Understanding recession as not enough demand is about as certain a way to lose the thread as it is possible to be. In an exchange economy, people producing what others do not want to buy is the cause of unemployment and a flat economy. If you want to fix it, you need to let market adjustments happen. This is all brought to mind from the latest gloom discussed in a survey of American economists compiled and published by the Associated Press:

The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists. Read more »

Probably not – the US experienced a severe recession. But there is always the old chestnut; it could have been worse. That is exactly the argument Alan Blinder and Mark Zandi have made.

In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year.

In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.

The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. Read more »

Tax avoidance is organising your affairs to avoid paying tax. Nothing wrong with that. But if you’re always crapping on about other people paying more tax then it’s not a good look. Step right up, John Kerry.

… the senator had purchased his New Zealand-built, 76-foot floating palace back in March and ported her in Rhode Island, a state which repealed its Boat Sales and Use Tax back in 1993. By doing so, the senator could dodge some $437,500 in Mass. sales taxes and an annual excise bill of around $70,000.

The high-seas tax maneuver was completely legal, but if Kerry had brought the yacht into Massachusetts waters within six months of taking ownership, he could have been liable for a use tax – the equivalent of the sales tax – and excise taxes.

He will now pay the tax. Read more »

I am too mean to buy the Financial Review: as a rule, I don’t get $3 of value for my outlay and to subscribe on-line is a ‘pretty penny’, as my mother would say.

But there is always a copy in the tea-room, so if I have time, I have a read, especially of the op-ed page.  Mark Latham’s piece today is a classic.  He maintains that Julia Gillard is following the Carr/NSW Labor Right/Bitar/Arbib/Hawker manual of election campaigning, down to the last decimal point.

There are five strategic ploys. These are: Read more »

A story doing the rounds today in the Business Spectator by Robert Gottliebsen suggests that the first round version of the Fair Work Act devised by Julia Gillard was n0t too bad and that businesses were relatively comforted by Julia’s assurances. 

She was then rolled by Greg Combet and other union-affilated ministers to alter certain provisions to reinforce the pro-union aspects of the legislation, plus meeting sundry other union requests.  As a result, the business community feels betrayed, as they had been lulled into a false sense of comfort by virtue of their inclusion in the consultation process.  I actually think that this has all been known for some time.

So what are the most egegrious provisions of the Fair Work Act? Read more »

Wayne Swan discussing Kevin Rudd

I do believe that he’s an honourable person

Mark Antony discussing Julius Caesar (as per William Shakespeare)

The evil that men do lives after them;
The good is oft interred with their bones.
So let it be with Caesar. The noble Brutus
Hath told you Caesar was ambitious.
If it were so, it was a grievous fault,
And grievously hath Caesar answered it.
Here, under leave of Brutus and the rest —
For Brutus is an honorable man,
So are they all, all honorable men

Imre Salusinszky is magnificent.

Can’t get the job you want? Can’t win the girl you desire? Can’t own the car of your dreams? Have you noticed the common link? That’s right: there’s always some other bastard who already has these things. Too many Australians!

(HT: Stephen Kirchner)

Another ALP leak came out. Gillard opposes paid maternity leave – not just the Coalition policy but the ALP policy too.

Ms Gillard reportedly opposed in cabinet the 18-week paid parental leave scheme set at the minimum wage, which is due to begin in January 2011.

“The idea that paid parental leave would be a political winner was misconstrued,” Ms Gillard was quoted as telling cabinet.

“People beyond child-bearing age would resent it as would stay-at-home mothers.”

Ms Gillard reportedly questioned the $30 a week increase for single pensioners, billed as the biggest rise in a century since the pension was introduced.

Government sources quoted in the report said that while Ms Gillard was not opposed to the pension increase, she questioned the $14 billion cost on the grounds “elderly voters did not support Labor”. Read more »

The ANAO Report into the Strategic Projects Component of the Regional and Local Community Infrastructure Program is a gift that keeps giving. It seems the spending allocations were biased. Here is the table from the Report.

It also seems that the money hasn’t been expended as quickly as it should have been.

Many of the so-called shovel ready projects were not ready at all. Read more »

The Prime Minister has today announced its mental health policy, pledging to INVEST (more on that later) $277 million over four years on suicide prevention.

This compares with the Coalition’s pledge to spend $1.5 billion over four years on community-based mental health programs.

Experts in the field of mental health, including Professor Ian Hickie, have already slammed the government’s plan as inadequate.

In response, the Prime Minister maintains that mental health is a second-term priority for her government  – which seems a very strange thing to say, frankly (can the mentally ill wait that long?) - because she is not prepared to forego other important health initiatives, such as additional GP Super-Clinics; e-health initiatives; and doctor on-line/call centre.  Read more »

Wayne Swan was telling us, just yesterday, about how the debt and deficit saved Australian jobs. Today we wonder how he knows? Certainly the Australian National Audit Office doesn’t understand how those sorts of claims can be justified. Read more »

The SMH makes an interesting claim (emphasis added).

The Herald obtained economic modelling by KPMG Econtech which shows a 2 per cent company tax rise would increase inflation by 0.5 per cent and boost prices by between 0.2 per cent and 0.9 per cent.
…
The modelling, commissioned by the government, says a 2 percentage point company tax increase, if passed on to consumers, would push up the prices for food, clothing and footwear, transport, recreation and household contents and services by 0.5 per cent.

So the ALP are leaking government commissioned and taxpayer financed research to the newspapers for political purposes? It doesn’t worry me that the government commissioned research into the Abbott proposal, but it does worry me that the ALP are using government property as their own. It is not their report to give out as they choose.

There is a fine line between reporting the news and making the news. Michael Gillies Smith makes the argument that The Australian made the news, in particular that it brought down the Rudd government.

The Australian, led by Dennis Shanahan, was highly influential in Rudd’s demise. The message here for politicians and stakeholders in public policy is: Beware The Australian and Dennis Shanahan, especially if you’re going to pick a fight with big business, an economic powerhouse of the nation.

But before we all congratulate Dennis on a job well done, lets take a few deep breaths – maybe even a cup of tea.

To be sure the press often run campaigns and editors fantasise about being able to do so. To carry off a camapaign is hard work and to do so well is difficult. Most media campaigns, I suspect, must fail. From memory the Australian and most of the rest of the print media campaigned in favor of the Republic (the AFR being the only stand-out that I recall). Read more »

The AFL is extending its socialist business practices to discriminate between different categories of fan.

There is a $2 levy charged for every person attending an AFL game and that money is taken from the home club’s revenue and put into an equalisation fund.

Under the AFL plan, Collingwood, Essendon, Geelong, Hawthorn, West Coast and Fremantle would be taxed an extra dollar a fan in a scaled increase over a three-year period.

Looks like a club tax on attending home games. So support your team by watching it on tv – or by attending away games (easy enough to do in Melbourne). I like the idea that the opposition clubs get to lose money if I go to the match.

Perhaps Julia Gillard this in mind when saying she was moving forwards?

Here are the lyrics to Ben Rector’s song Moving Backwards: Read more »

Wayne Swan has been having a go at Tony Abbott’s paid maternity leave scheme.

Standing in front of a Woolworths supermarket in the marginal Perth electorate of Swan today, the Treasurer said Mr Abbott had made a “stunning admission”.

“Cost of living is a very important part of this discussion we are having as we go through to the election campaign and the election itself,” he said.

“His Coles and Woolies tax will put upward pressure on business costs which will flow through to the prices at the supermarket and flow through to a whole range of items.

“Mr Abbott has admitted that very clearly today on radio.”

Clearly Swan is no longer under the influence of the Australian Treasury. Ken Henry recently told the Parliament. Read more »

Wayne Swan

So we did borrow, we borrowed to support employment, that’s the reason unemployment is so low in this country.

Lenore Taylor and David Uren

It is the opportunity cost – the things that cannot be accomplished by either this government or the next – that weighs heaviest as a result of the government’s spending more than was needed. Had the economy behaved anything like Treasury’s forecasts for it, no-one would have begrudged the money spent. But now $75 billion has gone, with a negligible addition to Australia’s productive capacity. The debt must be serviced and in due course paid back. In the context of a $1 trillion economy, it is not a crippling burden, but there is depressingly little to show for it.

Moving forward was a line from the last election.

I presented a paper on Friday showing some results Ashton de Silva and I have on the impact stimulus spending had on consumption and savings here in Australia. Our results show that private savings rose by slightly more than the sum of the cash handouts. So basically the money was saved – more or less what you’d expect to see.

One of my colleagues asked what it would take to convince me that the stimulus did work. A voice calling down heaven would be convincing and I said that. Of course that is a poor answer – I don’t know what would convince me until I see it. Research is about discovery in the Hayekian sense. The question itself, much beloved by progressives, implies that individuals are deliberately not looking at the evidence that is in plain sight. But that is another issue.

Niall Ferguson makes an interesting point (free subscription required).

In some ways, of course, this is not an argument about economics at all. It is an argument about history. Read more »

John Abbott and Jennifer Marohasy have a paper in Environmental Law & Management on the UK FOI legislation. Read more »

Julia Gillard has announced a cash for clunkers program.

AUSTRALIANS who trade in older cars for more fuel-efficient vehicles will be eligible for a $2000 rebate under a new initiative unveiled by Labor.

