In the SMH on 28 December (Sidestepping the seven-year itch) David Humphries wrote “This is not an argument for the states' supremacy, or their abolition, a constitutional nonsense given the effective impossibility of removing the states by referendum.”
I've heard lots of similar commentary over recent times, and would first claim that just because something is hard doesn't mean it is impossible - effectively or otherwise. It is possible that a requisite referendum could be past in every State.
However, there really is a relatively easy way to abolish the States, amend s51 of the Constitution so that the Federal Parliament isn’t restricted about the fields they can legislate in and slowly the States can be eroded into irrelevance. The operation of the provisions about Federal law having precedence over State laws mean the Federal Parliament can legislate the States out of "effective" existence.
Sunday, December 30, 2007
Friday, December 28, 2007
Property Rights
There is a strand of economists who would generally call themselves institutional economists who place great store in the concept of property rights. This theory runs both a developmental perspective - that economic development can only occur once prpoerty rights are protected - and an environmental perspective - following the Coase theorem that all externalities can be efficiently resolved by the market if all property rights are fully allocated.
There are, however, many flaws with this approach. Firstly, the Coase theorem has as an assumption that transaction costs in trading the properyy rights are zero. Secondly, many argue from the efficacy of the allocation of a property right to the presumption of its allocation. So a polluting firm claims that the property right in air quality (or water quality) is already theirs so they are the ones who need compensation if they are to stop polluting.
Joshua Gans writing in his blog Game Theorist has written a neat short review of Bee Movie. He says the movie as an allegory about property rights and concludes:
The message for the kiddies is you might have property rights but that enforcing them may cause others harm, so think about that one. Now think about that people who might be downloading Bee Movie rather than dragging everyone to the cinema.
It is an interesting thought for those running the property rights line at some of our biggest corporations. Take for instance Telstra who argued a case (decision pending) in the High Court that the access regime was unconstitutional as it was an unjust taking of property. I haven't fully read the transcripts, but one of the arguments is that if you choose to be a telecommunications carrier you choose to play by these rules.
It is an interesting argument because in a separate case Telstra and Optus won a case against local government authorities who wanted to charge the carriers for the above ground and underground space they occupied with cables. They won that case on the basis that the Federal telecommunications power did enable the over-riding of the State laws.
But it does seem to be a little like the Bee Movie analogy - you don't know where a property rights argument might end. Are the Council's being deprived of a property right by the Federal law, and therefore be entitled to compensation from the Commonwealth? would the Commonwealth raise this from a tax on the telcos?
This is not meant to be a legal argument here - just an argument of consequences. A similar matter also emerged in the case, that the asset of the network was always encumbered by the power of the Commonwealth Government to regulate prices.
Those who are resorting to property rights arguments might find out they have less than they ever imagined.
There are, however, many flaws with this approach. Firstly, the Coase theorem has as an assumption that transaction costs in trading the properyy rights are zero. Secondly, many argue from the efficacy of the allocation of a property right to the presumption of its allocation. So a polluting firm claims that the property right in air quality (or water quality) is already theirs so they are the ones who need compensation if they are to stop polluting.
Joshua Gans writing in his blog Game Theorist has written a neat short review of Bee Movie. He says the movie as an allegory about property rights and concludes:
The message for the kiddies is you might have property rights but that enforcing them may cause others harm, so think about that one. Now think about that people who might be downloading Bee Movie rather than dragging everyone to the cinema.
It is an interesting thought for those running the property rights line at some of our biggest corporations. Take for instance Telstra who argued a case (decision pending) in the High Court that the access regime was unconstitutional as it was an unjust taking of property. I haven't fully read the transcripts, but one of the arguments is that if you choose to be a telecommunications carrier you choose to play by these rules.
It is an interesting argument because in a separate case Telstra and Optus won a case against local government authorities who wanted to charge the carriers for the above ground and underground space they occupied with cables. They won that case on the basis that the Federal telecommunications power did enable the over-riding of the State laws.
But it does seem to be a little like the Bee Movie analogy - you don't know where a property rights argument might end. Are the Council's being deprived of a property right by the Federal law, and therefore be entitled to compensation from the Commonwealth? would the Commonwealth raise this from a tax on the telcos?
This is not meant to be a legal argument here - just an argument of consequences. A similar matter also emerged in the case, that the asset of the network was always encumbered by the power of the Commonwealth Government to regulate prices.
