behavioural signs that can relate to generational poverty.

    Any possible benefits from income inequality are actually underlied by the assumption about inequality being a problem. Inequality will only be a problem, and price signals won’t work, if there are barriers to upward and downward mobility. (I’m not arguing against a safety net).

    If income inequality may be useful, in itself is not destructive and you don’t know what the “right” level of it is, then why would you be concerned at all then? It is like being worried about dams having “too much” capacity.

  391. NPOV says:

    Income inequality obviously has some value – and nobody sane these days would argue for eliminating it entirely. Certainly one would never expect the average 18yo to have the income of the average 50yo.

    And John, I don’t really think there is an objective way of determining the “ideal” inequality. Some people are happy with more (or don’t care), some people want less. I think Australia’s current level is a little on the high side, but it’s the trend towards greater inequality that concerns me more than the absolute level currently. I’m quite sure that America’s level is unhealthily high, from my own first-hand observations and papers I’ve read about the impact it has on society (e.g. those by Elizabeth Warren, who looks at the “vanishing middle class” phenomenon).

    If there was a rational, objective way of calculating the ideal level of everything, we wouldn’t need democracy.

  392. Mark Hill says:

    If there is no ideal inequality, then how can you say in a positive sense, that we have too much or America is “unhealthy”?

    What’s happenin to the middle class? Are they becoming richer or poorer in absolute terms?

  393. NPOV — I understand that you think income inequality is too high. But I don’t understand why? You seem to say that democracy can answer that. Are you saying that you think inequality is too high because that’s the popular opinion?

    Democracy is not an answer to any question of objective reality. Democracy is simply a tool to allow peaceful action despite disagreement. It doesn’t create truth.

    This confusion about democracy is quite common, and quite unfortunate in my opinion. It is circular, because if democracy creates truth then how are we supposed to vote in the first election on an issue? And once that first election has taken place, on what rationale could we ever change? Once we’ve voted that drugs are bad, they are bad… because that’s what we voted!

    You have given no reason for believing a correct amount of diversity even exists. Nor reason for believing the current level is higher than the correct level. It seems scarily like you’re running on a vibe. I don’t believe religion should be involved in politics.

    I’m quite sure that every “trendy progressive” has to believe that American inequality is too high. I’m just as sure they have little base this on except for knee-jerk skepticism of all things American. I wish they had the same skepticism for all things said/done by all governments… but based on what they mostly complain about, the Chinese govt (questionable justice, Tibet, Taiwan, Falun Gong, censorship, supporting Zimbabwe & Sudan, more inequality than america etc) isn’t so bad.

    But that aside — surely we should at least agree that government policy can only be based on objective assessment of reality, and not on vibes and religious opinion? If politics is about faith, then rational discussion is irrelevant. While that is true for many people, I didn’t think that would be your position.

  394. Also — do you agree that the “correct” amount of diversity (if it exists) is constantly moving? And do you agree that if the trend towards downshifting is real and ongoing, then the “correct” amount of diversity should be increasing?

    And do you agree that real problems that objectively exist in the real world are more important than faith-based vibes about correct levels of diversity? Because ultimately I have a lot of sympathy regarding how difficult it would be for you to re-assess these issues (my family is also burdened with a strong faith-based belief set and I see how hard it is for them to question it)… but if you agree that real-world problems are more important, then we should be able to work broadly towards the same goals.

  395. NPOV says:

    John, have you read much of the literature in the U.S. examining the impacts that the growth of income inequality is having there? It seems a big part of the problem is a large section the population living beyond their means because they perceive the standard of living enjoyed by the top 10%, and assume they should be able to achieve that too – after all, we’re constantly told “America is the richest country in the world”. As I said elsewhere, it sure didn’t feel like it when I was there last (except perhaps in a few exclusive parts of L.A.).

    I would also note that it’s not necessarily measures like “wealth of the top 10% compared to those at the bottom 10%” that matter – it’s more an issue of ensuring that every income-bracket is well-populated. Indeed, if I had a choice between a society where the lowest 90% of the population earned between $9,000 and $11,000 each, and the top 10% earned on average $500,000 each, and one where the bottom 10% earned on average $10,000 each, the top 10% $1,000,000 each, but every decile in between earned amounts ranging from $20,000 up to say, $500,000, I’d choose the latter, even though by some formulas, the latter has greater inequality. But importantly, there’s no one group that has the ability to excercise so much power and influence that the majority basically gets pretty little say in how things are done.

    I don’t think democracy is a method of “calculating” what the ideal measure of inequality is – I’m just suggesting that democracy is probably the best bet we have in ensuring that economic inequality doesn’t get out of hand: if it really does reach a point that the majority are obviously unhappy about it, the a government promising to address it is more likely to be elected. In a way, I think there was an aspect of seeing this action wrt WorkChoices: a majority perceived (correctly or otherwise) that WorkChoices gave more power to employers and was likely to result in great economic inequality, and consequently voted against it. And if this process has arguably failed in the U.S., I don’t have an easy answer as to why, although U.S. voting patterns seem to be frequently driven by phenonema that appear anything but rational.

    Perhaps one day computers will be powerful enough and human behaviour well enough understood for us to be able to model the outcomes of various levels of inequality more accurately, and we will be able to calculate a level that results in maximum prosperity for all. But I can’t see that happening in our lifetime, so we have to work with, essentially, a form of trial and error in the mean-time.

