Next month I’m doing a gig for Rotary where I’m going to be on a panel with a demographer and a climatologist and they’re going to ask us to say what will happen in the next 20 years.
In five minutes.
That’s five minutes each – so there’s plenty of time. I get to talk about the economy.
I already know that I won’t be playing the clairvoyant but will suggest that the best questions about the future are what things we can do to make it better. It will look much like today, though we’ll be richer, mining will (presumably) be a lot bigger and other traded sectors commensurately smaller. Anyway, if I were to think about the biggest challenge it’s inequality. It’s hard not to see rewards to the stars getting higher. And trade and technology will continue to undermine the wages of the unskilled.
I thought I might quote the work of Mike Norton who was written up by Dan Ariely in one of those ‘smarties for 2012’ columns as follows;
There’s a significant amount of literature on the theory that, as people become richer, they don’t necessarily become happier. Norton asked instead whether people know how to use money to buy happiness. [Mike] asked: if you give money to people, what do they do with it? The answer was that they spend it on themselves. He then posited: what if we ask people to spend money on other people? His research revealed that those people are actually happier as a consequence. This worked with individuals, and also with groups — when people spent money on people they worked with, the team became more productive. He and I have been working together to try to figure out what level of wealth inequality people in developed countries are willing to tolerate. What we found is that people want to live in societies that are much more equal and much fairer than currently. So why are we willing to tolerate the current level of inequality? We don’t have the answer for this yet.
So I might run that by them. I’ll be interested to hear what they think. When I think of this it rings true. I think there’s a deep dissonance in people’s attitudes to inequaliy – especially in Australia. They don’t like inequality. They really don’t. But it’s not just that they don’t like it in principle, but then reject the measures in practice. I think there’s an additional step. If you want to tackle inequality effectively explaining what you’ll do will require abstract thought. You’ll explain that you’ll need capital gains taxes, and high taxes on top marginal incomes. And rent taxes – including green taxes. If you had an hour with everyone in the country you might be able to bring them round, at least those who would be made better off by what you have in mind – which is a large majority.
But that’s not how people make up their mind on these things. They see that a politician is putting up some tax somewhere (even if it won’t do them a skerrick of harm like the mining tax) and they can easily be made to think “There’s that sneaky politician trying to slip their hand into our pockets”. The fact that it’s proposed by Ken Henry who has no axe to grind and is opposed by self-interested billionaires doesn’t seem to change the dynamic.
Anyway, what do you think I should I talk about?