Catallaxy Files

polymathic pontification, bleeding heart economic rationalism and liberal secularist contrarianism

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    Saturday, July 27, 2002
    Interview with Dalrymple
    Here is a fascinating interview with the latest provocateur to visit Australia, the Spectator's Theodore Dalrymple.
    Calm down, Prof
    The mostly sensible John Quiggin is getting carried away, perhaps spurred on by the likes of Rob Corr into thinking that some recent errors in corporate governance spell the end of economic liberalism and free market reforms:

    . For example, it will be a great many years before anybody can use a phrase like "market discipline" with a straight face. Idon't suppose that the replacement for market liberalism will be a direct return to the social-democratic and socialist ideas that dominated policy from World War Ii to the 1970s, but it will be more like them than like the 1980s ideology that is still driving John Howard.

    Aren't the likes of Quiggin and Corr always the ones who say that there is a big divide between the financial markets and real world economies? Well, I kind of agree. I've never given a stuff about financial markets and it's rarely been relevant to the work I do or the economic issues that interest me. I also kind of agree that there is some truth to Keynes' 'beauty contest' theory of financial markets (whether the 'beauty contest' tendencies are important enough to tarnish the market for corporate control which is one strong argument for using the sharemarket to resolve principal agent problems in firms is another matter). So what have these recent events told us? Corporate governance matters.Yeah, corporate governance matters. No one's going to disagree with you and it's not exactly a profound insight. We've known that all along.

    But market disciplines don't always depend on what's going on in the stockmarket and microeconomic reform has primarily been about competition in the real world first, greater use of the price mechanism to allocate resources, dilute rent-seeking incentives and use of the competitive process as a mechanism for discovery of new and changing preferences.For instance I don't see how the upcoming debate on vouchers is in any way going to be affected by what has happened in the fjnancial markets - we're not talking about floating Sydney Uni on the ASX (not that that's necessarily a bad idea).

    Update: I guess people read into events what they will. This nutter who writes for the ultra-Misesian Austrian paleo-libertarian Lew Rockwell site seems to love the 'bust' and thinks that it vindicates Mises' Theory of Money and Credit, the gold standard and paleo-libertarianism.

    Friday, July 26, 2002
    Born to rule
    A very revealing quote from ex-Liberal now-Democrat Greg Barns on p. 30 of today's AFR Magazine (not available online):

    This is a suspicious government ... It doesn't necessarily see big business as its friend. Howard's whole political play is all about seeing politics through the prism of seats like Parramatta and Macarthur ... And that is the former Labor constituency ... And it is doing that at the expense of the North Shore in Sydney ... And that is where the social and economic liberals live, and that's where business lives.

    Well I am a 'social and economic liberal' and I live in the North Shore (after all, I am reading the glossy little AFR Magazine). I suppose I should be flattered that Greg Barns thinks that my vote is worth more than than the votes of all those nasty ex-Labor voting rednecks in Parramatta that the Liberal party has the bad taste to suck up to when it could be serving their social betters (there goes the neighbourhood, m'dear). I suppose a little Westie-bashing doesn't go astray in chardonnay left territory and can anyone deny now after this highly revealing quote that there is such a thing as the chardonnay left? So now we know the reason why Barns left the Libs for the Dems - he couldn't hack it trying to convince all those new upstarts the Liberal party is courting why their views on border protection and the republic are wrong when they should have automatically listened to him because he knows better. I don't necessarily disagree with many of the things Barns has said about particular policies in the past, just his whole attitude about how he thinks they should be received and who it's worth talking to about them.
    A picture is worth a thousand words
    Chris Textor expresses puzzlement at the source of Ann Coulter's appeal:

    I'm bewildered why so many of my fellow non-left comrades are so in love with this peroxide bathplug. She's as much of a flake as Richard Neville.

    I agree, she is a flake. However, in answer to Chris's very reasonable question, this is one reason, this is another and this is yet another. Hope these quench Chris's thirst for knowledge.

    Thursday, July 25, 2002
    Good Luck Aussies

    Good luck to our athletes in Manchester who start competing this weekend. Good luck in particular to the Australian netball team, especially the Swifts contingent! Want to wish any of the Australian team well – jump over to the Telstra sponsored Commonwealth games site to send a good luck message to your favourite team or athletes.
    Net Censorship Update

    The Age is reporting the latest attempt by the government to shore up their dodgy net censorship laws. The article itself is available online, but isn’t really that great as it appears to be a rewrite of a Democrats press release based on an EFA press release.

