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Author's Name: Gigi Foster
Date: Tue 12 Feb 2019

Gigi Foster

Professor Gigi Foster

Gigi Foster is a Professor with the School of Economics at the University of New South Wales Business School, having received her BA from Yale, majoring in Ethics, Politics, and Economics, and her PhD in Economics from the University of Maryland.  Upon receiving her PhD she joined the University of South Australia’s School of Commerce, and moved to Sydney in 2009 as a Senior Lecturer in UNSW’s Australian School of Business.  She has held several ARC Discovery Grants and authored more than 25 scholarly works, including the book (joint with Paul Frijters) An Economic Theory of Greed, Love, Groups, and Networks, published in 2013 by Cambridge University Press.  Gigi is active in the Australian media, particularly in regard to matters of education policy and economic thought, and has served the profession in a variety of roles such as ARC Expert Assessor and National Economics Learning Standards Working Party member.

Subject Area Expertise

Education, social influence, behavioural economics, and the multi-disciplinary analysis of human behaviour in groups.

Website

https://www.business.unsw.edu.au/our-people/gigifoster


Responses (39)


Motherhood, caring and the careers of Australian women - April 2019

Poll 37

Proposition 1: "Without changes to existing public policy or private sector practice in Australia, motherhood will always negatively affect a woman's career."

Proposition 2: "In Australia, fathers are more restricted than mothers in fulfilling a caring role while in employment."

 

Part1 - Disagree

10

A couple who chooses to have children can organize this in any number of ways around one or both parent's careers. It requires forward planning and coordination, and how easy it is depends heavily on whether the couple chooses to have one person stay at home (the man or the woman) or work part-time to look after the children. My responses should not be interpreted to mean that there is nothing Australia could do to make it easier for people to combine children and careers. However, the focus on the plight of mothers versus fathers distracts from the real issues, such as the scarcity of affordable, high-quality daycare with attributes that align with the needs of working parents.

Part 2 - Disagree

6


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

4

Part 2 - Disagree

8

A system of professional accreditation makes sense in the case of professionals to whom authority is delegated to make important decisions on behalf of an individual, group, or company - such as those who manage money for clients (https://www.fma.org/finance-certifications) or those who complete others' taxes ("certified public accountant"). These certifications are a way of addressing the problem that the services of a professional acting directly on one's behalf are credence goods: we don't know their quality, instead choosing whether to believe in it (a job made simpler with accreditation as a signal!), until after the service is rendered, or possibly never. By contrast, while some economists, such as economic consultants, do provide advice, they typically do not take direct action on behalf of clients. This, combined with the large costs and known problems with barriers to entry that an accreditation system would create, tips me against supporting professional accreditation for economists. With the barriers to entry created, I doubt that professional accreditation would draw more people in on net, though it's hard to be sure. Perhaps such a system would make it clearer to some young people that we actually do useful stuff, and thereby increase demand. That said, there is a credence good type problem in curriculum-setting for economics, given that the main forces steering economics curricula in secondary and tertiary settings today to reflect bona fide economics content are the unseen commitments to promoting bona fide economics arising from the prior indoctrination of existing economists (if any) who are consulted in preparing such curricula. These forces are strong, but others forces that are not strongly aligned with embedding authentic, high-quality economic content into our curriculum are also strong - forces like profit-seeking for dodgy education providers and the desire for turf control for state-wide curriculum-setting committees. Bearing in mind that the quality of an economics curriculum is best judged by an experienced economist, my suggestion related to this month's propositions would be to exploit the existing institution of TEQSA, which is supposedly tasked with quality control of university education, to contract the Economic Society of Australia to set up and run a system of certification for tertiary curricula based on the National Learning Standards in economics that have already been developed and endorsed by the ESA (https://www.economicslearningstandards.com/). The ESA would hire experienced economists from Australia or overseas to perform these reviews periodically, creating a "curriculum certification" rather than a "professional accreditation" scheme. This is along the same lines as what some of our most prestigious universities opt into when they seek EQUIS or AASCB accreditation, but would be specifically designed to review and certify (or not) the economics education on offer at any Australian university, helping to address the credence good problem in economics curricula.


Royal Banking Commission (II) - February 2019

Poll 35

"There is no way to significantly increase the degree to which Australian retail banks act in the interests of consumers."

