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Author's Name: Peter Abelson
Date: Tue 12 Feb 2019

Peter Abelson

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Professor Peter Abelson

Peter Abelson has a PH.D in Economics from London University.  Peter started life as a professional economist working in London, Lusaka, Bangkok and Kingston Jamaica. Peter taught economics at Macquarie University from 1974 to 2005, holding a Chair in Economics from 2001 to 2006, and taught public finance at Sydney University from 2007 to 2012.  Peter's text, "Public Economics: Principles and Practice" (McGraw-Hill) is the main Australian public economics text. Peter has published over 50 refereed articles on public economics and related areas. From 1993 to 2006, Peter was National Secretary of the Economic Society of Australia.  Peter is currently Managing Director of consultancy Applied Economics, Principal Economics Advisor (part–time) to the NSW Treasury, and the first popularly elected Mayor of Mosman Council Sydney (2012-16).

Subject Area Expertise

Public economics and related areas of transport, housing, health, education and utilities.

Website

Company website: www.appliedeconomics.com.au


Responses (30)


Professional Accreditation of Economists - March 2019

Poll 36

Proposition 1: "Professional accreditation for the economics profession would attract more people to economics as a career."

Proposition 2: "The benefits of professional accreditation for current and prospective economists would exceed any possible costs"

 

Part 1 - Disagree

7

Part 2 - Disagree

7

The issue of professional accreditation was discussed several times when I was Secretary of the Society from 1993 to 2006. There was always quite firm opposition to accreditation. The neo-liberal view was that the market should decide who are economists and who not. The pragmatic opposition was that there is no simple test of who is an economist. The pragmatic problem was twofold. What university qualifications would be required? And post university, some would practise economics and others not ? how would this be factored in? In about 2004, following a survey of falling standards in economics courses at universities, I proposed that the Society should sponsor a national third year UG course which would become part of university degrees in economics. There was very little support for this either from strong universities or less strong ones. So, the pragmatic problem remains. To conclude I remember an anecdote from the UK. Some dozen or so years ago, when the Head of the Economic Service in the UK Government retired, he was asked what is was like working as an economist in the UK government? He replied: ?Ninety per cent of the work we do in government is 101 Economics; but people are any good at this only after they have done it for 10 years?.


Congestion pricing - November 2018

 

Agree

8


Waste Policy - August 2018

Poll 32

"There are clear net benefits for Australians from (further) increasing the diversion of waste from Australian landfills."

 

Uncertain (neither agree nor disagree)

7

Unfortunately the question is too broad to allow for a specific response. In my view, there would be net benefits in diverting some waste from land fills but not in diverting other wastes.


Electric vehicles and road-use pricing - June 2018

Poll 30

"Pricing of road-use for electric vehicles should be the same as fossil fuel-powered vehicles."

 

Uncertain (neither agree nor disagree)

8

The pricing principles should be similar. Road user charges should reflect congestion costs, road wear and tear and third-party environmental costs. These charges may vary with vehicle type.


Will building more homes make housing cheaper? - May 2018

Poll 29

"A sustained increase in the number of new homes constructed each year, all else equal, will make housing cheaper than otherwise."

 

Agree

8

There have been many studies of the impact of housing supply on house prices showing elasticities varying between -1.1 and -3.5. Girouard et al. cite 20 studies. Oxford Economics cite 4 studies. Two points should be noted. One, these are national studies. Increasing housing supply in one city alone would have much less effect because net immigration into that city would increase and restore the prior spatial equilibrium relativities. Two, these results refer to changes in housing stock, not housing flows. A 50% increase in completions (flow) in one year, will typically add only about 0.66% to the housing stock and reduce house prices by the order of 1.5%. Thus, increasing housing suppl;y would have a small impact on house prices. The much greater driver of house prices is interest rates. Abelson, P., Joyeux, R., Milunovich, G. and D. Chung, 2005, ‘Explaining House Prices in Australia: 1970 to 2003’, Economic Record, 81, pp. S1-S8. Girouard, N., Kennedy, M., van den Noord, P., and C. Andre, 2006, Recent House Price Developments: The Role of Fundamentals, Economics Department Working Paper, No. 475. OECD, Paris.Oxford Economics, 2016, Forecasting UK House Prices and Home Ownership (1992 to 2014).


Australian Federal Budget 2018 - Reduce government debt or provide tax cuts? - April 2018

Poll 28

Proposition 1: "Slowing the growth in the debt to GDP ratio should be a priority for Australian governments."

Proposition 2: "Slowing the growth in the debt to GDP ratio is a higher priority than income or corporate tax cuts."