    The crux of the story is this. EFA submitted a freedom of information request in order to obtain details from the ABA on what sites have been censored. After much stalling and generally trying to weazle out of providing anything, they provided some documents, but blacked out the details of the actual url’s.( even on sites that didn’t contain RC (banned) material.)

    Now the government has decided to amend the FOI laws so that the ABA does not even have to provide the rest of the page - of any page where a url is blacked out. In other words, by simply blacking out the url of a censored site, the public will be denied any information on why a site was censored. The result is that the only information on what is being censored will be the reports published by the ABA, which simply give the numbers of items censored in different categories.

    This really is an appalling state of affairs, and makes the censorship system for traditional media look positively enlightened. Anyway, for the full story check out the EFA site, which has a detailed analysis and even has samples of the types of documents you won’t be able to obtain if the law is passed.
    Selective schools debate

    An interesting article in today’s SMH by former selective school student, now arts/law student Keppie Couts. The article criticises the proposals to either abolish selective schools or run selective school classes in regular schools. Neither proposal is likely to be popular with the type of students (and parents) attracted to the selective public school system. As Couts points out

    “ Being surrounded by similar people provides healthy competition and the impetus to achieve to your full potential, as consistently outstanding results demonstrate. …

    In his inquiry into public education in NSW, Professor Tony Vinson suggests that talented students should remain in mainstream schooling for the purposes of social "cohesion" and "inclusion". But this ignores the degree to which academic achievement is ridiculed in comprehensive high schools.

    Furthermore, having opportunity classes adjacent to regular classes in comprehensive schools can be alienating and divisive. ..

    …It is not in mainstream schooling that high-achieving students find a sense of belonging, but in selective schools. This is not to suggest that only selective schools can provide this for talented students, but it does raise questions about the system outside selective schools. Instead of dismantling the selective school system and thus removing an essential alternative for achievers, perhaps reactive policy should address the culture in mainstream schooling that belittles achievement of any sort.”

    As someone who attended a public school (albeit almost ten years ago now) I can attest to the comments about the culture of public schools. Although I had many talented and dedicated teachers, the culture of the student population (outside the smallish circle of academic students) wasn’t one that encouraged high academic achievement. As Couts points out, until something is done to improve the intellectual culture of public schools, the best and brightest (and the wealthy) will continue to flock to selective public schools or private schools.
    I know how you feel, mate
    According to my Site Meter, someone discovered my blog by searching in Google for "Justin Raimondo fuck". The searcher must have inadvertently left off the word 'wit' at the end of his or her search string.
    Immigration from an unashamedly Chicago School perspective
    From the introduction to The welfare economics of immigration law: A theoretical survey with an analysis of US policy by Alan Sykes, John M Olin Law and Economics Working Paper No. 10:

    Much like tariffs and quotas, immigration restrictions are a form of protectionism, insulating domestic workers from competition in the labor market. Yet, even the most ardent supporters of open markets usually stop short of advocating the abolition of immigration controls. Efforts to reduce barriers to the migration of labor are conspicuously absent, for example, from the ongoing Uruguay Round of GATT negotiations. For the foreseeable future, immigration policy will remain a bastion of national sovereignty in international economic relations, ensuring the persistence of a wide range of uncoordinated and often restrictive national regimes.

    This paper inquires whether restrictive national immigration policies have sound economic justification. The heart of the inquiry is normative, embracing the conventional tools and assumptions of modern welfare economics to analyze the efficiency of immigration controls. An ancillary aspect of the inquiry is positive, exploring whether current policy can be understood as an effort by unconstrained sovereigns to pursue the national economic advantage, perhaps at the expense of other nations. The current immigration policy of the United States receives close attention.

