Mark Latham and the return of the underclass

Not Dead Yet QE49

As opposition leader Mark Latham vowed to wage war on poverty. It’s an idea he revives for his latest Quarterly Essay, Not Dead Yet: Labor’s Post-Left Future.

According to Latham, poverty isn’t about a lack of money. The dole is generous enough to cover people’s basic needs, he says. It isn’t about a lack of opportunity either. He says our thriving post-Keating economy has plenty of jobs for those with the ambition to pursue them.

According to Latham, the real problem is an underclass mired in a culture of poverty. It’s a group of people trapped by shared sense of hopelessness and a pervasive lack of aspiration. Instead of taking responsibility, these people have gone feral "leading lives of welfare dependency, substance abuse and street crime."

The underclass is sustained by large public housing estates that concentrate disadvantage, says Latham. When disadvantaged people are clustered together, young people lack positive role models and dysfunctional behaviour becomes normal.

To destroy the culture of poverty and persuade the underclass to help themselves, he argues that governments should break up these dysfunctional communities. "The starting point for reform must be a policy of dispersal, " he says.

It’s easy to see the political advantages of Latham’s plan. If poor people cause poverty there’s no need to risk a popular backlash by challenging stereotypes about welfare recipients. And if welfare payments and services are already adequate there’s no need to run deficits, raise taxes or look for unpopular budget cuts. The system is basically ok.

The only serious problem with Latham’s plan to end poverty is that it won’t do much to end poverty. As US researchers Jens Ludwig and Susan Mayer explain:

Many public discussions assume that reducing poverty among future generations and reducing the intergenerational transmission
of poverty are equivalent goals. They are not. The poverty rate in the children’s generation depends not only on how many poor children grow up to be poor adults, but also on how many nonpoor children grow up to be poor adults. Reducing the chances that poor children become poor adults will dramatically lower future poverty rates only if most poor adults begin life as poor children.

In the US, most poor adults do not begin life as poor children. While the percentage of children from well functioning non-poor families who become poor is low, the group is very large. As a result, most of tomorrow’s poverty will from today’s non-poor families. The same is likely to be true in Australia. Most poverty will emerge from non-underclass suburbs.

This isn’t to say that a place-based approach to poverty is a bad idea. Preventing the next generation from inheriting their parents’ poverty would be an important achievement. But there’s little evidence that Latham’s plan to move people out of disadvantaged neighbourhoods would work.

It’s not that the idea hasn’t been tried. In the US, the Moving to Opportunity (MTO) demonstration tested the idea that moving households with children from government-subsidized, project-based housing in selected high-poverty areas to areas with lower poverty rates. The results the experiment were disappointing. As Ludwig and Mayer write:

Although evaluations of MTO after four to seven years find that moving to less disadvantaged communities reduces risky and criminal behavior in girls, they find that such moves on balance increase these behaviors in boys and have no detectable effects on children’s academic performance, such as achievement test results or the chance of dropping out of high school. It is possible that the benefits of moving away from very disadvantaged neighborhoods may become greater over time, or that the benefits may be more pronounced among children who were very young when they moved. But there is as yet no strong evidence that moving poor families to less disadvantaged areas will substantially change children’s life chances.

While preventing poverty is better than dealing with it after it happens, it’s a lot harder than it looks. So as Ludwig and Mayer write: "To reduce poverty among future generations, there may be no substitute for a system of social insurance and income transfers for those children who end up poor as adults."

Three generations who have never worked?

Recalling about his experience as MP of the south-west Sydney seat of Werriwa Latham writes:

… one of the saddest things I heard was the principals of disadvantaged high schools talking about career counselling. When asked about their work aspirations, students would often say, "I’m going to do what my dad and granddad do – go on the dole."

In the UK, tabloids and conservative politicians tell the same story. "Thousands of children are growing up in families where their parents and grandparents have never worked", reported the Daily Mail in 2008. A year later Conservative MP Iain Duncan Smith spoke about housing estates "where often three generations of the same family have never worked". But when UK researchers checked the data, none of them could find evidence to back up the claim.

Researchers from the Joseph Rowntree Foundation went looking these families but despite "strenuous efforts … were unable to locate any such families. Even two generations of complete worklessness in the same family was a very rare phenomenon". The researchers also failed to find any evidence of a culture of worklessness.

The return of the underclass

Underclass is a term usually associated with the conservative side of politics. But it was Swedish economist Gunnar Myrdal who introduced into the American poverty debate. In his 1963 book Challenge to Affluence, Myrdal wrote about:

… the wider problem of poverty in the midst of plenty, and the vicious circle that is on the way to creating an "underclass" of unemployed, unemployables, and underemployed, more and more hopelessly divorced from the nation at large and without a share in its life, its ambitions and its achievements (p 19).

The technological changes that made the economy more productive opened up opportunities for working class young people who took advantage of education and training. But technological change also destroyed jobs for adult workers with low levels of skill and education. Some of these displaced workers gave in to hopelessness and apathy. And according to Myrdal, some passed these attitudes on to their children who dropped out of school early and joined the ranks of the underclass.