 

1 - Disagree

2 - Disagree

1 - The statement talks about growth in debt rather than the current level which complicates response. Overall, current net debt is manageable. Unfortunately, budgets often mix capital with recurrent expenditure. Borrowing for productive capital investment capital is reasonable. Extending the debt significantly for recurrent services is not justified under current economic conditions.

2 - Again the question is overly complicated. This respondent disagrees on the basis that modest income tax cuts would be slightly preferred policy.


US corporate tax cuts - March 2018

Poll 27

"The recent US corporate tax cuts will have no impact on investments in and capital flows into Australia."

 

Disagree

7

Saying that the US corporate tax cuts will have "no" impact on capital inflows to Australia is too strong. But, in my view, the impacts will be minor as companies need to support existing investments and Australia remains an attractive destination for new capital investment.


Gig economy and worker welfare - February 2018

Poll 26

"The wages and conditions of Australian workers providing services in sectors affected by the rapid growth of digital on-demand subcontracting platforms will, on average, be expected to fall without further government intervention."

 

Uncertain (neither agree nor disagree)

8

This is a classic "it depends" problem.


Journalism as a public good - January 2018

Poll 25

Proposition 1: "The modern phenomena of information overload and social-media-fuelled 'fake news' bring into focus the value of quality journalism. Quality journalism has a public-good dimension that warrants public support."

Proposition 2: "The Australian government presently provides funding for the ABC and SBS, Australia's independent public broadcasters. The Australian government should increase its financial support of quality journalism."

 

1 - Agree

2 - Agree

1 - See below.

2 - These two propositions  are truly a poisoned chalice. Accurate information does have important public good qualities. And relying on market forces, billionaires such as the Kochs, Rupert Murdoch, the Mercer family or Berlusconi, to provide unbiased journalistic information is absurdly unrealistic.  Unfortunately, it is almost equally unrealistic to expect elected representatives such as Trump, Erdogan or Berlusconi to promote and finance independent quality journalism.  But as Churchill reputedly said, democracy is the worst form of government, except for all the others. In a similar spirit, I support taxpayer support for independent quality journalism.


Same sex marriage - November 2017

Poll 24

"Assuming that the law will be changed to allow same-sex couples to marry in Australia, this will generate net economic benefits for the nation as a whole over the next 10 years."

 

Strongly agree

8

A healthy and inclusive community is more productive than an exclusive one.


Public borrowing for infrastructure investment - September 2017

Poll 22

"As interest rates are at low levels by historical standards, federal and state governments, despite their public debt levels, should be borrowing more than they currently are to invest in infrastructure"

 

Strongly agree

8

As advocated in “Rebalancing Monetary and Fiscal Policies” (ESA Conference July 2017) with co-author Tim Dalton, borrowing to invest in infrastructure (subject to cost-benefit standards) is good economic policy when interest rates are low, productivity is low, there is under-employment and there is plenty of fiscal space (a low debt-GDP ratio). These conditions apply to some extent in Australia. Lower interest rates would be ineffective, somewhat regressive via higher asset prices and prudentially risky.


The Finkel Review - August 2017

Poll 21

"The Finkel Review has recommended a mandatory certificate scheme that obliges electricity retailers to purchase a certain proportion of the electricity they sell from sources of electricity whose emission intensity is below a defined level. This is preferable to conventional approaches to the pricing of externalities, such as an emission tax or cap and trade scheme."

 

Strongly disagree

8


Gender diversity in the workplace - role of government? - June 2017

Poll 19

"The recent Parliamentary Inquiry into "Gender segregation in the workplace and its impact on women's economic equality" was asked to examine measures to encourage women?s participation in male-dominated occupations and industries. Although there is growing awareness of the productivity gains of gender diversity, the private market alone is unlikely to steer the Australian labour market toward gender equality in male-dominated industries. Breaking down gender segregation in the labour market can only be achieved with some degree of government intervention."

 

Agree

4

Prefer nudge to regulation and note that Government might have to start by nudging itself.


Energy shortages - reserving Australian gas - April 2017

Poll 17

"In response to energy shortages around Australia, government policies requiring gas producers to reserve some production for domestic consumption are a good way to ensure that Australian consumers have access to sufficient gas supplies while still allowing for gas exports."

 

Disagree

7

The proposed regulatory solution is third best. The best ways are to introduce peak pricing of power to manage energy demand and consistent carbon pricing policy to encourage renewables and guide investment by other possible energy sources.


CGT deductions - March 2017

Poll 16

"Capital gains tax deductions for housing investment should be removed because they overstimulate the housing market, contributing to rising house prices."

 

Uncertain (neither agree nor disagree)

7

Arguably CGT should be less concessionary across the board (though not on CPI component of gain) but change should be general not discriminatory on one asset class.