Those who are resorting to property rights arguments might find out they have less than they ever imagined.
Wednesday, December 19, 2007
John Valder
John Valder in a letter to the SMH tries to argue that the Maxine McKew campaign was nothing special and that the ALP could have won in Bennelong in 2004.
There was an excellent repy today from young Tim Quadrio under the heading A Good Clean Win. He makes the three points that Maxine ran a positive campaign - not the slurs Valder wanted to rely on; that Maxine won with the national average against the incumbent PM ; and that in 2004 the election overall was such a disaster for Labor nothing would have secured an extra 5% in Bennelong.
For the record my own unused contribution was:
The beauty of time is that we never can know what would have happened if we had done things differently. That allows each of us the luxury of our own alternative view of history. John Valder (Letters 18 December) thinks that the ALP could have won Bennelong in 2004 if only they had taken the seat seriously. His reasoning is the influence of the ‘Not Happy John’ campaign and the candidature of Andrew Wilkie for the Greens.
My experience working polling booths on election day at this and the previous election is that the approach of ‘Not Happy John’ and the more recent incarnation ‘GetUp!’ delivered wavering votes back to the Liberals, specifically Mr Howard. As a former Liberal it is easy to understand that Valder thinks negative campaigning works, but it usually doesn’t. Its few apparent successes are masked by the more powerful effect of incumbency.
The outcome in Bennelong was primarily different because of the outcome nationally. The national two party preferred swing was 5.45%, while in Bennelong it was 5.53%. The significance of the Bennelong campaign was more in the uplift in spirits it provided across the ALP and Maxine McKew’s softly, softly model was ideal for that.
There was an excellent repy today from young Tim Quadrio under the heading A Good Clean Win. He makes the three points that Maxine ran a positive campaign - not the slurs Valder wanted to rely on; that Maxine won with the national average against the incumbent PM ; and that in 2004 the election overall was such a disaster for Labor nothing would have secured an extra 5% in Bennelong.
For the record my own unused contribution was:
The beauty of time is that we never can know what would have happened if we had done things differently. That allows each of us the luxury of our own alternative view of history. John Valder (Letters 18 December) thinks that the ALP could have won Bennelong in 2004 if only they had taken the seat seriously. His reasoning is the influence of the ‘Not Happy John’ campaign and the candidature of Andrew Wilkie for the Greens.
My experience working polling booths on election day at this and the previous election is that the approach of ‘Not Happy John’ and the more recent incarnation ‘GetUp!’ delivered wavering votes back to the Liberals, specifically Mr Howard. As a former Liberal it is easy to understand that Valder thinks negative campaigning works, but it usually doesn’t. Its few apparent successes are masked by the more powerful effect of incumbency.
The outcome in Bennelong was primarily different because of the outcome nationally. The national two party preferred swing was 5.45%, while in Bennelong it was 5.53%. The significance of the Bennelong campaign was more in the uplift in spirits it provided across the ALP and Maxine McKew’s softly, softly model was ideal for that.
Tuesday, December 18, 2007
What Gerard has said lately
I tried sending a letter to the SMH in relation to Gerard Henderson's 13 November column but I clearly no longer have the knack of being published in that journal. Only Crikey and the AFR and a few telco industry rags seem to like my stuff. Of course, the beauty of the blog is that I am my own editor - albeit for a far smaller readership.
His 13 November item was headed Truck of truth hits a few potholes. This was a column written during the election and in it he started with a criticism of then candidate Maxine McKew contrasting some comments she made with future outcomes during the last election.
His purpose was to "out" behaviour where participants in public debate label their opponents liars when “they really mean they recall events in different ways, disagree on current matters or have contrasting views about the future”.
This is fascinating because Mr Henderson has a reputation for writing detailed letters to correct what he claims are untruths said about him. He also has a reputation for pursuing the “Sydney Line” (as incoming Quadrant editor Keith Windshuttle calls it) of absolute truth.
So his column made interesting reading. Hopefully this new found belief in relativism means we can call a truce in the “history wars”.
More troubling is his claim that “inaccurate predictions” do not constitute a lie. I can accept that an inaccurate prediction based on a full analysis of such observations and explanatory theories as available is not a lie. But I think it becomes a lie when the person making the prediction consciously chooses to ignore factors in making that statement. For example, to make a three year prediction about interest rates which no market economist would dare contemplate.