According to Latham, "Academic achievement is a poor child’s passport out of a bad neighbourhood". But like Myrdal he worries that the hopelessness and apathy of disadvantaged households and neighbourhoods will prevent children from taking advantage of education.

Latham argues that "the problem of the underclass is an inability to make good choices in life" rather than a lack of opportunity. Australia’s welfare system might not be the world’s most generous, but allows recipients to cover basic living costs, he says. For those willing to give it a go, there’s plenty they can do to help their families escape poverty:

They could make good use of government labour-market programs and re-enter the workforce. They could encourage learning in the home, assisting in the education of their children. They could refrain from domestic violence and stabilise their family’s circumstances. And so on.

Latham argues that Labor’s mission is to break down class barriers and make social mobility possible. Whether or not people take advantage of opportunity is up to them. But the underclass’ passivity and lack of aspiration has become a problem governments must address.

Equality of opportunity

Of course it’s not just left-of-centre politicians who are concerned about equality of opportunity. Not even Tories believe in class barriers anymore.

In the UK the coalition government has set itself the task of improving social mobility and reducing entrenched poverty. Together with Liberal Democrat leader Nick Clegg, the Conservative Party’s Iain Duncan Smith has written about creating a fairer society "in which opportunities are not determined by background but by drive and ability."

Like Latham, Duncan Smith is worried that by concentrating disadvantaged families in public housing estates: "You create a sort of ghetto in which the children who grow up there repeat what they see around them." Duncan Smith argues that many of these dysfunctional communities have "become fertile grounds for drug dealers, gang recruiters and violent moneylenders".

According to Duncan Smith, Britain has seen the steady rise of an underclass: "a group too often characterised by chaos and dysfunctionality … and governed by a perverse set of values."

A post-left future?

Latham argues that Labor’s future must be post-left. Old style left wing politics no longer works. But Latham’s vision for social justice is so post-left it’s hard to distinguish from the British Tories and their coalition partners the Liberal Democrats.

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Paul Frijters
Paul Frijters
8 years ago

the problem with the ‘equality of opportunity’ mantra is that you by implication say of those that lose the competition that they are not just poor, but dumb and lazy as well. The key truth that would be handy to be recognised is that we are a competitive species in competitive societies, meaning that there will always be losers, however equal the opportunities. How do we wish to treat the losers, should be the question, not the fake promise of an end to poverty. And to force the losers to all pretend to believe they can be winners is cruel.

Our societies have ingenious solutions for these realities that are far more sophisticated than Latham realises. For instance, we give many poor people a ‘face saving’ out from the rat race. We call it disability. If you have one of those, you are exempt from the supposed duty of the poor to compete. One of the more interesting questions is whether we dispense too many or too few face-saving outs.

Martin
Martin
8 years ago

It’s certainly a diabolical problem but I think you make it a bit black and white, Paul. It is not necessarily about turning losers into winners, or telling them that they will never be winners, but about small incremental changes.

A seemingly small change invloving a guy who was previously fully unemployed moving into a job mowing lawns or cleaning offices one day per week may not make him a a career success story, but it can make a real difference over the long term to his, and his family’s welfare. Helping this to happen is worthwhile.

I don’t think its enough to say ‘poor people will always be poor, so lets just make sure they can at least get by.’

Paul Frijters
Paul Frijters
8 years ago
Reply to  Martin

is that what creating opportunity and ‘maintaining aspiration’ means? Advocating to the previously proudly employed that they clean offices and mow lawns once retrenched? And you expect them to be grateful and be a good inspiring parent as a result? And how do you think ‘we’ are going to ‘help make this happen’? Offering them a training course in lawn mowing?

All sounds a bit cruel to me.

GrueBleen
GrueBleen
8 years ago
Reply to  Paul Frijters

I used to ask my friends and colleagues a facetiously serious question: when we really do reach high(er) levels of productive efficiency (an ideal beloved of a great many economists and many of their fellow-travelling politicians), what would we do with the 85% of humanity for which we no longer had any useful work ?

I had a simple solution, of course: pay me (as an exemplar of the 15%) an annual salary of $1million and tax me $900K. I’d have got more take-home salary than I was getting, and there’d be a fund ($900K * 15% of the working population) to look after the ‘unemployable’.

I think that Australia and the USA could have a useful cross-fertilisation here: we should look at the EITC and the Murcans should take up HECS instead of the poverty creator that they currently run.

Paul frijters
Paul frijters
8 years ago
Reply to  GrueBleen

Must have slipped under your radar. There were the ‘Five economists’ advocating an EITC in 2001 I recall. Patricia Apps said it would be bad because of the work disincentive effects for those already in work, etc.
We did of course introduce something close to it via the tax free threshold. For single women with older kids we in effect have an EITC. Still, the general opinion is that it ‘helps’ push some people into part-time jobs at the expense of pushing others into same jobs who were previously full timers. It means you start to hand out welfare to lots of people with jobs.