Julia Gillard also announced stricter compulsory pollution standards for new cars from 2015, adding new elements to Labor’s climate policy.

The Prime Minister said the $394 million cleaner car rebate would help take some 200,000 pre-1995 vehicles off the road over four years from January 1, 2011 to the end of 2014.

So how well did this program work in the US? Read more »

A massive stimulus, huge deficit and a “relatively” jobless recovery. How is this to be explained? From today’s Associated Press:

New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.

That’s actually a little better than the administration predicted in February.

The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.

The Office of Management and Budget report has ominous news for President Barack Obama should he seek re-election in 2012 — a still-high unemployment rate of 8.1 percent. That would be well above normal, which is closer to a rate of 5.5 percent to 6 percent. Private economists don’t think the unemployment rate will drop to those levels until well into this decade. Read more »

I try to avoid reading the SMH and the Age as much as possible.

However, I was looking for a quote from Peter Hartcher about Joolia’s ‘population policy’, which of  course has nothing to do with immigration policy, according to the government, at least some parts of the government. 

(Note to Gillard: here are the four boxes to consider in terms of the determinants of the rate of population growth: the birth rate; the death rate; the immigration rate; and the emigration rate.)

When this article caught my eye. Gosh, the certainty of youth – and the condescension to boot.  I particularly love her explanation of the (misnamed) automatic stabilisers.

I am wondering whether she has actually undertaken any study in economics?  Was this at an Australian university? Read more »

Julia Gillard will announce her climate change plan today.

A JULIA Gillard government would create a ”citizens’ assembly” of ”real Australians” to investigate the science of climate change and consequences of emissions trading, under a plan to build a national consensus for a carbon price.

In a speech today, the Prime Minister will also promise to set up an expert climate change commission that would both explain climate science to the public and report on steps being taken in other countries to tackle the problem.

Citizens’ assembly of real Australians? We got one of those already – called the national parliament. Let’s see a list of the names of these ‘real’ Australians. A new propaganda unit – the expert climate change commission sounds like what the CSIRO is supposed to be doing, so I don’t understand that either. Read more »

There is a much commented upon article in the July-August American Spectator doing the rounds in the US that really is worth a read. By Angelo Cordevilla and titled, “America’s Ruling Class — And the Perils of Revolution”, it is an article about America’s political elites whose opinions dominate policy discussion and where the views of the population in general have almost no serious relevance. It is a long article but the general drift is found early on: Read more »

A re-elected Gillard government will introduce compulsory student unionism. Banning union conscription on campus was one of Brendan Nelson’s finest achievements as education minister.

I have this op-ed piece in the Australian today.

Do right-of-centre political parties make better economic managers than their more left leaning counterparts?  Are right-of-centre political parties more or less likely to introduce significant economic reforms that lift productivity and living standards?

 Viewed over the past several decades and considering these questions in the context of a number of countries, the answers are not at all clear-cut.  There have been very effective economic managers on both sides of politics and important economic reforms have also been introduced by both sides.  At the same time, disastrous economic managers have come from both the left and the right.

 So what is Tony Abbott’s position on economic reform?  And how would the Coalition approach the important task of managing the economy and implementing policies that raise per capita incomes? Read more »

For a summary of the new legislation.

There is something of a phoney war going on about the debate on population.  Julia  is definitely against a big Australia, which must mean she is in favour of a small Australia.  But surely she doesn’t mean smaller? I think Tony is also for a small Australia.

So if we are to believe the rhetoric, we now need to be told of the policy initiatives that will significantly reduce the rate of population growth.  (Note in the Intergenerational Report, the figure of 36 million is actually achieved with a lower annual rate of growth in the population than has been the case in the past decade.)

So here are some ideas and I am looking forward to hearing the two parties (three?) reaction to them: Read more »

The Greens are proposing a tax on junk-food and alcohol advertsing. The problem our Green friends will run into fairly quickly is the definition of ‘junk’ food. As Chris Berg has suggested.

So McDonald’s – the very embodiment of unhealthy eating – has introduced salads. It has struck a deal with the Heart Foundation. In New Zealand, it has a relationship with Weight Watchers. Through the responsible marketing initiative, the confectionery industry is trying to show it is as supportive of a healthy Australia as chocolate makers ever could be.

I suppose it is a retreat from the idea of having a (new) tax on junk-food itself. As Julie Novak has argued, we already have a junk-food tax, called the GST. Read more »

Michael Boskin in the Wall Street Journal.

President Obama says “every economist who’s looked at it says that the Recovery Act has done its job”—i.e., the stimulus bill has turned the economy around. That’s nonsense. Opinions differ widely and many leading economists believe that its impact has been small. Why? The expectation of future spending and future tax hikes to pay for the stimulus and Mr. Obama’s vast expansion of government are offsetting the direct short-run expansionary effect. That is standard in all macroeconomic theories. Read more »

I’m already switching off.

Neil Lawrence has it right. The obsession with slogans is tiresome.

For example, ‘moving forward’ – treats us like lemmings. Yes, we will be moving forward together to a cliff.

And it’s a great pity that the Coalition is eschewing labour market reform – but one can understand since the business lobby groups such as AIG and the BCA have hardly been standing up to the Rudd/Gillard governments over labour-market re-regulation.

Perhaps the populace deserves these deceitful slogans that treat everyone like idiots.

But one advantage of the obsession with slogans is that it leaves me with time to read and undertake other activities.

For the opportunity cost of not watching this election is low.

The ALP have put up an attack ad based on the Addams Family.

The bit where they say ‘He’ll unfairly dismiss you’ made me think about the last person unfairly dismissed in Australia.

Step right up … Kevin Rudd.

Last night in 7.30 Land Kerry O’Brien asked the question.

When you talk about better teachers, can you nominate any clear, existing example of where you can say that your policies have led to better teaching? Can you point to teacher trainees now coming out three years into your government – teacher trainees coming out having been given better training? Can you point to where there is a better quality of teaching in any Australian school as a result of your time as Prime Minister? Can you point to smaller classes?

Look carefully at the answer.

Kerry, I certainly can. I can point you to our new program, ‘Teach for Australia’, which already has some of our best and brightest graduates teaching in disadvantaged schools, people who got first class degrees going through an accelerated program, teaching in disadvantaged classrooms today. Read more »

To Protest Hiring of Nonunion Help, Union Hires Nonunion Pickets

Billy Raye, a 51-year-old unemployed bike courier, is looking for work.

Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.

“For a lot of our members, it’s really difficult to have them come out, either because of parking or something else,” explains Vincente Garcia, a union representative who is supervising the picketing.

In California, one group is offering to pay $10 and up per hour to activists to hold signs in demonstrations against foam cups and plastic bags. Read more »

No matter what Tony Abbott seems to say about the death of Work Choices, Labor is being successful in prosecuting a case that the Coalition intends to bring back Work Choices.

Now it is hard to say whether they are fighting yesterday’s war, and there is little doubt that Labor’s Fair Work is a step in the wrong direction – the re-regulation of the labour market – but Work Choices was also flawed. It was complicated and included unnecessary provisions.

Politically the Coalition has little choice but to neutralise the issue by promising not to do anything revolutionary on IR during the next Parliament. That’s very unfortunate, but the case for further reform is best prosecuted from Government and there needs to be further acceptance by the public for further reform. That will take another couple of years of careful explanation – showing the flaws in Fair Work and how it has damaged the employment prospects of individuals (including those wishing to work less than three hours for example). Read more »

Pakistan does not have a working tax system and many high income earners pay no tax, according to an article in the New York Times.

Much of Pakistan’s capital city looks like a rich Los Angeles suburb. Shiny sport utility vehicles purr down gated driveways. Elegant multistory homes are tended by servants. Laundry is never hung out to dry.
But behind the opulence lurks a troubling fact. Very few of these households pay income tax. That is mostly because the politicians who make the rules are also the country’s richest citizens, and are skilled at finding ways to exempt themselves. Read more »

Tony Abbott obviously thought that he could remove industrial relations as an election issue by pledging to leave untouched the Fair Work Act in the next term of parliament, should he be elected PM. 

The fact that it is impossible to envisage a situation in which the Coalition, even if it became the elected government, would have sufficient votes in the Senate to make any significant changes to the Act is obvious a practical rather than a political point.

Even so, Abbott (and Abetz) seem to be mangling the message.

It has been reported that Tony Abbott  has signed a “contract” promising that Work Choices is dead and buried but he continues to muddle his message on the controversial laws.

“Give me a bit of paper, I’ll sign it here,” Mr Abbott said to 3AW host Neil Mitchell as he tried to end questions about John Howard’s divisive workplace laws.

But pressed again by Mitchell, Mr Abbott said: “I can’t give an absolute guarantee about every single aspect of workplace relations. Read more »

Simon Johnson whacks Tim Geithner. Hard.

As President of the New York Federal Reserve from 2003, and de facto head of the government’s financial intelligence service, he completely failed to spot the problems developing in and around the country’s financial markets; nothing about this embarrassing track record has since stood in his way (Life #2). He subsequently became Hank Paulson’s Wall Street point person for one of the most comprehensively bungled bailouts of all time – the Troubled Asset Relief Program, TARP, which in fall 2008 first appalled Congress with its intentions and then wasn’t used at all as advertised (Life #3). Read more »

We all know that Kevin Rudd got his inspiration from Donald Duck comics. Where does Julia Gillard’s inspiration come from?

