The good, the bad and the ugly of Australian economics

The 41st Australian Conference of Economists was held in Melbourne last week. It provided a unique insight into the industry that should have been seriously shaken up by its failure to foresee the financial crisis, and to provide consistent macro-economic advice in general. Sadly, it was not.

John Quiggin set the challenge to all attendees to make economic research relevant to policy, and to communicate it better to the public.  He noted that microeconomics had advanced a great deal in the past 20 years, but that the profession had failed to maintain any policy relevance.  For example, Quiggin noted that there is no consistent agreed method for assessing whether private or public provision of a service is likely to be better than the other.  He noted that we went from three decades of government provision for no particular reason, to the past three decades of privatisation – with neither trend based on solid economic principles.

I agree whole-heartedly that microeconomics has advanced our understanding of markets, but the really important policy questions are mostly macro-economic, and it is here that economists world-wide have struggled.  Quiggin, like most intelligent economists, made this point very strongly and suggested that the path for macro-economics in the future would involve dynamic models – in fact it sounded like Quiggin was explaining Steve Keen’s work (and others), yet no one at the conference seemed to know or care about this type of analysis.

It was a telling insight into the ‘market failure’ of the economics profession.

I can divide my overview into three key areas – productivity, Dutch disease, and vested interests.

Productivity

David Gruen, Executive Director of Treasury’s macroeconomic group, spoke about our productivity challenge. Based on a recent international survey, he argued that Australia’s inferior management ability might be the cause of our productivity slump.  I held back from asking the obvious question – ‘Is management performance the same unexplained residual as productivity?”.  Because it is, basically. And I figured anyone who was a serious economist would immediately see this as the fundamental basis of the argument.

They didn’t. And the media reported his comments uncritically.

It took Dr Hui Wei, Director of Economic Analysis and Reporting at the ABS, to correct the panel about their incorrect inferences from the multifactor productivity (MFP) measure.  Wei is the ABS productivity measurement guru, and a serious critic of the measure. His own analysis makes my previous criticisms look mild. Labour productivity, he explained, is the only measure that contains useful information, and it grows mostly through ‘capital deepening’.  By this measure our productivity growth is world leading.

Yet, for the rest of the conference vested interest after vested interest used our declining MFP as the critical reason we should adopt their proposed reforms.  Henry Ergas tried to blame government infrastructure provision, especially the NBN, for our productivity performance, calling for more privatisation and less regulation in general.  He explained that no official cost benefit analysis was undertaken for the NBN, and that this would be just another ‘waste of money’ that will undermine our productivity.  He couldn’t think of any government infrastructure project that was ‘successful’, and his own private cost-benefit analysis showed the project the NBN to be a terrible waste of money.

An audience member suggested that most government infrastructure historically never had such analysis, even the successful projects, and that cost-benefit analysis can give you any answer you want in any case by simply tweaking the assumptions. Ergas replied that knowing what assumptions are required for the project to provide net benefits was critical.  He then promoted his own analysis (conducted by his consulting firm immediately before it went into administration), while generating a lot of confused looks when he seemed to argue that coaxial cable and fibre optic cable are as good as each other.  Yet his analysis is a feasibility study of private benefits, and ignores all social benefits. Indeed, his submission simply assumes that there are economy-wide productivity losses from the NBN compared to the base case.  Can’t argue with that now can we?

Judith Sloan added her two cents, suggesting that labour market reform (read: lower wages) is required to make us more competitive internationally.  I can’t help think what sort of wage reductions would be required to offset the 40% appreciation of the currency since the middle of last decade.

Ken Henry was one of the few presenters to demonstrate an exceptional understanding of productivity, noting that as we adjust towards mining, the ‘labour shedding’ in other sectors will automatically generate improvements in that sector’s measured productivity.  But he failed to make the final link with Wei’s analysis, especially that continued productivity growth requires capital investment in those sectors, which won’t happen during a mining investment boom.

Dutch Disease

Gruen’s presentation moved on to the Terms of Trade and the mining boom.  His chart of the ToT forecast out for 40 years was mind-bogglingly simplistic.  Last year I discussed in detail the patterns in the Terms of Trade and the reasons for concern about Dutch Disease.  Even the RBA has noted that the ToT never simply glides back slowly from a peak, but typically crashes to far below the long run average (here’s a long run chart).

The next day Max Corden, Bob Gregory and Peter Sheehan presented detailed analysis of the current Terms of Trade boom and surging investment in mining.  These three individuals had probably more experience and knowledge about the topic than the rest of the profession added together. Corden argued that the optimal policy response to the resources boom depends on how long you expect it to last.  If you expect it to last indefinitely, as Treasury does, then you could probably do nothing.  Although he thought that a highly unlikely scenario.

Ross Garnaut was the only one in the room to suggest that we might want to consider the policy question of what to do if you have just had a short term resources boom and did nothing about it?  A much more pressing question given that the ToT has peaked and the historical record shows no precedent for a long boom.

Later, Garnaut spoke about China’s development and Wing Thye Woo provided some insights into Chinese politics, including the problematic political incentives within the Communist Party.  If I add this analysis to Treasury’s, and to Ken Hernys’s suggestion that one way for non-mining sectors to adapt is to send production offshore, I get the impression that Australian economic policy has been outsourced to the Communist Party of China.

Ken Henry’s analysis (link has full speech transcript) was very important.  He made the observation that the mining boom is not soaking up workers but displacing them by making non-mining trade exposed parts of the economy very uncompetitive.  Of course Judith Sloan had her own interpretation:

In effect, mining has been papering over the weakness in the rest of the economy.

Actually, what Ken Henry said is that foreign mining construction investment causes the high dollar, which then causes the slumping non-mining trade-exposed sectors.  Although in an environment of low credit growth, other sectors would still be struggling.

Sloan further noted:

But listening to some of the speakers, it was easy to gain the impression that some economists think Australia would be better off without mining. After all, it is largely foreign owned, it doesn’t employ many workers and mining companies hardly pay any tax. And by pushing up the value of the Australian dollar, life is made more difficult for firms in other sectors, most notably those in non-mining trade exposed industries.

I think Sloan is missing the point entirely – there is value in macro-economic stability, and whenever a country has a boom, they forget about the inevitable bust. Ergas said it was odd that we think of mineral wealth and resources as a curse, or a disease.  But when asked whether the Spanish might have also thought their foreign funded construction boom was nothing but sunshine and lollipops, and might continue forever, he had little constructive to add.  Indeed, I asked him this exact question:

“Henry, you say the the benefits from the mining boom are what you have left when the boom is over. Yet by your reasoning we should all become engineers and labourers, build as many rail lines, ports, pipelines and gas wells as possible, let the dollar reach record highs, let other industries collapse and take no extra taxes from the mining sector. Only then will we be left a prosperous economy when the boom is over.”