Martin
Martin
8 years ago
Reply to  Paul Frijters

You’re assuming we’re talking about the previously employed Paul. Latham was discussing the long-term unemployed, people living with ‘hysteresis’, not previously hard working men and women temporarily down on their luck.

I grew up with able-bodied men and women in regional Australia who’ve never held a permanent job in their lives – living embodiments of hysteresis. The choice for them and the thousands like them is not between manual labour one day a week or a decent full-time job, it’s (if they’re lucky) a crappy part-time job or nothing at all. They’re all over the place Paul, you may just have to step off campus to find them.

Paul Frijters
Paul Frijters
8 years ago
Reply to  Martin

Ha! The labour force participation rate of the us is now (at 63.5%) as low as the 1990s. Ditto for the participation rates of women. So Sure, there were increases in the boom times and some women were pushed out of welfare when that became unavailable but dont kid yourself that the ‘joblessness problem’ has somehow gone away. Hours worked per person is remarkably constant across the peaks of the business cycle.

So tell me about the definition of success when in reality talking of reduced welfare. More jobs? Or just less given out in welfare payments? Do you think those single mums were happy with the changes?

Of course the Secretary of Commerce says that her policies are a success, But at the end of the day they are running the line ‘helping mother with kids less is good for them and everyone else’. Right.

Paul Frijters
Paul Frijters
8 years ago
Reply to  Martin

The EITC has been discussed at nausia by economists in Australia. A nice example is this paper by Leigh (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1631095##) where he argues that the EITC reduces take-home wages and of course discourages work amongst the sectino of the population suddenly hit by higher taxation rates due to a EITC (the workers hit by the taper rate: EITC makes part-time workers out of former full-time workers). The policy has as many losers as it has people who get a job because of it (though you cant call them winners because they too are worse off than before).

GrueBleen
GrueBleen
8 years ago
Reply to  Martin

Paul,

Thank you for that reference (more bloody reading to do !).

I have seen many discussions of “the poverty trap” in Australia, but I simply cannot recall any ‘public’ discussion of EITC or related approaches. Is this because you economists persuaded all the politicians of both parties that it wouldn’t work ? Or is it just because the politicians are as ignorant as I am ?

MT Isa Miner
MT Isa Miner
8 years ago

Paul, even the Q of what is a disability is not yet decided.

Is the inability to work with others – an excessive testosterone low boredom threshold characteristic a disability when all the jobs are service jobs?

Is a 2 digit IQ a disability- in an economy where the overwhelming majority of the jobs require 3 digit IQ skill sets ? Who has the guts to tell people the bad news.

Jim Rose
Jim Rose
8 years ago

But Hawke said that by 1990, no child will live in poverty. it is on youtube

see http://www.theage.com.au/news/National/Hawke-regrets-child-poverty-comment/2007/06/16/1181414583336.html

it must be a big if Hawke admits regret on anything. Hawke’s words returned to haunt him as his pledge was impossible to keep.

About 580,000 Australian children lived in poverty in 1987. Today at least 13 per cent of children, or 730,000 people, were poor.

old silver tail forgot that poverty is defined in terms of inequality so there poor will always be with us.

lifting child welfare benefits to $1 above the poverty line, as was done by Hawke, did not get to the hub of the matter.

some states parts of the USA reduced single mothers on welfare by 85% by capping lifetime welafre benefits eligibility at 2 years

Paul Frijters
Paul Frijters
8 years ago
Reply to  Jim Rose

“some states parts of the USA reduced single mothers on welfare by 85% by capping lifetime welafre benefits eligibility at 2 years”

quite true. And there was a horde of economists declaring it a ‘success’ because about 1 in 10 of those mothers founds one of those lawn mowing jobs. A great example of how the ‘ladder of opportunity’ in reality meant aggravating the situation of at least 9 out of 10.

Jim Rose
Jim Rose
8 years ago
Reply to  Paul Frijters

Among single mothers, labor force participation rose from 44 to 66 percent. Poverty rates among single-mother households fell to historically low levels by the
late 1990s.

the groups that were least employable such as mothers in ther ealry 20s with young children, no high school diploma and minority backgrounds had the largest increases in labour force participation.

Acting Secretary of Commerce rebecca blank is the key writer on this matter. see too http://www.frbsf.org/publications/economics/letter/2009/el2009-24.html

Blank has noted that US welfare reform was much more succesful that even its strongest supporters expected

Paul Frijters
Paul Frijters
8 years ago
Reply to  Jim Rose

Ha! The labour force participation rate of the us is now (at 63.5%) as low as the 1990s. Ditto for the participation rates of women. So Sure, there were increases in the boom times and some women were pushed out of welfare when that became unavailable but dont kid yourself that the ‘joblessness problem’ has somehow gone away. Hours worked per person is remarkably constant across the peaks of the business cycle.

So tell me about the definition of success when in reality talking of reduced welfare. More jobs? Or just less given out in welfare payments? Do you think those single mums were happy with the changes?

Of course the Secretary of Commerce says that her policies are a success, But at the end of the day they are running the line ‘helping mother with kids less is good for them and everyone else’. Right.

