Wednesday, May 28, 2008
Its a sensible argument - in my own household I have felt the increase in food prices clearly in terms of its impact of our household budget - it is a real impact but as a household we spend less much less than one third of the budget on food. At most I might have to cancel that mid-winter holiday and forgo that new set of golf clubs! For families already spending most of their low incomes on food the issue is of life-threatening seriousness - particular since high food prices are seen as likely for at least another decade. In South America alone 71 million extremely poor people face hunger as a consequence of rising food prices. Globally 850 million people suffer from hunger caused by poverty.
Global economic development has been a success story in recent decades. This should not induce complacency. While levels of absolute poverty have fallen dramatically it is important not to forget those 1 in 10 people of the world's population who are left behind and who suffer the adverse effects of economic growth on such things as food prices.
Tuesday, May 27, 2008
The solution is to price the parking spots so there is never any search time at a station site – this means hefty parking charges. Indeed according to parking expert Donald Shoup the ideal is to have 15% of parking spots free at any time in any location to prevent wasteful searches. Melbourne has the second highest fraction of its lands allocated to parking of any of the world’s cities – it is just eclipsed by Los Angeles. This is a wasteful use of land that imposes huge community cost.
I agree with Public Transport Users Association president Daniel Bowen - bus service upgrades should be a priority which will encourage people to switch toward bus rather than train services alone. It is often easier to walk to the local bus stop and even ‘park and ride’ solutions for bus travel and less likely to lead to the excess parking demands that occur at train stations.
Congestion issues are not straightforward to resolve. Parking issues need to be resolved if traffic congestion issues are to be sensibly addressed.
Monday, May 26, 2008
But listing is only provided by the PBAC if it judges drugs to be effective and not excessively expensive. This drives producers to offer drugs at lower prices and saves Australians a lot of money for their drugs - they are much cheaper than in the US even accounting for implied subsidy costs. Joshua has a couple of good posts on this topic himself but also points to a new NBER study showing that the PBS scheme saves on average a year of life for Australians by encouraging the use of the most recently developed drugs. I cite the abstract:
We examine the impact of pharmaceutical innovation on the longevity of Australians during the period 1995-2003. Due to the government's PBS, Australia has much better data on drug utilization than most other countries. We find that mean age at death increased more for diseases with larger increases in mean drug vintage. The estimates indicate that increasing the mean vintage of drugs by 5 years would increase mean age at death by almost 11 months. The estimates also indicate that using newer drugs reduced the number of years of potential life lost before the ages of 65 and 70 (but not before age 75). During the period 1995-2003, mean age at death increased by about 2.0 years, from 74.4 to 76.4.
The estimates imply that, in the absence of any increase in drug vintage, mean age at death would have increased by only 0.7 years. The increase in drug vintage accounts for about 65% of the total increase in mean age at death. We obtain a rough estimate of the cost per life-year gained from using newer drugs.
Under our assumptions, using newer drugs (increasing drug vintage) increased life expectancy by 1.23 years and increased lifetime drug expenditure by $12,976; the cost per life-year gained from using newer drugs is $10,585. An estimate made by other investigators of the value of a statistical Australian life-year ($70,618) is 6.7 times as large as our estimate of the cost per life-year gained from using newer drugs. We discuss several reasons why our estimate of the cost per life-year gained from using newer drugs could be too high or too low.
I have been asked this question countless times over the years in relation to a various taxes - taxes on alcohol, cigarettes and gambling all hit low income earners rather heavily. The standard economic response to this question – and one that I endorse – is that one should not be overly concerned with the impact of taxes on the consumption of particular items but should look at the overall impact of taxes and transfers on welfare. Particular taxes may be regressive – impact primarily on poor people – but the overall taxes and welfare transfers should be designed to compensate for such regressivity if one wishes to avoid it.
While there is certainly an element of truth in this explanation with respect to congestion tolls there are even more important issues. These tolls should not discourage car ownership but should encourage more selective use of cars. The opposite has been the case over recent decades since we know that cars are used more intensively rather than less. Some households make virtually all journeys by car – going to work, taking the kids to school and sports events, visiting friends and, of course, doing the shopping.
In my view we should think of public transport alternatives or of walking or taking a bicycle for many routine journeys that we make each day where large amounts of materials need to be carried. Trips to work and school are often repetitive tasks that can often be programmed to be dealt with via public transport, walking or by ‘park-then-drive’ actions. Certain trips require use of a car either because they are unexpected – the need to pick up a sick child from school – or because they involve transport of a large quantity of goods – for example, the weekly shopping.
Good road pricing should encourage greater selectivity in car use with the largest possible car ownership to facilitate the accomplishment of journeys which require a car. Generally I am in favour of hefty congestion charges, and petrol charges that are large enough to encourage the substitution of alternative fuels, but low car ownership costs.
This will encourage the type of car usage discussed for the US by John Quiggin – less usage of cars partly as a response of fewer journeys taken and increased reliance on public transport but also because, as I have emphasised above, car users more stringently rationalise their use of cars across tasks .