The same applies to a wilful failure to obtain additional information that was readily available, such as occurred with the children overboard scandal, or to consciously avoid “intelligence” that runs contrary to one’s pre-determined course of action, as happened with Iraq.
We needed more than just a truck of truth this election; we needed an injection of integrity. And in the end it seems like we got it - with the formidable Senator John Faulkner appointed as Special Minister for State with just such a brief.
But dear Gerard Henderson has again today inspired me to write. His contribution Failed policy strong on sentiment was an attempt to claim that the idea of minimum "living" wages is a fanciful affair that works against the interests of the economy at large and hence people in it.
There are two specific matters that I want to challenge. The first is that he manages to cover the early history of the Harvester Judgement without mentionuing why it was that Justice Higgins was required to rule on what constituted a "fair and reasonable wage". The reason was simply that in the era of protectionism the idea of protection was to protect employees as much as investors, and so the law stated that a firm would benefit from the protection (by exemptions from excises) so long as employees were paid a fair and reasonable wage.
The policy was itself entirely coherent if the assumption of protectionism was accepted, and it was not Higgins fault if the parliament's drafting was so woolly and vague. The fact that the first case required the development of a definition and a whole series of other parliamentary and judicial actions perpetuated the concept should not be laid at the feet of poor Justice Higgins.
The second point in the article to challenge is Henderson's derision of the proposition that if an employer can't pay a "fair and reasonable wage" then it would be better that they not be in business. Actually, a neo-classical view would be that it is indeed better not to have the firm in business if it cannot pay the genuine cost (a decent living) of the hire of labour. There are an array of reasons why labour might endure such conditions, but it is economically wasteful to consume something for less than the cost to produce it. Continuing to make the employment available "below cost" (subsistence) results in other ventures that might identify an available labor force from establishing or it results in labor not relocating when it should. This is an argument from simple economics, not from some social justice doctrine.
And what if the consequence is enduring unemployment? Well, the Keynsian response is still the right one. Generate growth in the economy by Government expenditure, either simply by the payment of unemployment relief, or far better by taking the opportunity to use the excess labour to undertake "nation building" projects. And in the process pay them a "living wage" because then we really could be accused of living in a fascist state as the workers on government projects dropped dead from malnutrition.
His 13 November item was headed Truck of truth hits a few potholes. This was a column written during the election and in it he started with a criticism of then candidate Maxine McKew contrasting some comments she made with future outcomes during the last election.
His purpose was to "out" behaviour where participants in public debate label their opponents liars when “they really mean they recall events in different ways, disagree on current matters or have contrasting views about the future”.
This is fascinating because Mr Henderson has a reputation for writing detailed letters to correct what he claims are untruths said about him. He also has a reputation for pursuing the “Sydney Line” (as incoming Quadrant editor Keith Windshuttle calls it) of absolute truth.
So his column made interesting reading. Hopefully this new found belief in relativism means we can call a truce in the “history wars”.
More troubling is his claim that “inaccurate predictions” do not constitute a lie. I can accept that an inaccurate prediction based on a full analysis of such observations and explanatory theories as available is not a lie. But I think it becomes a lie when the person making the prediction consciously chooses to ignore factors in making that statement. For example, to make a three year prediction about interest rates which no market economist would dare contemplate.
The same applies to a wilful failure to obtain additional information that was readily available, such as occurred with the children overboard scandal, or to consciously avoid “intelligence” that runs contrary to one’s pre-determined course of action, as happened with Iraq.
We needed more than just a truck of truth this election; we needed an injection of integrity. And in the end it seems like we got it - with the formidable Senator John Faulkner appointed as Special Minister for State with just such a brief.
But dear Gerard Henderson has again today inspired me to write. His contribution Failed policy strong on sentiment was an attempt to claim that the idea of minimum "living" wages is a fanciful affair that works against the interests of the economy at large and hence people in it.
There are two specific matters that I want to challenge. The first is that he manages to cover the early history of the Harvester Judgement without mentionuing why it was that Justice Higgins was required to rule on what constituted a "fair and reasonable wage". The reason was simply that in the era of protectionism the idea of protection was to protect employees as much as investors, and so the law stated that a firm would benefit from the protection (by exemptions from excises) so long as employees were paid a fair and reasonable wage.
The policy was itself entirely coherent if the assumption of protectionism was accepted, and it was not Higgins fault if the parliament's drafting was so woolly and vague. The fact that the first case required the development of a definition and a whole series of other parliamentary and judicial actions perpetuated the concept should not be laid at the feet of poor Justice Higgins.