Economics teaching - micro before macro - February 2017

Poll 15

"It is more effective to teach an introductory course in micro-economics first before an introductory course in macro-economics."

 

Disagree

7

I think economic education should start with presenting big picture concepts to students - the subject matter of economics, circular flow model of the economy,  GDP, employment, role of capital and labour, role of government, income distribution, inflation, productivity and growth. Logically, macroeconomics comes next and then microeconomics.


2016 US Election - November 2016

Poll 13

"Hillary Clinton is likely to be the superior US presidential candidate for the Australian economy and for Australia."

 

Strongly agree

10


Social costs of gambling - December 2016

Poll 14

"The social costs of gambling exceed the benefits (including consumer surplus from recreational gambling and tax revenue for governments)."

 

Uncertain (neither agree nor disagree)

7

The proposition is plausible but evidence is needed to support the assertion.


Part 1: 'Behavioural economics provides new and useful insights into individual behaviour.' Part 2: 'It is unethical for governments to use behavioural economics to

The total benefit of current levels* of migration to Australia will outweigh the total costs to Australia's economy.

 

Agree

7

Useful insights include loss aversion and individual responses to probabilities, but many insights were incremental to existing knowledge rather than wholly new.


Immigration - November 2016

Poll 12

'The total benefit of current levels* of migration to Australia will outweigh the total costs to Australia's economy'.

 

Agree

8

A fair to high proportion of migrants are working age, moderately or well qualified and motivated to work.


Behavioural economics - September 2016

Poll 11

Part 1: 'Behavioural economics provides new and useful insights into individual behaviour.'

Part 2: 'It is unethical for governments to use behavioural economics to "nudge" citizens.'

 

PART 1 - Uncertain (neither agree nor disagree)

8

It depends. Some nudging (advertising) is highly appropriate (tobacco consumption, drugs, gambling etc) but nudging like advertising can be abused by governments, sometimes badly so.

PART 1 - Uncertain (neither agree nor disagree)

8

It depends. Some nudging (advertising) is highly appropriate (tobacco consumption, drugs, gambling etc) but nudging like advertising can be abused by governments, sometimes badly so.


RBA economic growth targets - August 2016

Poll 10

"The Reserve Bank of Australia should be tasked with targeting nominal economic growth rather than inflation."

 

Disagree

8

This objective is too crude. For example, it implies raising the bank rate when real growth increases and the inflation rate is constant, which may not be appropriate. The criteria for the RBA should be more nuanced.


The Brexit - impact on UK citizens - July 2016

Poll 9

"Assuming it is implemented, Brexit will deliver net economic benefits, on average, to UK citizens within its first 5 years."

 

Disagree

8


Budget 2016-17 - Returning to surplus - May 2016

Poll 7

"The recently released 2016-17 Commonwealth Budget projects that the Australian Government's underlying cash balance will return to surplus by 2020?21*. Australian politicians should rebalance the budget with greater urgency."

 

Agree

6

I accept the target as reasonable given our economic and net financial position, but agree with this statement because I doubt that the target will be achieved.


Efficiency of tax Government investments in major sporting events - February/March 2016

Poll 5

"Government investments in major sporting events usually generate net benefits for the city or region where the investment is made."

 

Uncertain (neither agree nor disagree)

10

Benefit depends primarily on negotiation over economic rent (profit) which belongs to the event promoter. This is so sensitive that the Australian (Victorian) Grand Prix Corporation would lose the right to run the GP if it revealed to any third party its payment to the F1 Corporation.


Efficiency of tax incentives - February 2016

Poll 4

"New tax incentives for investments in technology and innovation businesses and start-ups are likely to be inefficient."

 

Uncertain (neither agree nor disagree)

5

In my view, the incentives are likely to induce only small changes in behaviour, innovation or investment (as innovators and investors in this space are not seeking marginal gains) and the concessions could be rorted. However a tick for a culture shift to encourage new business over old.


Bah Humbug Australia - December 2015

Poll 3

"Giving specific presents as holiday gifts is inefficient, because recipients could satisfy their preferences much better with cash."

 

Disagree

8

My wife (a psychologist) and I have been invited to a X-mas party. I ask my wife whether we should take a bottle of wine, chocolates or flowers or whether we should maximise our host's utility by presenting her with $20. My wife replies that if I am going to embarrass her by behaving like a silly rational economist she won't come with me to the party.


Penalty Rates Reform - November 2015

Poll 2

"Aligning Sunday penalty rates for hospitality, entertainment and retailing industries with the current levels for Saturday, as proposed in the Productivity Commission's draft report, will lead to more employment and greater availability of services in these industries on Sundays."

 

Agree

7