Sunday, May 25, 2008
Recently the journal has become a completely online affair – hard copies must be purchased from the ANU publisher individually. I am a bit unhappy with this – though still a strong fan of Agenda – I can’t for the life of me see why it is so difficult to provide the option of a paid annual subscription rather than having to buy each issue separately.
However a side benefit of publishing the journal online is that everything ever published in the journal can now be viewed at an ANU website. In particular all of the papers I have ever published in Agenda are there. Access to the entire contents of Agenda is also now free.
In 1999 I wrote one of my first efforts on addictive drugs Public Provision of Heroin for Addicts where I debunked proposals to provide heroin free to those addicted to it. In 2000 I wrote what I thought was an interesting, if to some an idiosyncratic piece, Aesthetics, Economics and Conservation of the Endangered Orange-bellied Parrot which provided a case study of species-specific biodiversity conservation efforts. In 2001 I wrote Prioritising University Research: A Critique of the Kemp Reforms which provided a sustained polemic against proposals for commercialising and prioritizing research effort in the universities. I think it has stood the test of time quite well and have not shifted an inch from my earlier position that succeeding Labor and Liberal Governments have forced a foolish research policy on Australian universities. In 2002 I wrote what I thought was an interesting piece, Institutional Design for Biodiversity Conservation, which tried to apply agency theory ideas to biodiversity conservation policy. It has generated much less interest than I had hoped. In 2006 I wrote (with former student Andrew Hawkins) one of my most widely-cited papers in recent years an Economic Framework for Melbourne Traffic Planning. It is still bearing fruit – on Friday I was interviewed by the Today Tonight television show and asked to provide views that stemmed from work leading up to this paper. Finally, in 2007, a piece that I first previewed on this blog, Conserving Biodiversity in the Face of Climate Change, appeared.
I have written four book reviews over the past decade on ‘Drugs and Democracy’, on the Gans-King book ‘Finishing the Job’ and two reviews of books on Australian immigration policy (here and here).
I have always enjoyed the freedom to get away from the strict model building methodologies insisted on in other journals that often amount to little more than symbolic window dressing for what are typically straightforward ideas. I always feel that I have the freedom to exercise more than 5% of my brain when writing for Agenda. I do not always get that feeling when seeking to publish in more conventional economics publications. Nor do I feel that some of the editors of these publications always exercise more than about 5% of their intelligence when refereeing contributions.
These last two sentences doubtless reflect unsavoury attitudes on my part. I’ll happily confirm more evidence of such attitudes. I recently gave away my complete sets of Econometrica, International Economic Review and the Review of Economic Studies from 1975. They were clogging up my office bookshelves and I realised that I’d rather chew on funnel web spiders than take a serious interest in much of their content. I am interested in the world these days and in models which illuminate the world. The exercise of building models - as an end in itself - I’ll leave to the next generation. Life is too short.
Friday, May 23, 2008
Why would such sexual intercourse be a 'scandal' even if it did occur? Are soldiers intended (or ordered) to remain celibate while on duty? Are women not permitted to select soldiers as sexual partners? The whole episode is a stunning non-event.
Update: In a separate incident an MP from Western Australia has become the 'lastest casuality in the state's political sleaze scandal'. His alleged offence - he invited a woman with whom he was apparently on friendly terms to join in a sexual threesome. He didn't do anything other than ask her. I am bewildered as to what the 'offence' here was.
Are 'threesomes' illegal in WA? Is it disrespectful of women to invite them to join in consensual sexual activity? Is the presumption that not only do women wish not to participate in sexual activities but that they also resent even being given the opportunity to do so?
A person cannot be made worse off if they can accept or costlessly decline any offer. They get choice. I can understand that offers can be put to people in terms that are offensive but then that should be the offence not the offer itself.
Australians are becoming very American in their attitudes - on the one hand many aspects of life are becoming sexualised via a media focus on sex and, at the same time, there is an underlying puritanism about sex in the media and the women's movement.
Thursday, May 22, 2008
But as this article in The Atlantic makes clear, the local situation is improving in some respects and China is serious about climate change. It is important in the west to acknowledge such improvements - and indeed to nurture them - if the right types of political signals are to be set in motion within China. The situation remains awful but is improving and the Chinese seem to want international approval and recognition for their efforts rather than ongoing condemnation.
Tuesday, May 20, 2008
My colleague at Monash University, and by far the best welfare economist in Australia, Professor Yew-Kwang Ng, has suggested taxing diamond-like goods whose value is seen to be higher in the eyes of consumers when they are more expensive. Again the basic idea is that noone loses with such an excise tax. The government gets revenue and diamond consumers get more satisfaction by being able to display even more expensive diamonds.