Apparently I suffer from Rip Van Winkle fallacy.  We won’t simply wake up in forty years. The economy will still exist in the mean time, adjusting back and forth.  While I think his forty years is a bit optimistic, he basically has no prescription for macro-economic management regardless of any circumstance.  It’s privatisation, deregulation, and lower wages all the way. Not really the guy I’d be looking to for policy advice.

Speaking of very little constructive contribution, the amount of talk about Dutch Disease, with absolutely no reference to foreign ownership and the demand for the Aussie dollar, very little about interest rates and the carry trade, nothing about currency intervention, nothing about anything, really, except nice polite chit-chat about magically becoming more productive, which makes no sense at all because we would actually have to become more productive than everyone else, was a worry.  And remember Dr Wei? To become more productive in non-mining sectors they need to invest in more capital equipment, which is exactly what is not happening during a mining construction boom.

Vested Interests

If there was one final lesson, it was that top quality independent thinkers in the profession are vastly outnumbered by vested interests.

For example, Michael Porter thinks that incomes taxes on the rich ‘crowd out’ philanthropy , that there has not been one decent public university anywhere in the world, ever, and that school vouchers are clearly the only way to provide a fair school system. He also said he wished he could live 50 years longer to see just how massive our mining boom will be.  According to his CV some very powerful people take him seriously. When Porter asked Ken Henry about decreasing taxes on the super rich so that they might be more inclined to start ‘a private university like the University of Chicago’, Henry at least made it clear that the question was absurd. By the way, the Productivity Commission has very good research on taxes and charitable giving here.

Lawrence H White, George Mason Professor, and an exceptionally engaging speaker, spent his time in the spotlight promoting his book on the Clash of Economic Ideas. If his speech was anything to go by, the book explains how the ideas of the Mount Pelerin Society have stood the test of time, and that governments can do almost nothing to promote well-being and social aims (and that the US might default on its debts to itself).

I asked Professor White whether he thought his discussion was even-handed, noting that he was exceptionally flattering of the Mt Pelerin Society’s members, against a caricature of  the ideas of John Maynard Keynes.  If I read his book, apparently another chapter deals with Keynes’ ideas in more detail.

Another audience member took this line of enquiry further, noting that the initial meeting of the Mount Pelerin Society in 1947 was funded by bankers and wealthy business people, and that it probably had some vested interest in promoting post-war privatisation policies and a right-wing agenda from the start.  White responded that, in fact, he was a member of the society, and that it was now mostly funded by members and their institutions, be they universities or private ‘think-tanks’.  Oh, now I get it.

Then there were the usual suspects – some already mentioned such as Judith Sloan, Henry Ergas and some who really shouldn’t have been there at all, like Steven Kates and the statistician of the Master Builders Association.

Lucky, amidst all of this, there were some high quality papers presented by up and coming young stars of the profession, and I learnt a great deal about a wide variety of topics from them.

I want to end with some lessons:

  • A Nobel Prize in economics is not an indicator of public speaking ability
  • those who know the least talk the most, and this applies to economic debate in the Australian media more generally
  • the good guys are completely outnumbered by the vested interests
  • there is an absolute lack of disclosure about financial interests of people offering economic policy advise and contributing, “as experts”, to the public policy debate
  • The standards of statistical understanding vary enormously
  • No one knows what money is or where it comes from
  • Representatives of our public institutions are good at talking without saying anything of value
  • Ideology rules the day
The good, the bad and the ugly.

Tips, suggestions, comments and requests to [email protected] + follow me on Twitter @rumplestatskin

Comments

    • Rumplestatskin

      The good guys seemed to be very restrained. Ken Henry, for example, showed immense knowledge but was very reserved when expressing his opinions on policy. Bob Gregory and Peter Sheehan, along with Max Corden, probably the best macroeconomists in the room, had their reasoned views completely swamped when you look at the conference as a whole. And they never seem to generate media attention to their rather sophisticated work, except here at MacroBusiness.

      Also, a handful of the young stars were very good, but mostly in microeconomics.

      Quiggin, Jagdish Bhagwati, Stephen King were all very good, well reasoned and sensible. Except Bhagwati’s view that international free flows of capital can be very disruptive (and not even considered in most economic theories), in contrast to the beneficial free trade of goods and services, was ignored for the whole discussion on Dutch disease.

      • It sounds like Australia, with its foreign-funded mining boom, runs the risk of becoming the 21st-century version of South Africa, with the economists blindly cheering along this process. As Hannah Arendt put it in “The Political Emancipation of the Bourgeoisie,”

        **quote**
        What imperialists actually wanted was expansion of political power without the foundation of a body politic. Imperialist expansion had been touched off by a curious kind of economic crisis, the overproduction of capital and the emergence of “superfluous” money… For the first time, investment of power did not pave the way for investment of money, but export of power followed meekly in the train of exported money.
        **end of quote**

      • Good analysis, Cameron. I love:

        “…..the good guys are completely outnumbered by the vested interests…..”

        ABSOLUTELY.

        You are more likely to get honest analysis from someone who is completely OUTSIDE the system and who does not depend for an income, on any of the vital players in it.

        I have been saying that CBD property owning interests are one vested interest that is responsible for a LOT of bad policy, especially on urban form and transport policy.

        One of my most treasured acquaintances is a partner in an international consulting firm (with HQ in Washington) who candidly admits behind the scenes that consultancy firms that make recommendations that are different to what the BUREAUCRACIES want (more so than the politicians) speedily end up with no work. The main means of change for the better, is informal networking and getting the ear of courageous politicians.

        • The Patrician

          Interesting doco on ABC2 last night “The Battle for Brooklyn”

          Not so much the Quixotic battle of the little guy but the tactics and astroturfing of the developer Forest City Ratner and paralells to Oz.

          Nice little cameo towards the end for Barclays and the smooth as silk Bob Diamond

      • The Patrician

        Re Ken Henry

        I’d like to have a couple of hours and a few beers with him to find out what he really thinks.

  1. ‘those who know the least talk the most, and this applies to economic debate in the Australian media more generally’

    That’s probably what really bothers me, mainly because those that talk the most usually are the ones that get listened to the most.

  2. Deus Forex Machina

    Rumple – Brilliant and thanks.

    Although this is a truly saddening perspective on economics

  3. Geo FibonacciMEMBER

    Ergas has always been a shill for the Telstra/Foxtel/NewsCorp/Coalition agenda. He’s been wrong about the Australian telco industry for decades. It’s no surprise that his NBN CBA ignores the long-term social benefits, a view that team “NBN White Elephant” need to justify its cancellation.

    HFC equivalent to fibre eh? I guess only a room full of economists could believe that.

    thanks for a great wrap.

  4. Thanks for the update Rumple,

    Hopefully the papers will be available to the general public in due course.

    Look forward to some coverage of the up and comers and what they are writing about.