Here she is announcing the election.

Instead, I believe this is a moment for all of us to strengthen, to innovate, to learn – in short, to move forwards, not backwards.

Well she gets her inspiration from The Simpsons.

In The Simpsons episode Citizen Kang, two aliens by the name of Kang and Kudos possess the bodies of Presidential nominees Bill Clinton and Bob Dole in an effort to take over the world.

The two find it surprisingly easy to usurp the democratic process, get elected and enslave the human race with a series of speeches full of empty political rhetoric. Read more »

One of the points of (possibly minor) differentiation between Labor and the Coalition in this election campaign is the two parties’ positions in relation to GP Super Clinics.  My suspicion is that Labor is rather partial to the title, Super Clinics; it’s rather P.G. Wodehouse, super and all that.  Who is in their right mind is not in favour of super? SUPER!

When it comes to GP Super Clinics, quite a few are not in favour of them, including the AMA and other groups representing doctors.  Perhaps one bit of good news – although I guess it is a broken promise -  is that compared with the 2007 election commitment made by the ALP, the number of GP Super Clinics that have been built and are now in operation is low. Read more »

News has emerged of another botched federal iniative, with the inauguration of the new Australian Health Practitioners Regulation Agency. This new body takes over the activity of some 85 state-based agencies covering a wide range of health practitioners, including doctors, nurses, physiotherapists, etc.

Evidently, the agency is fielding, or failing to field, some 3000 calls a day.  And overseas doctors who require the agency to provide them with the necessary professional registration are being told that they may have to wait for months.  Anyone with a complaint against a health professional is being advised to wait.

No surprises really, but the more interesting issue is that the rationale for this body was very weak in the first place.  It is also an example of the federal compact being  undermined yet again.  Who ever dreamt up the term national seamless economy had no understanding of the working of a federation. Read more »

How different it was earlier this year. The Australian decided that Kevin Rudd should be made its Australian of the Year. Here is the article published on 23 January 2010.

The quotes from Wayne Swan show the extent of his betrayal of Kevin Rudd:

Working closely with Kevin over the past year, I’ve seen just how much the jobs and livelihoods of ordinary Australians have motivated him throughout the global recession. This award is a worthy piece of recognition, although I think he’ll see the most important reward as having several hundred thousand more Australians in work and spared the hardships of unemployment. Knowing Kevin, it will just spur him on to work even harder building the future economy and serving the Australian people.

Kevin Rudd. Wins the election on 24 November 2007. Sworn in as Prime Minister on 3 December 2007. Australian of the Year 23 January 2010. Knifed on 23 July 2010.

Lived by Newspoll. Died by Newspoll. See attached graph. Read more »

On the apparent eve of the calling of the 2010 Federal Election, I’d like to give a left field ‘shock and awe’ tactic that could work a treat for the Opposition.

Lucius Quinctius Cincinnatus was a famed Roman general who was held up as a perfect role model for Roman values. He had retired to  his small farm when the Roman Republic called him up in 458 BC to serve as dictator and to lead the Romans in defeating the Aequians and the Sabines. He agreed and immediately on defeating the tribes, resigned the dictatorship and returned to his farm. This action – to serve one’s country in its time of need but to willingly step down from power – was rightly seen as great example for future generations of Romans (including, perhaps Sulla, who also resigned the dictatorship but had acted as a tyrant in the meantime).

So here is my shock and awe strategy.

On Saturday afternoon, following Gillard’s press conference stating she has seen the Governor General and that there will be an election on 28 August, Tony Abbott appears at a press conference with Peter Costello. Read more »

Piers Akerman makes an important point.

Though Mr Swan announced the new figures as if they were set in concrete and the media cheer squad led by Fairfax writer Lenore Taylor and the usual gaggle from the ABC’s geese rushed to approve his latest nonsense, it would be dangerous in the extreme to claim a Treasury prediction is akin to money in the bank.

Using Treasury’s own Budget forecasts of revenue for the Petroleum Resource Rent Tax (PRRT) over the past 10 years, versus actual revenue collected from that tax during each of those years, it is apparent that Treasury’s revenue forecasts have been out by as much as 86 per cent in a single year.

In 1997-98, the difference was 6.71 per cent, in 1998-99 it was -56.35 per cent; 1999-00: 64.44 per cent; 2000-01: 85.86 per cent; 2001-02: -4.83 per cent; 2002-03: 12.63 per cent; 2003-04: -8.75 per cent; 2004-05: 32.64 per cent; 2005-06: 42 per cent; 2006-07: -35.98 per cent; 2007-08: -5-51 per cent; 2008-09: -28.12 per cent. Check for yourself. Read more »

On 2 November 2007 the journalist Steve Price heard Peter Garrett saying:

once we get in we’ll just change it all

The removal of Rudd by Gillard and her supporters proves that Garrett was right all along.

The continuing battle between these former prime ministers is an interesting example of two versions of history. One has Hawke as the dominant player pulling along a reluctant Keating to the economic reform camp. The other has Hawke as a depressed and disengaged prime minister whose Treasurer covered up for him and allowed to accept kudos for some strong reforms.

Keating’s letter – attached – is fascinating and well worth a read. It is prompted by Blanche d’Alpuget’s new biography, conveniently timed to maximise exposure before the federal election. Keating’s outburst will also assist in its publicity.

But I thought the two-part interview of Hawke by Kerry O’Brien on the 7:30 report was over-the-top. I thought the ABC’s charter was supposed to prevent it promoting commercial products – yet this is precisely what the 7:30 report did by interviewing Hawke about the book.

831972-100715-keating

From the NT Times

Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.

But that’s the most it can do. For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.

There are some interesting quotes from Julia Gillard’s address to the NPC today.

For example:

I believe that prudent and disciplined economic management is the foundation of good government. The good-quality, essential services that Australians expect can only be sustained by a Government when our public finances are sound.

That’s why I believe in strong budget surpluses.

Sure, she believes in strong budget surpluses like the fairy at the bottom of the garden. They are never seen. Pigs will fly before the Gillard Government delivers a surplus. She and her predecessor have never delivered a surplus.

… throughout the coming election campaign, the Government will sustain the discipline that has brought the budget back to surplus.

Excuse me, what discipline? And the budget hasn’t been brought back to surplus. It’s like saying that Labor will be frugal, but just not yet. Read more »

Wayne Swan yesterday

During the global recession, we managed to keep employment growing strongly.

Data from the Australian Bureau of Statistics

The cross marks the election of the Rudd – Gillard government and the black box marks September 2008.

Julia Gillard says that work is good.

So, for me as Prime Minister, I will make my economic judgements based on what gives Australians the best opportunity for access to work.

Getting a job, holding a job, developing skills and experience, getting the next, better job or starting your own business is what propels an individual’s life forward and gives families security and choices.

For the nation, supporting jobs today as we embrace the changes needed to build for the jobs of tomorrow, is what propels the nation forward to increased prosperity and fairness.

For both individuals and the nation, going forward requires hard work, determination and smart choices. It tests you, and in the last few years this nation has been tested by the global financial crisis and global recession.

Good to hear. So what is she doing about this? Read more »

As Ken suggests below the budget update is dodgy. All the action is in the so-called parameter variations. The whole document is here. Have a look at Table 5 on page 15.

Policy decisions are active decisions the government have made and parameter variations are things that happen. For example, Treasury might forecast a massive increase in future commodity prices. It seems that is exactly what they have done – they have manufactured a massive increase in the budget by imagining future prices to be high. Read more »

The Keynesians like to cite Ireland as a case study in the failure of economic rationalism and the austerity measures that have been advocated by non-Keyesians to handle the debt crisis.

The following text is taken from an email circulated by Nicholas Vardy “The Global Guru”. His thoughts can be found on his blog . 

The take-home lesson is that the boom was particularly spectacular and this provoked a frenzy of spending. Austerity came later, and it appears to be working. This looks like textbook Austrian boom and bust theory. Lets see how Ireland and the US perform over the next year or two.

From the Global Guru Read more »

The de facto coup d’état of Kevin Rudd on 24 June 2010 has prompted considerable discussion as to its efficacy and whether it is consistent with democracy.

Yes, he was elected as the Member for Griffith. But Kevin07 was no figment of that electorate. His picture and presence was seen on all ALP how-to-vote cards throughout Australia and he was the key presence throughout the election from the side of the ALP. Most Australians saw themselves voting for a government led by Kevin Rudd, not Julia Gillard.

Yes, Rudd made many errors throughout his 2.5 years in office. These have been well documented on Catallaxyfiles.

But he made one final error when confronted by Julia Gillard and her coterie of plotters. He decided to hold a leadership ballot on 24 June 2010 and then, when confronted with the likely voting pattern of the Caucus, resigned.

Since then he has been a pariah, with Gillard and her troops blaming Rudd for all of the errors over the past 2.5 years.

This was predictable – the Party decided to shaft him and he shouldn’t have gone quietly. Read more »

The Climate Institute yesterday released a report arguing that uncertainties surrounding the pricing of carbon in Australia would lead to higher electricity prices (estimated at $2 billion per year). Without wishing to endorse this figure, or indeed the methodology, the general point that the uncertainty surrounding the future pricing of carbon will lead to higher electricity prices in Australia is almost certainly correct.