Now I have found a third twist to the possibility of taxes without DWLs that involves taxing naughty or sinful goods that consumers really know they should not consume. FXH sent me a link to this attractive piece in Slate that reviews a relatively old paper by Jonathon Gruber and Sendhil Mullainathan arguing that excises on tobacco products made consumers better-off in both the US and Canada by increasing their ability to resist the temptation to indulge in the filthy habit of cigarette smoking.
Its a fairly complex argument but basically this paper argues that higher taxes and hence higher prices give consumers greater motivation for self-control. Higher prices reingage the cognitive parts of the brain and make it easier for smokers to cut back or stop smoking
It is worth noting that this argument augments traditional Ramsay-George arguments for levying hefty taxes on cigarettes because their demands are relatively inelastic. From these perspective taxing cigarettes both punishes a sinful activity and delivers loads of dough to the Treasury.
I don't agree with many of Paul Mees' views on transport - I clashed with him once on the issue of congestion pricing - but he is a valuable member of the academic community who does maintain an academic focus on contemporary issues of transport policy.
University administrations are becoming increasing centralised and authoritarian at a time when private firms are becoming more decentralised and liberal. As every academic in Australia knows this is true everywhere - collegiality is dead. Maybe the University of Melbourne had good grounds for disciplining Dr Mees - I do not know all the background - but I have not heard these reasons. The notion that criticism of a state government department can lead to demotion within a university is deeply troubling.
It calls into question the whole critical function of a university and brings into focus the pressures that competing for research funds places on academic pursuits.
Update: This letter from one of Mees' colleagues shows there is concern that the action was political.
In this setting treachery within the Liberal Party is almost predictable. The Victorian Liberal leadership has been viciously attacked in a blog apparently organised by employees at state Liberal Headquarters – incidentally the blog can still be viewed. Now Brendon Nelson claims that the Shadow Treasurer has leaked an email that showed he did not support the cut in excise on petrol. It is a fiasco for a Party presenting itself as an alternative government!
The problems of inept policy and of intra-Liberal Party treachery are linked. It is imperative for the Party to speak with one voice on policy positions that are democratically agreed to. It is also imperative that the battle for political power within the Party remain within the Party. To accept a position where insiders can attack the Party leadership in the public arena is to accept permanent opposition and permanent political irrelevance. But this unity will be much easier to maintain if the leadership espouse policy positions based on Liberal Party principles rather than opportunism and cheap populism.
There is a broader dimension to this issue as well. The Labor Party is composed very largely of power hungry incompetents whose devotion to symbolism and the glib response will damage Australia. They need to be held to account for their political position when they get it wrong and they deserve support when they get it right. Democracy does not work without effective political opposition and currently the Liberal Party is behaving like a bad joke – not an effective opposition.
Sunday, May 18, 2008
Saturday, May 17, 2008
Miranda Devine asks what should be done about Dr Wodak's position as Director of the alcohol and drug services at St Vincents Hospital? I have not heard criticism of his work in this role so I guess not much. But he does speak with a voice of authority. I think he inflicts a lot of false views and hence social damage on the community because of these views but I assume we have to live with that cost as one of the effects of living in a democracy.
Moreover, my experience with the APSAD meetings is that many in the drug treatment industry (those earning good livings from treating those with drug and alcohol problems) are supporters of liberalising policies with respect to illicit drugs. Dr Wodak is not alone. Most of these people have never made any attempt to study economics or other disciplines that address the social effects of eliminating constraints on drug usage and instead look solely at the welfare of patients as they present themselves for treatment right at the time of treatment.
It is a deep problem that many of these supporters of legalising illicit drugs depend for their existence on the public teat. I wonder how many tax payers are aware of this?
(*) A logically consistent claim would be to assert usage might decline with legalisation because people demand cannabis because it is illegal for 'thrill-seeking' reasons. This seems to me farfetched. The legalisation of alcohol after prohibition in the US did not discourage use.
Friday, May 16, 2008
Restaurant smoking bans don't just protect diners and staff from other people's smoke, they help stop young people becoming habitual smokers.
‘In 2001, Michael Siegel* and colleagues at Boston University surveyed 3834 Massachusetts youths, with follow-ups two and four years later. In towns where restaurants had no smoking bans or kept smoking areas, 9.8% had smoked over 100 cigarettes in their lifetimes, compared with 7.9% in towns with smoking bans.
Once the researchers corrected for factors such as whether their parents smoked, those in towns with bans were 35% less likely to be habitual smokers (Archives of Pediatric and Adolescent Medicine, vol 162, p 477).
Bans don't make teenagers less likely to try cigarettes, but seem to stop them making it a habit, perhaps due to less contact with smokers or because smoking seems less socially acceptable.’
The full article by Siegel is available free at the link. BTW Michael Siegel has a very active and interesting blogsite here. Via it I came to this interesting report on tobacco control in Canada – one of those countries most successful in encouraging less smoking.
Wednesday, May 14, 2008
The following from John S. and Lena provided comic relief.