    The economic issues are difficult to resolve, though more at an empirical than a theoretical level. Ultimately, any economic justification for immigration restrictions must rest on the presence of adverse external effects upon the world as a whole or the country of immigration. Theory identifies a variety of possibilities, though many are at best conjectural and fail to provide compelling support for a restrictive policy. Perhaps the most plausible argument for restrictions rests on the existence of entitlement programs in wealthier nations that may, depending upon how they are structured, induce inefficient migration from poorer nations. The most direct solution to such problems lies with changes to entitlement programs rather than with immigration policy, but legal constraints may in some cases make immigration restrictions the only alternative. There is little basis for barring the immigration of those who are not allowed to participate in entitlement programs, however, or to vote themselves a right of participation.

    This proposition has implications for, inter alia, the perceived problem of if illegal aliens in the United States. The curtailment of the temporary workers program in the United States may have much to do with the growth of illegal immigration. It is difficult to fashion a persuasive economic argument against an open door policy toward temporary workers with employer sponsorship, and thus illegal immigration may be in large part the result of economically unsound U.S. policies. Further, because illegal aliens participate only minimally in entitlement programs, do not vote, and usually pay taxes much like other workers, it is by no means clear that their presence should be viewed as a problem.Absent an appropriate policy regarding the admission of temporary workers, illegal immigration may be a second best response to the resulting economic inefficiencies.
    Two refugees
    Helen Hughes tells a tale of two refugees who made contributions to development economics - Peter Bauer and Australia's very own Heinz Arndt.
    Ruddock vs Carr vs Gillard
    I love the irony of this - Ruddock reprimands the Malthus of Maroubra for not taking enough migrants into NSW while a member of the Malthus of Maroubra's party, Julia Gillard, says that Ruddock is not taking in enough migrants at all. And let's not forget that the Greenies and their supporters who want us to be generous to asylum seekers also have been calling for zero migration for ages. And refugee advocates accuse Ruddock of 'migrant snobbery' because he wants skilled migrants but not refugees:

    The answer to the falling birth rate is to accept more skilled migrants, but NSW is not accepting its fair share of those who already come to Australia, the Immigration Minister, Philip Ruddock, said yesterday.

    Mr Ruddock said a record 4136 skilled migrants were placed in regional areas in the last financial year, nearly half of whom settled in Victoria. NSW accepted only 228.

    He said he was keen to see NSW match Victoria's intake and capitalise on the "brain gain".

    He said while the Victorian Government had been "very keen" to utilise the skilled migrant program, the NSW Premier, Bob Carr, had placed a caveat on increased involvement in the scheme.

    But he said Mr Carr had "indicated his preparedness to discuss a range of measures that may get people out of Sydney and into regional NSW."

    Let's be unapologetic about this. There's no reason not to take the welfare of the current population into account in deciding who to let in. But there is also no reason for a conflict between national interest and humanity. Unskilled refugees who have been self-selected for initiative and ingenuity can also be good citizens. On the other hand public perceptions are important and the public needs to be convinced of the benefits of immigration if you want them to be happy with massive increases in both skilled and refugee intakes. - and whether they are happy or not matters to whether your immigrants get properly settled in.

    Wednesday, July 24, 2002
    In praise of amoral art
    Andrew 'it's all about me' Sullivan is all upset because no one is pointing out the illegality of a sex scene in the new movie Tadpole which is about an affair between an intellectually precocious 15 year old boy and a 40ish woman (sorry no permalinks). It all started ages ago when some conservatives accused gays of glamourising pedophilia and pederasty. Ever since then Sully hasn't let up in pointing out the supposed double standards when hetero sex is involved. About the movie he writes:

    Lane is reviewing the hot new movie, "Tadpole," in which a fifteen-year old boy is molested by older women. The law describes this as criminal conduct on the part of the women involved - one of them even, in Lane's words, "pimps" the youth to her friends

    I would agree (sort of) if the movie presented an affair between a 15 year old girl and a 40ish man in an untroubling light. Even Sully acknowledges there is a difference in this case however:

    Now I think a commonsensical view of pedophilia will make a distinction between a horny fifteen year old boy and a mature women and other abusive relationships

    But then he goes on to talk about 'pedophilia chic'. Now the fact of the matter is there is a big difference when the genders are switched. That there may be lack of consent involved in man-girl or man-boy sex is quite probable but not so probable for woman-boy sex for shall we say obvious anatomical reasons? There is good reason for treating these matters substantially differently. In the woman-boy case the presumption of lack of consent in a literal sense is a less sensible one and questioning shifts to issues of 'balance of power' as in teacher-student cases. But why are we making the point of over-analysing this anyway?