Of course, the imposition of an ETS or carbon tax will also lead to higher electricity prices as more expensive ways of generating electricity replace previously cheaper forms.

Is it a case of damned if we do, damned if we don’t? The point is that investment decisions are driven by expected prices, not current prices – something of which many politician seem naively unaware. Read more »

The PM’s East Timor solution seems to be in a spot of bother. The Timorese parliament has passed a unanimous resolution rejecting the proposal. Well, there is more to the story.

On Monday, East Timor’s parliament passed a resolution rejecting Australia’s proposal to establish a centre for asylum seekers there.

While the resolution was passed unanimously, only 34 of the 65 members of parliament were there for the vote.

But what does our government say?

Foreign Affairs Minister Stephen Smith says the rejection should not be over-interpreted and discussions between the two countries are continuing.

“Unlike the Australian Parliament, East Timorese ministers do not sit in East Timorese parliament so this is a reflection on those members of the East Timorese parliament at the time and not the government’s response,” he said.

“The government of East Timor’s response remains as it has been over the last few days.” Read more »

From Christopher Booker

Last week, after six months of evasions, obfuscation, denials and retractions, a story which has preoccupied this column on and off since January came to a startling conclusion. It turns out that one of the most widely publicised statements in the 2007 report of the UN’s Intergovernmental Panel on Climate Change – a claim on which tens of billions of dollars could hang – was not based on peer-reviewed science, as repeatedly claimed, but originated solely from anonymous propaganda published on the website of a small Brazilian environmental advocacy group.

The ramifications of this discovery stretch in many directions. First, it seems to show that the IPCC – whose reports governments rely on to justify presenting mankind with the largest bill in history – has been in serious breach of its own rules. Read more »

Interacting with those pesky constituents must be a real pain in the bum. Especially these days when the cost of communication is so low. Wendy Christie emailed her state ALP MP to get help on a charity event from her work email and eventually got fired from her job after the MP complained.

In a written warning in March 2008, the company confirmed Mrs Kiernan complained to Xstrata Copper chief operating officer Steve de Kruijff about employee Wendy Christie emailing the Mount Isa MP seeking help with a local community fundraising event.

Mrs Kiernan had said the email about the Mount Isa Campdraft Association – a bushman’s cattle event raising funds for charity – appeared to have a “perceived connection” to Xstrata. Read more »

Rafe has pointed to my reviews of Mises in the 100 Great Books of Liberty. I’m reproducing my review of Socialism below.

In this 1922 classic Ludwig von Mises (1881 – 1973) provides a methodical, relentless critique of socialism. Henry Hazlitt, in his 1938 review of the English translation, says that “this book must rank as the most devastating analysis of socialism yet penned”. That comments remains true today. It is important to note the date – 1922 – socialism at that time was predominantly a theoretical concept. It would be another 67 years before the fall of the Berlin Wall finally discredited socialism. Yet Mises provided the antidote to the nonsense that socialism was a good idea in theory, but not in practice. Read more »

You know how Dr Kevin said there wouldn’t be any more health bureaucrats, but I have been noticing a number of advertisements for senior positions in the Department of Health and Ageing.

But rather than truthfully just using the phrase, Central Planners Required, in today’s Australian, the advertisement has the heading, “Health Care that Meets the Needs of All Australians”.  In case you think I am making this up, the ad is on page 2 of the Weekend Australian.  It seems that spin now extends to job descriptions.

The blurb continues, “In providing better health and aged care for the community, a key focus is the implementation of the Government’s health reform agenda through the National Health and Hospitals Network.  Over the next five years, the Department will deliver (sic) the $7.4 billion reform program of funding for better hospitals and improved primary care and preventive health….” (The modesty of the wording is quite overwhelming.) 

Only those committed to making difference need apply, evidently.

Check it out.

Went to a breakfast presentation by Jerry Jordon, the former President of the Federal Reserve in Cleveland and hardly an outsider either to monetary policy or theory. And the essence of his talk was that “a good case can be made that the last two years is not the big one”, big one of course referring to the meltdown to come.

He framed his discussion around the corruption of the financial system as it has evolved here in the US. Between the bailouts and the “permission-and-denial” form of regulation the power that is held by regulators makes nonsense of the idea that the banking system is open and free. An awesome level of moral hazard is now built into the system where survival will depend on administrative decision rather than market determinations. Read more »

Tony Abbott’s pitch to small business has some very worrying aspects. Rather than recommending the elimination of the unfair contract provisions introduced by the federal government, which in the end were restricted to the consumer-business relationship, he is recommending that the provisions be extended to business-to-business contracts.

Where is the respect for freedom of contract that we could expect of a conservative political party?

The very notion of unfair contracts is a very curious one, if parties have freely entered into a contract for their mutual benefit.  Moreover, there are various protections in the standard law of contract, such as absence of duress, that provide all the safeguards needed. Read more »

“We are led to believe that friendships without a recognizable gain are, in the economic sense, irrational.”

You shouldn’t have to calculate an IRR on a friendship says Professor Todd May who is working on a book on the subject. I don’t ever remember anyone suggesting otherwise. Perhaps it is common on American university campuses.

I reckon he was paid for his opinion piece in the Times while we bloggers do what we do for irrational reasons.

I am at the Freedomfest here in Las Vegas which is a confluence of all of the Conservative-Republican-Libertarian and generally free market groupings in the United States. It is like going to a Quadrant dinner only times 50 in numbers. It is an unbelievable pleasure to be amongst it, and as an invited speaker as well.

My paper is tomorrow on “Keynesian Economics: the Beginning of the End?” The question mark only reflects my pessimism. We went to see the magician Lance Burton today but there is no escape artist in the history of magic as slithery as Keynes was in economics. No failure, no theoretical idiocy, no evidence of any kind seems to be able to undermine the hold that Keynes has on economic thought. We shall see if he escapes again, but this is like Houdini welded into a milk can and thrown into the middle of the Yarra. He will never get out of this, you say, but we shall see. In no time flat we shall see Maynard Keynes again rise to the surface as if nothing had happened and economics will go on as if the American economy had also floated to the surface without a hitch. Read more »

On Monday Ken Henry appeared before a Senate Committee and was asked several questions about the RSPT and MRRT. The whole question of forecasting came up.

Dr Henry—No, I have not said that. There is considerable uncertainty surrounding estimates forecasts of commodity prices. We in the Treasury forecast commodity prices for the budget and we forecast commodity prices at Mid-Year Economic and Fiscal Outlook times. We forecast them at other times through the year as well but, for publication, we essentially have two forecasts of commodity prices. Others who comment on these things, including the companies themselves, have the ability to forecast, to various degrees, commodity prices every morning, maybe even several times during the day. Because commodity prices are volatile, as I indicated earlier, a forecast of commodity prices conducted, say, two months after an earlier forecast of commodity prices could well be quite different. If somebody is suggesting that, because of that, the earlier forecast is a bungle then I would suggest that they know very little about forecasting. Read more »

I have an op-ed in the Age today talking about the RSPT and MRRT.

So the MRRT doesn’t resolve the problem for the RSPT was to have solved, the inefficient state royalty systems, and doesn’t seem likely to raise much revenue. What is making things worse is that Treasury is staying tight-lipped, as if Australians had no right to take an interest in fiscal matters.

The government and Treasury just want us to trust them. But the lesson of the RSPT debate is that we can’t trust them. These are the same people who told us that miners only pay 17 per cent in tax. These are the people who called miners liars and ignorant. These are the people who argued that the uplift factor had to be the government long-term bond rate to avoid over-compensation, and the 40 per cent tax rate was non-negotiable. Read more »

The Cooper review has a number of interesting recommendations, including some which aim to improve the governance and accountability of trustees to members, including increased transparency.

This is an industry where a number of lobby groups came out in support of the resource super profits tax in exchange for an increase in the superannuation guarantee from 9 to 12 per cent. That is, they were happy to compromise on their members’ returns in order to mandate additional flows (and hence fees) through the superannuation system.

Today’s headlines include the AFR’s

Super fund trustees vent anger at Cooper shake-up

As noted, the reforms would seek to increase the governance standards of public offer superannuation funds to that of public company boards. It would also require a third of members of boards being independent directors, impose increased legal duties on trustees and higher competence standards. The review also proposed that trustees should only serve on the board of one fund and the mandatory equal representation of employers and employees. Read more »

Back in Sydney, some final comments on the trip.

The last official business of the trip was a meeting to discuss how it all went and how it could be improved. The major suggestion was to allow more time, perhaps two weeks instead of ten days with more free time.

Some other minor criticisms emerged but the overwhelming response was positive.

People set off to many different destinations, hardly any went straight back to Australia. I moved to a Northern suburb of  Tel Aviv to spend a few days with Joe Agassi and Judith Buber Agassi.

They were just back from the German launch of Judith’s book on the Ravensbruck Concentration Camp where her mother spent several years (and survived). They live in a house with a lot of books, so if the walls fell down the roof would be held up by the bookcases. Joe said that most of their books are in the basement. Read more »

Adam Cresswell has a piece in the Australian today about the failure of the state governments to sign on to the 12 month target for elective surgery, one of the core features of Health and Hospital Reform.

You remember the pledge: Joe, public patient, needs a hip replacement, we were told by Dr Kevin.  He should not have to wait more than twelve months.  If he has not had his operation within that period, he will be guaranteed that he can have the operation at a local private hospital, funded by the local hospital network. No cost to Joe.