GrueBleen
GrueBleen
8 years ago

Very good post, Don. It told me (to praphrase the little girl and penguins) more about Latham than I ever wanted to know.

He’d have made a disastrous PM, wouldn’t he – way worse than Rudd … nearly as bad as Abbott will make, I think; a similar inability to hold more than one ‘important’ idea at a time, and a conviction that whatever they think of must be the answer !

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[…] course, as Don Arthur put it, “the only serious problem with Latham’s plan to end poverty is that it won’t do much to […]

Jim Rose
Jim Rose
8 years ago

paul, the labour force particpation of solo mothers stayed up.

those that lost their jobs in many cases would be eligible for unemployment insurance that lasts up to 99 weeks

Labor Outsider
Labor Outsider
8 years ago

I have to disagree with Paul on this. The vast majority of the empirical evidence suggests that EITC type policies increase employment/hours worked in net terms. Of course there are taper effects and they should not substitute for an adequate safety net, but designed well they are welfare enhancing. That is because they can reduce effective marginal tax rates for those whose labor supply is most elastic. The increase in EMTRs for other workers can be designed to be smaller and target people with less sensitive labor supply. European countries have introduces these policies within the context of more generous welfare arrangements quite successfully. The OECD has done extensive work reviewing them. It is worth checking out.

Labor Outsider
Labor Outsider
8 years ago

I also think that it doesn’t make sense to infer that because LFP in the US is back to where it was before the welfare reforms, that those reforms had no real effect on the supply side of the labor market. It is almost certainly the case that labor supply would be even lower today in the absence of those reforms and the existence of those policies will mean that labor supply will eventually recover to higher levels. That doesn’t mean that the US welfare system is adequate – it certainly isn’t – but labor supply in the US is currently being depressed by the financial crisis and its aftermath.

Paul frijters
Paul frijters
8 years ago

LO,

The OECD’s strength is in statistics, not analysis so I would not pay too much attention to them. You are better off looking at what the country experts conclude. Take this paper for instance which says of an EITC on mothers with children above 12 that the net effect on participation has tight confidence intervals around zero! They also review the international literature on this point.
http://www.cpb.nl/sites/default/files/publicaties/download/cpb-discussion-paper-229-dog-did-not-bark-eitc-single-mothers-netherlands.pdf

Labor Outsider
Labor Outsider
8 years ago
Reply to  Paul frijters

You are cherry picking Paul and don’t seem to know the work of the OECD very well.

Labor Outsider
Labor Outsider
8 years ago

Also, without wanting to get into an econometric debate, the paper you are citing is looking at a very specific policy, and uses a methodology that is not without its flaws. Even the authors acknowledge their results are somewhat at odds with the broader literature.

Paul Frijters
Paul Frijters
8 years ago

LO,

you are a fan of the OECD’s pronouncement of labour policies? I am not. I remind you of how Nick accused them of letting go of ‘pure wind’ in their assessments of the economics crisis (see http://clubtroppo.lateraleconomics.com.au/2013/03/02/airbrushing-the-news/).

If we talk particularly about their pronouncements on labour though, lets have a look at what their ‘editorial’ had to say in the 2011 employment outlook about youth unemployment. Foregoing the pleasure of the first two pages of pure flatulence, let’s look at what they actually say governments should do (http://www.oecd.org/els/48679203.pdf page 13-14):

“First, policies must be put in place to overcome the long-term failure to give all youth a better start in the labour market. To start with, “preventative” measures must be taken to improve early childhood education and care, particularly for children from low-income families and disadvantaged backgrounds. To be fully effective, these measures need to be sustained through the period of compulsory schooling. This, in turn, will help minimise school drop outs.
These measures need to be complemented by efforts to achieve a better match between the skills youth acquire at school and those needed in the labour market. As documented in Chapter 4 in this volume, a considerable proportion of young workers are over-qualified for their jobs, although this proportion tends
to decline with age. Reducing skills mismatch requires greater responsiveness of education systems to changing skill needs and a strengthening of educational choice through, for example, better opportunities for vocational education and training. Finally, barriers to employment of youth also need to be removed. In particular, highly segmented labour markets, resulting from overly strict regulations on permanent employment contracts, can mean that short-term entry jobs fail to act as a stepping stone to more stable jobs and become instead dead -ends. If set too high relative to average wages, minimum wages may also act as a disincentive for employers to hiring low-skilled and inexperienced young people. Therefore, some countries have adopted lower sub-minimum wage rates for youth.
… and despite fiscal pressures, it is crucial to maintain adequate resources for cost-effective measures to tackle the large rise in youth unemployment
The second line of policy action needs to be directed at tackling the rise in youth
joblessness that took place during the recent economic and financial crisis. As many countries are facing mounting pressures for fiscal consolidation, it is important that governments give priority to cost-effective interventions to improve youth labour market outcomes. Thus, policies should focus on the most disadvantaged, including the long-term unemployed and those at high risk of exclusion. Job-search assistance programmes have been found to be the most cost-effective early intervention for young people who are assessed as ready to work. Temporary extensions of the social safety net can also be vital to
prevent poverty among unemployed youth.
Some countries have also introduced wage subsidies to encourage employers to hire low-skilled unemployed youth. However, in order to avoid the well-known deadweight effects entrenched in these subsidies (i.e. hirings that would have taken place without subsidies), these subsidies should be adequately targeted, for example on small and medium-size enterprises or on apprenticeship contracts. There may also be a need in many countries to expand opportunities for “study and work” programmes such as apprenticeships and other dual vocational education and training programmes. Finally, more intensive, remedial, assistance should be targeted on those youth at greatest risk of social exclusion. While back-to-the-classroom strategies might prove counterproductive for them, training programmes taught outside traditional schools, combined with regular exposure to work experience and adult mentoring, are often better strategies for these disconnected young people.”