    Far more importantly Sully should lighten up for god's sake.

    1) This is a work of fiction
    2) The boy in the movie is depicted as being intellectually precocious and thus with a mental age far above 15. The movie emphasises that he is well-read, quotes Voltarire etc and that therefore is seen by the Bebe Neuwirth character as having the mind of a refined adult in a young body while retaining the considerateness and innocence long tarnished in older and more jaded minds. This is the source of appeal for the Bebe Neuwirth character and is really the underlying idea behind the movie. Far from any sociologically realistic depiction of 'abusive relationship' one would think and that is the point.
    3) The movie doesn't glamorise anything - it's set up as a farce, and plays with various cliches and fantasies that have been in the minds of red blooded heterosexual males for centuries. In fact one could argue that the movie is far too conservative because at the end it purportedly involves this precocious boy deciding that girls his age are better company after all. How ultimately prudish-Hollywood! I'm sure a French version would be different. As this New Yorker article points out:

    The true scandal of "Tadpole" comes in the closing moments, as a relieved Oscar seems to settle back into girls his own age. The implication is that when Neuwirth, wearing a leather skirt and a fur coat, guides you back to her apartment, gives you a massage, and spirits you into her bed, the whole thing is just a phase

    I agree. If you're prepared to dump Bebe Neuwirth for some 15 year old girl you must be whacked in the head.

    Sully the Briton has certainly imbibed in the puritanical airs of his adopted country for far too long that he is moralising over this and reading movies as sociological texts and dicta for morality. For God's sake, if you want a moral lesson go to Sunday school, not the movies ... or art in general.

    Yes, I will use the Wildean defence that art should not be about glorifying or condemning anything, it should not be sending messages, it should just do its tricks to stir the imagination and the aesthetic sense. Is Sully also going to regard this beautifully written book or this beautifully written book as examples of 'pedophilia chic' because they depict sexual relationships between women and boys? Or should one just take them as works of the imagination that succeed in their aims? If the former, he has been perversely transformed into a Babbit by his peculiar brand of politically correct prudery.
    Roonism II
    More comparing of apples with oranges. Poor old Ross Gittins forgot his password and couldn't access the website to view his phone bill. He delayed phoning his phone companyfor a month to solve this problem because he was afraid of call centre queues. So he writes a big whinge about this horrific experience and passes it off as an economics article telling us why our quality of life is going down even though our standard of living is going up. On the basis of one experience and with no other evidence he tells us that quality of service is going down, pulling down our quality of life with it. Oh, wait a minute, there is evidence - the fact that we have to deal with machines and call centres.

    Why is this comparing apples with oranges? Again a case of heightened expectations. Many years ago he wouldn't have been able to access a website to view his phone bill whenever he wanted to. Now he complains that because he mislaid his password he can't access it and puts off getting a new password because he may have, at worst, to pass through a call centre queue once. It doesn't sound like a very rational calculation to me, Ross, but then De gustibus non disputandum eh, as we economists say?

    Well, I've had to call businesses before, like once when I wanted to check my credit card details and it wasn't something I could do via the phone banking service. If you call at the right time like sometime later in the evening or at night you can get through pretty quick. You take for granted the fact that there is someone there to answer your queries at 10 pm at night.

    As for the other contrivances which have supposedly reduced quality of service so we can no longer have profound conversations with people at the other end, I would not have a clue how to pay my bills for rent, electricity and phone in person and I never have, nor do I have much patience to stand in a queue so thank god for phone banking and websites. And the only time I ever have to step into an actual physical bank is when I sometimes deposit tax refund cheques. That's service.
    More Roonism
    Speaking of Philip Adams and his boo hoo mentality, the poor old feminists get another bucketing from an ABC journalist no less:

    ... here we are, supposedly "having it all" as we edge 40; excellent education; good qualifications; great jobs; fast-moving careers; good incomes; and many of us own the trendy little inner-city pad we live in. It's a nice caffe-latte kind of life, really.

    But the truth is - for me at least - the career is no longer a challenge, the lifestyle trappings are joyless (the latest Collette Dinnigan frock looks pretty silly on a near-40-year-old), and the point of it all seems, well, pointless.