Michelango's David after a two week visit to the US. (both thanks JS)
Cars, roads & petrol (thanks Lena)
The bugdet response has been to award miserly tax cuts to lower income groups and to defer them for higher income groups and to run a massive budget surplus. Much of the surplus is to end up in investment funds to be spent on infrastructure, health and education.
This budget is therefore a beginning not an outcome. The main issues are how these funds will be allocated and how they will be spent when the economy is close to full employment. Project costs will be high so there is the prospect that returns on these investments will be under pressure. There is the possibility Labor will use them to pork-barrell in 2010 but they may surprise and spend the money wisely. It is a beginning.
Longer term these surpluses belong to the citizens of Australia not to the Labor Party. It is unsatisafactory for tax rates to be set so high that the government runs massive surpluses.
The funds can only be spent with a continued commitment to Labor market reform that prevents cost push inflation from emerging. The economy should be able to reduce unemployment still further and guarantee longer term better wages if the link between wages and prices can be broken.
I was less-than-impressed by the response of the Coalition to the budget. Malcolm Turnbull's responses on alcopops taxation added a bit of comic relief however. His claim was that the tax could not seriously target youth drinking because revenue to the government was forecast to increase with the tax! This is incorrect since the demand for alcopos clearly will slope downwards. The tax can still yield additional revenue if the price-elasticity of demand for alcopos is low enough. If the price elasticity is high then the tax will substantially reduce consumption but (contrary to the expectations of Treasury) yield less tax.
Update: John Quiggin makes a scathing attack on Brendon Nelson who has apparently followed Malcolm Turnull in criticising the alcopops tax. As I publicly supported the Government in increasing this tax two weeks ago I've got to agree with John that the criticism of the increased tax is foolish politics that suggests foolish policy sense. Taxes on alcohol in Australia are approximately volumetric which makes sense if you believe (as I do) that alcohol is a neurotoxin - they are not quite right however as the alcohol in beer is taxed less heavily than that in spirits. I favour a hefty tax on alcopos because these drinks are directed at youth and at ensuring an ongoing dependence on booze.
His advice to would-be trippers was simple. “Go to the meadow, go to the garden, go to the woods. Open your eyes!”
Monday, May 12, 2008
As a Class C drug a maximum prison sentence of 2 years is set for use while supply carries a maximum penalty of 14 years.
In Britain as in Australia cannabis use has decreased markedly (20-25%) over the past 5 years in all age groups.
Cannabis damages lungs but by less than cigarette smoking because less is smoked. Severe lung damage has been reported in heavy young users and there is the potential longer-term risk of lung cancer.
Cannabis damages the reproductive system in both males and females and causes low birth weights among pregnant women.
Cannabis can cause short-term psychotic effects - usually short-lived and responding to tranquilisers. A Danish study suggests half of those who contract a cannabis-induced psychosis experience repeat symptoms over 3 years although this may be due to continued cannabis use.
The incidence of cannabis psychoses has not been increasing.
Cannabis is the most common illicit drug found in the body fluids of those suffering motor vehicle injuries.
Dependence on cannabis is ‘unquestionably, a real phenomenon’. Significant numbers of young (under 18) and older cannabis users are dependent on cannabis.
Cannabis worsens the symptoms of schizophrenia and dealing with cannabis use (including dependence) is a major element of the treatment of many young males with this disorder.
The Council concluded that the evidence supports a causal link between use of cannabis in adolescence and the subsequent development of schizophrenia (page 18, para 8.10). Heavy users of cannabis have a 2-fold increase in the incidence of schizophrenia (page 19 para 8.10.1).
The Council was unclear whether cannabis use supported the ‘Gateway theory’ – that it led to use of more dangerous Class A drugs.
Cannabis impairs performance of tasks requiring sustained attention.
In preferred forms of cannabis (‘Sinsemilla’) THC concentration has doubled over the period 1995-2007.
The Council favours campaigns to drastically reduce cannabis use particularly among young people.
There would be some cost-savings generated by the merger because branches could be closed and moderate network externalities realised. But these businesses are already large so that the gains in terms of having lower cost access to capital markets would be very modest.
The main effects will be however to reduce the very limited competition Australians have with respect to choice of banking service. The 'big four' banks offer lousy, expensive service and yet yield bloated profits to their shareholders on the basis of their preexisting market power. Service will be marginally worse not better should this takeover proceed because there will be still less competition.
Why can't the banks come up with innovative market ideas and improved service to extract better returns for their shareholders? Or are the only strategies open to the financial geniuses in the big four banks those involving takeovers of smaller Australian banks or dud investments overseas?
Incidentally I am also annoyed by claims that professors could not care less about the cost of texts because they do not pay the costs – this is untrue. This professor at least does exercise concern. Many students work part-time in relatively low paid positions and a bill of $500 per semester for texts is a real burden. In addition it is often an unnecessary burden given that many undergraduate course materials are fairly standard and could in principle be supplied online at zero cost. Many course materials and course guides are provided online in any event.
As a general issue consumers are better-off if they can be offered cheaper goods and services – and with respect to textbook provision they can be.