 

Disagree

7

There are ways to do this, but they have so for proven infeasible for political reasons. Some options are: (1) the (re-) creation of a state bank, whose remit is to handle basic banking and mortgage services, leaving only the complex and high-margin business for the retail banks to compete over (this reduces the welfare take of retail banks overall, while concentrating the take that remains amongst Australia's richest consumers and businesses); (2) the introduction of third-party regulation of banks, ideally by international parties that have no financial or political stake in the outcome of their reviews; (3) government subsidization and coordination of Australian consumers' access to overseas providers for particular services that are particularly over-priced or unavailable here, such as superannuation management or educational savings management. What you need is either to increase competition for the business that Australian retail banks presently hold a joint monopoly on, and/or to authorize a dispassionate party to (at least temporarily) take away the right to trade from retail banks shown to be gouging consumers.


Congestion pricing - November 2018

 

Agree

9

The question asks whether there is at least one existing tax that reduces welfare more than a congestion tax, a question to which the answer is almost surely yes. A congestion tax is likely to be progressive, as it will be paid disproportionately by those who must travel at peak hours (i.e., people with jobs), although some incidence may fall on low-wage workers who do not have the labour market power to escape the tax. For this reason we should be careful in implementation not to apply the tax to all methods of transport at peak hours - for example, to leave buses out of it, and/or car travel on secondary roads. As with sin taxes, the behavioral distortion induced by a congestion tax is likely to be pro-social: a reduction in costs paid by others due to the behavior that is reduced (though those others will in fact be the same people who pay the tax, rather than second-hand smokers who are not paying the tax). What taxes are likely worse for welfare than a congestion tax? Some likely candidates are stamp duty, personal income tax on any bracket below the top, the Medicare levy. A final caveat though that in implementation, tax revenue often gets earmarked for particular expenditure categories, and this political problem could make a congestion tax less appealing: for example, if the money raised by the tax gets ploughed into building a highway expansion that only the rich really need, rather than spending on welfare programs or extending the subway lines to under-served poorer suburbs.


Banking Royal Commission and the Credit Crunch - October 2018

Poll 33

Proposition 1: "There is a significant risk that, either as a result of the findings and recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry or as a result of the financial institutions' response to those findings, credit will become less readily available to Australian households or businesses."

Proposition 2: "Assuming credit becomes less readily available to Australian households or businesses, this will in turn have adverse consequences for the performance of the Australian economy."

 

1 - Agree

2 - Uncertain (neither agree nor disagree)

1 - Both due to changes in regulatory requirements and due to banks' strategic incentives (as distinct from economic necessity), there is a reasonable chance that lending restrictions will become tighter.  Banks of course are shouting loudly about the negative impact the Royal Commission's review will have on Australians, because that argument makes them look like stewards of our welfare rather than businesses that have been spoilt by a sweet sham called "industrial self-regulation" under whose banner they have abused the trust and reduced the welfare of Australians for years. The Royal Commission's report intends to cast light on this latter concern, which is far, far more economically important in the medium and longer run than the credit tightening that the banks are tsk-tsking about.

2 - To the extent that credit is allocated more efficiently (i.e., to borrowers who will produce more with it, pay it back with higher likelihood, and so on) as a by-product of less of it in total being given out, this may have positive longer-run economic consequences for the country.  Certainly one must expect a clean-up of Australia's financial industry as a whole, of which the Royal Commission's review is a first step, to have positive long-run economic consequences.


Motherhood, caring and the careers of Australian women - April 2019

Poll 37

Proposition 1: "Without changes to existing public policy or private sector practice in Australia, motherhood will always negatively affect a woman's career."

Proposition 2: "In Australia, fathers are more restricted than mothers in fulfilling a caring role while in employment."

 

Part1 - Disagree

10

A couple who chooses to have children can organize this in any number of ways around one or both parent's careers. It requires forward planning and coordination, and how easy it is depends heavily on whether the couple chooses to have one person stay at home (the man or the woman) or work part-time to look after the children. My responses should not be interpreted to mean that there is nothing Australia could do to make it easier for people to combine children and careers. However, the focus on the plight of mothers versus fathers distracts from the real issues, such as the scarcity of affordable, high-quality daycare with attributes that align with the needs of working parents.