    I am childless and I am angry. Angry that I was so foolish to take the word of my feminist mothers as gospel. Angry that I was daft enough to believe female fulfilment came with a leather briefcase.

    It was wrong. It was crap

    I've written about this before and I don't want to repeat myself but frankly I find all this reactive 'oh I want a baby' anti-feminism as silly as the opposite extreme. Funny that to this latest person to backlash, career fulfilment is represented by a leather briefcase and frocks rather than the sense of play from interesting work. Certainly a lot of raised expectations there but at the end of the day, your life is only as meaningless as you make it.

    Tuesday, July 23, 2002
    Oh woe is us.

    In a rather lengthy column, Phillip Adams bemoans the undermining of so many pillars of society and leaves his readers with the following parting thought.

    “It's hard to find a profession, an industry, an institution that doesn't see itself in crisis. Everywhere, Australians live in a maelstrom of self-doubt, insecurity, guilt. Everywhere, trust and hope are being eroded, corroded, destroyed.”

    To which I was much amused to see one wit follow-up with

    “I blame Phillip Adams for 40 years of extreme negativity.”
    The Rise & Rise of Open Source

    No time for a detailed commentary, so I’ll just point you to this interesting article on open source software. Apparently, not only is open source on the rise, but much as I have suspected (though for different reasons), it turns out software piracy figures may be somewhat overstated by the software industry.
    SMS He Said

    John Quiggin gives the world his view on why SMS is overpriced – by comparing apples with oranges. Quiggin compares the data cost of an SMS message to the data cost for a typical ISP, and then the cost compared to making a voice call if it were transmitted as data.

    Certainly if you are making a kilobyte to kilobyte comparison it doesn’t look good value. But that’s different to saying that SMS isn’t good value relative to the alternatives. Given that the flagfall on most mobile phones is higher than 25c, an SMS message can be quick and convenient (and relatively cheap) way to pass a simple message. Since even a local voice from a public phone costs more than 25c – for a short and simple message, it actually makes quite good value, which would be why Australians under 25 alone sent more than 75 million SMS messages on the Telstra network last year.
    System and talent, system vs talent
    Steve Sailer has some pretty insightful commentary on his blog about the whole Enron mess, Malcolm Gladwell on talent and why not to invest in firms which are too dependent on high IQ individuals to generate income but lack a system. Unfortunately no permalinks so you'll have to scroll to read it - it's the first long posting of today anyway:

    Gladwell almost, but not quite, grasps why investors should avoid publicly traded firms that act like McKinsey, which is a private partnership. The problem with companies where the talent is stronger than the system is that the assets go down the elevators every night. If the company isn't adding any value to their productivity above what they could generate anywhere else, the firm can't extract any above market profits from its talent.

    Pure consulting firms are like law firms - there's nothing there when everybody goes home. That's why in consultancies and law firms, the talent owns the business. If they didn't, they'd use their enormous leverage to extract the profits from the legal owners (which is exactly what Enron's talent did, in a particularly nefarious way). That's why foreign firms that buy Hollywood movie studios get burned - the talent drives off in Lamborghinis, leaving few profits for the stockholders.

    Gladwell should have mentioned the clearest ever example of how a star system doesn't add up to shareholder wealth - the old New Yorker under editor William Shawn. He hired the best talent in the world and then let them ramble on endlessly about whatever hideously boring topic caught their easily amused fancies. The talent was happy, but the owners were not.

    Sunday, July 21, 2002
    "Shut up, boy!" says Tim Dunlop
    According to Tim Dunlop, John Howard and what he calls 'neo-liberals' who share John Howard's views on the role of the State are not entitled to bitch about things if they used to be poor and enjoyed the beneficience of publicly funded education and the like:

    I always find it particularly amusing to hear the likes of Howard prattling on about this stuff - constant odes to the triumph of individual endeavour from a man who went to government schools his whole life, went to a publicly funded university on a publicly funded scholarship, who has been on the public payroll since the mid-70s, including having his trips to America and Europe paid for

    I can't fnd any reference in the Howard quote (reproduced below) that Dunlop critiques to a frontiersman myth, just the standard banality about equal opportunities etc. Can you?:

    Our pioneer past, so similar to your own, has produced a spirit that can overcome adversity and pursue great dreams. We’ve pursued a society of opportunity, fairness and hope, leaving – as you did – the divisions and prejudices of the Old World far behind.