What the?, I thought at the time.  Read more »

Andrew Shearer has a piece in the Wall Street Journal Asia setting out the contributions that John Howard made to Asutralia – India relations. He makes a good argument that Howard did more for relations with India than the Rudd-Gillard government has.

Mr. Howard’s diplomacy may not have been flamboyant or flawless. But it was principled and consistent, and it got results. He understood India’s growing importance and was serious about building a strategic relationship with New Delhi. Australia-India relations were better under Mr. Howard’s leadership than they had been before, and certainly better than they are now. His efforts to build a stronger friendship between Australia and India deserve better. Read more »

This is taken from the Introduction to a collection of essays that I wrote between 1971 and 1989. It points out how Popper challenged the philosophical establishment by reformulating some of the basic questions regarding the justification of beliefs and the clarification of concepts. Work on these topic has run out of steam and so the profession has degenerated into special fields of interest that make little or no sense to people in the street.

There is a very serious downside to that situation in the form of irrationalism (distrust of arguments or incapacity to engage in genuine give and take in arguments) and anti-intellectualism.  When the dominant doctrines (like language analysis or hermeneutics) look silly to ordinary people, (and indeed are silly) then two very bad things happen. (1) the ambitious or conforming students do their best to copy and so find themselves committed to perpetuating the defective methods, and (2) less ambitious students think “if that represents serious scholarship and the life of the mind, then you can shove it!”. And so they turn their back on serious intellectual pursuits. Read more »

Ross Gittins has a very strange article in The Age today.

I quote some of his comments below:

HOPE I’m wrong, but I fear the all-in fight over the resources rent tax will in time be seen to have brought the era of microeconomic reform to an end. If so, the economics profession will bear its share of the blame.

There is a host of useful lessons you’d hope the pollies would draw, but the one they’re more likely to draw is: don’t let economists sell you complex reforms that are almost impossible to explain to mere mortals because the economists will fall to arguing among themselves and leave you in the lurch.

Think about it: what is reform? It’s governments making changes that economic theory says will make us all better off, but in the process arousing intense resistance from those who fear their rents are threatened. Read more »

Since his appointment as deputy prime minister, Treasurer Swan has been bombarding the media and those on his email distribution list with his new title: “Deputy Prime Minister and Treasurer”.

Perhaps he is a little too keen on the title?

Paul Keating was Deputy Prime Minister and Treasurer from 4 April 1990 to 3 June 1991. But I can’t find any example of letterheads with “Deputy Prime Minister and Treasurer”. No, he was content with the simple “Treasurer”.  See for example this press release.

What was good enough for the great PJK surely should be sufficient for Wayne Maxwell Swan?

We’ve all learned a lot about different taxes – Australians now know more about Brown taxes than anyone in the world. I suspect we now have a Claytons tax – the tax you have when you’re not raising any revenue.

On 9 May Wayne Swan put out a Treasurer’s Note with a table of figures in it. Lurker Noodle kindly provided a spreadsheet with the underlying calculations to the Swan table. I have taken that method and applied the MRRT model in order to compare the current arrangement with the RSPT and the MRRT. That exercise is shown below. Read more »

From the Australian

A source present at the talks said Kloppers “took the lead” for the big three miners in telling Swan the “threshold issue” for a resolution was dealing with the tax’s retrospectivity (that is, it applied to existing producing mines).

“He was taking the Treasury through the issues. And when he finished Swan looked up stoney-faced and said something like well, we have a real issue then,” the insider says.

“At that point Marius indicated that the companies might be wasting their time and indicated they were prepared to leave the meeting. Ferguson led Swan out of the meeting. When they returned, Ferguson ran the rest of the meeting. If we had left at that point we would have gone public on the miserable quality of what had been a hostile discussion.” Read more »

Julia will be haunted by her coup against Kevin. While she has no logical reason to provide him any comfort, her conscious will niggle at her – was it really right to shaft a prime minister who was elected only in November 2007 on a tide of popular support and who received the highest public support for a prime minister ever?

This is a dilemma. What job can be given to a former prime minister that will satisfy his ego, while preserving the dignity of the office of prime minister?

No ministerial job would be suitable. An ambassadorship would also be a downward step.

There is really only one job – since he cannot be considered for a High Court position.

And that’s Governor-General of the Commonwealth of Australia.

Conventionally Quentin Bryce’s five year term will expire on 4 September 2013. But she is in the position “at the Queen’s pleasure”.

Bryce was first appointed as vice regal in the role of Governor of Queensland in July 2003 so she has served over seven years as vice regal. Read more »

More good reading.

Subscriptions. Quadrant can be read on line for a modest fee, it can  be obtained in paper form by sub and at good newsagents. There is a joint Quadrant/Policy sub for $104. There is also a $300 sub that gets access to the archives and occasional publications. There have been so many books in the last 12 months that the $300 sub turned out to be good value!

Professor Dennis O’Keefe of Buckingham Uni is good value. He has a review of Scammell’s recent book on Arthur Koestler. His colleague John Clarke has a review of his book on Edmund Burke in the major conservative and libertarian thinkers series (more on that later). Not to be confused with Gary Clarke who also reviews the Koestler book.

O’Keefe makes a point that I think is very important. On the durability of left-liberal thinking and the bipartisan tendencies to big government and the nanny state he writes: Read more »

Looking to post on the good stuff in the June IPA review, it turns out that backnumbers are archived! I wanted to do a post on the best pieces but they are all good. Dang! Read for yourself and find out.

The archives.

I have received a copy of the joint press release that describes the details of the tax. Read more »

We all remember Clive Hamilton expounding the intersection between climate change and democracy.

Climate scientists have been afraid to talk about the true extent of the dangers of global warming. Those who have looked closely at what the scientists are concluding believe that the truth is so frightening that, if told, it will stop people from acting, rather than stimulate them to do more.
…
Very few people, even among environmentalists, have truly faced up to what the science is telling us.

This is because the implications of 3C, let alone 4C or 5C, are so horrible that we look to any possible scenario to head it off, including the canvassing of “emergency” responses such as the suspension of democratic processes.

Now Penny Sackett is is trying to spin a different story. Read more »

A useful multi-purpose form of words to have on hand to write about meetings of international organizations.

An ineffectual international organisation yesterday issued a stark warning about a situation it has absolutely no power to change, the latest in a series of self-serving interventions by toothless intergovernmental bodies.

“We are seriously concerned about this most serious outbreak of seriousness,” said the head of the institution, either a former minister from a developing country or a mid-level European or American bureaucrat. “This is a wake-up call to the world. They must take on board the vital message that my organisation exists.”

etc.

Courtesy of the John Roskam column.

I have a piece up at The Drum that compares the effects to introduce the GST, the CPRS and the RSPT.

Extensive debate and community acceptance of any new tax is vital. The political cost of introducing the GST was high – but politicians have not been willing to pay any price for the CPRS or the RSPT. Cheap policy cannot be good policy.

The introduction of the RSPT has been particularly inept. The Rudd government tried to introduce an extraordinarily complex tax with just ten days warning before expected revenue was included in budget estimates. Another point is that new taxes should form part of a genuine package of tax reform that leads to a reduction of the overall tax burden. Again the CPRS and RSPT offered nothing on that front – they were tax grabs that would simply lead to Australians paying more tax.

The GST was the last great tax reform that Australia experienced. In the subsequent ten years we have become accustomed to tax cuts, not new taxes. The GST was a well-known and well understood idea that had been tried and tested at the ballot box. Read more »

The last of the Howard-Costello tax cuts get delivered today.

The GST is ten years old today. This is the last major tax reform Australians experienced. I have the view that the introduction of the GST has been remarkably successful. The most important thing is that, unlike the European experience, the GST rate has remained unchanged. As I argued earlier in the calendar year but late last financial year there will be pressures to raise the rate in future.

Unlike many other countries with a GST-type consumption tax, the 10 per cent rate has been very stable. The long-suffering Australian taxpayer has been fairly confident that the rate wouldn’t escalate to very high levels. That was the genius of the Howard government’s implementation. The commonwealth bore all the political costs of the GST while deriving none of the benefit. Read more »

Over at Troppo they were excited by a report from the US which suggested that a large proportion of Republican voters have really silly ideas, indeed they are practically insane. Interesting to read that this result came from a survey commissioned by Daily Kos and they have now admitted that the survey results are bogus. They were “defrauded” by the agency!

[Update: I've added the link to Troppo. Sinc]

Now this is interesting. Peter Dutton, an opposition front-bencher, bought some mining (BHP-Billiton) shares just after the RSPT was announced. The response was ferocious.

Here is Wayne Swan

“You can’t trust a Liberal Party who is out there saying this will ruin the mining sector while one of their most senior frontbenchers is buying shares in BHP,” he said in a statement.

“This proves you just can’t trust anything Mr Abbott and the Liberals say about the economy.

“And it shows why they’re such a serious risk to our economy.

“Mr Abbott and Mr Dutton must now admit this is nothing but a scare campaign which is risking our economy to make a cheap political point.

Here is Julia Gillard Read more »

Not normally my thing to go around quoting Paul Krugman but his column today has put the issue squarely before us. According to Krugman what we are now looking at is a mass fall off in spending that will lead to deflation and pull the whole economy down around our ears.