    Very interested in what work is going on to outline what an economy without debt growth might look like and whether it is really possible to transition to one from a high level of debt without effective default.

    That seems to be the elephant in the room.

    There may be no alternative to default and by default i dont include the concept of ‘managed inflation’ which seems to be developing a fan base.

    It may just be a question of when and how.

  5. Good, unbiased coverage; not something you see on the MSM.

    Did any of the economists talk about high level of private debt or why so many of the public-private-partnerships have ended in failure in Australia?

    • That only depends how you define failure.. Massive fees and bonuses for writing the deals = success.

      They’re only failures for the taxpayer/consumer who has to pay for it all..

  6. That’s pretty sad Cameron. Thanks a lot for posting as it’s a looking glass into mainstream economics. Factor this with our political policy landscape and we’re in a bad place. Maybe that’s the best we can do?

    • Rumplestatskin

      It is mild compared to the US economic and policy debate, so it could be a lot worse.

      • The worst failure everywhere, but especially in the USA, is the failure to see the crucial role of urban land supply restrictions in long term economic performance and cyclical volatility.

  7. Great reporting, Rumplestatskin.

    The economics profession here in the US is in every bit as bad of conditon as in Australia, if not worse.

    The current state of the economics profession very much reminds me of the state of the Roman Church of the late medieval period, which Martin Luther excoriated as having “become the most licentious den of theieves, the most shameless of all brothels, the kingdom of sin, death, and hell.”

  8. Great reporting, Rumplestatskin.

    The state of the economics profession here in the U.S. is every bit as bad, if not worse, than it is in Australia.

    It reminds one of the despicable condition the Roman Church descended into during the late medieval period.

  9. I can’t help think what sort of wage reductions would be required to offset the 40% appreciation of the currency since the middle of last decade.

    Bingo!

    Actually the currency appreciation has been more like 100% since the lows of 2001-02, and its more than 40% above its long term average of 70c.

    BTW, great post.

  10. Interesting overview, perhaps a little politically clouded…

    Thought the Ken Henry speech a stunner (linked to it in Weekend Musings), worthy of some discussion, particularly in regard to extent of structural adjustment

    Also linked Max Corden’s speech during the past week. A refinement of his paper earlier this year – looking forward to seeing him later this month at a presentation here in Perth, have a question or two.

    Finally leave you with John Quiggin, last week, on the current government:

    ‘Looking at this appalling crew, I can only quote Oliver Cromwell “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go.”’

    Looking forward to the ‘microscope’ on individual presentations?

    • Lets include the full quote shall we…

      And now, these geniuses have decided that it’s smart politics to make war on the party that’s keeping Federal Labor in office, and with which they will need to deal for the indefinite future if they ever want to pass legislation through the Parliament. Looking at this appalling crew, I can only quote Oliver Cromwell “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go.”

      Please take your selective quoting and astroturfing elsewhere.

      • Either way, for whatever reason, Quiggin has made his view abundantly clear. That is the essential point. I agree.

        • You do know Quiggin votes Green don’t you?

          We all know the ALP machine is broken — hence their idiotic decision to distance themselves from the Greens — but there is no sane alternative. The Abbott-led Liberal Party is a long way from the political centre and is infested with ideologues, social conservatives, climate denialists, creationists, monarchists, and apologists for the resources sector.

          If Turnbull was running the show the Liberals would have far greater appeal to the middle ground, and it would keep a lid on the more extreme elements in the party, but I doubt an Abbott government with a huge majority will be able to stop themselves overstepping the mark with a Work Choices 2.0 or somesuch.

          If Clive Palmer gets the nomination in Swan’s seat I think it will be the Libs shark-jumping moment.

          • “If Clive Palmer gets the nomination in Swan’s seat I think it will be the Libs shark-jumping moment.”

            Please, please, please let this happen.

          • Quiggin’s voting preferences (as wrong as they may be) are irrelevant to the timing and correctness of his plea: In the name of God, go.

            The Liberals policy is largely centrist in all key areas.

          • Clive does not want a seat. He wants a bargaining chip.
            “I will not run, if my casino gets approval….etc”

          • drsmithyMEMBER

            The Liberals policy is largely centrist in all key areas.

            Nope:

            http://www.politicalcompass.org/aus2007
            http://www.politicalcompass.org/aus2010

            And the continuing shift to the right with Abbot at the helm has only gotten worse.

            The last time the Liberals were “centrist”, Keating was still PM. Then Little John set off eagerly into the religious-right-wing, neo-con jungle on a quest to turn us into a mini-me of America.

            The implication that your far right wing libertarian ideology and Quiggins’ centre-left social democratic ideology would align on much of substance is somewhat comical.

          • The Australian version of Political Compass has been highjacked, politicised and as such is not reliable.

            Each of the two major parties are are generally centrist, with slight leanings (soft left,soft right) on some individual policy – just enough to create a sense of differentiation.

          • And who will give Abbott this huge majority. Oh yes, the people.

            So the people are stupid and insane even (“the only sane alternative”), the same people who (stupidly?) put this stupid broken Labor “machine” into power? To waste our money on (Green) cultist nonsense and a plethora of policy failures?

            If Turnbull was running the show , Labor would romp in. Ergo, he is not and quite rightly so. MT is Labor lite and was a lap poodle to Rudd .He turned out so well for the Left didn’t he? MT will never again lead the Libs. He clearly has an identity crisis.

            You see Lorax, to differ with you on what is right for the good of our country should not attract scorn , insults or derision.

            What Quiggan and much of the Left already now know is this: Labor is not good for our Country and it’s future.

            HnH, thanks for a great article.

          • The Australian version of Political Compass has been highjacked, politicised and as such is not reliable.

            ROLF..Minebot exchanging the hard hat for a tin foil hat.

            When will you realize the problem IS WITH YOUR political and moral compass, led astray by the magnetic greed and self-interest, extracting the nation’s resources for windfall profits.

          • No problem with me mate. Australia has always had a mining sector, nothing new there, business as usual. Extraction is what we do!

            As for windfall profits, a much debated concept (eg are massive bank profits in times of a credit boom ‘windfall’, should they be taxed as such). Even Ken Henry appears to have doubts about the worth/iness of the MRRT… (see Prince’s twitter feed)

            Times are changing. 🙂

          • drsmithyMEMBER

            The Australian version of Political Compass has been highjacked, politicised and as such is not reliable.
            No, it hasn’t. Just because you have a huge cognitive dissonance between what you actually believe and what you want to think you believe, does not make everyone else wrong.

            Each of the two major parties are are generally centrist, with slight leanings (soft left,soft right) on some individual policy – just enough to create a sense of differentiation.
            No, they’re not. The entire political spectrum in Australia – as with the rest of the world – has been shifting right (at an accelerating rate) for 30-odd years.