You really want to hold them as paragons of wisdom? The quote is full of contradictions: the OECD wants more education and training for the most disadvantaged, but not of the type that doesnt work ie something resembling education; the OECD wants to improve the match between skills and employer demand, apparently by making sure some people are less educated; The OECD wants regular, and apparently organised, exposure to work experience, ie governtment organised jobs of the type that have been such dismal failures everywhere.

And of course, some pieces of advise are just brilliant. ‘Improve early childhood education’, who could argue against that? Who would not cheer on ‘cost-effective measures to tackle the large rise in youth unemployment’?

The writers of these things are not really academics, LO. To be fair, some really good people worked for the OECD and are still working for them, but you can throw their sanctioned ‘advise’ straight into the bin.

Labor Outsider
Labor Outsider
8 years ago

Paul, you are being very harsh. The OECD is making the simple point that in many OECD countries too many people complete university degrees for which there is little demand for their skills and too few people come out with vocational qualifications that for many are more useful. Think for example of how the German education system functions differently from the US education system.

I could go on.

You aren’t a labour economist are you? Of course all views in these areas can be disputed but all the OECD’s policy recommendations are at least based on empirical evidence, and not just work done in house. Evidence and recommendations change over time (think of the the 1994 jobs study for example) but there is a stronger evidence base than you seem to think.

I am biased of course because I worked at the OECD and wrote two chapters of individual country economic reviews on labour market policies during my time there.

I’m more of a macroeconomist than a labour economist but I’m not ignorant in this area.

Jim Rose
Jim Rose
8 years ago

If in many OECD countries too many people complete university degrees for which there is little demand for their skills and too few people come out with vocational qualifications that for many are more useful, why do people not learn from these errors?

Which is the better explanation, people do not learn from errors, or the econometrics and the data is not good enough. Much more basic issues such as the returns to education and the effects of the minimum wage are still in dispute!

In The Engineering Labor Market by Jaewoo Ryoo by Sherwin Rosen Journal of Political Economy February 2004 they used a dynamic supply and demand model of occupational choice and applied it to the engineering profession.
• The model is largely successful in understanding data in the U.S. engineering labor market. The engineering market responds strongly to economic forces.
• The demand for engineers responds to the price of engineering services and demand shifters.
• supply and enrolment decisions are remarkably sensitive to career prospects in engineering.
• A rational model, in which students use some forward-looking elements to forecast future demand for engineers, fits the data reasonably well.

In Overeducation and Mismatch in the Labor Market IZA DP No. 5523 February 2011 Edwin Leuven and Hessel Oosterbeek found that
• omitted variable bias is substantial and possibly explains the entire difference between returns to required schooling and overschooling and underschooling.
• The overeducation/mismatch literature has for too long led a separate life of modern labor economics and the economics of education.
• conceptional measurement of overeducation has not been resolved, omitted variable bias and measurement error are too serious to be ignored, and that substantive economic questions have not been rigorously addressed.

The second last dot point was most politely made.

john r walker
john r walker(@annesanders)
8 years ago
Reply to  Jim Rose

“people not learn from these errors” is the one great lesson of history.

Jim Rose
Jim Rose
8 years ago
Reply to  john r walker

John R Walker, Vernon Smith, the great experimental economist, when asked about behavioural economics, wondered how so cognitively flawed a creature made it out of the caves.

The answer had a lot to do with the institutions that emerged to overcome human limitations. The double auction has been clearing markets for 1000s of years.

People have a better understanding of rationality such as through the work of Vernon Smith on ecological and constructivist rationality and of how people deal with human frailties and correct error through specialisation, exchange and learning.

Smith and Hayek both posit that market institutions rather than individuals bear the primary cognitive burden in coordinating economic activity.

john r walker
john r walker(@annesanders)
8 years ago
Reply to  Jim Rose

Oh yeah…. ever read the March of Folly?

Jim Rose
Jim Rose
8 years ago
Reply to  Jim Rose

that book is about the historical recurrence of governments pursuing policies evidently contrary to their own interests. it is not about markets.

• George Stigler’s in his Existence of x-inefficiency paper opposed attributing behaviour to errors because error can explain everything so it explains nothing until we have a theory of error.

