Friday, November 14, 2008

Train station conversation

If you live in the State of NSW you have been subject to some screaming headlines about the current Government over recent days and its mini-budget.

But it is interesting to note the most common stoic public response to this - as reflected in conversations on the train this morning. Large sections of the public think the solution is to get rid of State Government as an institution, not just change the set of currently elected politicians.

Today Tony Abbott has made his suggestion, change section 51 of the constitution. While his focus has been more on places where Federal?state co-operation is required - his suggestion does create a pathway that could lead to the eventual abolition of the States, as a central Government with the ability to make laws about anything eventually would.

The idea has merit, but we shouldn't fool ourselves into believing it solves much. As the early experience of Federation showed, and the 1910 Royal Commission into the Postal Service demonstrated, migration to a centralised model is hard.

And the issue of the need for "co-operation" doesn't go away, it just changes. Even if there is only one level of Government the co-ordination of the training of sufficient doctors and nurses with the availability of hospital beds, and the managing of the balance between hospital beds, rehabilitation beds and aged care facilities is a dfficult undertaking. But at least the proposal would reduce the ability to undertake the "blame game."

However more of the issues require us to think harder about the procedures and methods of co-ordination, and the ways incentives are constructed that can result in sub-optimal outcomes. If you remunerate a salesman just on how many units he sells and manufacturing on how low the per unit cost can be you can wing up selling al red widgets and making all blue. The same co-ordination issues occur everywhere, but our systems rarely deal with the need for the co-ordination to occur.

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