When governments make grand policy unveilings, as Julia Gillard has with her white paper on the Asian century, it’s terribly tempting for people in jobs like mine to sit back and criticise. After all, unlike you and me governments tend to be less than perfect.
If you’re disposed to criticise, there’s never a shortage of material - particularly if you’re prepared to offer mutually inconsistent criticisms, or shift your angle...
Wednesday, October 31, 2012
Monday, October 29, 2012
It's better to honour budget commitments
Those economists who’ve joined the smarties in proclaiming Julia Gillard’s seeming resolve to get the budget back to surplus this financial year to be purely political and of no economic merit are revealing how little they know about political economy - the politics of economic policy.
They don’t understand the vital role faithful adherence to ‘frameworks’ has played in giving Australia it’s widely envied record on fiscal (budgetary)...
Saturday, October 27, 2012
How the budget redistributes income
In a capitalist economy such as ours, the rich have loads of money, the poor have next to none and the government does little about it.
Is that what you suspect? It's a long way from the truth. While some (including me) may argue they could be doing more, between them our governments - federal and state - are doing a lot more to redistribute income from the rich to the poor than many people imagine.
The reason so few people...
Wednesday, October 24, 2012
Budget redistributes income over life cycle
Listening to all the argy-bargy over the budget update makes you think - what strange things budgets are. The government spends all this money - hundreds of billions a year - but where does it come from? From us, of course. The politicians use the budget to take money from us with one hand, then give it back with the other.
They have one set of public servants to take our money from us and another to give it back. What's the...
Monday, October 22, 2012
Business cons the states out of tax revenue
WHEN we see the mid-year budget review today, all eyes will be on the savings Wayne Swan will announce to ensure he still achieves a surplus this financial year. The measures will be needed because the weakness in tax collections is even greater than expected.
Deciding how much we should cut spending is one thing, but working out what to do about the budget's structural problems on the revenue side is quite another.
One way...
Saturday, October 20, 2012
Game theory can be practical
Children play games. Teenagers play video games. Footballers play games. Economists don't admit to playing games. They prefer to say they study game theory.
This week two academic gamesters, the economist Alvin Roth, of Harvard Business School, and the mathematician Lloyd Shapley, of the University of California, Los Angeles, were awarded the Nobel Prize in Economics for their efforts.
This brought to 10 the number of academics...
Wednesday, October 17, 2012
Psst. Don't tell anyone about poverty
It's remarkable that, despite all the effort and expense the government goes to in measuring gross domestic product, it doesn't run to the modest extra expense of measuring poverty. But this being so, it's hardly remarkable the media and the public pay far more attention to the gyrations of GDP than to the extent of poverty.
Why the lack of official interest in such a basic measure of how we're doing as a nation? Because, in...
Monday, October 15, 2012
Reserve Bank moves to Plan B on interest rates
IT'S not at all clear that falling commodity prices - or the Reserve Bank's latest cut in the official interest rate - will lead to a lower Aussie dollar. But if it doesn't fall, and the economy doesn't look like it will stay growing at its trend rate, the Reserve will just keep cutting rates.
The best way to think of the Reserve's problem in using monetary policy (interest rates) to maintain non-inflationary growth is that...
Saturday, October 13, 2012
Labour market can be flexibile as well as fair
If you listen to business, we still have big problems with the labour market. John Howard deregulated it, but then Julia Gillard re-regulated it and now we can't do a thing with it.
The business people are right to this extent: particularly at a time when the economy is under so many pressures for change in its structure - the rise of the emerging market economies and the resources boom it has produced, the digital revolution,...
Wednesday, October 10, 2012
The Asia boom is just getting going
Have you noticed how joyfully the media trumpet the bad news they seek out so assiduously? The latest is that the resources boom is finally busting. O frabjous day! Callooh! Callay!
It's true the prices we're getting for our exports of coal and iron ore, having lifted the terms on which we trade with the rest of the world to their most advantageous level in 200 years in the September quarter of last year, have been falling ever...
Monday, October 8, 2012
We need to talk about the budget
I have a terrible fear that just as the rest of the developed world is demonstrating how much better off our three decades of budgetary discipline have left us, we're in the early stages of letting it slip.
Australians have drawn many (usually disheartening) conclusions from the tribulations of the Europeans and Americans since the global financial crisis, but they don't seem to be getting the most obvious message: thank god...
Saturday, October 6, 2012
How the financial system works
It’s amazing to think the mighty, mysterious, overawing edifice of high finance - run by people much smarter and infinitely better-paid than us - is built on a pathetically simple, often fickle emotion: trust.
This is something economists and bankers understand in theory but, in their world of high-falutin’ mathematical models, keep forgetting in practice - to everyone’s cost. In this they exhibit the very human fallibility...
Thursday, October 4, 2012
GLOBALISATION - the importance of an economically literate Australia
Business Educators Australasia Conference, Sydney, Thursday, October 4, 2012
Just as the media have lost interest in talking about globalisation it’s starting to have big effects on Australia and on the daily lives of Australians. Often, the consequences of globalisation are buried too deep to be visible to the untrained eye, but that doesn’t change the reality. Why are overseas holidays a lot cheaper these days? Why are a lot...
Wednesday, October 3, 2012
The psychological roots of morality (and politics)
Paul Keating still quotes his early mentor, Jack Lang: "In the race of life, always back self-interest - at least you know it's trying". This may be why, as treasurer, Keating so readily embraced economic rationalism. The economists' working model assumes the self-interest of the individual is the sole force that makes the world turn.
Fortunately, the latest research tells us it's not that simple.
I can't go on a sight-seeing...
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