    Memo to Dunlop - Howard was in the US when he delivered that speech. He was doing, shall we say, a bit of sucking up, yes. He had to talk about commonalities and these sound vague enough to pass muster. And the stuff about contrast with the 'Old World' is common knowledge - the difference between continental European societies and the newer settler 'Anglosphere' societies, not having to go through feudalism, yadda, yadda, yadda. Things even a PhD should know. There is something in that and to accept it is not necessarily to paint Australia as the Wild, Wild West.

    I don't regard Howard as a principled liberal in any case but I find the logic and relevance of such personal attacks lacking. The merits and demerits of complex policy debates about such matters as whether the delivery of health care could be enhanced through reform of current arrangements or implementation of competition policy which is fundamentally dependent on welfare analyses isn't altered by the fact that the proponents of such views may themselves have benefited from past arrangements. Nor does the fact that John Howard has some vaguely individualistic conservative philosophical views mean that he should be deemed hypocritical if his actions fall short of endorsing an anarchist view. This is not to mention the fact that there is a distinction even within conservative philosophy between strong and limited government on the one hand and weak and expansive government on the other and that within the sphere of activities which one deems government to have the most important and indispensible role one might be inclined to be generous with resources. But all of this is by the way and I don't want to spend half the night guessing at and defending what John Howard might or might not be thinking.

    Tim also notes::

    But the PM and his ilk are on a cleft stick with this one. On the one hand great patriots whose populism plays well; on the other, neo-liberal apologists who can't abide the fact that are a perfectly good country was built, not on the crest of rugged individual achievement, but upon an egalitarianism that believed in redistribution and a strong role for government.

    What the hell does Tim know about what drove neo-liberal apologists to adopt the views they have? Is Peter Walsh, a man who spent most of his life in the Labor Party and genuinely thought he was defending the interests of the underprivileged a 'neo-liberal apologist'? Possibly, by Tim's implicit definition - Walsh was a hard-core economic rationalist within the Labor Party. Was he moved to these views by some idealised view of 'rugged individual achievement' or did he comes to these views because he thought they were the best means of achieving social democratic ends and was good public policy?

    The tactic Tim has adopted against Howard is of course particularly cunning because for some strange reason many genuinely conservative leaders (as opposed to, say, Malcom Fraser) were not born in privilege (for instance Margaret Thatcher who was constantly being derided as the 'shopkeepers' daughter' And Nixon who was accepted into Harvard but couldn't afford to go). Right class, wrong opinions. Ungrateful - not believing the things you're supposed to believe given your station. Tim's argument reminds me a bit of those patronising wealthy white liberals in the US who would point out with glee that black conservatives who had principled reasons for opposing affirmative action were themselves beneficiaries of affirmative action. To wit 'Shut up, boy!'.
    Back from the Dead ..

    Perhaps noting my prolonged absence and distinct lack of positing, Jason sent me a link to a blog post by Tim Dunlop on market economics and the health care sector. It’s a lengthy piece which I have a number of issues with, but I’ll try and stick to the main game.

    “Let's start with the basics: markets, by their nature, create winners and losers. Anyone care to argue? Therefore, opening up the health "market" to competition in the manner that Wood suggests is an invitation to create winners and losers.“

    Well Tim, since you are so fond in your own blog of pointing out what you think is mere assertion, perhaps I should point out that you have also made an assertion - and I do care to argue. Markets don’t by their nature create winners and losers. Free markets are based on the idea of trading value for value. I give you money and you give me something I want (a book, an icecream, medical services) in return. Both parties benefit from the transaction as they both get something they want – a win/win.

    Sometimes parties to a transaction have expectations about what they should get which are either unrealistic or based on the assumption they are entitled to something they aren’t. This is where the notion of winners and losers comes in. People like Dunlop start from the assumption that there is a right to health care without any effort to justify why health care should be seen as a right. (especially as it is just another example of a positive right).

    The problems with Dunlop’s arguments don’t end there.