            This has given us today’s far-right (Liberals), centre-right (Labor) and centre-Left (Greens) political parties.

            Though at least we haven’t fallen as far into the void as America, with its right (Democrats), far right (Republicans) and Loony Right (Tea Party) parties, despite the obvious fantasies you have about it happening.

          • drsmithyMEMBER

            What Quiggan and much of the Left already now know is this: Labor is not good for our Country and it’s future.

            Indeed, but people like 3d1k quoting Quiggan on that topic are missing (or ignoring) the point: they’re bad for the country because they’ve become a right-wing party just like the Liberals (albeit not so extreme).

          • Come off it Smithy. The Australian Liberal Party is not ‘far-right ideologues’.

            Problem might be you’re old-school socialist – Rhiannon is right up your alley (and to my mind the most articulate of the current Greens, Hanson Young is annoyinglyg woeful, Milne ineffective – ah, but Rhiannon is not really a Green…)

          • drsmithyMEMBER

            Come off it Smithy. The Australian Liberal Party is not ‘far-right ideologues’.
            That’s the second time in this discussion you’ve misquoted someone.

            They are well and truly on the far right of the Australian political spectrum. An American politician – or one of their loyal believers like you – probably wouldn’t consider them far right, but they absolutely are in this country.

            Labor are following close behind in a ridiculous misguided attempt to win back voters. To the point where we now have the absurdly macabre situation of the two parties trying to outdo each other on how much suffering they can threaten to heap onto refugees in an effort to dissuade them from risking death on a boat trip.

            Problem might be you’re old-school socialist […]
            Given your definition of an “old-school socialist” appears to be someone who thinks things like publicly funded education and healthcare are good ideas, then yes, I suppose I would be.

  11. russellsmith55

    Awesome wrap up, sounds an awful lot like other industry conferences I’ve suffered through 🙂

  12. That was a thoroughly depressing read.

    The worst thing is the dutch disease discussion. Why is Ken Henry still peddling this line that the currency is over-valued because of the ToT? It has no basis in reality or theory. Check the post-float data, the strongest force behind changes in the exchange rate has been long-term interest rate differentials (not the ToT). Cordon has pointed out that Dutch Disease is partly self-inflicted (because the RBA has been forced to do the tightening). Does anyone listen to Cordon?

    There are actually good Australian economists and ideas, but they never seem to make it into the mainstream media/policy debates.

    • Sweeper, I think Henry’s view is more nuanced than suggested here – linked to both papers last week if you are interested to read.

    • the strongest force behind changes in the exchange rate has been long-term interest rate differentials (not the ToT).

      Sure, but why has the RBA set rates so much higher than other developed economies? Surely the mining boom (and mining investment boom) were the primary drivers of interest rate hikes during the 2009-2011 tightening cycle? Its not like the non-mining economy was going gangbusters during that period.

      • +10. Good catch.

        Minebot, remember what I said about intelligence of MB audience Versus MSM audience. Don’t treat us like gullible fools.

      • “…why has the RBA set rates higher than other developed economies?”

        Essentially because the Australian moneyed class – bankers, financiers, and policymakers – are perhaps some of the most conservative and parochial bunch of philistines in global finance today. There is currently in this country a very serious disconnect between the money economy and the real economy made all the worse, of course, with financial deregulation. Combine this with a political class completely bereft of any foresight and intellectual leadership and the vast black hole that is economic discourse in Australia will continue to be filled by the vested interests. And this is precisely how the moneyed class prefer to do business.

      • During that cycle, fiscal policy was way too loose – even when it was clear that the economy was growing and the ToT recovering.

        The inflation targeting framework should have been reconsidered when it became clear that other high income countries weren’t recovering – especially when the US started talking up QE2.

  13. Two of my PhD students went and presented. I am not sure if they were the “up and coming young stars” but I agree the young people are better trainded now. But they are also more distant from the real world now.

  14. thomickersMEMBER

    The good, the bad & the ugly thing about the Australian economy is that “it’s different here”

  15. Cognitive Dissonance

    Thank you good post.

    Your comments made me think of Niall Ferguson and his latest book.

    He discusses that failures in complex societies maybe the result of the corruption of our institutions, and that once too many of our institutions go rouge by becoming wealth consumers and not producers (this can tie into the silly productivity discussion) that our failure or necessary correction is set in motion

    http://www.youtube.com/watch?v=yrkjD7-knCU

    • Absolutely agree on the increasing failure of society and its opinion leaders, to distinguish between “wealth creation” and “wealth transfer”/”rent seeking”.

      The danger is that in the mounting backlash against “capitalism”, our capacity for wealth creation per se will be destroyed, while on the record of the last few decades, it is the rent-seekers who seem to outwit everyone and survive. Wall Street grew at the expense of Main Street USA something shocking. Here is a quote from Dr David Evans of the “Science and Public Policy Institute”:

      “……..The profits made in the financial sector (in the USA) increased from 10% of all profits before 1971 to 45% in 2006. The finance industry only employs about five percent of workers, and produces no tangible goods and few essential services, yet it captured a huge share of profit during the financial bubble. That is rent seeking on a monumental scale……”

      I understand that there was once an opinion among classical economists, that “finance is handmaiden to industry”. I do see the above situation, if true, as a case of wealth transfer dominating wealth creation. But I do see a range of factors affecting this; urban growth constraints as a prime example.

      • Well it looks like we’re getting ready for the blog wars here. It’s Macro Business and Demographia—-the brain child of right-wing ideologue Wendell Cox ( http://en.wikipedia.org/wiki/Wendell_Cox )—-pitted against Steve Keen’s Debtwatch.

        Debtwatch put up a new post today titled “Beware the rent-seeking organisation: don’t be dudded by housing data” which states:

        **quote**
        The non-existent housing shortage probably comprises the most popular argument used by the bubble deniers to justify astronomical housing prices. As Australia is apparently suffering from a chronic deficit of dwellings, demand is greatly outstripping supply, leading to rising prices.
        **end of quote**

        This sounds like anathema to Leith van Onselen, who has asserted:

        **quote**
        As long as commentators focus primarily on the demand side of the housing market, whilst ignoring supply-side constraints, they will never fully understand the drivers of housing bubbles and busts.
        http://seekingalpha.com/article/245203-the-truth-about-the-u-s-housing-market
        **end of quote**

        So get your bag of popcorn and sit back for the fireworks to begin. This should be a great sequel to the Keen vs. Krguman episode.

        • The lack of understanding of housing market economics has done and is still doing appalling damage all around the world. The few urban economists who do understand are being ignored: Alan W. Evans; Steven Malpezzi; Alain Bertaud; Peter Gordon; for example.

          The crucial factor is NOT “numbers of potential buyers”, it is the difference between the PRICES of the homes and the INCOMES of the potential buyers. It does not matter if there are one million, 2 million, or 20 million people without housing AND unable to afford the prices…..!!!!!