Part 2 - Disagree

6


Waste Policy - August 2018

Poll 32

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

 

Disagree

6

Setting high landfill charges is a brute-force and misguided way to try to encourage recycling in a setting where the market's capacity to accommodate recycling is inadequate.  Also, the breakdown into landfill versus recyclable waste in Australia's current waste management system is on par with peer nations.  Rather than narrowly targeting how much we are putting into landfills, the government would be better advised to subsidize the domestic recycling industry in the short run in order to build up our capacity to process the quantities of recyclables that Australia generates. The money to pay for such a subsidy could come from levies on companies that use environmentally unfriendly (i.e., landfill-bound) packaging or in other ways leave high environmental footprints via the production and sale of their goods.


Sugar sweetened beverage tax for Australia - July 2018

Poll 31

Proposition 1: "The best economic policy instrument available to policy makers seeking to address obesity and related health issues in Australia is the introduction of a tax on sugar sweetened beverages (SSBs)."

Proposition 2: "The health and non-health benefits from a tax on SSBs are likely to outweigh the possible costs felt elsewhere in the economy."

 

1 - Disagree

2 - Disagree

1 - Obesity is mainly the result of psychological/mental problems, so a long-run strategy to address it needs to involve policies that improve the psychological/mental health of those at risk for obesity.  Policies that try to make the ambient environment less obesogenic (like the SSB tax, but also efforts to improve access to exercise infrastructure and healthy food options for the poor) are likely to be somewhat helpful, particularly for children for whom poor choices and the development of poor habits in childhood may have lasting impacts into adulthood, but they do not treat the root cause of obesity.  The root cause is much harder to influence through conventional economic policy.  Broadening the definition of economic policy, we might consider imposing requirements on day care programs or schools that receive public funding to embed interventions like self-positive programs, self-discipline training techniques, and local contests that elevate interpersonal support and community production.  Confining oneself to conventional economic policy, one could implement a fat tax - i.e., have all ATO offices install scales, and every taxpayer who falls under a certain threshold BMI (like 30) qualifies for assessment at a lower marginal tax rate, or gets a tax credit, or something - and if hefty enough and publicized enough i'd expect such a tax policy to shift weight, but something tells me that this approach wouldn't be particularly politically palatable.  It would also be regressive, as would virtually any economic policy measure that targets obesity, because obesity and income are strongly negatively associated.

2 - This is a margin call. The main benefits would probably be in terms of reductions in weight and dental cavities, which can be estimated with reference to recent evaluations of SSB taxes that have been imposed in other countries. The drawbacks of an SSB tax include that it is likely to be regressive, and that drink makers may switch to artificial sweeteners that come with their own negative health consequences.


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."

 

Disagree

7

The proposal is an impossibility, given that there is no single price for road-use paid by fossil-fueled vehicles: the fuel tax impacts different fossil-fueled vehicles differently, depending on the very factors mentioned in the question. Electric vehicles do enjoy some advantages that the government could withdraw, which counterbalance to some extent their disadvantages (e.g., high price, inconvenience of re-charging, limited range), but the fact that fuel-powered vehicle sales still vastly outnumber sale of electric vehicles in Australia shows that the median Australian consumer still prefers the former - so present policy settings are not creating a significant distortion in favor of electric vehicles. As electric vehicles become more competitive with fossil-fueled vehicles in terms of price and other features, it may make sense for governments to change their road-maintenance funds collection mechanism away from fuel taxes and towards other types of taxes, tolls, and/or levies. As a more general point, moving ourselves away from fossil fueled vehicles and towards vehicles that create emissions through draws on the national electricity grid rather than at point of operation may make it easier for policy-makers to monitor and/or manage environmental pollution.


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

10

As written, this is an econ 101 sniff-test question. Of course increasing the supply of a good drives down its equilibrium price, holding everything else constant. In the case of the Australian housing market, however, the signs indicate that much of the housing supply being created is actually not meeting the demand in the market that is feeling the unaffordable prices. Many new homes are built in areas where few people want to live (sometimes due to zoning restrictions, as indicated in the RBA report), and many homes are snapped up by rich and/or foreign investors (because they can, and are further encouraged by various Australian tax and other laws) who are not the less well-off Australian residents presently prevented from accessing good housing to live in who generate a lot of what we think of as the unmet demand in the market. Phillips and Joseph find that housing supply growth has outstripped local household growth, yet still this seemingly steep growth has not saturated the market to the point that prices stop rising. This perhaps perplexing fact is a signal of the disconnect between who is trading in the goods being supplied, on the one hand, and who is forming the demand-side source of the felt shortage, on the other. Through this lens, the Australian housing market is a dual market: one for the rich and/or foreign investors, and another one for Australian residents who need homes in decent places to live in. The first of these markets is humming along fine, and the second is massively under-supplied. All of this said, there is some overlap between these two markets. In a counterfactual world where the houses recently built had not been built, and everything else was held constant, prices would have been even higher than they are in our actual world.


