Why much of what we're told about taxes is off beam

There are lots of ways to describe the subject matter of economics, but the ponciest way is to say it’s about “the study of incentives”. It’s true, but a less grandiose way to put it is that conventional economists are obsessed by prices and not much else.If you’ve heard someone being accused of knowing “the price of everything, but the value of nothing”, that phrase could have been purpose-built for economists. Read on and you’ll...

Read more >>

Boards and managers responsible for reducing banks' value

Too few of us realise it, but we should thank God (and my new best friend, Peter Costello) for our independent central bank. Prime ministers and treasurers seem to say little that’s not point scoring, and Treasury is now highly politicised, but we can always rely on Reserve Bank governors to be frank about what’s happening in the economy and what should be happening. Last week the latest of our straight-shooting governors,...

Read more >>

We should rescue economics from the folly of neoliberalism

There's no swear word in politics today worse than "neoliberalism". It's badly on the nose, and the reaction against it has a long way to run. But what is it, exactly? Where does mainstream economics stop and neoliberalism begin? The term means different things to different people. Professor Dani Rodrik, of Harvard, says in the Boston Review the term is used as a catchall for anything that smacks of deregulation, liberalisation,...

Read more >>

Metrics-obsessed managers must be careful what they wish for

In decades to come, when the history of business endeavour in the early part of the 21st century is written, I predict it won't be kind to the great management fad of "metrics". When you look at the terrible mess the Commonwealth and the other big banks have got themselves into, it's hard not to suspect that misuse of KPIs – key performance indicators – and incentive pay do much to explain their predicament. It's not that I'm...

Read more >>

Profit motive drives business to bend rules

Sometimes I think economists are people who believe fervently in private enterprise and the profit motive, but have never actually met a business person. That doesn't apply to economists working for business, obviously, but it applies very much to the econocrats who give advice on economic policy and even, I suspect, academic economists. Living in Canberra doesn't help. One of the advantages of spending your entire career...

Read more >>

Econocrats propose same old answer to all problems

If Malcolm Turnbull wants policy reforms that make the economy more innovative and agile, he should think long and hard before accepting advice from the economists in Treasury and the accountants in the department of Finance. If you want innovation and agility, the last people to whom you should look for help are the two professions that, in their approach to problems new or old, demonstrate minimal innovation or mental agility. I...

Read more >>

KPIs a dumb way to encourage good performance

You've been doing good work lately, and the boss is thinking of acknowledging your contribution. How would you like to be thanked? With a bonus, or with some kind of award? If you want the money rather than the glory you'd be in good company. That's how most bosses want their own good work rewarded (and arrange their compensation package accordingly). And it's how almost every economist would advise your boss to reward you....

Read more >>

Selfish pseudo-economics fights deficit levy

If you want to see a classic example of selfishness posing as high principle, look no further than the fuss big business's high income-earners are making over the deficit/debt levy/tax expected to be imposed in Tuesday's budget. Jennifer Westacott, of the Business Council of Australia, said "raising Australia's already high dependence on personal income tax will place an increased burden on workers [note that word] and...

Read more >>

We risk letting lawyers stifle innovation

If our business people, economists and politicians are genuine in their desire to lift our productivity, rather than just moan about the Fair Work Act, they'll put reform of the regulation of intellectual property high on their to-do list. Unfortunately, the minor changes to intellectual property regulation put through Parliament last week, to the accompaniment of great self-congratulation by the Gillard government, suggest...

Read more >>

Give and take: The new tax is a piece of cake

Years ago, the Keating government had a problem with pensioners wasting taxpayers' money on prescriptions. Knowing their elderly patients got their prescriptions free, doctors were happily issuing ones their patients might or might not end up needing and pensioners were taking them to the chemist and getting them filled, just in case. Many of these often very expensive drugs were not used. So the government decided to impose...

Read more >>

Looking to Aristotle for a guide on reform

How things have changed. When I was growing up Labor portrayed itself as the party of reform, out to fix an unjust world. The Liberals were conservatives, satisfied with the world as it was and trying to keep change to a minimum. Needless to say, the Libs kept winning. These days, however, both sides portray themselves as parties of reform. And the faster the world changes the more certain both sides become of the need for further...

Read more >>

Gillard's Law of economics at a crass roots level

Frederick Taylor, the American inventor of "scientific management" a century ago, believed workers were dumb and lazy. So the tasks they were required to perform had to be broken down into the simplest of steps and they needed to be closely supervised. The only way to motivate them was by paying piece rates - what today we'd call "performance pay". I'm sure Julia Gillard would never admit to regarding "hardworking Australians"...

Read more >>