  396. Mark Hill says:

    NPOV,

    Your ideas are underpinned by the assumption that relative poverty causes pain. I say it does but it is irrelevant, and even useful. Aspiration is a good thing for society to have. When someone drives off in a 4WD towing a boat, you can either say “you bastard” or “I’ll work to have those or one better one day”. Or you can not care. I say what matters is absolute income. Strangely you don’t know what level of pain is correct but nevertheless you are concerned about it and wish it would go away.

    You are implying that we need to adjust income inequality, with an adjustment range between 0% to just less than 100% equality. At the same time you are advocating free enterprise and pure Marxism.

    What happens when an entrepreneur finds a new production method which benefits mankind – their wealth rises to 5% of global GDP from nothing. What should we do? How will the new policy affect their firm and future generations directly and indirectly in terms of innovation? You have to answer these questions from a policy perspective because economics constantly asks us about unintended consequences.

    “It seems a big part of the problem is a large section the population living beyond their means because they perceive the standard of living enjoyed by the top 10%, and assume they should be able to achieve that too – after all, were constantly told America is the richest country in the world.”

    Some very bad Clinton era policies have lead to this and partially to the sub prime crisis. Lenders were legally barred from calculating risk based on income and denying people loans on the basis of insufficient income as it was deemed “racist”.

    This is the kind of policy folly we have when we worry about relative poverty. But now living beyond your means is your concern, not inequality?

    ‘Ah, but the poor only spend so much because the rich are so wealthy. Reduce the rich to middle class and there is no problem’

    That would be a very condescending response. People of all wealth levels spend beyond their means or can exhibit miserly behaviours. People spend beyond their means because they can and are not financially educated. If banks are allowed to deny people credit, they will (No, banks don’t make money by lending to people who cannot payoff loans, an actual bank levered 15 plus times risks severe financial distress itself if a small proportion of customers don’t pay up. What can make banks lend too much? Moral hazard creating policies we don’t have here but exist in the US like deposit insurances).

    “its more an issue of ensuring that every income-bracket is well-populated”

    Why is this an issue at all? Because there is a discontinuity in raw data doesn’t mean there is injustice. You don’t remove said imaginary injustice by making the graph looking more appealing. How well off is everyone now? In ten years time?

    “But importantly, theres no one group that has the ability to excercise so much power and influence that the majority basically gets pretty little say in how things are done.”

    Andrew Forrest also has very little say. It appears he doesn’t care enough to meddle.

    “And if this process has arguably failed in the U.S., I dont have an easy answer as to why, although U.S. voting patterns seem to be frequently driven by phenonema that appear anything but rational.”

    You still want poll driven policy, by assuming Australian voters are rational. This is just America bashing which ignores the problem of median voters.

    “Perhaps one day computers will be powerful enough and human behaviour well enough understood for us to be able to model the outcomes of various levels of inequality more accurately, and we will be able to calculate a level that results in maximum prosperity for all.”

    That will never happen. Maximising prosperity is quite different to choosing an “optimal”, yet undefined mix of income inequalities. I’ve mentioned the empirical and theoretical failures of policies based on income equalisation. You want the computer to come up with a solid answer for you. How are you going to programme it when you rquire it to violate the laws of mathematics?

    You should note to that central planning is impossible, due to the constraint of virtually boundless information which the price system has. You want to use central planning to blur prices even more. How will society organise it’s economy with prices that don’t reflect scarcity? I doubt you could even calculate such prices in the first place. Hayek’s address to the American Economics Association as President is noteworthy on this topic.

    http://www.econlib.org/Library/Essays/hykKnw1.html

    Hayek, F. A., 1899-1992.
    “The Use of Knowledge in Society”
    American Economic Review, XXXV, No. 4; September, 1945, pp. 519-30.

  397. If inequality leads to certain problems… then those problems should exist more in places with higher inequality, anywhere on earth & in history. But this isn’t what we find in many places on earth & history. So something else must be at play.

    I agree that looking at the top 10% can cause jealousy, higher expectations and sometimes unhappiness. But those same 10% are equally visible (sometimes more so) in India & China & Egypt etc. We live in an internationalised world now… so unless we raise the incomes of all people in a country they will still end up jealous of their (international) neighbours.

    America is not the richest country on earth. That is Luxemburg… with Qatar fast catching up. America is the richest *big* country on earth. Even then, they often share that title (or swap that title) with Norway. But close enough. America is a huge country with a lot of diversity. It’s a difficult place to generalise about.

    I like your second paragraph. It’s an interesting point that I am instinctively sympathetic towards and will think about more. You seem to be saying that it’s important to have a vibrant middle class between the upper and lower “clases”. I think that a free-market achieves that quite well… and better than most alternative approaches. Indeed, I think the free-market effectively created the middle class in the first place.

    I wouldn’t call that issue “income inequality”.

    You repeat the concept of income inequality getting “out of hand”, but that presupposes both a correct level of diversity, and that you know what it is. I don’t think you’ve established either points. Even if we had that super-computer you mention, I have no idea what equations you would put into it.

    I also think you over-estimate the virtues of democracy. I agree people will change a govt if they are unhappy with them. But I don’t think the popular position is necessarily the correct one.

    I agree with most of your analysis re: workchoices. Many people saw it as an unfair attack on low-income workers. But… I think their concern was with low-income workers, not the gini coefficient. I also think they were wrong in thinking the reforms were going to do much. The ALP & Liberal positions were actually quite similar.

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