          Speculative irrationalism means that it is quite possible for steady increases in the number of unoccupied properties, at the same time as prices continue to rise driven by speculation, and the REAL potential “end user” buyers remain living with their parents, flatting with several other young people, or living in slums. The worst example is China today – millions of grossly overpriced apartments, with capital gains already banked by the corrupt CCP officials who have flicked the properties to “greater sucker” investors; and the slums bursting with people who COULD afford to rent an apartment had development been on Houston-free-market lines.

          The names and faces are different but the underlying principles are the same, in Ireland, in Spain, in Australia, in the UK. The problem comes down to “supply” being QUOTA-ED. Even if supply is “excessive”, the process is QUOTA-ED. If it was not quota-ed and there was a genuinely competitive land supply process, there would be no price volatility – ergo; most of the housing markets in heartland and southern USA.

          This is true for virtually anything; it is mystifying that so many economists are so slow to work this out. Here is a parallel example. In New Zealand a few decades ago, the government decided to change the approach to car import licensing, and put the quantities of import license up for tender. The next few rounds of the tender process, were marked by car dealers bidding higher and higher prices for larger and larger quantities of license. The government saw this as a nice little revenue earner and started to increase the amounts of import license sold. Initially, the pent-up demand for imported cars resulted in high prices for the cars. After about round 3, the few winners of the import license tender process, who had secured large quantities of license each, went bankrupt, and the prices of imported cars dropped like a stone from the earlier high. The tender winners had locked their competitors out of the market by cornering the supply, but got themselves huge warehouses full of grossly overpriced cars that the end consumer simply was no longer prepared to pay the price for.

          Simultaneous oversupply and price inflation is perfectly possible under a quota system. This is exactly what happens when land for urban development is “quota-ed”. Steven Malpezzi says: “PRICE” is the single sufficient statistic to determine whether supply is sufficiently elastic or not. Alan W. Evans, Shlomo Angel and others have been saying for years that an urban “plan” for “X years supply of land” will not be sufficient to maintain affordability unless it is so relaxed that it will not in fact constrain urban growth compared to “no restraint”. Portland’s famous urban growth boundary had “20 years supply of land” inside it, yet prices began to escalate just 3 years later, and within another 3 years, every rural property owner within the boundary was being harassed by developers and speculators, and price expectations on the part of the vendors steadily increased by tens and even hundreds of times compared to true rural land values.

          The only market condition that prevents this, is an absence of growth constraints and the ability of any developer to “leap-frog” onto land for which the price expectations are true rural values. And the fact that this is possible means that people do not bother to speculate in the first place. This is true “free market discipline”.

    • There are so many issues now, and just how do we correct them? Just look at JPM where they can make more money from derivative gambling rather then conventional lending for one. Ok they got caught on the last Whale trade, but that was just a discontinuity in their performance in that sector.

      IMO until we can hold politicians to account we’re done for. How is it that politicians and PS’s have a golden pension yet we don’t. If we cross the line we pay with jail or fines, yet they don’t; pretty much the same for bankers and big business. You’d think the politicians should be for the people, but more like vested interests as Cameron says.

      Gillian Tett (FT) commented last week we should be concerned by corporations dash for cash yet they trade pension funds in the equity market with no regard. Every trade gets a commission so why waste a good crisis.

      It used to be that if you worked hard you could get somewhere, but I’m not sure that’s the case anymore.

      • a63 said:

        It used to be that if you worked hard you could get somewhere, but I’m not sure that’s the case anymore.

        The Christian theologian Reinhold Niebuhr (who came from an era when there was still such a thing as a liberal Christian theologian) put it this way:

        **quote**
        Thus the rising middle classes of the eighteenth and nineteenth centuries regarded their superior advantages over the world of labor as the just rewards of a diligent and righteous life… [I]ndividualism, and the emphasis upon the virtues of thrift and diligence, allowed them to believe that the poverty of the workers was due to their laziness and their improvidence… This middle-class creed sprang so naturally from the circumstances of middle-class life that it ought perhaps, to be regarded as an illusion rather than a pretension. But when it is maintained in defiance of all the facts of an industrial civilisation, which reveal how insignificant are the factors of virtuous thrift and industry beside the factor of the disproportion in economic power in the creation of economic inequality, the element of honest illusion is transmuted into dishonest pretension.

        –Reinhold Niebuhr, Moral Man & Immoral Society, 1932

        **end of quote**

        • It is worth noting at this point, that all other cultures always have, and still do, regard prosperity and/or poverty as “the will of (insert name of deity here)……”

          Only (Judeo) Christian values celebrate altruism, which is why Ayn Rand hated Christianity so much. Ironically, the free markets and property right and so on that began part of humanity heading in the “right” direction for the likes of Ayn Rand, owe everything for their gestation, Christian values post-Reformation.

          The morphing of the protestant work ethic into a justification for greed, as identified by Neibuhr, is of course a perversion of christian values and a sign of the decline in the practice of those values. There is still a strong correlation between charitable giving and “conservative” Christian belief.

          “Liberation theology” and so on are a perversion of Christianity in the other direction, and most likely a result of “the long march through the institutions”, the long march through the clergy being the same as the long march through the universities and journalism and the legal profession and so on. There are not many Christian denominations now that are immune to this stuff, beyond US “fundamentalism”. I believe this to be a factor in the economic standout performance of “the bible belt”. Even the IMF did a paper that found a correlation between the absence of a house price bubble, and the proportion of the population that are “evangelical”. The title: “Irrational Exuberance in Housing Markets: Were Evangelicals Left Behind”?

        • Note, too, that anti-christian regimes are marked by the bringing of disaster on their people; Communism, Naziism; etc. Note the endemic corruption in so many non-christian nations, and even in the “nomenklatura” in Communist systems.

  16. “I agree whole-heartedly that microeconomics has advanced our understanding of markets, but the really important policy questions are mostly macro-economic”

    Whilst many interesting policy questions (especially at the moment) are indeed macroeconomic, surely this is too strong. This ignores the entire field on applied microeconomics which answers crucial questions for the long-term welfare and productivity of society. Examples are Health Economics (How should we fund the healthcare system? Are private hospitals more efficient than public hospitals?), Development Economics (How big are externalities to aid projects? How can microfinance enhance economic growth?), labour economics (how important is the gender wage gap? how does education improve future wages? Do minimum wages cause unemplyment?)

    I really enjoy reading Macrobusiness for its coverage of Australian and global macro issues but sometimes it seems to fall into the trap of assuming “economics” and “economists” = “macroeconomics and “macroeconomists”

    • Rumplestatskin

      I take your point, and perhaps my writing was too strong. But in my experience even applied microeconomics typically ignores the inseparable macroeconomic implications of their analysis.