• Kirzner wrote a response saying that error is pervasive in economic processes. Rational Misesian human actors are human enough to err.

What is inefficient about the world, said Kirzner, is at each instant, enormous scope for improvements exist in one way or another and is yet simply not yet noticed. The lure of pure entrepreneurial profits harnesses the systematic elimination of error and points the way to the institutions necessary for the steady social improvements.

Behavioural economics is a clumsy way of discussing the pervasiveness of errors because insufficient attention is paid to decentralised, emergent market processes that correct them, often long ago.

Pedro
Pedro
8 years ago

Have you seen this article relevant to the discussion of EITC
http://www.reuters.com/article/2012/02/08/us-germany-jobs-idUSTRE8170P120120208 BTW, I don’t agree with the headline

And this illustrates why that side is not so dark
http://www.economist.com/news/europe/21571900-elected-left-frances-president-seems-be-veering-towards-centre-which-way-mr

Pedro
Pedro
8 years ago

BTW, it might be time to revisit the mast head

“Fearlessly dispensing political, legal and economic analysis (and some whimsy) since 2002”

With the govt proposing a law allowing the minister to appoint a media regulator and no mention of it here, perhaps the claim to fearless political analysis should be withdrawn. Politically, I think that is the biggest story of the last 15 years at least.

Ken Parish
Admin
Ken Parish(@ken-parish)
8 years ago

Oh come on Pedro. You don’t really swallow News Ltd’s hyperbolic rhetoric on this, do you? As I understand it, Conroy’s proposal is essentially that print media would continue to be self-regulating under the industry-controlled Press Council (and its even weaker WA equivalent), but with a marginal sanction of losing absolute Privacy Act and Australian Consumer Law immunity if the media does not live up to it own claims of integrity etc. Bernard Keane at Crikey describes it as follows:

Conroy’s alternative, is that if media self-regulatory bodies don’t live up to the claims made by News Ltd, member media companies lose their privacy and consumer law exemptions. The media, currently, has a blanket exemption from the requirements of the Privacy Act and is allowed to engage in “misleading and deceptive conduct” under the Competition and Consumer Act. Imagine a media company open to litigation if it engages in misleading and deceptive conduct like any other company!

It doesn’t really sound like the “biggest story of the last 15 years at least” to me. Do you really believe this? It may be that there is a need for better review/appeal rights from decisions of the new PIMA regulator to strip a media company of Privacy Act and Australian Consumer Law immunity. One would hope Conroy/Labor would negotiate with the cross benches on that, otherwise these extremely modest reforms look certain to fail (they may well be certain to fail anyway given the inept way the Gillard government appears to have pursued them).

desipis
8 years ago
Reply to  Ken Parish

Ken, it’s not a matter of living up to ‘claims made by News Ltd’. It’s a matter of living up to the standards of the government of the day. The lack of independence of the advocate is probably more of an issue than the lack of any appeal rights. The way I read the legislation, the advocate (i.e the government) has essentially unfettered discretion in approving or revoking the privileged status of a media body. If the government is going to get into regulating the media, shouldn’t it be through an open and objective process rather than relying on the subjective views of the government of the day?

john r walker
john r walker(@annesanders)
8 years ago
Reply to  desipis

Ambushing your own cabinet and party collegues on the Tuesday, trying to get a quorum on late Friday afternoon, for a one day ‘consultation’, sums up why- ‘the sooner they go the better’ is the national verdict on these idiots.

Ken Parish
Admin
Ken Parish(@ken-parish)
8 years ago
Reply to  desipis

desipis

I agree to a point with your lack of independence argument. The Public Interest Media Advocate Bill 2013 only allows the PIMA to be dismissed for the usual grounds of misbehaviour, incapacity, bankruptcy etc that apply to other independent office holders like the Ombudsman etc., and is not subject to Ministerial direction (s 21) again like other independent office holders.

However s 16 allows the Minister to appoint the PIMA for any term he likes up to a maximum 5 years. Short-term appointments would potentially allow the Minister to exercise significant influence over the PIMA by the implicit threat of non-renewal of the short-term appointment. The Howard government brought the Refugee Review Tribunal to heel by means of short-term appointments some years ago.

As for your argument re unfettered discretion, the PIMA’s role is to approve/declare (and if necessary revoke approval) of a “news media self-regulation body” like the Australian Press Council. See News Media (Self-regulation) Bill 2013. In doing so s 7 of that Act specifies a detailed list of matters the PIMA must consider. The PIMA would be subject to judicial review in respect of such decisions under the ADJR Act, which also allows affected bodies to force the PIMA to give written reasons for decision. Thus it is not correct that the PIMA has anything like an unfettered discretion.

Note that it is the “news media self-regulation body” e.g. the Australian Press Council, not the PIMA, which would actually regulate media organisations themselves. The only additional sanctions proposed by Conroy’s scheme, namely subjecting a media organisation to potential liability for breach of privacy or consumer law misleading and deceptive laws, would apply if and only if the Australian Press Council were to suspend or expel the media organisation from membership of the Press Council. Presumably the APC would only do so if a media organisation repeatedly and flagrantly breached the ethical standards that the media organisations themselves have drafted and agreed to abide by. It is only the industry’s own APC which is given additional power (at least directly) over media organisations, not the PIMA.