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 - Uncertain (neither agree nor disagree)

2 - Agree

1 - The debt-to-GDP ratio is an odd bird in the first place, as by combining a stock measure corresponding to the government's position and a flow measure corresponding to the entire nation's position, it is not interpretable using conventional economic logic. It does not capture the government's ability to re-pay its debt since it does not accommodate tax rates and regulations, and it does not capture the nation's ability to keep growing as it does not capture the suite of things funded by the debt (which could be any number of things, running the gamut from education to defence). The ratio is arguably a noisy signal about the economic health of a nation but it is a symptom, not a cause, and the cause can be of very different economic import for different nations. Whether slowing up the recent growth we've seen in the Australian debt-to-GDP ratio is something that should be "a priority" is hard to answer mainly because it depends crucially on how it's done.

2 - Australian tax rates are of the same order of magnitude as those of its peers. Despite the media frenzy about Trump's latest tax cuts having ripple effects for other countries as they lose their international competitiveness, I don't see that as a major concern for Australia. I just do not think the sensitivities of the decisions of individuals or corporations to tax rates in isolation are strong enough. Hence the reason to respond "Agree" to this proposition is that I disagree that tax cuts should be on the table at all at this time.


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

5

"No impact" is too precise a prediction to agree with. However, the much-fanfared changes to the US's headline corporate rate mask many details in relation to state tax rates, exemptions, and other rules and opportunities that combine to make the change in the effective US corporate tax rate in all likelihood far less dramatic than the change in the headline rate. Furthermore. corporations do not base their investment decisions entirely, or even primarily, on differences in taxation regimes between countries. Australia will continue to offer companies a unique mix of inputs, infrastructure, institutions, and market access in the Asian region. Yet the rate changes are being noisily advertised, which is likely to prompt some businesses to at least reconsider their international positionings. I would expect the new rules to trigger more changes in the global distribution of where companies park their profits than in the global distribution of where they invest or conduct business. Australia may be affected somewhat by the former and probably not much by the latter, to the extent that the latter occurs more than negligibly.


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

On the one hand, the reduction in involvement of central wage-bargaining bodies that should be expected to accompany a rise in contractual labour in a given occupation should be expected to put downward pressure on wages. On the other hand, many of these workers' wages will already be bound by award rates or the minimum wage. Also, the conditions of workers who are sub-contracting might improve from the perspective of having greater flexibility to choose their working hours and types of jobs, although other conditions might become worse.


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 - Strongly agree

2 - Disagree

1 - While the independence of public broadcasters is never fully immune from political threat, in a democracy a public broadcaster is in theory not primarily motivated by either political ideology or profit-seeking. The providers of all other sources of "news" do have one or both of these motivations, both in theory and in practice, which can imperil their ability to claim unbiased reporting.  One force working against the total debasement of private reporting is the professional ideal of 'quality reporting' that characterises the journalistic profession itself and helps to keep journalists in line through self-monitoring, but even this ideal (a public good itself) is indoctrinated (or not) through the education system, which is largely state-funded.  Another countervailing force is the ability of the population at large to smell a rat and thereby keep fake-news from getting too far away from reality, and that (in)ability too is a product of education.

2 - The ABC and SBS reach the vast majority of Australian households - the primary decision criterion on this question - and offer a variety of types of programming to suit a reasonable number of tastes for learning and entertainment.


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."

 

Agree

9

Apart from the additional wedding expenses and other joint investments on the margin that might not otherwise be spent (joint investments by heterosexual couples are higher in marriages than in co-habitations, and I'd expect the same for homosexual couples), legalising same-sex marriage will allow Australian parliamentarians and the public to move beyond this contentious issue and focus on other things. My answer reflects an optimism that the time and effort freed up after same-sex marriage is legalised will be spent on things that will in fact result in net economic benefits for Australia. Same-sex marriage legalisation may also be seen by some as a tick in the box of "we are all in this together," a message that is good for the collective morale (and hence productivity) of the nation. I see no economic downside to legalising same-sex marriage.