In microeconomics where I teach there are dozens of texts on the market which cover more-or-less the same content and many of which are updated every year or so with new editions and new paginations designed to ‘kill off’ the second-hand market. While some of these Australian versions of US texts are good many offer product differentiation only in treating an unnecessarily large range of topics. They do not teach core material better. Many are appallingly proof-read and poor value for money – in my view the authors should not claim publication credit for participating in commercial scams. We would all be better off if fewer high quality texts were written.
Of course the strategies of the textbook vendors in pricing high but in killing off the second hand market reduce the value of buying a textbook. Whereas almost all undergraduates bought all recommended texts 20 years ago my contacts in the University Cooperative Bookshops tell me the figure has fallen to about 50% today. Why buy an incredibly expensive text that will have low resale value because suppliers can be anticipated to intervene to ‘kill off’ the second-hand market?
Greg Mankiw asks the question why don’t critics of excessive textbook pricing provide texts competitive with those claimed to be over-priced? It is a fair question. My guess is that the use of ‘big name’ US professors in an Australian market where the cultural cringe is alive and well, provides a strong barrier to entry of perhaps equally competitive locally-produced texts. Reflecting the strength of cultural cringe factors academics at one large university I know advise their best graduate students not to pursue their PhD in Australia. Too many Australian academics buy what is obviously just self-interested deceit.
With respect to book publication there are substantial fixed costs that need to be incurred in marketing new textbooks. Large firms with established distribution and marketing efforts can impose big entry barriers here.
How to defeat this manipulation? One immediately pragmatic response if you do use texts authored by our US ‘betters’ is to issue reading lists which include references to past as well as current editions so that ‘killing off’ the second-hand market works less effectively. Another response is to not discourage students in their development of creative skills with photocopying machines. Instructors should be careful with your words here or the greedy publishing houses will be on your back with legal actions – a text of 500 pages could be photocopied at the University of Melbourne library for about $30 (12 cents per page) although this would violate copyright law. Photocopying short sections of texts that are provided in the Reserve sections of libraries is legal and should be encouraged as a substitute for complete texts.
Probably the best solution of all is to use online material as texts and to encourage reading of reference texts in the library. A few texts have been placed online for free and this is definitely the way of the future. Greedy publishing houses who charge monopoly prices for overrated, poorly-written US-style textbooks that have limited resale value are creating incentives for their own destruction.
Sunday, May 11, 2008
I agree and so too does the Managing Director of the Australian Tourism Export Council. His argument – having a sound international reputation for health services would encourage heath tourism and regular tourism among those with health concerns. It would also lead to having improved health facilities available for Australian residents. We would have to pay more for our health services - unless discriminatory pricing was enforced via, for example, a tax on health exports - but economically Australia would enjoy gains from trade.
"Any sovereign nation has the right to determine how it will exercise its compassion and how it will increase its population."
I think I have heard that sort of sentiment more recently – was it John Howard? Hard to believe since compared to his Labor predecessors Howard expanded both the refugee and migration intakes.
Rudd, when asked whether ‘Advance Australia Fair’ fills him with pride, said:
‘It does, and the reason it does is when you’ve got verses like ‘For those who come across the seas we’ve boundless plains to share’ that that should be the resolve of any Australian Government, unlike the one we replaced which seemed to pull up the shutters when it came to our proper international obligations, particularly to refugees who found themselves in real strife.
While his detractors might suggest that Rudd is knowingly lying his head off here I'd prefer to assume is just another instant of his compulsive grap for the glib phrase regardless of any issues of truth. Truth is secondary when those famous cliches start rolling off his tongue.
BTW, to be fair, Rudd has increased the skilled migration intake significantly. Probably reflects the fact that Aussies generally are more relaxed about having migrants – although only one-third want public support for preservation of ethnic cultural identity among migrants.
Saturday, May 10, 2008
An Upper House parliamentary inquiry into alledged corruption by the State Government and by consulting firm Hawker Britton has returned an open finding although it asserted that the refusal of former premier Bracks to give evidence hindered its investigation. Former Labor minister David White was offered a $350,000 success fee in acting for Tattersall’s and the firm of which he was director (yes, Hawker Britton*) received access to confidential information in relation to the lottery license tender process before its public release. Bracks denied ever speaking to Tattersals regarding licences though the committee of inquiry concluded he probably did. There are many unresolved issues – Bracks seemed to have a non-incidental role:
‘...the committee also heard from former Tattersall's trustee Peter Kerr, who said Mr White's subsequent report of the Lorne meeting with Mr Bracks was the 'blockbuster' development that led Tatts to float on the share market’
The Greek company Intralot has got that share of the lotteries market that Tattersals lost. Intralot spokesperson Tony Sheehan is a former Labor Treasurer in Victoria. Some wicked gossip has suggested Intralot does not always walk the straight and narrow.
As many have pointed out there are numerous Labor Party hacks and ex pollies involved in advising the $2.5 billion gambling industry in Victoria.
