Ah, but we know what’s good for you!

By skepticlawyer

I’d made some effort to ignore the latest inter-blog political stoush, but when I saw Helen on the Cast Iron Balcony who (unlike many people on all sides of politics in Australia) actually has something between her ears defending Robert Manne (quite possibly the rankest intellectual bully in Australia), I knew something was up.

In short, The Australian has been attempting to define ‘the Left’ in Australia by getting a bunch of different people broadly identified with ‘the left’ to write on issues they consider central to leftism. The first was fellow Oxfordian Tim Soutphommasane, followed by various others, including Julia Gillard and Robert Manne. The whole series is here. You’ll need to trawl through a great deal of dross to find the relevant piece; David McKnight was another contributor. Tim’s piece is far and away the pick of the bunch, the others degenerating rapidly into the sort of low-rent sentiment one associates with Mills & Boon ripoffs of Jane Austen (no dear, that isn’t Mr Darcy, despite what you might think).

I am especially perplexed by Gillard’s piece. She recounts how her father won an 11+ scholarship to the local grammar but was ‘unable to take up his place.’ This is simply inconceivable, unless her family had the sort of entrenched prejudice against education common in many working-class British families of that period. You see, my father also aced the 11+ and went to the local grammar (from Kilburn, London, not rural Wales, but I am not going to engage in competitive/Pythonesque ‘I was born in a shoebox’ games with Ms Gillard). The grammar scholarships were extraordinarily generous, constructed such that anyone who did well on the 11+ could go on to better things. They were a way to punch through disadvantage for many working-class British children. The only reason for a person not to take up his grammar place was the sort of familial attitudes so memorably assayed in Barry Hines’ A Kestrel for a Knave, filmed by Ken Loach as Kes. Billy may not want to ‘go down the pit’, but his family’s disrespect for anything that might rescue him from that fate is the touchstone of the film and book, not any failure of the British education system. 

My dad was constantly told that he was ‘getting out of his class’ by being at the grammar, even though he did well. His parents — my grandparents — took the scholarship money with gratitude, but offered him no support. I wonder greatly whether Julia Gillard’s family was similar. Eventually, Dad joined the Royal Navy as a boy seaman: ‘I joined the Navy to see the world, but what did I see? I saw the sea’ he often told us, a wry smile on his face.

Gillard aside, of course the other stoushers around Ozblogistan have got into the act. Quadrant, (disclosure: a magazine for which I have occasionally written) has produced its own series on ‘the left’, memorably summarized thus by Andrew Norton:

From the classical liberal side there is Jason Soon on social justice and me re-working my left sensibility material from last week.

Angela Shanahan and Bill Muehlenberg represent family-values conservatism.

John Dawson argues with Dennis Glover about equality.

And Mervyn Bendle provides the Quadrant grumpy old man perspective: ‘the Deputy Prime Minister of Australia is a shallow, condescending narcissist.. a labored, cliché-ridden, self-serving piece of propaganda, without even a hint of an interesting idea or original vision … the Left is about are simplistic ideas and slogans, jealousy, resentment, opportunism, and a lust for power and personal advancement.’

This has produced appropriately stoushy responses from both Larvatus Prodeo and Catallaxy. It is all very prolix and rather unedifying. Why am I commenting, then? The weirdness of Gillard’s piece is one reason (there must be other descendants of £10 Poms whose parents went to grammars who found her piece odd, surely?), the stubborn refusal on all sides to even attempt to understand what one’s opponents are saying, and then — from someone who really should know better — an attempt by Dave at Balneus to define those politically opposed to him as suffering from mental illness. Shades of the Soviet insane asylums for dissidents, anyone? Now maybe that piece was tongue in cheek (I sincerely hope so). Andrew Norton — while lunching Dave’s central assertion — managed to let the whole business pass, which is a credit to Andrew. I am afraid I am not willing to be so charitable.

