Forgive my absence at such an anxious time but I've been away on holiday in Western Australia, walking bits of the Bibbulmun Track, which runs from Perth to Albany. The wildflowers were unbelievable. And so was the affluence in Perth, where the mining companies' skyscrapers are so tall they can be seen from Rottnest Island, 19 kilometres away.
How'd you like to be living in Perth, in the winners' circle where everything is on...
Wednesday, November 9, 2011
Monday, October 17, 2011
Brave economist blows whistle on bosses' pay
You could be forgiven for not knowing it, but economists are meant to be tough on business. Their ideology holds that capitalism is good not because it's good for capitalists, but because it's good for consumers - and consumption is "the sole end and purpose of all production".
So said Adam Smith, who added that "the welfare of the producer...
Saturday, October 15, 2011
Understanding the Aussie dollar
Economic theory tells us the level of the exchange rate is an important factor in the health of the economy. Unfortunately, there's nothing in economic theory that can explain the Aussie dollar's strange behaviour in recent weeks. It's hard to know whether to cheer or boo.
We do know the Aussie has a strong and longstanding tendency to move in line with the prices we're getting for our commodity exports so, since during the...
Wednesday, October 12, 2011
Look within to pick up productivity
One of the tricks to success - in business, or in life - is to focus on the things that matter, not the things people (and hence, the media) are getting excited about this week. Of late we seem to be doing a lot of worrying about the wrong things.
For instance, our preference for bad news over good means we've been doing a lot of hand-wringing over the economic problems in Europe and the US. What's happening in China and the...
Monday, October 10, 2011
Taxation reform is a cargo cult for business
When you look at the varied contributions to the public policy debate made by business people and their lobby groups, one attitude unites them: the politicians owe them a living.
Government, it seems, has one overwhelming responsibility: to make life easier for business. You see this in business people's views on "competitiveness". Economics has a lot to say about competitiveness, but not what business people imagine it says.
To...
Saturday, October 8, 2011
Doomsday rate cut scenarios off mark
If the Reserve Bank ends up cutting the official interest rate by 0.25 percentage points on Melbourne Cup Day, it won't be because the economy has weakened so much as because it's not looking as strong - and thus, inflationary - as the Reserve had earlier expected.
The air is full of uncertainty and fear about the fate of the European and American economies, with one excitable pundit even predicting a ''world recession''. But,...
Wednesday, October 5, 2011
Tax cut buffet but no appetite for fixes
Seen anything on the tax reform smorgasbord you fancy? How about cuts in the top two rates of income tax? How about abolition of conveyancing duty? Or maybe an end to stamp duty on insurance policies?
For business people there's a special range of goodies on display: a cut in the company tax rate to 25 per cent, special tax breaks for mining and construction companies that use Australian steel, abolition of payroll tax. Or maybe...
Monday, October 3, 2011
Two minds make us all muddled thinkers
Conventional economics got set in its ways long before neuroscientists discovered something that helps explain why the decisions consumers and business people make are often far from rational: our brains have two different, and sometimes competing, systems for deciding things.
Psychologists call it system one and system two thinking. System one is our intuitive system of processing information. It's fast, automatic, effortless,...
Saturday, October 1, 2011
You're not as ethical as you think
Another long weekend, another personal question: how honest are you? According to the people who study these things, not as much as you think you are.
In an experiment in which people were asked to solve puzzles and were paid a set amount for each puzzle they solved, some participants were told to check their answers against an answer sheet, count the number of questions answered correctly, put their answer form through a shredder,...
Wednesday, September 28, 2011
Pinned down by fear of possibilities, not outcomes
It's not something economists emphasise. Indeed, they prefer not to think about it because it reminds them of the limits of their so-called science. But the peregrinations of the economy are as much about psychology - moods and feelings - as tangible economic forces.
When you view the economy from outside, what you see is might and power.
Big corporations with towering offices, branches in every suburb, huge factories, gleaming...
Monday, September 26, 2011
Memo bosses: happier staff work better
In the quest to lift the flagging productivity of labour, we can go back to old, failed ideas or move on to new ones. Last week Peter Reith came out of retirement to urge the Liberals to get tough with workers and reopen class warfare.
Want to get more out of your workers, make them work at unsociable hours for normal hourly rates, keep wage rises tiny or simply whittle away at their conditions? Re-introduce statutory individual...
Saturday, September 24, 2011
Retail despair as consumers spurn goods for services
There's a bumper sticker that says: if you think money doesn't buy happiness, you don't know where to shop. It's just a joke. But there's actually a bit of science in it. Research by psychologists says buying stuff doesn't bring us as much satisfaction as buying experiences - such as a holiday or even a restaurant meal.
Experiences are more satisfying than goods because they leave us with memories to think over (which we often...
Wednesday, September 21, 2011
Sydney too must go up to go green
As a denizen of the inner city, I love getting away to the countryside. Away from the tar and cement and exhaust fumes to the trees and grass and clean air. In the country or on the coast you feel closer to nature, leading a simpler, cleaner life, doing less damage to the environment. I always feel that, being more natural, trees and grass...
Monday, September 19, 2011
New budget office must clarify, not confuse
Economists believe people should be judged by their ''revealed preference'' - by what they do, not what they say. If so, Wayne Swan is supremely confident Labor will romp home at the next election, whereas Joe Hockey is not at all sure the Liberals will win this time round.
You can deduce this from the different positions the two men take on the legislation to establish a parliamentary budget office. Swan has presented a bill...
Saturday, September 17, 2011
Thrift paying big dividends on current accounts
The nation's econocrats have been pondering the resources boom for years, but one thing they've been expecting isn't coming to pass: we're not getting huge deficits on the current account of the balance of payments.
Last week's figures showed a deficit of just $5.3 billion for the June quarter, about half what it was in the March quarter. This included a surplus on the balance of (international) trade in goods and services of
$7.5...
Wednesday, September 14, 2011
Terrorism. A vast cost of feeling a little more secure
Now the 10th anniversary of the terrible events of September 11, 2001, has passed, it's time for plain speaking.
You've often seen me criticise economists for their bloodless rationalism - their excessive focus on efficiency in the satisfaction of our material wants and neglect of our emotional and social needs. Yet it's possible to go too far the other way, to be too emotional and not sufficiently hard-headed in our reaction...
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