Conroy’s regime is actually quite weak, much weaker than either the Finkelstein or Convergence Review recommended. It is being disgracefully misrepresented by the Murdoch media especiall.y Surprise! Surprise!

desipis
8 years ago
Reply to  Ken Parish

Ken,

I think s 17 of the PIMA Act could also be used to pressure the office of the PIMA to be used in certain ways.

The ADJR Act only enables a limited scope of review (as is appropriate for judicial reviews) that is focus on process and not substance. It will only require that the PIMA ‘considers’ the factors, not that they aren’t given weights that achieve a political purpose. As long as the PIMA ticks all the boxes and frames their declarations properly I think there’s significant enough scope for them to act purely in the political interests of the government. I mean factors such as 7(3)(c) “the extent to which those standards reflect community standards“, would seem to give quite a bit of leeway before a court will intervene.

Further, the powers are expressed as what the PIMA ‘may’ do. There is nothing giving a reasonable organisation that meets the criteria any right to be declared a “news media self-regulation body”. Further, if the PIMA declares a relatively restrictive organisation as a “news media self-regulation body”, it can use 7(3)(q) “the need to minimise the number of news media 20 self-regulation bodies” as an excuse to exclude other reasonable bodies from the privilege.

The ‘stick’ of liability under the privacy act might not be as significant as the response has made it out to be, but I think it’s still significant enough for a government to put undue pressure on the media by threatening to appoint the ‘bad cop’ as the PIMA.

Pedro
Pedro
8 years ago
Reply to  Ken Parish

I do think it the biggest story. A bureaucrat is to be appointed by the minister with the job of ensuring that the self-regulation rules of the media are in the public interest and match community standards as determined by the bureaucrat. The penalty is the loss of the Privacy Act exemption. I think that’s a pretty big penalty and I think that there is a real risk the bureaucrat will be appointed on the basis of the political needs of the govt at the time.

I don’t think any form of appeal would be a sufficient protection as the appeal only narrowly changes the real problem, which is that a person or a few persons, have the roll of determining the public interest. The whole Parliament struggles with that job.

I think the potential damage done by a free media (who still have libel laws to consider) is a price worth paying to avoid the damage resulting from a constrained media. The public interest in a free media has been established by centuries of experience. The public interest in privacy and greviance rules, not so much.

Imagine what people would say if it were 1987 and JB Petersen wanted to impose such a law in Qld.

Also, News is not alone in arguing against the proposals, they’re just the most vocal, and not surprising seeing they are the target.

Pedro
Pedro
8 years ago
Reply to  Ken Parish

Hmmm
“Fairfax chief executive Greg Hywood described the threat to news-gathering organisations as “nuclear”.”

john r walker
john r walker(@annesanders)
8 years ago
Reply to  Pedro

Pedro

There’s no “Public Interest Media Advocate” in either the Convergence or Finkelstein review.

Admittedly, the idea of a “public interest test” did appear in the Convergence Review. But it was a tiny sliver of a much broader proposal to rationalise media regulation across all platforms. To rip three words out of the Convergence Review is to miss the point entirely. The purpose of the public interest test, as conceived in Convergence Review, is to completely remove “the old platform-specific media ownership rules”. Conroy doesn’t plan to do anything of the sort.

http://www.abc.net.au/unleashed/4581542.html

Jim Rose
Jim Rose
8 years ago
Reply to  john r walker

How does a free press emerge? the answer is market competition

For much of the nineteenth century U.S. newspapers were often public relations tools funded by politicians. Information hostile to a newspaper’s political viewpoint was either ignored or dismissed as sophistry. Newspaper independence was a rarity.

The degree of fraud and corruption in 19th century America approached that of today’s most corrupt developing nations.

The newspaper industry underwent fundamental changes between 1870 and 1920 as the press became more informative and less partisan.
– 11 per cent of urban dailies were independent in 1870,
– 62 percent were in 1920.
The rise of the informative press was the result of increased scale and competitiveness in the newspaper industry caused by technological progress in the newsprint and newspaper industries.
• From 1870 to 1920, when corruption appears to have declined significantly within the United States, the press became more informative, less partisan, and expanded its circulation considerably.
• By the 1920s, the partisan papers no longer coupled allegations of the corruption of their party members with condemnation of the character of the person making the charge.
A reasonable hypothesis is rise of the informative press was one of the reasons why the corruption of the Gilded Age was sharply reduced during the Progressive Era.

A supply-side model suggesting that newspapers weigh the rewards of bias—politicians’ bribes or personal pleasure—against the cost of bias—lost circulation from providing faulty news.

The key predictions are that, as the size of the market for newspapers rises, and as the marginal cost of producing a paper falls, newspapers will become less biased and invest more in gathering information.

Corruption declines because media proprietors discovered that they could maintain and boost circulation by exposing it.

