Monday, February 14, 2011

The art of selective quoting

In a piece in today's SMH titled Use broadband funds instead, says business council economics correspondant Peter Martin starts;

The federal government should take money out of the funds set aside for the national broadband network to pay for flood reconstruction and abandon plans for a levy, the Business Council says in a pre-budget submission to be made public today.

This is an interesting take on the submission. The BCA media release didn't mention the NBN or broadband. The actual pre-budget submission referred to the NBN three times in 136 pages. Once was an example of an infrastructure project that had not been demonstrated to have a net benefit.

The paragraph read;

We need governments to maintain their commitment to fund important economic infrastructure. However, the current shortage of funds and labour required in our growing export sectors and to support rebuilding efforts from flood damage in the eastern states means that spending on infrastructure for the purpose of stimulating the economy alone is no longer necessary. Any infrastructure project that is currently being supported by government but which has not been demonstrated to provide a net benefit to the Australian economy should be strongly reconsidered. The largest of these projects is the National Broadband Network.

The BCA is here apparently conceding a very Keynseian that a government could justify an expenditure purely on expansionary grounds. The argument here is that since we don't need expansion then only projects with a positive net benefit should be pursued.

But the problem is there is likely to be more infrastructure projects with a positive net benefit than would be able to be met from the budget, and especially so if there is an additional constraint of not wanting to overheat the economy.

If the real issue is a net capital constraint, the theory is not that you invest in projects with a net benefit, but instead you invest in those of all the competing projects that have the highest benefit/cost ratio.

The challenge remains identifying the real benefits. The CEOs who make up the BCA get paid a lot of money to make business decisions. They make these decisions on incomplete information, just like governments.

The only other references to the NBN were in the context of labelling the "intergenerational report" as "political". Since when is it a crime for politicians to be political? That is what we pay them for - to make decisions on incomplete information.

As for journalists, in particular economic correspondents, it looks like we pay them to peddle their favourite prejudices. How else to explain;

The council's submission echoes a report from the Economist Intelligence Unit in Britain last week that found Australia's proposed network to be the world's most expensive, offering relatively poor value for taxpayer funds.

Novae Meridianae Demetae Dexter delenda est

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