A week ago the current Labor Premier John Brumby announced that both Tabcorp and Tattersalls were no longer to be the duopolies controlling most of Victoria’s pokie industry. I praised the decision but my guess is that the background to this decision would make a great blog post.
I have respect for John Brumby's integrity. As a speculation – I have no firm evidence for it – I wonder whether the machinations in the gambling industry over recent weeks represent an attempt by Brumby to extricate the Labor Party from a scandalous history in relation to gambling in this state.
If readers had information I would be interested in hearing about it. Either through the comments thread or by email to me directly.
Of course these issues have been ignored by leftwing blogs. They are still preoccupied with the AWB 'scandal' and 'children overboard' incidents and, as any honourable lefty will tell you, allegations of corruption are only ever a problem when they occur on the conservative side of politics.
* White is still listed as a staff member. Its MD is a former Carr staffer.
Friday, May 09, 2008
Egan's argument is more pragmatic. Labor will be unelectable federally and in any Australian state if it is perceived by the community to having its policies dictated by narrow trade union interests. He then argues that the Prime Minister and the Labor Premiers will understand this and therefore will not allow themselves to be dictated to by the unions. They will need to assert themselves to assert autonomy in order to survive.
There is not a gram of principle in this approach but it does bring joy to my heart. If Egan is right then Rudd and the Labor Premiers will stand up to the unions and limit the riole of the unions. This is certainly the appropriate policy. But if he is wrong and the Labor leaderships do not assert themselves then they will be replaced by an opposition who identify their cowardice in the face of the union bullies. Thus any pain that the community experiences as a consequence of Labor rule will be transitional - there is light at the end of the tunnel or, dare I say, at the top of the hill.
Thursday, May 08, 2008
Rudd is trying to suppress release of the Treasury critique of Labor’s foolish IR policies. These will add to inflation and unemployment. But the trade unions can do much more damage than this. They have already made their views clear. The following passage from The Australian is worth studying. Australia faces an impending wages explosion unless Kevin Rudd gets serious about dealing with these trade union fools who evidently seek to damage the interests of labour in Australia:
‘….unions in Victoria vowed to chase annual pay rises of up to 6% for the next 3 years to compensate for the 4.2% inflation rate and suppressed pay under John Howard.
Victorian Trades Hall Council secretary Brian Boyd told The Australian a deal struck by teachers in Victoria endorsing pay rises of up to 15.2% exemplified the catch-up increases unions wanted under the Prime Minister.
"I am quite aware that a number of key private sector unions and groups of workers are arguing for 5% (a year) to get ahead of that 4%" he said.
"There are agreements already being looked at around 15% over three years, and some will even go to 18-19%.
"(It's) not only to compensate for inflation but also to compensate for the restriction on the ability you had for decent wages under the previous government."
The Australian understands the pay push includes unions in the construction, manufacturing, transport, electrical and plumbing sectors. The Victorian teachers' deal has also buoyed public servants across several states - including teachers and nurses - on the verge of pay negotiations.
The wage push came as Brendan Nelson demanded Mr Rudd release Treasury advice prepared in February showing whether his industrial relations reforms would drive up inflation.
….Mr Boyd said the Victorian teachers' deal was a "good case in point" of unions playing catch-up after wages were suppressed under the Howard government.
"There has been a lot of wages curtailed in the last 3 or 4 of the Howard government and people are trying to catch up," he said.
Ordinary working people were not responsible for rising inflation, but were entitled to receive compensation for higher petrol and grocery prices, he said.
"The union movement is an independent voice for trying to find a fair market price for workers they represent in the capitalist market place," he said.
"We have put up with 11 years of IR laws that have been aimed at restricting our ability to find a fair price for labour.
"Just because (John) Howard got elected for a decade doesn't mean we accept that these harsh IR laws were justified in restricting our ability to find a fair price for labour.
"So I have no qualms in saying if we want to play the catch-up game for wages and conditions, we'll do it."
Mr Boyd said he did not accept the wage push would exacerbate game for wages and conditions, we'll do it."
Mr Boyd said he did not accept that the wage push would exacerbate inflationary pressures. "Ordinary working people didn't cause the inflation situation," he said. "Other factors caused that. The oil price internationally is one of them, and grocery prices going up has nothing to do with what workers do.
"They're entitled to get compensation for that. That's why I'm calling it a catch-up process, not a breakout process."
Mr Boyd denied the pay push could lead to a wages breakout. "It's not really a wages explosion, in my view. It's a catch-up that is currently going on because of what happened over the last few years of Howard," he said.
"It's making up lost ground. I think there should be an understanding that a lot of the workforce across the country, not only in Victoria, are viewing their situation in terms of inflation and (consumer price index) rises, in terms of the cost of living, in terms of petrol prices and power prices, and so on".
If Boyd and his crony economic-illiterates can't achieve these objectives then well-and-good. The difficulty is if they can and unions in Australia start playing 'wage catch-up'. Once-and-for-all price hikes will then translate into inflation and eventually the need for a major monetary contraction.