The second point in the article to challenge is Henderson's derision of the proposition that if an employer can't pay a "fair and reasonable wage" then it would be better that they not be in business. Actually, a neo-classical view would be that it is indeed better not to have the firm in business if it cannot pay the genuine cost (a decent living) of the hire of labour. There are an array of reasons why labour might endure such conditions, but it is economically wasteful to consume something for less than the cost to produce it. Continuing to make the employment available "below cost" (subsistence) results in other ventures that might identify an available labor force from establishing or it results in labor not relocating when it should. This is an argument from simple economics, not from some social justice doctrine.
And what if the consequence is enduring unemployment? Well, the Keynsian response is still the right one. Generate growth in the economy by Government expenditure, either simply by the payment of unemployment relief, or far better by taking the opportunity to use the excess labour to undertake "nation building" projects. And in the process pay them a "living wage" because then we really could be accused of living in a fascist state as the workers on government projects dropped dead from malnutrition.
Saturday, December 08, 2007
It gets worse - journalism that is
You can't blame journalists for the headings that sub-editors choose but "A Ruddslide that never happened" is how The Australian heads an article by Brad Norington.
The article makes the observation that as the count has continued more of the doubtful seats have gone to the coalition, and that the ALP holds a lot of seats by very slender margins. This is used to start a claim that the ALP didn't win a thumping victory. If one thought that newspaper was into running agendas you'd think it was an attempt to de-legitimise the ALP's "mandate".
Last time I looked (thirty seconds ago) the AEC website had the ALP on 52.86% 2PP with a swing of 5.60%, as oft repeated the third largest swing ever. It is no surprise that following a change of Government that the new Government has a lot of close marginals, because usually those seats have seen strong local defence campaigns by well known incumbents with the generous parliamentary resources of incumbency. Let's face it the coalition ran the mother of all "defend the marginals" campaign this election.
So let's not get confused. The win was huge and awesome. No one in the ALP had dreamed they could pull it off till about March, and even the move to Rudd was interpretted as desperation Mark 2 not a winning plan. And finally the former Prime Minister's so called political genius and direct connection with the Australian people has been revealed for the chimera it was. He won 96 because the coalition lost in 93 (i.e. the public were waiting with baseball bats). He really lost in 98 but won due to the effect of Govt held marginals. He won in 2001 because, as John Howard is quoted in the recent biography, the ALP misunderstood 1998 and he won in 2004 because the ALP campaign dissolved in the yawning gaps between Mark Latham and his campaign team (reminiscent of the ALP in 96 and the coalition in 2007).
And come the next election there will be a swag of local ALP members with all their resources, and who will have been doing their Kevin homework in their electorates.
The article makes the observation that as the count has continued more of the doubtful seats have gone to the coalition, and that the ALP holds a lot of seats by very slender margins. This is used to start a claim that the ALP didn't win a thumping victory. If one thought that newspaper was into running agendas you'd think it was an attempt to de-legitimise the ALP's "mandate".
Last time I looked (thirty seconds ago) the AEC website had the ALP on 52.86% 2PP with a swing of 5.60%, as oft repeated the third largest swing ever. It is no surprise that following a change of Government that the new Government has a lot of close marginals, because usually those seats have seen strong local defence campaigns by well known incumbents with the generous parliamentary resources of incumbency. Let's face it the coalition ran the mother of all "defend the marginals" campaign this election.
So let's not get confused. The win was huge and awesome. No one in the ALP had dreamed they could pull it off till about March, and even the move to Rudd was interpretted as desperation Mark 2 not a winning plan. And finally the former Prime Minister's so called political genius and direct connection with the Australian people has been revealed for the chimera it was. He won 96 because the coalition lost in 93 (i.e. the public were waiting with baseball bats). He really lost in 98 but won due to the effect of Govt held marginals. He won in 2001 because, as John Howard is quoted in the recent biography, the ALP misunderstood 1998 and he won in 2004 because the ALP campaign dissolved in the yawning gaps between Mark Latham and his campaign team (reminiscent of the ALP in 96 and the coalition in 2007).
And come the next election there will be a swag of local ALP members with all their resources, and who will have been doing their Kevin homework in their electorates.
Getting Policy Objectives Right
Peter Hartcher in the SMH has given the new Prime Minister suggestions on five key policy areas in which he needs to make progress.