His article The Third Depression is about why we are about to descend into an economic abyss, essentially because we pulled back from our spending commitments too soon. Here is the man himself and these are his words:

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. Read more »

Mentioned on the thread of my previous post was a link to the following article also from the Wall Street Journal, RBS tells clients to prepare for “monster” money printing by the Federal Reserve .

This is truly scary stuff. The scariest quote of all comes from the Chairman of the Fed:

The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.

That the US dollar did not reach the level of the peso overnight can mean either nobody thinks such idiocy can be turned into policy or else – and this is the scariest part of all – that most commentators and economists are on board, that this is now considered the next good idea to fix the American and world’s economy.

That it is the second is suggested to me by the tenor of the article which seems fully in favour of the Fed inflating our way out of debt. Read more »

Two bigs questions.
All those Republican who crapped on about having a foreign born monarch have yet to comment on a foreign born Prime Minister with a fake Footscray fish-wife accent.

What exactly does Ms Gillard mean when she talks about ‘the right kind of migrants’?

One of the first policy areas on which the new Prime Minister has opted for differentiation from the Rudd-led government is population policy. This is not surprising since the party’s polling is obviously telling them that high rates of population, particularly based on high immigration intakes, are not popular in many parts of Australia. 36 million was a figure with all the appeal of a dead fish, it would seem.

Earlier in the year, I had an article published in The Australian, that summarised the economic literature on the link between population growth, including growth induced by immigration, and growth in per capita income.

The bottom line of the research is that there is no signficant link between economic well-being, as measured by per capita income, and population growth associated with immigration. If there are (small) benefits, they are snaffled by the migrants themselves. Moreover, the economic literature does not account well for any external effects, such as the cost of congestion, loss of social amenity and environmental effects. Read more »

Surely Julia Gillard must see a great deal of political mileage in suing quickly and successfully for peace with the miners.

As Stephen Bartholomeusz has pointed out, there are some reasons to feel pessimistic about this prospect because of the inclusion of Wayne Swan in the negotiating team. But by relaxing the ‘revenenue requirements’ needed to be generated by the new tax – always ridiculous, Treasury doesn’t believe in hypothecation by the way, certainly not this sort, and the obvious alternative is to rein in spending plans – there are some grounds to think that a peace treaty is possible. Read more »

My good friend Noodle emails to say that the Centrebet odds of an August election have narrowed in the last couple of days. August 28 was $4.50 the last time I looked (a couple of days ago) now it is $2.40.

A sorry tale!  The US economic decline.

The conclusion.

The process of debt deflation is straightforward. New lending at levels that would maintain or expand the broad money supply is impossible for two reasons: (1) asset values and incomes have fallen and millions remain unemployed; and (2) debt levels remain excessive compared to GDP, i.e., real economic activity (outside of the government and financial services industry) cannot service additional debt. The inability to lend, actually the result of prior excess lending, results in a net drain of money from the economy. The drain effect, in turn, leads to further defaults as cash strapped consumers and businesses fail to service existing debt, and as debt defaults impact bank balance sheets, putting a damper on new lending and completing the cycle of debt deflation.

  Read more »

The WSJ has op-eds on both Rudd and Gillard.

On Rudd (subscription required)

Mr. Rudd’s key political insight was that Australians liked the economic prosperity that more than two decades of continuous liberalization ushered in. That thinking was in the tradition of former Labor leaders Bob Hawke and Paul Keating, who opened the Lucky Country’s economy to the rest of the world starting in the early 1980s. But voters judged that other Labor leaders, like Mark Latham, posed a threat to that prosperity, and the party lost four successive elections.

So Labor turned to Mr. Rudd, a wonky former bureaucrat who didn’t grow up in the union movement. On the campaign trail, he called himself a “fiscal conservative” while nodding to the Labor base by promising to make the workplace “fairer.” He also adopted conservative positions on immigration and the war on terror. After 11 1/2 years of Liberal Party rule, that platform reassured voters who wanted a fresh face in the Lodge. Read more »

The notion that we were saved from a recession by Kevin Rudd is perhaps one of those untrue notions that will enter the historical record without having been even remotely true.

So before everything is frozen into its historic form, let me note that the only sense in which Australia escaped recession was because, firstly, we insist on using the so-called technical definition of recession which requires two consecutive quarters of falling GDP to count as a recession, and then, secondly, because we use the average of the three measures as “the” measure of GDP.

What makes the calculation of GDP an inappropriate and misleading methodology is the way in which the expenditure series was drenched by public spending during the end of 2008 and the beginning of 2009. There was therefore a major increase in the expenditure series, which was recorded in only a muted form in the income and production series. Read more »

Prime Minister Gillard is giving a press conference. Her first cabinet meeting will be held today and she is determined to get the country back on track. But the press conference was all about her phone call to Obama. The conference can be summarised as
Obama … Obama … Obama … Obama

Every other world leader was named by their title. Not a good start.

The Australian is reporting that Lindsay tanner will not contest the next election. I suspect he realises the Greens will take his seat. This is a good thing, he has been absolutely useless as Finance Minister.

My decision is absolutely unrelated to the events of the last twenty-four hours, and is entirely related to personal considerations. I will continue to work as hard as I can for the re-election of the Government, which has been a very good government, and will continue to be a very good government. I will also work as hard as I can to ensure that Labor retains the seat of Melbourne.

If Gillard were smart she’d replace him before the election with Craig Emerson being the only person I can think of who’d be any good.

Government that rewards those who work – so a government-centred approach to community.

Three and a half years of loyal service. Good government was losing way. Health and education at risk at the next election. Election about education, health and rights at work.

Commitment to strong and responsible government. Takes her fair share of responsibility, Rudd government did not always do what it said it would do. Acknowledges that she is unelected. Will call a general election in the coming months. Seeking consideration and support.

We should be proud of the economic achievement of the GFC. Gives credit to Hawke, Keating, Howard and Costello for reforms. Budget to be in surplus by 2013 – so how will that be done?

She believes in climate change but talks about technology. A carbon price at home and abroad if re-elected. Will reach a consensus on the RSPT – end uncertainty. Not enough to consult, but must negotiate. End of government adverts and asks the mining industry to end campaign against government.

Thanks the troops and acknowledges Kevin Rudd. Wayne Swan is deputy Prime Minister and Treasurer.

It looks like support for Kevin Rudd has collapsed within the ALP. Irrespective of whether he goes today or tomorrow or even the next day, the bottom line is that once people start counting the numbers, it’s only a matter of time.

The ABC has learned that powerful party figures have been secretly canvassing numbers for a move to dump the Prime Minister and replace him with his deputy, Julia Gillard.

Television cameras captured Ms Gillard and Defence Minister John Faulkner going into Mr Rudd’s office. They have since been joined by Finance Minister Lindsay Tanner, Anthony Albanese and Senator Joe Ludwig.

Factional support for Mr Rudd has collapsed around the country and the Australian Workers Union (AWU) is now supporting Ms Gillard.

Update: Gillard has challenged. Caucus meets tomorrow at 9.

Worksafe Victoria have been advertising that they conduct an inspection every 12 minutes. This is what they claim at their website.

Inspectors can enter any workplace during working hours or when there is an immediate health and safety risk to any person.

Inspections are also conducted after workplace fatalities, serious injuries, dangerous incidents and emergencies. If necessary, WorkSafe inspectors can direct that an incident scene be left undisturbed prior to an investigation or while seeking assistance from an expert.

Inspectors will also attend workplaces in response to reports of unsafe work conditions. Read more »

I have lost the link to Athol Fitzgibbon’s article; key quote here:

In fact, the most efficient way to tax mineral resources is to tax the depletion of the resource, using a royalty on the value of production at the mouth of the mine. The royalty should be no less than the loss of wealth from the depletion of the resource, as determined by discounted future resource prices.

An excess profits tax, a tax on any profit above a certain amount, has been used predominantly in wartime. Applied to resources, it can be only a second-best strategy because it taxes capital instead of resource depletion.

Did anyone see Colin Barnett, Premier of Western Australia, on the ABC last night (I think it was Lateline)? He was very measured and sensible.

It now seems his state will be getting the money from the feds for the Health and Hospital Reform package, notwithstanding his refusal to hand over one-third of the GST. Asked about the prospect of the federal government handing the money directly to the Western Australian public hospitals, he responded that it was neither here nor there to him, because the Western Australian government owns and operates the public hospitals. (Note to feds: money is fungible.)

At the end of the day, and notwithstanding all this talk about the greatest reform since Medicare, the states have been able to screw considerably more dollars, including in the short-term, from the federal government, while ceding no control and, in all likelihood, changing very little. (Note junking of additional federal architectural feature last week.)

And in contrast to the federal government’s preferred hospital network of four hospitals, it now seems that Victoria will be allowed to keep its current network arrangements, all 80 of them.

People keep pointing to the stock market reaction to the RSPT and make all sorts of claims. The thing to remember is that the Aussie dollar has also fallen in recent weeks so comparing Australian share prices to, say, Brazilian Real can be misleading. So I downloaded FTSE share indices for mining in US dollars and graphed them.

The blue dot corresponds to May 3, 2010 – the first trading day after the RSPT was announced.

Peter Costello famously urged Australians to have one for dad, one for mum and one for the country. To provide an extra incentive for having offspring, he introduced the baby bonus. Bryan Caplan argues that we should all have more kids for selfish reasons.