Robots, artificial intelligence and the 'future of work' - October 2017

Poll 23

Question A: "Holding labor market institutions and job training fixed, rising use of robots and artificial intelligence is likely to increase substantially the number of workers in Australia who are unemployed for long periods."

Question B: "Rising use of robots and artificial intelligence in Australia is likely to create benefits large enough that they could be used to compensate those workers who are substantially negatively affected for their lost wages."

 

A - Disagree

B - Uncertain

AI is the latest form of capital that throughout its history has combined well with skilled humans, leading in the latter part of the last century to what economists christened "skill-biased technological change" in which people with higher levels of human capital saw their wages go up faster than those with lower levels of human capital due to being able to combine their skills with technology.  As with previous technological changes, the AI revolution will not only increase the marginal productivity of labour for highly-skilled workers, but will significantly change the content of many jobs.  Human mediation will nevertheless still be required to apply AI effectively to production and distribution processes, and some of those mediation and support jobs will not require exceptional levels of intelligence or skill.  Human service provision in certain industries will also continue to constitute a differentiated product from AI provision, with accompanying demand for it.  The binding constraints we see now on productivity in many industries will change, and the nature of many jobs will change, but we will adapt without huge increases in the count of long-term unemployed even if the government does nothing to help.


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"

 

Uncertain (neither agree nor disagree)

8

I agree with this statement up until the final word: infrastructure. Australia's government debt levels relative to its peers are not alarming (https://data.oecd.org/gga/general-government-debt.htm) and in the current environment of low interest rates, it is sensible to review the government's investment portfolio against what Australia's needs are likely to be in 10 to 20 years' time. Rather than tangible infrastructure, my pick for increased investment would be research and development - particularly blue-sky research funding, which delivers historically large long-run returns on investment, and funding of research in areas of potential industrial comparative advantage for Australia (such as solar power generation) - and this is an area where Australia lags its peer nations (https://theconversation.com/infographic-how-much-does-australia-spend-on-science-and-research-61094). Some R&D costs would be classified as infrastructure, hence my response of "uncertain".


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

7

The rationalisation provided in the Finkel review for adopting a certificate-based scheme rather than some other means of market intervention towards lowering emissions due to electricity generation does not convince me that the authors fully understand the alternative market-based mechanisms of achieving emissions reductions.  It is possible that the institutional history of the Australian electricity sector and/or the ambient sophistication of its players would make another type of scheme tricky to implement in this country, but a convincing economic case for why a certificate-based scheme would be easier to implement is not made in the report.  Political arguments are offered instead - to quote from the report:  "The Panel notes that many stakeholders have expressed strong support for an EIS [emissions incentive scheme, the primary alternative to a certificate-based scheme that the report considers]. The Panel also notes that to date the Australian Government has ruled out implementing an EIS."  In general, economic logic tends to favour interventions to account for externalities that rely less on regulation and (costly) local enforcement, and more on creating an institutional backdrop for market activity that gives rise to incentives that will work all by themselves at the local level with minimal (costly) local monitoring and enforcement.


Does privatisation of human services hurt outcomes? - July 2017

Poll 20

"For-profit provision of human services like health and education leads to poor client outcomes and high costs to government."

 

Uncertain (neither agree nor disagree)

7

Both health and education services have a strong credence-good dimension, due to information asymmetries about service quality between suppliers and consumers, and both also often involve some of the biggest and most influential investments of people's lives. For these reasons, the institutional backdrop against which for-profit delivery of such services occurs must be set up very carefully. The potential for scams, particularly in the case that providers have no existing long-run institutional reputation to protect and/or serve each of their customers only once (reducing the market-facilitated punishment for poor service), is high. Ideally, for-profit providers would be allowed into such markets only when there is already an accessible, low-cost, good-quality public provider, so that real choice is available to consumers; when a cap is set on the fees that can be legally charged, in order to reduce the size of the profits obtainable by any for-profit entrant; and in the presence of a quality-certifying mechanism operated by independent (i.e., not captured) monitors. There are examples of good-quality health and education services delivered by for-profit providers both in Australia and overseas, so it's not impossible to engineer.