I won't address them all here, but what I want to show is how shallow this kind of thinking and writing is. His first goal is for the new Government to show it is serious about fighting inflation and calls for the Government to run a higher surplus than the 1% commited to by Howard and Rudd in the election. He chooses 2% - not I think based on any science other than it is bigger than 1. This begs the question of what the Government is supposed to do with this surplus - they have no debt to pay off, they have almost already fully provisioned for the public service super and we have higher education and health endowment funds.
Perhaps Hartcher needs to ask whether there are other ways to divert cash into savings rather than expenditure. A really good way would be to get back to work on lifting average employees super contributions to 15% of income - not just politicians (in the post Latham rules) and public servants. One way is to divert some tax cuts into employees super funds. So we can still tax but not spend but make the saving in the name of the taxpayers not the amorphous Government.
Hartcher's second policy area is education, where he generally joins the crowd who want to beat up on teachers and education unions. His first call is to adopt national standard curricula. Memo to all commentators: this is a good policy almost everywhere other than NSW where we still have a fairly substantive curricula. Uniformity in itself isn't always necessarily good. He then turns his attention to literacy and numeracy standards asking the States to insist that the results of the national standards tests be released school by school when conducted. This is such poor policy, because it makes the assumption that the school is the only factor determining the result and ignores other socio-economic factors. I'm all for reliable data, but what we need is data on the school "value added". That is, for each school how good is the phalanx of Year 6 results against the results that the same students (wherever they were then) scored in Year 3 (or whatever prior comparison years are available). That is the measure of the school.
As for demanding "explicit mechanisms for improving levels of numeracy and literacy" I don't know of any State education system that doesn't have that as a goal and indeed have matching strategies. Does Hartcher really imagine it is otherwise?
On the third policy area - health - Hartcher really squibs it by saying "All you have to do this year is set the detailed performance targets for the states to meet" While that is simply repeating what the ALP said in the campaign, anyone will tell you that the problem in health policy is actually knowing what good looks like. For example, if hospitals have success in improving recovery times and reducing hospital stays (usually with the application of expensive high-tech capital equipment) they get criticised for reducing the number of bed-days in the hospital.
Public policy planning I think is a little beyond the capability of Peter Hartcher.
I won't address them all here, but what I want to show is how shallow this kind of thinking and writing is. His first goal is for the new Government to show it is serious about fighting inflation and calls for the Government to run a higher surplus than the 1% commited to by Howard and Rudd in the election. He chooses 2% - not I think based on any science other than it is bigger than 1. This begs the question of what the Government is supposed to do with this surplus - they have no debt to pay off, they have almost already fully provisioned for the public service super and we have higher education and health endowment funds.
Perhaps Hartcher needs to ask whether there are other ways to divert cash into savings rather than expenditure. A really good way would be to get back to work on lifting average employees super contributions to 15% of income - not just politicians (in the post Latham rules) and public servants. One way is to divert some tax cuts into employees super funds. So we can still tax but not spend but make the saving in the name of the taxpayers not the amorphous Government.
Hartcher's second policy area is education, where he generally joins the crowd who want to beat up on teachers and education unions. His first call is to adopt national standard curricula. Memo to all commentators: this is a good policy almost everywhere other than NSW where we still have a fairly substantive curricula. Uniformity in itself isn't always necessarily good. He then turns his attention to literacy and numeracy standards asking the States to insist that the results of the national standards tests be released school by school when conducted. This is such poor policy, because it makes the assumption that the school is the only factor determining the result and ignores other socio-economic factors. I'm all for reliable data, but what we need is data on the school "value added". That is, for each school how good is the phalanx of Year 6 results against the results that the same students (wherever they were then) scored in Year 3 (or whatever prior comparison years are available). That is the measure of the school.
As for demanding "explicit mechanisms for improving levels of numeracy and literacy" I don't know of any State education system that doesn't have that as a goal and indeed have matching strategies. Does Hartcher really imagine it is otherwise?
On the third policy area - health - Hartcher really squibs it by saying "All you have to do this year is set the detailed performance targets for the states to meet" While that is simply repeating what the ALP said in the campaign, anyone will tell you that the problem in health policy is actually knowing what good looks like. For example, if hospitals have success in improving recovery times and reducing hospital stays (usually with the application of expensive high-tech capital equipment) they get criticised for reducing the number of bed-days in the hospital.
Public policy planning I think is a little beyond the capability of Peter Hartcher.
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