      For example, questions like whether foreign sourced micro-finance has a detrimental exchange rate impacts? Is there an optimal size of healthcare sector and how would policy stop it growing to large, as expected by Baumol’s cost disease?

      In my view, minimum wages and unemployment is clearly a macro-economic question, where one needs to consider all feedbacks in the economy.

      Indeed, anytime you consider the total impacts to society, rather than a single market in isolation, you are essentially discussing a macro-economic problem. Maybe I should have made this more subtle point instead.

  17. Thanks for your reply rumplestats. I agree that of course all microeconomic reform have macroeconomic (or ‘general equilibrium’) effects. However these are often very hard to model. I don’t think this means we should ignore applied micro as a topic. I work in applied micro myself so I suppose I’m biased!

  18. “He noted that we went from three decades of government provision for no particular reason, to the past three decades of privatisation – with neither trend based on solid economic principles.”

    Ugh, how can you take such nonsense seriously? Hands up who would prefer the government to deliver the train service compared to the, arguable poor, delivery by private companies? Who would prefer to deal with telecom/telstra than one of the other companies?

    Which states have seen smaller rises in electricity costs privatised ones or the rest? No solid economic principles? How about plain old reality?

    You quote approvingly a known big government leftist then accuse those who call for less regulation as having “vested interests”. Stopped reading there.

    I want economic analysis, not thinly veiled political arguments please!

    • ..which is why I suggest ‘perhaps a little politically clouded’.

      Vested interests are the economy – trouble is you can only identify them when they are not your own personal/ideological vested interest!

    • Rumplestatskin

      “You quote approvingly a known big government leftist then accuse those who call for less regulation as having “vested interests”. Stopped reading there.”

      Someone holding an ideology based on life experience is vastly different to promoting one for financial gain.

      You can stop reading whenever you like, but I don’t think your your ‘plain old reality’ argument is sufficient to justify rather important government policy, especially given the mixed experiences with privatisation (and nationalisation) here and abroad.

      You don’t see any grey areas in the arguments for privatisation of prisons? The police force?

      I have a four part series at my old blog that explores this issue in far more detail, if you’d prefer to read that. Lots of examples, theoretical arguments and so forth – even some plain old reality in there I hope.
      Part I
      Part II
      Part III
      Part IV

      • Cameron, I’ll clarify my comment. ‘Perhaps politically clouded’, I was referring to your dismissal of the views of Ergas, Sloan and, as someone who followed your Twitter feed during the ACE2012 conference, your apparent disdain toward those that held other views. This did not easily gel with the more ‘impartial but subject to rigorous analysis’ approach in either your former blog, nor your posts here.

        You generally persuade by solid argument based on factual evidence. Of course, there is the strong possibility that you shared Sloan’s disappointment with aspects of the conference to such a degree that expression of disapproval was inevitable!

        Cheers.

        • Rumplestatskin

          Fair enough. My views are my views, so I expect them to be ‘biased’ towards my worldview.

          But I suspect even you would have thought some of the comments a little extreme, and would have seen them as simply promoting their interest group agenda.

          • Absolutely, Lawrence White, in terms of speakership, included. But it is one of my key ideas, vested interests are the economy. It is how the various interests meld to make a functioning whole that is of interest.

          • 3d1k said:

            But it is one of my key ideas, vested interests are the economy.

            Maybe so, but you can only come to such an idea if you do what the early industrialists and neoclassical and Austrian economists have done, and that is to blot out The Theory of Moral Sentiments from Adam Smith’s oeuvre. As Robert L. Heilbroner observed:

            **quote**
            Smith was neither antilabor nor anticapital…

            But in Smith’s panegyric of a free and unfettered market the rising industrialists found the theoretical justification they needed to block the first government attempts to remedy the scandalous conditions of the times.

            –Robert L. Heilbroner, The Worldly Philosophers

            **end quote**

            And of all the recent research done in the field of neuroscience, there is precious little to justify your idea. As the moral psychologist Jonathan Haidt explains:

            **quote**
            These findings suggested that emotion played a bigger role than the cognitive developmentalists had given it…

            Obviously I’m biased in terms of what I notice, but it seems to me that the zeitgeist in moral psychology has changed since 2001. Most people who study morality now read and write about emotions, the brain, chimpanzees, and evolution, as well as reasoning. This is exactly what E. O. Wilson predicted in Sociobiology: that the old approaches to morality, including Kohlberg’s, would be swept away or merged into a new approach that focused on the emotive centers of the brain as biological adaptations. Wilson even said that these emotive centers give us moral intuitions, which the moral philosophers then justify while pretending that they are intuiting truths that are independent of the contingencies of our evolved minds…

            Studies of everyday reasoning show that we usually use reason to search for evidence to support our initial judgment, which was made in milliseconds. But I do agree with Josh Greene that sometimes we can use controlled processes such as reasoning to override our initial intuitions. I just think this happens rarely, maybe in one or two percent of the hundreds of judgments we make each week.

            http://www.edge.org/3rd_culture/haidt07/haidt07_index.html

            **end of quote**

        • Rumplestatskin

          Some more evidence in favour of my interpretation of conference discussions – “Yet, for the rest of the conference vested interest after vested interest used our declining MFP as the critical reason we should adopt their proposed reforms. “

      • Rumplestatskin said:

        Someone holding an ideology based on life experience is vastly different to promoting one for financial gain.

        Absolutely!

        As Reinhold Niebuhr put it:

        **quote**
        The false abstraction of “economic man” remains a permanent defect in all bourgeois-liberal ideology. It seems to know nothing of what Thomas Hobbes termed “the continual competition for honor and dignity” in human affairs. It understands neither the traditional ethnic and cultural loyalties which qualify a consitent economic rationalism; nor the deep and complex motives in the human psyche which express themselves in the desire for “power and glory.” All the conflicts in human society involving passions and ambitions, hatreds and loves, envies and ideals not recorded in the market place, are beyond the comprehension of the typical bourgeois ethos.

        –Reinhold Nieburh, The Irony of American History

        **end of quote**

        • Perhaps. But I am continuously amazed by the capacity for humans to line up their personal views with those that give them financial gain and over-time over time honestly fail to be able to distinguish the two.

          In fact, in most of the greatest pedlers of dubious financial services I have met over the years, the convincing of themselves was an evolution that formed the base to the convincing of others.

          • There is undoubtedly a large minority of the population that behaves in a purely selfish manner and could be classified as homo economicus. As Elinor Ostrom (“Policies That Crowd Out Reciprocity and Collective Action”) explains: “It is a well known fact in the experimental literature that in games like the trust game, there is always a 30-40 percentage of individuals who act in a purely egoistic way.”

            But as she goes on to assert, “This leaves 60 to 70 percent of the other individuals who tend to follow more complex strategies involving some levels of trust and reciprocity.”