If you simply don’t like kids, research has little to say to you. If however you’re interested in kids, but scared of the sacrifices, research has two big lessons. First, parents’ sacrifice is much smaller than it looks, and childless and single is far inferior to married with children. Second, parents’ sacrifice is much larger than it has to be. Twin and adoption research shows that you don’t have to go the extra mile to prepare your kids for the future. Instead of trying to mold your children into perfect adults, you can safely kick back, relax and enjoy your journey together—and seriously consider adding another passenger.

I am a member of a New Zealand government taskforce focusing on means of reducing the per capita income gap between New Zealand and Australia by 2025 (the 2025 Taskforce). We released our first report last year and I will talk more about it when I have some time.

In the meantime, I received a summary of one of the key proposals from the New Zealand Institute:

• New Zealand has many opportunities to improve labour productivity, the main determinant of prosperity. Choosing policies that differ from those followed by more successful countries has contributed to economic underperformance.

Other OECD countries have become wealthy by expanding exports of differentiated value-add goods and services but New Zealand has continued to rely on commodity exports.

• Economic improvement efforts should focus on transforming the New Zealand economy so it more closely resembles the successful advanced economies. That implies a focus on expanding exports of differentiated goods and services: ICT and niche manufacturing, as well as value-added primary goods and differentiated goods and services based on agricultural technology. Read more »

The WSJ has a column about Jodi O’Brien – a respected scholar who had her job offer of Dean of Arts and Sciences recinded by the University President.

Marquette University’s decision to withdraw an offer to Jodi O’Brien, a self-described “sexuality scholar” to become Dean of the College of Arts and Sciences at the Jesuit-led institution continues to divide the faculty. Although Ms. O’Brien reached a settlement with the University last week, her supporters maintain that she is the victim of homophobia. Teachers who criticized the initial job offer say that Ms. O’Brien’s sexual orientation is not what disqualifies her, but rather the fact that her publications disparage Catholic moral teachings on marriage, sexuality and the family.

I have mixed views on this. Clearly her academic track record was enough to get her a job offer. Read more »

There is a story today that the Russians are trying to push the ruble forward as a world reserve currency to break dependence on the American dollar. Who can trust the socialist Americans any more with their asset bubbles and loose monetary arrangements. As written:

Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s.

And then there is this other story about Russia: Read more »

What is it with these people? Conroy wants to filter it, Obama wants to shut it down.

US President Barack Obama would be granted powers to seize control of and even shut down the internet under a new bill that describes the global internet as a US “national asset”.
…
The proposed legislation, introduced into the US Senate by independent senator Joe Lieberman, who is chairman of the US Homeland Security committee, seeks to grant the President broad emergency powers over the internet in times of national emergency.

I suppose it isn’t Obama per se who wants to shut it down, rather the US congress wants to create that power and vest it in the US president.

As usual, Henry has a great piece in The Australian today.

The theme of his article extends beyond the issue of the mining tax, but he summarises the ways in which the PRRT is a distorting tax by discouraging risky investments and leading to cost padding and lack of attention to efficient production methods.

It is interesting the the PRRT is perceived to be a succesful tax – certainly in terms of the consultation leading up to its implementation – which has not harmed off-shore exploration or production of oil and gas. The fact that oil production in Australia has been dropping quite rapidly and that we are becoming more dependent on importing crude is conveniently overlooked.

What this broad conclusion on the PRRT also ignores is the possibility that it has distorted the type of investments made, skewing them towards more ‘utility’ type projects like LNG, which generate reliable and steady cash flows once they are operational. Read more »

I have a satirical (but serious, too) piece in the National Times part of the The Age today. It’s hard to believe that this story just goes on and on. It is not obvious what will kill it off.

You know the one about the floggings continuing until morale improves. My guess is that this pretty much applies within Treasury these days, as the debate about RSPT drags on and on.

But I have been worried about how the boffins within Treasury are coping, what with the on-going barrage of criticism about the tax.

Is there no end to it? Why can’t all those self-serving mining executives come on board? After all, we designed the most elegant of taxes, where the effects are entirely neutral, irrespective of the rate at which the tax was struck.

40 per cent seemed like a good number and would double the revenue from the mining industry while, at the same time, increasing investment and employment in mining. Read more »

We keep hearing that we can learn from the Norwegian experience. They have a 50 percent ’super-profit’ tax on mining and all the money goes into a future fund type investment. That is more or less true. But let’s tease that out a bit.

Norway has a 50 percent tax on oil from the North sea. That is in addition to a 28 percent corporate tax. Australia has a 40 percent Petroleum Resource Rent tax. As best I can work out there is no proposal to increase the Australian PRRT to 50 percent. The Australian PRRT is deductable for corporate tax purposes, whereas the Norwegian petroleum tax isn’t. Again there is no proposal here in Australia to add the two together. When Craig Emerson was designing the PRRT he could have added that feature but chose not to. When Clive Palmer argued that the RSPT would be added to the corporate tax he was ridiculed – but that is the Norwegian way, that everyone keeps pointing to. No wonder he got confused. Read more »

Jerusalem to Tel Aviv

On the way in to Jerusalem from the airport there is a line of deformed shells of military vehicles parked in the nature strip between the carriages of the highway. On the way out from Jerusalem to Nazareth and TA we were told these are a memorial to the battles fought in 1947 to relieve the siege of Jerusalem. Twice the Arabs repulsed desperate attempts to make a way along the ridge, then the Jewish forces found another road. We passed a village where the Moslem inhabitants sided with the Jews in the war, they were from Russia, perhaps they played along the lines of race rather than religion or maybe they just picked the likely winners. Not that the Jews were a sure thing in that part of the country during the early stages of the war.

This was a day of many biblical sites, Nazareth, the places on the sea of Galilee where Jesus first lived and started teaching, the possible site of the Sermon on the Mount. Some of these places and the churches located there, are very beautiful. I don’t have any photos but will hope to obtain some from other travelers or find some links. Read more »

Peter van Onselen has an interesting article in The Australian.

In this article, he recounts the story of a mining executive attending a RSPT consultation sessions. He asked whether one of the attending Treasury officials had ever been to a mine, to which the reply was “no”. The executive immediately invited the official to visit his mine to which the reply was that he was too busy.

And doesn’t it show? From day one, it has been apparent that Treasury has no idea of the real world of mining and finance. Do they understand the difference between commodities; that iron ore ain’t coal; coal ain’t oil and gas? Do they understand the difference between open cut and underground mines; between stand-alone projects and ones that share infrastructure? Read more »

I have an op-ed in the AFR today (subscription required). I cover the issue of the dodgy graph in the Budget Papers. It has been two weeks since the Treasury admitted the error and over a month since I posted the issue here at Catallaxy. Read more »

On the weekend I got to take number two son and a nephew to see the A-Team. Lots of explosions and action with no gratutious violence, no nudity, no profanity, and no fornication. The movie had an M rating. Luckily the nephew’s father is as sensible as I am about these things – the A-Team with an M rating! FFS.

Anyway the gist of the story is that the A-Team have to recover some US dollar engraving plates that the US government had given the the Shah of Iran that had then been stolen by Saddam Hussain and might now fall into criminal hands. So far so good. But why do these plates have to be recovered? Because, we are told, if those plates fall into the wrong hands, criminals could print off billions of ‘unbacked’ dollars and create havoc with the international financial system. Unlike what the US government doing, printing off billions of unbacked dollars and … oh.

There has been a lot of talk about a lack of adult input into Rudd government policy making. Today Peter van Onselen raises the issue in The Australian. Three individuals are singled out as being too young and inexperienced for the positions that they hold.

Chief of staff Alister Jordan, 30, press secretary Lachlan Harris, 30, and senior economics adviser Andrew Charlton, 31, are three of the most powerful players in the Rudd government because they are listened to and trusted by the Prime Minister in a way cabinet is not. But they are all relative political novices with no experience in the labour movement and next to none in industry or business.

So let’s take all of that as given and read and so on. It is only when we get to the end of a long feature piece that the real problem begins to emerge (emphasis added). Read more »

Is it too cynical to suggest that a number of groups have been requested to issue supportive comments, endorsing the RSPT proposal as well as tossing a bouquet or two on the government’s general approach to public policy and economic management?

The cheer squad has been lining up.

The Association of Superannuation Funds has weighed in by claiming that the impact of the RSPT will be less than 1 per cent of members’ balances, taking into account the lower rate of company tax and the increase of 3 percentage points in the Superannuation Guarantee Charge. Having begged the federal government for years to increase the SGC – the addictive power of the 9 per cent is clearly wearing off and the superannuation funds and the funds managers clearly feel the need for more – it is important to them that nothing upset this apple cart. Read more »

With busy days the caravan has moved on faster than the electronic fingers can keep up with the story.

First a story to indicate the intensity of religious feeling among the ultra-orthodox. The movement of progressive Judaism started small with very few congregations. I suppose at some stage there was only one! [The origin in Germany is described somewhere below]. Anyway there was a progressive congregation in Jerusalem which had no synagogue, they met in the  private home of the rabbi. A local orthodox rabbi was so scandalized by the thought of men and women dancing together in the Simchat Torah ceremony that he hired some thugs to break into the house during a ceremony and take the torah, the sacred scroll that is central to the ceremony. They achieved this although the people linked arms to protect the torah. When the mayor of Jerusalem heard the story he gave the congregation a plot of land to build their own place, which we attended on the first Friday evening in Jerusalem for the very important pre-sabbath ceremony of Shabat. Read more »

The Age is reporting that the government wants ISPs to keep records of web browsing.