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

9

There are obvious things that the government could do to help women access traditionally male-dominated positions in Australia, such as prioritizing quality, flexible childcare access for all parents. The government could also mandate the removal of gender-biased ("maternal", "paternal") language or conditions within parental leave policies, and invest in programs that try to embed the notion that women can succeed in traditional male occupations (like CEOs) and men can succeed in traditionally female ones (like nursing). However, it's impossible to force people to take up certain jobs, and even were access to every occupation exactly equal for the two genders, for the foreseeable future we will continue to see occupational gender segregation due to preferences. If these preferences are driven mainly by entrenched cultural norms, then we may see them change over time (and for this reason i disagree with the absolutist statement that gender desegregation can ONLY be achieved through government intervention). To the extent that different work-type preferences by the different genders are hard-wired, we may be stuck with them and their labour market consequences.


Australian Federal Budget 2017 - Outsourcing Economic Forecasting - May 2017

Poll 18

"Given the Commonwealth Treasury?s ongoing difficulty in making accurate forecasts of some of the key economic variables underpinning the Budget ? in particular nominal GDP growth ? the Government should ?outsource? the economic forecasts used in framing the Budget to an independent agency (such as the Parliamentary Budget Office), as now happens in the United Kingdom."

 

Disagree

7

Accurately forecasting national macroeconomic aggregates for Australia is a difficult job that many private-sector organizations already have an incentive to do. International organizations also try to do it. While an argument could be made that these incentives for other players imply that generating official government forecasts in-house is optional, forecasting the country's progress is a natural role for a competent government to take on: it has a public-goods aspect, can inform policy (including the development and refinement of economic measures), and nurtures economic competence within the country's public service. Whether to split the forecasting job off from other Treasury responsibilities and give it to a separate government department is a second-order question to which the answer depends on factors like the degree of bureaucratization and the returns to scale and specialization within the public service.


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."

 

Agree

7

What's initially unappealing about this proposal is that it constitutes an intervention in a market that doesn't appear to be exhibiting an obvious market failure. However, there are two reasons to support this policy. The first is that unlike in the case of most protectionist-style policies, the group benefiting from it would be not a small subgroup, but rather all of Australia - anyone who uses natural gas, which is essentially everyone. Australian politicians have previously failed to find ways of extracting some of the surplus created by the country's rich natural resources and channeling it towards the people (with the shining example of this failure being the mining tax debacle), and gas reservation constitutes an alternative mechanism for doing basically the same thing. Second, the world price of a crucial productive input like natural gas may be affected by things other than "traditional" market factors, such as financial speculation on future prices, and protecting Australian consumers from unpredictable price fluctuations in core commodities due to socially unproductive speculation is a pro-social thing for the government to do.


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."

 

Disagree

5

The longer-run effects of implementing full capital gains taxation on housing investment are not obvious, but may well include upward pressure on housing prices due to weaker incentives to develop and supply properties to the market. If the policy goal is increased housing affordability, then other levers should be considered, such as government auctioning of the right to re-zone urban areas in order to build upwards.


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."

 

Agree

7

The reasons why macroeconomic aggregates move as they do are found ultimately in the responses of individual economic actors - consumers, producers, exporters, importers, workers, employers - to changed circumstances.  Each agent reacts individually to changes in the prices, constraints, competitors, information, and so on that s/he personally faces.  These myriad individual reactions combine to create dynamism in the whole economy that we can analyse using the tools of macroeconomics.  Teaching how single agents are likely to respond to changes in their economic circumstances, which is the focus of basic microeconomics, is therefore a natural first step on which to build a deep understanding of macroeconomics.


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."

 

Agree

9

Clinton provides superior stability and policy certainty, and she is also a bigger supporter of free trade policies, and these aspects of a Clinton presidency would both work in Australia's favour.  Also, if Trump were to become president, the political influence of the USA on the world stage would likely decline at least temporarily, and this would indirectly affect Australia as an ally of the USA.


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)."

 

Disagree

3

Quantifying the social damage for which gambling is directly or indirectly responsible is not easy. As with other "sins" (e.g., drinking, smoking, drug use, prostitution) there are many potential costs and benefits both to individuals and to whole groups, and which of those materialises in any given instance is both hard to measure and dependent on unseen factors like stress levels and cultural norms. Any answer to this question hence requires making a call on the net influence of these background factors, plus a commitment to some taxonomy of good and bad (e.g., is it "good" or "bad" for people to get high once in a while?). As with other sins, the canonical economic advice would be to keep them legal (if regulated) so as to avoid pushing them into a black market, enabling society to see the behaviour: the government can then use that visibility not only to tax the behaviour, but to try to work against the worst of its negative effects.