But the key task for Kevin Rudd is not budgetary. It is to talk down the demands for an instant wage nirvana in Australia. It is to put the trade unions in their place and to reinitiate the processes of labour market reform that Rudd has so foolishly quashed.
Wednesday, May 07, 2008
"...the secret Treasury advice, the department, under Treasury secretary Ken Henry, concluded that the abolition of AWAs and the return of guaranteed penalty rates would cut jobs, put "upward pressure on prices", create more "flow-on" wage claims from sectors such as mining to less productive sectors and allow unions to "bid wages up above their market level".
"The shift to a more centralised wage system might reduce employment and increase inflation. For example, higher unit costs, either through higher real labour costs, lower productivity, or a combination of both, will place upward pressures on prices, which effectively lowers real disposable incomes, consumer spending and thus employment. The rate of flow-on of wage increases from high-productivity firms and sectors to low-productivity ones may increase. Reinstalling union power will raise the ability of unions to bid wages up above their market level."
In addition abolishing unfair dismissal laws will cut jobs, increase red tape for small business and make it more difficult for people to move from welfare to work.
Treasury said WorkChoices was "expected to allow a more expansionary monetary policy setting and result in higher rates of employment".
Where's Labor's cheer squad on this one?
This document was written before the last election but despite Julia Gillard's denials it is definitely applicable to Labor IR policies. The unemployed of Australia and those facing higher mortgage repayments and higher inflation can attribute part of these problems to inept Labor IR policies and to those sections of the leftwing intelligensia who, against all reason, supported these particularly inept and foolish proposals to reregulate the Labor market.
Tuesday, May 06, 2008
Barry O'Farrell, who I knew as a very decent fellow student at the ANU in the 1970s, should be ashamed of his fence sitting. His duty is to NSW - not to scoring a few cheap political points. On this one my old cobber Barry - back Iemma.
I wonder what Australia has done to deserve such people. I also wonder why those doctors so concerned with the health problems of managing illicit drug use seek to employ measures that will definitely increase its use.
Cannabis use in Australia is falling as the recent National Drug Survey shows – among youth use has fallen by about 20% from 2004-2007.
This call is appallingly irresponsible. It would substantially reduce the user costs of consuming cannabis and given that the demand for cannabis certainly depends on price would encourage its use substantially Dr Wodak believes that such a move would substantially reduce consumption. How? If prices (inclusive of other costs) were less than illegal market prices then quantities demanded would be greater. If legal prices exceeded prices in illegal markets then there would be two sources of supply - illegal cheap cannabis and more expensive legal cannabis. How will this help reduce demand?
As I have written before, Wodak’s uncritical support for harm-minimisation at the expense of the most basic appreciation of the laws of supply and demand makes no sense.
Are not physicians supposed to ‘do no harm’. How is reducing the cost of a dangerous drug by decriminalising it going to help? Why pretend that current policies seeking to limit the use of cannabis are failing when they manifestly are succeeding.
Update: An updated version of this post is cross-posted at the ABC website.
Update: Here is Miranda Devine's view. Very similar to mine.
I suppose at least he didn't award their ambit claim of 30%!
One teacher a Jason Pietzner said he ‘was still coming to grips with what the deal would mean over time. It says we will be the highest paid teachers but I wonder if that will be the case in three years' time after the other states have struck new deals’.
The Victorian taxpayer clearly has more to look forward to.
Melbourne’s Pravda called the deal a 'win-win' outcome. The teachers get more money and the government will get greater teacher productivity. I agree with the first part of this claim.
Last September the Victorian Government awarded police salary increases of 14%. Public service unions around the country are lined up for their next round of wage negotiations and will undoubtedly insist on parity. Wages have been galloping away for state public servants around Australia in recent years. Sharon Burrow has told workers they are not responsible for inflation and deserve to be compensated for foreign fuel price increases and food cost rises.
Federal Workplace Relations Minister Gillard urged ‘restraint across the economy’. Should I laugh or cry?
My expectations are that, with Labor holding a monopoly on political power in Australia, there will be a dramatic economy-wide surge in wages over the next year or so followed by rapidly rising inflation, huge rises in interest rates followed by a severe contractionary monetary policy needed to get things ‘back on track’ that will lead to hundreds of thousands of low income Australians being unemployed. The Coalition will be returned to power both Federally and at the State level around Australia but another generation of Australians will have their lives devastated by the latest batch of incompetent Labor yahoos.
I really do hope I am wrong on this one.
Monday, May 05, 2008
I agree with Don that the RBA have shown flexibility in not mechanically responding to external price shocks via a Taylor rule. It makes sense not to do so if these shocks are price increases that are not necessarily the start of an inflationary process.