THE federal government wants your personal internet data, and they don’t want to have to apply to a court to get it.

Revelations that the federal government wants Australia’s 400-odd internet service providers (ISPs) to log and retain customers’ web browsing data, so law enforcement can access it during criminal cases, have sparked alarm in the industry.

Currently law enforcement needs court-approved search warrants before they can record someone’s personal data via their ISP. The proposed regulation would mean companies would be forced to store certain information for several years just in case it was later needed.

Between this and Conroy’s back from the grave internet filter this government is a clear and present danger to our liberties, let alone our wallets.

Sarah Palin has written a note to Barack Obama about the offshore catastrophe in the Gulf of Mexico which I have hardly seen mentioned anywhere. In a note titled More Talkin’ Less Kickin’ she has outlined the kinds of actions a clued in executive would take given the dimensions of the problem. It is only that I have not even seen this mentioned anywhere so far, other than on the web, that I bring it up. I probably shouldn’t mention her penultimate paragraph rather than let you come across it yourself but who can resist: Read more »

Jon Faine must have had a go at the Australian yesterday because today they have a reply to him. Faine suffers from the view that a 100 percent government owned and financed organisation is somehow ‘independent’ and ‘objective’ while people who earn their living by selling services (like advertising) to willing customers and newspapers to willing consumers somehow are not. Anyway the Australian are clearly being sarcastic. Read more »

Quite an interesting survey reported in the Wall Street Journal.

The bare bones is this. 4,835 American adults were asked to answer eight survey questions about basic economics. They were also asked about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

An answer was counted as incorrect only if it was considered flatly “unenlightened”.

The example provided of the questions asked was this: “Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Because of the many possible ambiguities, only “somewhat disagree” and “strongly disagree” were classified as wrong.

To this question, the percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. This set the pattern for the entire test. Read more »

Barnaby Joyce asks the Treasury markets group about the RSPT. Read more »

The electorate would never wear this.

TAXPAYERS would be forced to contribute 40 per cent of the cost of a BP-style environmental disaster under the Rudd government’s plan to refund project losses as part of its proposed resource super-profits tax.

During a teleconference briefing on the RSPT with about 40 institutional investors in Melbourne and Sydney last Friday, senior Treasury officials confirmed the government would guarantee 40 per cent of a company’s losses sustained through a major environmental incident.

The Australian has spoken to several conference participants who confirmed the officials’ comments in response to a question that cited the BP oil spill in the Gulf of Mexico.

It is understood many of the investors were shocked to learn of the potential extent of the government’s liability for environmental clean-ups.

We heard too much about the polluter pays principle during the ETS debate for people to buy into this implication of the RSPT.

It would be great if the whole RSPT issue would go away, so we could talk about something else. But, no, it drags on and on.

So where do the players line up? And what is the (changing) balance between the ayes and the nayes.

On the FOR side:

The Government, although there are likely to be some waverers, especially among the backbenchers and those in marginal seats.

The Treasury, although maybe only parts, but definitely Ken Henry (his baby). Unclear what other deparments think: maybe the industry/resources department (whatever it is called these days) could run with this new motto: A New Industry Policy: Kill Mining.

The AWU and the CFMEU, although this could be confined to the officials of these trade unions rather than the members. The CEPU is showing signs of not going along for the ride.

22 economists (or was it 21), endorsed the idea of a resource rent tax without necessarily supporting the design of RSPT.

OECD, support in general terms. Read more »

It is surprising that the government has still not come up with a coherent explanation of the key features of RSPT as the debate drags on, day after day.

As far as I can observe, there has been no defence of the 40%, save to reference it to a figure in the PRRT. But the PRRT is a completely different kind of tax/charge: only after the capital is paid off with undeducted expenses augmented at rates well above the long-term bond rate (+ 15% for exploration and +5% for development) is the 40% levied. This is completely different beast from RSPT.

In theory, RSPT remains neutral irrespective of the percentage the “government joint venture” expropriates, because the rate of return on the remaining share is unchanged. So a figure of 90% could have been chosen, and the supposed neutrality (note, the many other assumptions needed) would remain in tact. Read more »

DEPARTURE

At the airport, stood in the line to check in with a young man who does fashion, he has two retail outlets one in King St Newtown the other in Crown St. In Thailand near the Cambodian border he has people making the goods to his designs, that is his story anyway he says he often has his bags carefully  searched on the way in because he travels regularly and looks like a drug dealer but it helps when they see his fashion designs. I said I was confident that the Israelis would let me in because I am carrying the itinerary of the Christians and Jews tour. He said that is just the kind of thing that a well prepared terrorist would use as a cover.

On the long flight from Bangkok to Ben Gurion sat next to an Israeli in communications, he Australians must be mad, he did a job to put satellite detecting location devices in SA ambulances so when the ambos are attacked while they attending a patient they can press a red button and help can he immediately directed to the precise location. He hopes to do the NSW ambulances as well.

ARRIVAL Read more »

France has L’Académie Française, Spain the Real Academia Española, and Italy the Accademia della Crusca — august institutions that uphold the rules of their languages. English, however, has no such bastion against corruption and continuously mutates as new words develop, or fall out of use, grammar changes and the intricacies of punctuation go in and out of fashion.

There are moves afoot to introduce an English Academy. The language is becoming corrupted by the yoof and their txting ways, not to mention rappers and, of course, those ghastly colonials.

Can’t really see this going very far. The fact that the French have such an institution should be a warning to us all.

Ben Smith is one of 22 economists who signed an open letter in support of the RSPT. Today he has an oped in The Australian that seems to somewhat modify his position. Yet it isn’t clear where he now stands.*

The resource rent tax applies to offshore petroleum extraction. Compared with the regime it replaced, it has considerable advantages but it would be a backward step for the government to modify its proposed mining tax to emulate it as some have proposed. My paper, expanding on earlier work with George Fane, showed the distorting effects of this tax by contrasting it with the tax of which I am a proponent. That is the Brown Tax which, in Ergas’s words, is “as good as it gets” as a means of charging for natural resource depletion. Read more »

The Australian Capital Territory Government has released a new Draft Outdoor Cafe Policy. As reported in the Canberra Times, the Government has rejected claims by the Opposition and others that the new policy imposes new and onerous requirements on businesses.

Although the Minister claims these new requirements are only “guidelines” they are to be “strictly enforced”!

The guidelines include the requirement to seek permission from the Government on the design of the furniture. Note that the sample tables and chairs at the end of the policy document do not include the traditional Parisian cafe designs. Read more »

Paul Kelly has finally woken up to the terrible reality.

Yet Labor keeps moving in the direction of Rudd’s maiden speech philosophy. “I believe unapologetically in an active role for government,” he said. He repudiated the view that “markets rather than governments are better determinants of not only efficiency but also equity”. It is a sweeping statement. And it is entirely consistent with his interventionist car industry agenda, plans to build 12 new submarines, compulsion for new spending programs, government-directed nation-building across several fronts and declared timetables to reduce homeless levels and close the gaps for indigenous Australians.

The unifying idea is that government direction or intervention or ownership is the way forward. It fits into a more personal theme: Rudd knows best.

Word out of Canberra is that Rudd told the mining chiefs on Wednesday that he was Prime Minister and knew what was good for them. How does Kelly describe this? Read more »

It is not that long ago that politicians would do anything for that hard hat photo opportunity: the new hospital wing, the new school hall, the new mining project. Now it seems that politicians are just as keen to see large scale mining projects scrapped, although there are few photo opportunities in these cases.

So when will the government decide that the Treasury has sold it a pup when it comes to the RSPT and start to work on some sort of face-saving narrative?

There now seems little doubt that the current design and parameters of the proposed RSPT are profoundly misconceived. Using a textbook theory and some unrealistic assumptions, the proposed resource rent tax was of course only one part of the many recommendations of the Henry Review. Perhaps it made more sense in the context of the larger package of tax changes, although I am unconvinced on this point. This Brown tax idea has been around for decades and an obvious unanswered question is: if it is such a wonderful neutral, best-practice form of tax, how come it has not been implemented worldwide? This question remains unanswered. Read more »

Today is Adam Smith’s 287th birthday. So here is a quick life story.

Adam Smith was born in a small village in Kirkcaldy, Scotland, where his widowed mother raised him. At age fourteen, as was the usual practice, he entered the University of Glasgow on scholarship. He later attended Balliol College at Oxford, graduating with an extensive knowledge of European literature and an enduring contempt for English schools.

He returned home, and after delivering a series of well-received lectures was made first chair of logic (1751), then chair of moral philosophy (1752), at Glasgow University. Read more »

The WSJ has a leader on the current kerfuffle over illegal immigation into Australia. Their punchline?

Narrowing opportunities for entrepreneurial foreigners to come work no matter what their skill level is a greater threat to Australia’s future than even a few thousand waterlogged asylum seekers off the western coast. Australians should know that better than anyone—their country was built by English convicts who showed up with rap sheets, not Ph.Ds.

Simply magnificent.

In related news the lead article in this months Quadrant launches into Chris Berg and his arguments for a more sensible policy towards illegal migrants.