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Author's Name: John Freebairn
Date: Tue 12 Feb 2019

John Freebairn

Professor John Freebairn

John Freebairn holds the Ritchie chair in economics at the University of Melbourne. He has degrees from the University of New England and the University of California, Davis. Prior to joining Melbourne in 1996, his preceding career includes university appointments at the ANU, LaTrobe and Monash, and periods with the NSW Department of Agriculture and the Business Council of Australia. John is an applied microeconomist and economic policy analyst with current interests in taxation reform and environmental economics.

Subject Area Expertise

Public finance; environment and resource economics.

Website

http://www.findanexpert.unimelb.edu.au/display/person14508

 


Responses (27)


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

9

Part 2 - Strongly disagree

10

Where to draw the accreditation line is arbitrary, vague, and unlikely to provide additional signals. For many employers and employees, an honours degree, or a graduate degree, in economics is an informed and well-understood signal of skill. Suppose we go to the three-year undergraduate degrees in economics, business and commerce, what would be the accreditation line; x subjects at level three, and then the minimum of core micro, macro and econometrics subjects, or electives? Any accreditation measure will be arbitrary, and provide limited if any additional information to potential employers. Given the wide range of career paths taken by graduates who have included economics subjects in their studies, together with the likely small if any additional information provided by the arbitrary accreditation measure, I do not see accreditation inducing an increase in demand for economists. Similarly, it is difficult to argue that accreditation would shift outwards the supply curve for students to study economics. The combination of no shifts in demand and supply means no changes in remuneration or quantity.


Congestion pricing - November 2018

 

Strongly agree

10

In the short run and for available capacity, setting congestion charges would better allocate scarce capacity from less valued to higher valued uses for a net efficiency gain. In the longer run, the information on congestion prices and usage would better signal the choice of national productivity investments to create additional capacity. For the case of roads, current special taxes on motor vehicles, including Commonwealth excise on petroleum products, and state taxes, including registration, transfer duty and city parking levies, are poorly correlated with vehicle use of government funded roads, pollution and congestion. As proposed by the Henry Review, and many others, an aggregate revenue neutral reform package would replace these taxes with a road user fee, a pollution tax and a congestion fee.


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 - Disagree

2 - Strongly disagree

1 - Hopefully, a revised set of better applied simpler and more transparent rules, as suggested by BRC, will reduce low value products now provided via information asymmetry market failures. Apart from some short term fines, costs of providing valued services will not rise.

2 - Disagree that valued credit will become less available or more costly as argued for Proposition 1.


Waste Policy - August 2018

Poll 32

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

 

Disagree

8

The society optimum waste quantity would equate marginal social benefits with marginal social costs, and then for different categories of wastes. Social costs of landfill include opportunity value of sites, disposal costs and any external costs associated with pollution to water and air and neighbourhood comfort. Including regulations and their costs, most local councils seem to set fees equal to or greater than marginal social cost.It should be important to recognise the heterogeneity of the vast array of different waste products sent to landfill, and their different marginal social costs and benefits. And, technological changes are and will continue to shift both curves over time.


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 - See below

2 - SSBs contribute only a portion of external and internality costs of excess consumption of sugar, other food products and lack of exercise. Better to tax sugar input to encourage changes in product mix, including sugar content per SSB, as well as consumption of SSB. For many consumers, at least a third and perhaps a half, with moderate consumption of SSB and other sugar products, and minimal to no external costs, a SSB causes a loss of consumer welfare. That is, product and consumer heterogeneity needs to be recognised in the tax design. Where inadequate information is a part of the market failure problem, education and provision of product information should be a component of the policy packages.


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."

 

Strongly agree

10

The whole gamut of current taxes on motor vehicles should be reformed as proposed by the Henry Review and others. Current fuel excise, luxury car tax, and state registration, conveyance duty, and others should be replaced with (i) a road use charge based on weight per axle times kilometres travelled, (ii) a congestion fee based on location and time of day, if not actual congestion, and (iii) marginal pollution costs. For (iii) a lower excise is appropriate for fossil fuel vehicles and a similar tax on fossil fuel supplied electricity used by electric vehicles. The luxury car tax is both distorting and inequitable: why tax luxury cars but not luxury boats, holidays, clothing, etc?


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."

 

Strongly agree

10

So long as demand is less than perfectly elastic, as is supported by many studies, an outwards shift of supply brings a lower price, ceteris paribus.


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 - Strongly agree

2 - Uncertain (neither agree nor disagree)

1 - All indicators point to an underlying structural deficit, e.g. IGR; unfunded NDIS, education, defence, foreign aid, etc expenditures; bracket creep is not an acceptable route for higher taxation; inevitable risks of a future recession and need for a strong fiscal position.

2 - The underlying structural budget problem requires fundamental rethinking across all areas of expenditure and taxation. Playing with bits and pieces of the bigger puzzle is unlikely to solve the challenge. Income tax reform is much more than changing tax rates.


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."

 

Strongly disagree

10

There are many global investors located in many countries looking for the best after-tax return on their funds. The USA corporate tax changes will increase the after-tax return on investments in the USA. Some global investors will shift some of their funds from elsewhere, including from Australia, to chase the higher returns in the USA, and accept a lower pre-tax return but still receive a higher after-tax return on the funds switched to USA investments.


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."

 

Disagree

8

As argued by Jeff Borland and Mick Coelli in December 2017 edition of the Australian Economic Review, structural changes of the Australian labour market are roughly the same over the last decade as in previous decades-for example, changes in industry and occupation mixes, job turnover and experience. Assuming close to a full employment economy, competition and the ability of employees to pick and choose across established and new type jobs should force similar working conditions across the labour market. Current general economy labour market protection policies seem more effective than the suggested option of additional "new industry specific" policy interventions.