Don argues that the danger with the RBA's 'softly, softly' policy is that inflation may emerge unchecked. I agree but see the problem here mainly as an issue of preventing wage increases to match cost-of-living increases that are exogenously imposed on us. Its the reason I* worry about Labor's political debts to the trade union movement. RBA policy itseklf seems to me quite sound.
Abstract: We designed and tested a voluntary commitment product to help smokers quit smoking in the Philippines. Individuals who sign a Committed Action to Reduce and End Smoking (CARES) contract deposit money into a savings account and agree to let the bank forfeit their entire balance to charity if they fail a urine test for nicotine and cotinine six months later. Bank marketers offered the product by approaching smokers in public places. Marketers administered a short survey, provided a standard pamphlet with information on smoking’s harmful effects and how to quit, and then made one of three randomly assigned offers: (i) CARES; (ii) aversive “cues”: graphic, pocket-sized pictures of the deleterious health effects of smoking, modeled on Canada’s cigarette packaging mandate; (iii) no intervention (control group). 11 percent of individuals offered CARES accepted. 6 months after marketing, the bank marketing team returned and administered urine tests to participants from all three groups. Subjects offered CARES were 3.1 percentage points more likely to pass the test than the control group (a 38.8% increase); this intent-to-treat effect rises to 4.3 percentage points for those who reported in the baseline survey that they wanted to quit smoking at some point in their lives. Treatment-on-the treated estimates suggest that those who signed a CARES commitment were 29 and 33 percentage points more likely to pass the test than the control group.
This proposal has advantages over the one I analysed a few weeks ago which simply gave rewards to those who abstained from smoking. This scheme isolates those with specific incentives to quit. It is less open to manipulation.
The issue is whether democratically elected politicians should be responsible to the people or to unrepresentative trade union bullies. So far Iemma has shown more guts than I would have given him credit for.
The implications of this momentous struggle are clear – how can Rudd embark on a reform program if fat-cat public sector unions are to rule the roost? How can Treasurer Swan defeat the cost-price hikes that can trigger inflation if unrepresentative trade union idiots in the ACTU argue that price increases must be met with increased wages? Indeed this is exactly the inflationary spiral Swan must at all costs prevent from happening.
The Labor Party should not be owned by unrepresentative trade union swill.
Update: Kim at LP endorses the actions of the trade union thugs. After all why join the Labor Party unless you seek to promote the causes of the unionists. She asks do Labor Party members only seek public office? To Kim there are no issues of democratic principle here - Iemma is only mimicking the anti-union sentiments of the other cside of politics. Daft.
Saturday, May 03, 2008
I had to use the search function on my blog to recall the name of the singer, you know, what's-his-name, who dealt with the issue of, what was that again, oh yeah, forgetfulness.
......and thinking of Tom Rush and the songs I really liked of his (here) I found a version of "Urge for Going' by Joni Mitchell (she wrote this beautiful song) recorded around 1965 that was even better than Tom's version. How come I remember all this old stuff?
Friday, May 02, 2008
Abstract: Are individuals more likely to smoke when they are surrounded by smokers? In this paper, we examine the evidence for peer effects in smoking. We address the endogeneity of peers by looking at the impact of workplace smoking bans on spousal and peer group smoking. Using these bans as an instrument, we find that individuals whose spouses smoke are 40% more likely to smoke themselves. We also find evidence for the existence of a social multiplier in that the impact of smoking bans and individual income becomes stronger at higher levels of aggregation. This social multiplier could explain the large time series drop in smoking among some demographic groups.The basic idea is that smoking is a social activity – people like to smoke with others. It confirms other work already cited on this blog that eliminating smoking by individuals has positive direct effects and positive indirect effects of stopping others to smoker.
Incidentally I find it strange that the Cutler/Glaeser study does not refer to earlier work published in a widely-respected journal. I have noticed this before among US economists.
At Intrade the probability that the US has fallen into recession has fallen to 25%. (When I last looked it was 33%, look under Financial/Economic Numbers).
Thursday, May 01, 2008
THE federal intervention in the Northern Territory has led to a decline in new notifications of sexually transmitted infections among children.Come on supporters of’ doing nothing’ think of a good alternative explanation for this good news. Perhaps: The data was collected by Liberal Party flunkies, adults grew smarter at hiding sexually abused children. These stories and many others are a useful way of continuing to live in a world of illusion and denial.
The Northern Territory Government's latest surveillance update on sexual health and blood-borne viruses revealed that 62 children aged under 14 were diagnosed with sexually transmitted infections in the Territory in the first six months of the intervention. Three of the children diagnosed with chlamydia between July and December last year were under the age of 10. The figures also showed that total diagnoses of chlamydia, gonorrhoea, syphilis and trichomoniasis declined in the second half of last year, compared with the first half, following the intervention.
Of course the general STD problem remains massive:
The rate of notification of gonorrhoea among Aboriginal people in the Territory was 51.7 times the national rate.But Mal Brough and John Howard were on the right track and the brainless apologists for inept NT policies are shown to have put their political biases ahead of real concern for the welfare of indigenous kids.