            Ernst Fehr and Urs Fishbacher (“The Economics of Strong Reciprocity”) believe that “in addition to the purely self-interested types, roughtly 40 to 50 percent of the people exhibit strongly reciprocal preferences.”

            Strong reciprocity is defined by Herbert Gintis et al (“Moral Sentiments and Material Interests: Origins, Evidence, and Consequences”) as “a predisposition to cooperate with others, and to punish (at personal cost, if necessary) those who violate the norms of cooperation, even when it is implausible to expect that these costs will be recovered at a later date.”

            The rest of the population, according to Fehr and Fischbacher, is made up of those of other social preferences, such as inequity aversion, unconditional altruism and spiteful or envious preferences.

            So neoclassical and Austrian economics are not complete fictions. They have just enough truth to them to seem plausible and verisimilar.

            All of the essays cited above can be found here:

            http://ompldr.org/vOHU2cA

      • I find “The Paradox of the Statist Business Man” by Theodore Forstmann, convincing.

        Possibly the most glaring example, is the vested interests in property investment, especially CBD interests, supporting urban growth constraints and urban planning and transport planning.

        Patrick Troy, in “The Perils Of Urban Consolidation” also gets this point right:

        “….At its heart the effect of the policy of consolidation is to defend and further entrench central city interests (emphasis added). It fails to recognise the multi-centred functioning of the existing cities. The policy relies on the alleged benefits of a highly centralised fixed rail public transport system without acknowledging to whom the benefits accrue at whose cost……”

        The once-famous economist Colin Clark was very clear in “Regional and Urban Location” (1982):
        “……In net effect, the subsidies on rail and subway suburban transport are subsidies to the owners of certain types of land – for which there is no social justification. …..”

        The same goes for radial road networks; these help to concentrate value at the CBD. Refer Brown, Morris and Taylor, “Planning for Cars In Cities”.

        Cheshire and Mills, in the introduction to the 1999 “Handbook of Urban Economics, Volume 3”, estimate that the most expensive land (usually CBD land) in growth-contained cities is 100,000 times more expensive than equivalent land in typical non-growth-constrained cities.

        It is also worth noting that much property in the centre of London has been owned by the same entities since well before the 1947 Town and Country Planning Act ensured them a much more substantial ongoing “return on investment” than what might have occurred otherwise.

        Magazine articles as far back as 1974, in possession of this writer, discuss the involvement of certain high-profile wealthy individuals in advocacy of the introduction of strict land use controls in the USA. Many such people are well known to be major funders of environmental and planning activism right to today. Of course the activists so funded will rationalise this as genuine social concern on the part of the wealthy property investors.

        Here is Mason Gaffney, in “Policies of Urban Growth Containment”, 1964:

        “…..As the German historians relate, the monopolistic city can exploit its customers. The city exploits its customers by stunting its own development, limiting the number of creaking doors and sagging gates through which its customers may go for supplies and services.

        There is also exploitation within the city. Employers, merchants, and assorted rent-collectors are generally happy with policies that keep out untrained interlopers who might have alien ideas about competing for labor, tenants, and customers, and in general keeping the natives restful in their compounds. Negative containment policies have an instinctive fascination for anyone whose interest is to limit competition.

        There are many groups which would like to limit competition, of course. But cities tend to fall most strongly under the sway of those who stand to gain or lose most by municipal decisions, and those whose assets are irrevocably committed to the city, that is, the landowners. The rest of the citizens are ‘by comparison mere transients, outsiders and climbers whose organization and influence is seldom commensurate with their numbers. To the dominant landowning oligarchy, few limitations on competition commend themselves with quite the same force of logic as limitations on the entry of new lands into urban use. It is therefore no accident that negative containment is the most respectable and salable kind of planning in many quarters. It harmonizes all too mellifluously with the interest of a dominant class. But from the viewpoint of social economy, of other interest groups, of the general welfare, of the region, state, and nation, and even of most urban landowners in their roles as workers and capitalists, negative urban containment is an instrument of monopoly exploitation……”

        • I don’t necessarily agree PB because i think the proposed cure is worse than the disease (ref the ecological, amenity and urbanisation disaster that is Gold Coast to Bris) – but you make a reasonable case as to what we have now.

          • There are several authors going back years, who have advocated the application of “sustainable living” solutions to LOW urban density and low land costs and democratised land ownership – which is the case in all 200 odd “affordable” cities in the USA in the Demographia Reports. Patrick Troy (Australian National University) “The Perils of Urban Growth Containment” (1996) is a must-read on this. Michael Neumann, “The Compact City Fallacy” is another. Patrick Moore (the famous ex Greenpeace guy) also says a lot like this in his recent book.

            Consider: high density living versus low density living: under which scenario are the following most possible?
            Geothermal heat pumps
            Burning biomass for heating and cooking
            Use of active and passive solar energy
            Use of fresh air and wind for drying clothes, ventilation, etc
            On site wind turbines
            On site food growing and poultry
            Drainage and surface permeability, CO2 absorption and heat island amelioration
            Maximum use of renewable wood (sequestered Co2) in structures
            Collection of rainwater
            On site composting and recycling
            On site waste disposal
            Local biodiversity
            The environmental movement once stood for all this stuff, along with a celebration of the benefits for humanity, especially children, of interaction with nature and greenery. Morphing into a movement insisting on cramming humanity into concrete jungles, just shows that the whole thing is quasi-religious and post-enlightenment. A LOW density model sustainable city would beat a high density one hands down, and would involve LOW land costs, not inflated land costs and relentlessly unaffordable housing and crushing debt/rent.

          • Sure, and “Smart Growth” is theory too, and in practice, we get Liverpool and Manchester and Birmingham and Newcastle and 50 other urban hells around the UK. Patrick Troy was absolutely right. You should read his book, “The Perils of Urban Consolidation”.

            In any case the Brisbane GC corridor has had more to do with bad urban planning than it has had to do with “lassez faire”.

            By the way, there is little or nothing to show for the difference between a typical US low density city, and a typical UK high density city that has been practising “smart growth” for 60 years, when discretionary incomes are taken into account. In fact congestion and local pollution of all kinds are worse outright, in most UK cities. The very severe COST of urban growth containment has been estimated by the London School of Economics Spatial Economics Research Centre, as equivalent to a 4% tax on incomes. Of course this effect compounds over time. And this cost has secured little identifiable tangible benefit. In fact it is a form of slow economic suicide. Australia is doing exactly the same to ITS urban economies right now.

    • drsmithyMEMBER

      Hands up who would prefer the government to deliver the train service compared to the, arguable poor, delivery by private companies?
      Me.

      Most, if not all, of the best run public transport systems in the world (Switzerland, France, Germany, Japan, etc) are Government owned, either directly or by proxy.

      Privatisation of natural monopolies and/or essential services has been, pretty much across the board, catastrophic for the consumer.

      • +1 giving monopoly services to the corporate sector is tried and tested failure.