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.

 

Strongly agree

9

Many aspects of real-life decision-making have no clear analogue or explanation in the world of traditional economics in which self-interested, atomistic, fully-informed agents allocate their resources by applying cold and near-perfect optimisation. 'Behavioral economics' is the umbrella term under which sit many attempts by economists over the past 20 years or so to explain these aspects of decision-making in ways that are consistent with an expanded notion of economic reasoning and can be integrated with existing economic models. The lessons from these attempts have been both new (to economics) and useful (to policy-making and, potentially, to welfare).


Immigration - November 2016

Poll 12

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

 

Strongly agree

9

Australia's strongly skill-biased immigration program creates a modest flow of mostly English-speaking immigrants that almost surely adds to the country's net economic capacity now and in the future. The only reason not to agree with the statement is if one took an alternative scenario in which we had higher levels of immigration - quite possibly more favourable to the country than the present level - as the counterfactual. As it is written, the question appears to assume a "no-immigration" scenario as the counterfactual. Arguably this is silly, however: have we ever had zero immigration? Australia is largely a nation of immigrants and we have built upon and benefited from their/our diversity and innovations over generations. Why stop now? The main priorities in this policy arena should be to keep the immigration flow reasonably skilled, and to support the cultural assimilation of immigrants in the medium run.


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 - Strongly disagree

9

Let's get real: governments "nudge" people all the time, intentionally and unintentionally (though usually the latter). The "extra nudging" that may result from an active attempt on the part of some sub-group of policy-makers to encourage people to make (slightly different) decisions (slightly differently) will, in any modern democracy like Australia, be overwhelmed by the multi-dimensional chaos of phenomena that characterises the interaction of citizens with government-influenced constraints. Even if there were a meaningful effect, if the government's objective is to increase aggregate welfare, I see no ethical dilemma:  it is the government's job to maximise social welfare, so one could argue that not using proven insights to design better policy would be negligent of the government, and hence unethical. Would it be possible for a governmental official to attempt to "use" behavioural economics to lower aggregate welfare?  Yes, and that attempt, even if unsuccessful, would arguably be unethical, but then we are mainly talking about corruption - not behavioural economics-guided nudging. (I am assuming throughout that we are speaking of reasonably well-proven and robust insights, not merely conjectures on which the health of the realm should not be bet.)

PART 2 - Strongly disagree

9

Let's get real: governments "nudge" people all the time, intentionally and unintentionally (though usually the latter). The "extra nudging" that may result from an active attempt on the part of some sub-group of policy-makers to encourage people to make (slightly different) decisions (slightly differently) will, in any modern democracy like Australia, be overwhelmed by the multi-dimensional chaos of phenomena that characterises the interaction of citizens with government-influenced constraints. Even if there were a meaningful effect, if the government's objective is to increase aggregate welfare, I see no ethical dilemma:  it is the government's job to maximise social welfare, so one could argue that not using proven insights to design better policy would be negligent of the government, and hence unethical. Would it be possible for a governmental official to attempt to "use" behavioural economics to lower aggregate welfare?  Yes, and that attempt, even if unsuccessful, would arguably be unethical, but then we are mainly talking about corruption - not behavioural economics-guided nudging. (I am assuming throughout that we are speaking of reasonably well-proven and robust insights, not merely conjectures on which the health of the realm should not be bet.)


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

4

The popular vote in favour of Brexit seems to have resulted mainly from fear amongst Britain's citizens that the free immigration flows into the country from the rest of Europe were having negative effects - such as increased competition for domestic jobs and increased risks of violence at home due to radical Muslim influences.  Britain's contributions towards propping up Greece and the other PIIGS may also have scored some influence. Whether and how these aspects of Britain's relation to the rest of Europe will change with Brexit depends entirely on the terms of that exit, which have yet to be negotiated. What we do know is that the markets seem to think that Brexit was a bad idea in the short run (the GBP fell), and that policy changes that make it more difficult for Britain to do business with the rest of the world, like increased tariffs on British goods shipped to other European countries, would be predicted to damage Britain in the medium and long run.


Spend on education or business tax cut - June 2016

Poll 8

"Australia will receive a bigger economic growth dividend in the long-run by spending on education than offering an equivalent amount of money on a tax cut to business."