    “But back to the point - health is not a "weird market": it is a public good, which puts it well within the realm of the extra economic and therefore beyond the rationalisations of market theory. Well, it should. A public good (which they probably don't teach in Economics 101 anymore) is defined thusly:

    Public goods have three characteristics. The first is that they yield non-rivalrous consumption: one person's use of them does not deprive others from using them. The second is that they are non-excludable - if one person consumes them it is impossible to restrict others from consuming them: public television is non-excludable; although, if devices are made for scrambling television pictures, except to those who own picture decoding cards, television becomes an excludable service. Thirdly, public goods are often non-rejectable - individuals cannot abstain from their consumption even if they want to. National defence is a public good of this sort, although television is not. Non-excludability and non-rejectability mean that no market can exist and provision must be made by government, financed by taxation”

    For starters, this is the first time I have seen a definition of public goods include the idea of non-rejectability. But even if we accept the definition put forward by Dunlop, there is no effort made to actually explain why health care is a public good (by reference to the definition), and thus all we are left with is Dunlop's own assertion that health care is a public good. This might well be because it would be very easy to refute a claim that health care (as opposed to certain health programs) is a public good.

    For starters, health care is rival. If I am taking up a bed in a hospital and a physicians time, and nursing care – this precludes you from consuming the same health care and would suggest health care is going to fail the non-rival characteristic. What about non-excludible – again, it doesn’t take much imagination to see that most health care is excludible. Just try and walk in and get seen by a doctor without filling in a form or making an appointment. So we now have a tick against rival and excludible. As for non-rejectability – again, I can’t imagine anyone being forced to consume health care. So the ball is back in your court Mr Dunlop, to demonstrate how health care is a public-good.

    If you want to read the rest of Dunlop’s arguments, go right ahead. Just remember to 1) don’t assume health care is either a right or a public good – and then you should be able to pick your own holes in Dunlop’s blog post..
    In defence of queue jumpers ... but one cheer for mandatory detention
    The title of this post reflects my highly conflicted thoughts on the whole refugee mess.

    When the Tampa first seared a hole in our national consciousness I remember being disgusted, not at the 'queue jumpers' but at the government response. I stand by my previous disgust even though I think in terms of the general policy on mandatory detention the government has been proved correct. One would have to be extremely naive to deny that there was not an element of demonisation and a racist, xenophobic undercurrent to the government response to the Tampa, as if the haste with which it sought to push through laws to repel the Tampa were not distasteful enough. The observation that many Afghan Hazara refugees had paid people smugglers to get them out of what was then a hellhole (and in some respects still is) was supposedly enough to delegitimatise their claims to sanctuary - they didn't 'play by the rules' , they threw their children overboard - an obviously undesirable antisocial element. Let me clarify - I believe there was a racist subtext to the whole government campaign on this issue - this does not mean that everyone who voted Liberal because of this issue were racist though undoubtedly some votes were so tainted.

    Try observing bureaucratic protocol when your family is being slaughtered some time, not that there was any 'queue' to begin with so that one could comply with a protocol (arguably circumstances may have changed now, but still people need reminding of what was then). People forget that some Jews managed to escape the Holocaust because they could afford to pay people smugglers and paying for fake passports. Is it unfair that those with no resources to effect such an escape were left behind to die? Of course. Does that mean that those who could afford to escape by paying people smugglers deserved to die? Of course not.

    Having said that, is even the most vocal pro-refugee advocate in favour of open borders? No - in fact the Greens are explicitly for lower population in Australia, as are the Democrats for environmental reasons (and let's not forget the Malthus of Maroubra who thinks that Sydney already has too many people). Is there some maximum of number of refugees admitted per year in everyone's minds or do the pro-refugee advocates think that Australia should take in everyone? The answer is obvious. The next question then is - is mandatory detention of some sort a proportionate means of enforcing an immigration policy? My instinctive reaction at first was no. Didn't the Europeans have a system whereby asylum seekers were billetted into communities of related ethnicity for the period in which their appeals for refugee status were being contemplated, aren't there more humane alternatives involving such billeting and probation? Perhaps. I am yet to fully make up my mind on this.