        Every time I have to pay extorionate parking fees at the airport I have to count slowly to 10.

      • Haha actually it really is funny that our idiot politicians are hoodwinked into trying to create competition in monopolies and into allowing them where there shouldnt.

        • drsmithyMEMBER

          Haha actually it really is funny that our idiot politicians are hoodwinked into trying to create competition in monopolies and into allowing them where there shouldnt.

          Dunno if “funny” would be the word I’d use… 🙂

          Hopelessly naive, maybe (if I was feeling generous). Or, perhaps, maliciously negligent (if I wasn’t).

        • I agree that selling off public monopolies and making them private monopolies instead is nonsense. Here is an interesting bit of historical trivia for you. How far back was private para-transit banned in most western countries? Back in the 1920’s when the monopoly public transport systems even then, could not compete with private citizens in Model T Fords picking up fare paying passengers en route to where they were going.

          It is the “monopoly” model that is a total, utter anachronism in this day and age of GPS’s and mobile IT. The major vested interest here is public transport employee unions; just as teachers unions are what “education” policy is all about. “Transport” policy is nothing to do with the interests of “mobility” and “education” policy is nothing to do with the interests of “a well informed citizenry”.

          • drsmithyMEMBER

            How far back was private para-transit banned in most western countries? Back in the 1920′s when the monopoly public transport systems even then, could not compete with private citizens in Model T Fords picking up fare paying passengers en route to where they were going.
            I wasn’t aware private transport was banned at all.

            Also, I propose that picking up and dropping off random unknown people during a journey would largely defeat the purpose of not taking public transport for most people, to say nothing of the major and minor risks faced by both parties.

            It is the “monopoly” model that is a total, utter anachronism in this day and age of GPS’s and mobile IT. The major vested interest here is public transport employee unions; just as teachers unions are what “education” policy is all about. “Transport” policy is nothing to do with the interests of “mobility” and “education” policy is nothing to do with the interests of “a well informed citizenry”.
            I guess that explains why everyone is clamouring to be a teacher and they’re all so rich, right ?

          • PARA transport is taking fare paying passengers on board on what is otherwise a private trip. This is banned, otherwise mass transit would not exist. All your concerns re security etc can be met under existing technology. Mass transit has public safety issues too.

            Teachers unions do to education, what the UAW has done to Detroit. “Everyone is clamouring to work there and get rich”, too. Pity that education matters so much more to the future of the whole nation. Howard was a genius for getting a whole third of Australia’s children into the private system.

          • drsmithyMEMBER

            PARA transport is taking fare paying passengers on board on what is otherwise a private trip. This is banned, otherwise mass transit would not exist.
            An enormously bold claim. I certainly hope you have some better evidence than you’ve already cited.

            All your concerns re security etc can be met under existing technology. Mass transit has public safety issues too.
            Mass transit doesn’t have quite the same “serial killer cruising the streets” potential as a completely unregulated private taxi industry.

            Teachers unions do to education, what the UAW has done to Detroit. “Everyone is clamouring to work there and get rich”, too. Pity that education matters so much more to the future of the whole nation. Howard was a genius for getting a whole third of Australia’s children into the private system.
            Howard was merely engaging in his usual class warfare and trying to isolate quality education options to the well-off. It is a tragedy for our future he was so successful.

          • Howard was just a rare conservative who actually fought back in the culture war. It was not him who started it. I sincerely hope Tony Abbott restarts the push-back where Howard left off.

            Technology would mean it would be impossible for a provider of private para-transit to remain anonymous and unapprehended for long. But mass transit has problems with crime too, especially at the “stops”.

            Contrary to popular theories regarding conspiracies against streetcars, regulations actually protected the streetcars and ensured their existence for far longer than purely economic considerations would have allowed. If “jitneys” or private para-transit held an unbeatable competitive edge over rail based transit systems even in the 1910’s and 1920’s, it is certain that the competitive gap has widened considerably since that time, not closed or reversed.

            http://www.cliffslateralso.com/TQOrigin.pdf

            It is noticeable just how biased the buraucracies and advocates are, who are tasked with saving the planet. It always seems to involve entrenching a dirigiste interest rather than anything bold, progressive, and EFFECTIVE.

          • drsmithyMEMBER

            Howard was just a rare conservative who actually fought back in the culture war. It was not him who started it. I sincerely hope Tony Abbott restarts the push-back where Howard left off.
            Uh, right. The whole world has been drifting to the right at an accelerating rate for 30-odd years but it’s the conservatives who are “fighting back”. Fighting back against what, exactly ? The race back to feudalism not going quick enough ?

            Technology would mean it would be impossible for a provider of private para-transit to remain anonymous and unapprehended for long.
            There’s a lot of faith in those words.

            Also, it apparently hasn’t crossed your mind it’s not just the passengers who might be in danger.

            Further, you still haven’t addressed the point that one of the big reasons people prefer private transport over public is precisely so they don’t have to share with anyone else.

            But mass transit has problems with crime too, especially at the “stops”.
            Any type of transport has “stops”, so the point is moot.

            Further, mass transit is relatively easy to police and monitor (not to mention quality control). Doing the same for ad-hoc transport in millions of private vehicles is essentially impossible.

            It is noticeable just how biased the buraucracies and advocates are, who are tasked with saving the planet.
            I have no idea how we got to a topic of “saving the planet”, but it’s pretty obvious you’re just ranting aimlessly at this stage.

      • There is a great example in Sydney itself, of the difference in public transport run by government and private entities.

        It takes me around $8 to travel ~15km to the CBD. But if I have to get to the Airport, which is a few kms further to the south, I’ll have to shell out another $15 as surcharge to Westpac for their Airport Link “service”.

        If I chose to take the car instead, Macquarie Airports is waiting at the other end to rat-f#@k me with their extortionate parking fees.

        If I chose to take a taxi, Cabcharge will be waiting to line their pockets for providing a mundane service.

        • In Wellington, NZ, the public monopoly refused to subsidise an express bus service from the airport to the Hutt Valley; they wanted people to get to Wellington Railway Station somehow first, and then catch a train. The Hutt City Council managed to at least secure the right to run an UN-subsidised service, which has been a roaring success. Fares are several times as high as what it would cost to catch a subsidised bus to the Railway Station and then a subsidised train to the Hutt Valley, but hey – people are actually prepared to PAY the money for the RIGHT SERVICE…..!

  19. anonysubscribe

    there is very little good in the lessons which I have learnt the hard way as an ignorant consumer of MSM trusting pollies and business leaders when they lack the ethics and morality to be true or even competent.

  20. anonysubscribe

    the lessons by this poster are so clear and obvious to laymen it reflects on the hypocriscy of economists, the intelligentsia here, and the pretenders everywhere who seek to lie to us, relying on our turning the other cheek and politely not exposing their chicanery.
    thank you.