 

Agree

7

In the long run, the engine of economic growth is not the dissemination of existing knowledge but the discovery of new knowledge. The judgement that education investments are more likely than business tax cuts to lead to innovation assumes that some of the proposed education spending will flow to the university system, where much new knowledge generation occurs; it also assumes that businesses' elasticity of knowledge generation with respect to tax obligations is small, which is the case if the proposed tax breaks mainly increase profits or salaries without spurring knowledge-discovery investments. This is likely to be true in many of Australia's oligopolistic industries. Further, preserving a healthy state is essential for long-run growth, and investments into training the next generation of Australian citizens are more likely to maintain a healthy state than reductions in the funding provided to the state by the businesses that benefit from its present institutions.


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."

 

Disagree

8

Many OECD nations have quite similar fiscal situations as Australia, and politicians' harping on about the national deficit - like the harping on about national debt - seems driven mainly by the desire to be seen by voters to care about something important rather than to do what best promotes social welfare. The plan to recover surplus gradually by 2020-21 seems reasonably aligned with the strategy of spending into deficit when times are tough, in order to prop up the economy, and getting back into surplus at a steady pace (as well as spending down the national debt, when possible) during better times. Some opportunity to recover fiscal strength was lost during the mining boom, but that is a story for another question.


China services boom for Australia? - April 2016

Poll 6

"As the Chinese economy makes its transition from investment-led to consumption led growth, the Australian service sector which currently accounts for around 20% of total exports, will produce a second 'Chinese economic windfall' for Australians."

 

Disagree

7

The commodity-led boom Australia experienced due to Chinese demand for our raw materials is unlikely to be echoed in a boom led by Chinese demand for our services in the coming years because, while they cannot copy Australia's raw materials deposits, the Chinese are largely able to copy Australia's service sector products in the medium run. Our educational exports are likely to remain strong for some time, but Chinese universities are developing quickly and over time a larger share of the best Chinese students will be educated in China. Other services Australia could provide will gradually become home-grown in China as that country develops, and from the perspective of Chinese consumers these services will be not only in a preferred language and location, but likely cheaper than what Australia can offer with its high labour costs.


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)

7

Major sporting events stimulate consumer spending on merchandise and other event-related goods, generate some local employment and occasionally some new infrastructure, and also strengthen patriotic or at least region-specific sentiment. However, government funding for such events crowds out spending on other goods and services that provide benefits to a wider swathe of society, and/or whose benefits last for a longer time (e.g., basic infrastructure, education, health). Hence, the "net" effect on the city or region is difficult to be sure of in the abstract.


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."

 

Strongly agree

8

Complex tax laws are an open invitation to taxpayers to find creative ways to gain from special concessions or complicated loopholes, because a law's complexity increases the difficulty faced by government in monitoring compliance. Taxes make up a big chunk of gross earnings, so the incentives for taxpayers to find ways of violating the spirit of the law but not the letter are also high. For these reasons, the waste generated by the present proposal - in terms of government support for bad projects and taxpayer resources spent on creative tax accountants - would likely be significant. Far better to support innovation through more direct and more efficient means, such as direct competitive grant programs and other tournaments, subsidized job fairs and other contact-making events, and wise investments into the basic infrastructure and higher education that are inputs into innovation.


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

6

This may be true for some people - even those whose preferences (like most people's) include things like being loved, understood, and cared for. However, a norm in our society is that the existence of these intangibles of love and understanding is outwardly proven partly via personalized material gift exchange on special occasions. For this reason, NOT giving a thoughtful gift to a loved one at the holidays would be seen by many people as a slight. A lesser slight can still be felt at the receipt of a simple money gift, which betrays no personal understanding of the recipient.


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."

 

Strongly agree

9

The Commission's arguments are well-founded theoretically and accurately describe current realities. These realities include frustrated would-be Sunday buyers, long hours of weekend work by owner-managers who cannot afford Sunday rates, and dysfunctional incentives for workers to substitute Sunday work - if they can find it - for investments in further skills. Arguably the very social activities that the Sunday pay rates supposedly support are presently hampered by the inaccessibility of places to buy goods and services that are complementary to those activities (e.g., cafes, restaurants, alcohol, etc.). The potential countervailing force against employment rising as a result of this change is workers' unwillingness to work on Sundays. I suspect that this imagined unwillingness is not the binding constraint in the market at present, and that the binding constraint is instead the present unwillingness of employers to provide jobs on Sundays at outlandish rates of pay.