    But why are so some countries moving towards the mandatory detention system now? Is it simply because they've mindlessly picked up the fad from Australia or is there some good reason for this? Think about it. Many people in detention centres are people whose application for refugee status has already been rejected. They have thereby appealed and appealed for the umpteenth time. They are in a state of limbo because these decisions can take a long time to process. What are the long term consequences of deciding we will take in x refugees a year but having substantially more than x people whose refugee status has not yet been confirmed and who may be in cases tied up in courts for years living in the community? Will we allow them to find employment in the meantime? What do the unions and those concerned with 'award wages and conditions' think about this? How do they support theselves? Do they or their hosts in the community get subsidies from the government? Most importantly why won't some of them whose applications have been turned down for the umpteenth time simply 'disappear' - after all, if they can break out of detention centres, why wouldn't it be easier for them to disappear? And what are the long term incentives of such an approach? if they know they have a chance of at least living in the communities they move to for the period in which their refugee status is being considered and appealed why won't more of them decide to take the risk and come here rather than try other countries as well ? i.e. the 'soft touch' argument though it sounds unpleasant does have some sense to it.

    What are the options? Something has to give. Can a reasonable case be made for a mandatory detention policy being a proportionate means of enforcing a practical immigration policy. Yes. But can mandatory detention be made to work better, can special consideration be given to needs of children? It depends. Are all the people who are concerned about 'children behind bars' seriously suggesting that they be taken away from their parents if it is accepted that a mandatory detention policy of some sort is a necessary adjunct to a practical immigration policy? Or if they find this alternative equally unpalatable and think the answer is that there should be no mandatory detention policy at all, then please people, do less carping and more thinking. Sketch out the alternatives. Show us how they can be practical and how they address some of the problems I have raised. I am more than willing to believe, no, let me rephrase that, I want to believe that there is some practical alternative to mandatory detention - would it involve tradng off against a lengthy appeal process so that people whose claims are rejected once or twice are deported immediately? If not then what does one do about a growing population of unassimilated asylum seekers of indeterminate status with no citizenship rights living among the community with limited means of support tying up the courts and causing Australia to attract a disproportionate share of other asylum seekers who then add to this mess?
    Natural monopolies and all that
    John Quiggin says that telecomms is a natural monopoly, natural monopoly is a technological fact and that therefore telco competition can't work. That's the gist of it anyway. Yes, natural monopoly is a technological fact and technological facts change with .. technology. One of the arguments for moving from the way we regulated natural monopolies then (by basically giving the incumbent firms statutory monopolies) to the way we regulate natural monopolies now (via an access regime that facilitates retail competition) is that the old way made the assumption of natural monopoly a self-fulfilling prophecy as it tended to suppress innovation.

    In fact opinion among economists is pretty divided about whether telco by and large is a natural monopoly - this issue is far from being uncontroversial. But let's assume for the sake of argument that at the very least the 'local loop' in telco is a natural monopoly. The question is what are the policy implications of this?

    I will recklessly oversimplify to discuss these implications.

    If John Quiggin is unqualifiedly endorsing the article by Ken Davidson that started this whole discussion then he is saying more than 'telco is a natural monopoly'. Recall the whole point of access regulation is to regulate Telstra's wholesale prices so that if another telco provider can just as efficiently provide retail services to the consumer as Telstra, that the provider has access to Telstra's networks on the terms and conditions necessary to do that. The wholesale prices must be regulated to reflect a variety of tradeoffs - on the one hand low enough so that the competing provider can set up shop by resale competition and perhaps distinguishing itself from Telstra via other value-added services (and forcing Telstra to respond in like terms), on the other hand high enough to preserve Telstra's incentives to upgrade its networks and high enough so that if it were more efficient for the telco provider to construct its own networks to set up shop, it does so.

    Now, there is substantial room for debate on this - one could argue that previous access prices were set too high or too low, that in the cabling race for Pay TV the federal government provided subsidies by way of various exemptions from usual environmental laws that encouraged overbuilding, that it's simply not worth the trouble of introducing these reforms given all the administrative and litigation costs involved. What one can't do is make the automatic leap, I don't think, from saying that 'some part of telco is a natural monopoly' to saying that therefore 'there is no room for competition, no reforms should ever have been introduced and any other provider than Telstra is a waste of resources'. Saying this implies a placing a very high weighting on what economists call in-period productive efficiency i.e. technical efficiency over dynamic efficiency (that is ensuring resources are allocated to their highest valued uses taking account of technological change).

    Update: While the more cynical among you might wish to discount to some nth degree what Professor Janusz Ordover has to say about this because his submission is on behalf of Telstra, he is nonetheless a respected economist.




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