An independent press which kept a watchful eye over government and business was a spontaneous order that was a by-product of rising incomes and literacy of readers.

Politicians did not help the process along. Technological innovations and increased city populations caused the huge increase in scale.

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Pedro
Pedro
8 years ago
Reply to  john r walker

The whole thing makes me sick. The Fink yesterday said he thought the proposal was no threat to free speech and only a minimal control of the media. What a joke. The problem is not with threats to free speech but a free press.

Even more laughable was the Fink’s claim that you didn’t need evidence of media problems to justify govt regulation of the press and then that self-regulation had failed. Ummm, if nothing seriously bad has happened then where is the failure.

As far as the Fink is concerned, I think this demonstrates that you can become a judge even if you’re a bit of a dill on matters outside of the narrow confines of the law.

Jim Rose
Jim Rose
8 years ago

with the print media down for the count and losing money and readers around the world, you wonder why a sunset industry is attracting so much attention?

Newspapers and TV stations are big businesses, and they increased readership and revenue by presenting factual and informative news. Competition forces news outlets to cater to their customer’s preferences.

Positive profits accrue to those outlets who are better than their competitors. Their lesser rivals will exhaust their retained earnings and fail to attract further investor support.

Any bias is likely to be slightly to the centre-left for the following reasons:
1. young women tend to be one of the most marginal groups of news consumers (i.e., they are the most willing to switch to activities besides reading or watching the news).
2. young females often make more of the consumption decisions for the household so advertisers will pay more to reach this group.
3. Since young females tend to be more centre-left on average, a news outlet may want to slant its coverage that way. Newspapers sell space to advertisers tailor the way they cover politics to gain more readers.

a good measure of media bias used endorsements of state-level initiatives and referendums and found that newspapers are located almost exactly at the median voter in their home states.

Ken Parish
Admin
Ken Parish(@ken-parish)
8 years ago
Reply to  Jim Rose

Jim

I think you’re under-estimating the power/influence that print media continue to exert, even as their revenues continue to shrink. The coverage of current affairs by TV, radio and to a large extent bloggers is still heavily determined by what our mainstream newspapers cover and how they cover it. Thus some plausible mechanism to provide some level of sanction where they fail to adhere to basic standards of ethics and accuracy is entirely reasonable.

I actually think Conroy’s scheme is just about as minimalist a proposal of that sort as one could possibly envisage. The fact that the MSM is nevertheless objecting to it means that they are effectively saying:

“We should be able to behave however we like with no limits whatever other than the law of defamation. In particular we should not under any circumstances, irrespective of how inaccurately or unethically we behave, be subject to the privacy and consumer protection laws that apply to most other corporations.”

I do not find this argument persuasive.

Jim Rose
Jim Rose
8 years ago
Reply to  Ken Parish

since he established himself as a major newspaper proprietor, Murdoch has unashamedly backed political winners, only to dump them when he was convinced that they were washed up or that his newspapers might be left dangerously stranded on the losing side of politics. The most notorious example was his brief flirtation with Gough Whitlam.

The circumstances were roughly analogous to those in Britain in 1994: a tired, ailing conservative administration with which voters were disenchanted, and a revamped Labor opposition with a personable, intelligent leader offering new ideas.

To the continuing discomfort of Australian Labor Party MPs, who still remember his turncoat tactics against Whitlam, media barons Murdoch (and Kerry Packer) became embraced as ‘business mates’ of the Labor government in the 1980s.

after Keating’s unexpectedly comfortable australian election triumph in the 1993 Australian federal election, Murdoch’s papers were generous to Labor.

Murdoch’s see-sawing political stances are entirely pragmatic. He has always been prepared to back winners just before they win, and to shift allegiances on non-ideological grounds.

Murdoch makes himself the new best friend of the next Prime Minister his business strategy. He is always been prepared to back winners just before they win, and shift allegiances on non-ideological grounds.

Leigh and Gans in How Partisan is the Press? Multiple Measures of Media Slant, ECONOMIC RECORD, MARCH, 2012, 127–147 employed several different approaches to find that the Australian media are quite centrist, with very few outlets being statistically distinguishable from the middle of Australian politics. The minor exceptions were the ABC channel 2 and perhaps the Melbourne Age in its news slant in the 2004 election. Their media slants were small.

Australian newspapers tended to endorse the coalition in the federal elections from 1996 to 2007 although The Australian, right-wing rag that it is, backed the ALP in 2007! I agree that this was a serious lapse of judgement.

HT: http://www.independent.co.uk/news/world/a-man-of-selfish-loyalties-rupert-murdochs-apparent-overture-to-tony-blair-strikes-a-chilling-chord-among-australian-politicians-he-has-supported-1376362.html

john r walker
john r walker(@annesanders)
8 years ago
Reply to  Ken Parish

The way that it has been handled by Conroy does not inspire trust .
Assuming that it is truly minimalist , then it looks like a stupid election stunt.

john r walker
john r walker(@annesanders)
8 years ago
Reply to  john r walker

Actually mindlessly stupid “just does things” sums this government to a tee.