I accept that I am deeply unfashionable and not just because I’m an economist. It’s my analytical approach to issues that’s the problem. Where’s the emotion, where’s the vibe?
I had come to this realisation some time ago, but the now-thankfully-completed election campaign utterly confirmed this conclusion. No one was interested in facts or figures, in policy alternatives, in limiting the role of government. (Gosh, I risk being sent off to the intellectual gallows for even mentioning that last one.)
Unless a political proposal gave voters a warm and fuzzy feeling as well as an elevated sense of virtuousness, it barely rated a mention by the press. To be sure, more handouts were given some coverage but generally because they were purported to achieve a higher goal.
Higher wages for aged-care workers – better quality and sympathetic care for oldies. More subsidies for childcare fees, even for couples on very high incomes – higher workforce participation and good for the economy. A higher emissions reduction target – lower electricity prices. (Any guffawing is not permitted after 21 May, by the way.)
It’s not really surprising in this new knowledge-free environment that some economists have ventured out to seek popularity by loosening the analytical constraints that generally bind our thinking. A recent survey of a number of ‘leading’ Australian economists – I guess they lap up the adjective ‘leading’ – revealed that the climate and environment is regarded as the most significant economic challenge facing Australia.
According to some person who won the title of Young Economist of the Year, ‘Australia had fallen so far behind the richer countries on measures to reach net zero it ranked dead-last according to the Climate Council. It was not only embarrassing, but incredibly short-sighted given Australia’s exposure to extreme weather events.’
Where do you start? Well, questioning the reference to the hyper-partisan and unreliable Climate Council would be a good place.
But getting back to me, I’ve noticed that I became a very lonely figure recently when it came to writing about the costs and benefits of the policy positions of the two major parties. (I’m not that stupid – I wouldn’t waste my time analysing the policies of the Greens.) There were just so few pieces of investigative commentary on the existing policy arrangements or the policy proposals of the Coalition and Labor.
My approach is always to consider an issue – take childcare and government fee subsidies – and then ask the following fundamental questions: why should the government be involved; to what extent should it be involved; and what are the best means of intervening. A quick run through the history of the policy interventions and their impact and you are half-way to analysing the policy proposals being offered to voters.
There is a perfectly legitimate view that governments should not be involved in childcare beyond some light-handed regulation. After all, having children is a private decision and parents should expect to bear the cost of their care and upbringing. Why should those without children want to subsidise those who have them?
The arguments for taxpayer-provided fee relief have always been confused, but initially focused on the financial barriers for low-income parents – generally mothers – to hold down employment as well as the supposed benefits of early childhood learning for the children themselves.
Federal government spending on childcare started at a relatively low level – less than one billion dollars per year in the early 2000s. By 2013, however, childcare fee relief was among the top twenty spending programs of the federal government. It was chewing up more than $10 billion per year as the Coalition left office. Labor thinks this is insufficient and intends to increase the subsidy rates from July 2023 and to extend fee relief to couples earning up to $530,000 per year. (It is currently a tad under $360,000 per year). This will of course cost more dough – over $800 million extra over four years – at the very time when the budget needs repair and more spending adds to inflation.
The fact that childcare centres are generally full and that there is a clear tendency for greater fee relief simply to generate higher fees (daily childcare fees of close to $200 per day are not uncommon) were of no interest to journalists. (Mind you, the Coalition was pretty quiet on the topic.) As for the benefits of early childhood learning, does anyone really believe that sticking babies and toddlers in a germ-generating centre does them any good beyond allowing the parents to sub-contract out their care? Perhaps for four-year-olds, in the year before they go to school. But seriously?
Had I fully appreciated the electoral appeal of the ‘Teal’ women – highly educated, high incomes – I might have written a column or two on their castles in the sky. Labor’s emissions reduction target of 43 per cent is regarded as derisory by the ‘Teal’ brigade. New member for Goldstein, Zoe Daniel, wants 60 per cent. She gives no indication how this will be achieved. No assessment of the costs and benefits (apart from that warm and fuzzy feeling again) is provided. It’s just a nice big number.
New member for Wentworth, Allegra Spender, is also very impressed by China’s efforts to decarbonise its economy. (I’m not making this up.) There has been a lot of spending on wind and solar evidently even though China has over 1,000 coal-fired power stations, many of which have been recently constructed and its demand for coal has been rising sharply.
Here’s the thing, Allegra: you might want to take into account the fact that China has been playing the West like a fiddle. As the major supplier of renewable energy componentry and rare minerals, it stands to gain by pretending to decarbonise its economy while insisting the West accelerate their efforts.
But it’s all OK because the day after the election, one of Australia’s longest-serving economics editors declared that Australia can become a ‘renewable energy superpower’ now that Albo has been elected. What does ‘renewable energy superpower’ even mean? Evidently we have lots of wind and sun in Australia, so it’s a dead cert.
Don’t get me wrong – I don’t care about being unfashionable. I’d rather stick with the analytical principles I was taught and have applied than give in to the fashion du jour. It’s all very well voters feeling virtuous but a sense of righteousness doesn’t pay the bills. There will be a day of reckoning and I’m prepared to be patient.
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