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 - Uncertain

B - Disagree

Robots and AI is likely to be a game of "job destruction and creation" along the lines of the steam engine, electricity, mechanisation,telephone, TV, etc of history. Automation and AI will be introduced if they offer lower cost ways of production and new or better products than the replaced technology in a positive sum game. The surplus generated by the positive sum game of lower production costs and more utility per dollar spent finds its way into additional outlays and some job creation.
Yes, the process of job destruction and job creation also involves devaluation of some skills and additional demands for other skills creating structural unemployment. Government taxation of a share of the additional real income generated by adoption of robots and IA provides additional resources for short term income support and retraining of displaced employees to better adjust to the additional new jobs created. But, this increase of funds is limited.


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."

 

Disagree

9

Pollution can be reduced by changing decisions in the production of electricity and decisions on the use of electricity, including energy intensity and mix of energy intensive versus extensive products. Finkel proposal and emissions tax roughly similar in cost effective reduction of pollution intensive generation methods. But, the greater price flow-through effect for emissions tax means equality of marginal abatement costs across decisions options available to electricity users as well as electricity generators;  Finkel proposal will not incentivise many of the low cost electricity user decision changes. Further, the government revenue windfall gain of an emissions tax can be recycled as lump sum compensation for the higher electricity prices to maintain distributional equity, e.g. increases of social security payments and target reductions in marginal income tax rates.


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

9

Economic forecasting is difficult and always with error. No one organisation or person has shown repeated success at being the best forecaster.The sooner government and the wider community accept inevitable errors with economic forecasts the better. Current Treasury scenario work should be given greater prominence.There is no evidence that the Treasury in its forecasts is swayed by the wishes of the government.In aggregate, there is no evidence that PBO would develop better forecasts than Treasury. Just another Canberra empire funded by the taxpayer.


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."

 

Strongly disagree

8

Over the many years of the lives of gas projects market forces are more likely to select quantities to maximise OZ wellbeing than governments. The real world of the future will be one of changes in domestic gas supply, domestic demand and export demand, and of course prices, and there is much uncertainty about these variables. Almost certainly, government choices of the reservation gas quantity for the domestic market will result in a mixture of large effective subsidies/taxes which misallocate gas resources.


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."

 

Uncertain (neither agree nor disagree)

10

Provided a general introduction about the economics discipline is provided, coherent subjects for either microeconomics or macroeconomics can be offerred as the initial subject. While there are overlaps of questions and methodologies, and there is a compelling case for students to understand both micro and macro, one does not necessarily require the other as a prerequisite.


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

8

It is very hard to know what Trump really proposes, and then what he might activate if elected and what economic policies Congress would support. Therefore much uncertainty. His anti-trade and immigration views would put a brake on international trade. His incoherent budget strategy is likely to become an adverse global economic shock. On the other hand, the very-much more of the same Clinton economic strategy if followed seems unlikely to overcome the many economic challenges facing the US and world economies, with adverse flow on-effects to the Australian economy.


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)

3

For most recreational gamblers and about a half of dollars spent, gambling is one of many recreation choice options with no problem gambling costs; the other half spent by problem gamblers involves spill-over costs on third parties and personal costs inconsistent with rational choice (Productivity Commission, 2010). To selectively tax or regulate against recreational gamblers, but not other forms of recreation such as restaurants and concerts, distorts these decisions.These distortions have to be balanced against the external costs and individual poor choice decisions by problem gamblers. Numbers to make the comparison are uncertain.Selective taxation of gambling primarily involves a transfer from gambler to government. Productivity Commission (2010) analysis shows this to be a highly regressive tax. Also, the tax fails horizontal equity with those choosing gambling over alternative recreation and other pursuits on similar incomes/expenditures pay different tax burdens.


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

Ideas such as endowment effects, inconsistent time preferences provide different explanations and predictions of behaviour compared with the neoclassical model. Often the behavioural economics explanation is a better approximation to a complex reality.


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

6

The answer involves trade-offs, endogenous public and private decisions, and more generally the composition of migrants can be important (even if the question refers to the current mix). On the benefit side, a larger and more diverse economy and society. On the cost  side, and to date Australia has been mediocre, require both private and public investment to support the larger economy and society. To date, public investment seems to be driven more by political opportunism than logical assessment of infrastructure and other investment options, and deficit fetishness has ruled against borrowing to finance good  investments and to be repaid by better-off beneficiaries.


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 - Disagree

8

For example, to promote availability of organ transplants, a nudge would say default is to allow rather than the alternative option of requiring a positive family request

PART 2 - Disagree

8

For example, to promote availability of organ transplants, a nudge would say default is to allow rather than the alternative option of requiring a positive family request


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

7

In the short run, uncertainty, and the loss of confidence and of animal spirits reduce aggregate demand. Over medium term, likely additional restrictions on free trade and loss of mobility of inputs with likely negotiated separation to add to adjustment costs and reduce opportunities for trade.


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

5

Yes China will provide a significant shift in demand. But also, other export countries and China itself will increase supply capacity. Result, a larger market and more sales with a relatively small price premium.


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."

 

Disagree

5

Most of the benefits and costs of major sport events are private with relatively small external spillovers. Government investment requires transfer of scarce funds and resources from alternative valued uses.


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."

 

Agree

8

While generally agree that U($) ≥ U(a specific good or service), some gifters and recipients attach additional utility with the specific good or service transferred.


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

9

A first round story assumes (i) labour supply for Sunday similar to Saturday, which seems reasonable, and (ii) no other changes to labour remuneration, which seems both unreasonable and unlikely. For second round, offsetting compensation will have little effect on Sunday services and would reduce magnitude of first round employment increase.