Apart from Andrew, I suspect I am Ozblogistan’s favourite libertarian, in part because I am ‘nice’ and do not seem particularly doctrinaire. It is true that I distrust doctrinaire politics in all its forms, but that does not make my classical liberal values any less profound. I loathe groupthink in all its forms and see it in about equal proportions among both loopier conservatives and the social democratic left. Read the various Quadrant pieces (guided by Andrew’s comments) for good examples of the former; read the comments at LP or Dave’s piece for signal examples of the latter. I think (in order to make a proper job of flinging away my ‘nice’ libertarian appellation) I need to make it clear that if the price of a more equal society is the hammering down of individual difference and eccentricity (such that I experienced from the likes of Robert Manne and his on-the-taxpayer’s-tit literary acolytes) then I want no part of it. If that means the poor and the weak go to the wall, then too bad.

Thing is, the poor and the weak won’t go to the wall in a more liberal state, despite all the dire predictions engaged in by the commenters over at LP. They may have to take a little more personal responsibility, but no-one will go to the wall. At the heart of the social justice ‘category mistake’ (the phrase is Hayek’s and I suspect Quadrant did not give Catallaxy’s Jason Soon enough space to explain it) both conservatives and social democrats engage in is a complete failure to understand the limits of law and what law may reasonably achieve. Law does an excellent job of process (what justice is). It does a remarkably shitty job of outcomes (what justice is not). It is wise to remember this fact.

Legislation has two limits. One is practical (call it a ‘means-end’ limit). The other is principled (call it a ‘normative’ limit). Most philosophers spend all their time arguing over the latter: John Stuart Mill’s ‘harm principle‘ represents an attempt to get at what a principled limit on the powers of moral and redistributive legislation may look like. This is philosophically interesting and forms a major part of my DPhil thesis here at Oxford. In the case of conservatives and social democrats, however, both groups engage in major legal wish-fulfillment: they think they can ignore ‘means-end’ limits. That is, they seem to think that passing a law will make it so. If wishes were horses, people, beggars would ride.  They think they will, for example, be able to make abortion illegal (or greatly restrict access to it) with no social or economic comeback, or impose salary caps on business executives without hemorrhaging talent overseas or to other industries.

This is utter hokum. 

Law has limits. Legal officials at various times and in various places have objectives and they need to find the best way of achieving them. Some might seek to end casual street violence, so impose stiff legal penalties on anyone caught engaging in such conduct. Some might seek to end demonstrable harms caused by alcohol or drugs through prohibiting their sale and consumption. Others might seek to meet housing needs by imposing minimum standards for accommodation on those who rent out their properties. Though they seek the best means of reaching their goals, they might fail and the failure could be dramatic.

In all the examples mentioned above the aims sought may not materialize. The stiff legal penalties imposed by those seeking to curtail street violence may lead only to an increase in violence as perpetrators reason they may as well be hung for a sheep as a lamb. The prohibition of alcohol consumption may merely drive consumption underground, failing in its purpose and succeeding only in adding to the stock of societal harms as further criminality incident on the prohibition grows. Property owners, rather than forking out for legally mandated improvements to their rental property, may simply take their properties off the market, resulting in fewer affordable properties available for rental and fewer needs met. In each case the law has overreached itself. Having observed the results of their efforts, the legal officials may conclude that it would have been better to have used other means or maybe even to have done nothing, to have tolerated the former level of harm, since their means of putting it to an end did not solve the problem aimed at, but exacerbated it. In pursuing the best result as they see it, they have achieved only the third-best and now the problem might be the embarrassing one of getting back to second-best.

These are familiar stories in skeletal form and illustrate the commonplace that the methods the law might use can simply misfire. There are limits to what the law can achieve because some of its tools are blunt. Some tools do not work, others are counter-productive; some exacerbate the problem they were supposed to resolve. Knowing what works and what does not and what will be counterproductive is important knowledge indeed. Again, enforcement of a desired policy may be prohibitively expensive and divert resources away from still more important goals a state may wish to pursue. A state may also need to consider in some contexts the psychology of its citizens. Perhaps there is something in the Freudian notion of pale criminality: ‘the condition of one who commits a crime because of, rather than in spite of, its forbidden status’.  There may also be a ‘mixture problem.’ I have in mind John Stuart Mill’s point that truth and error may be found combined in one package deal, so that there is no way of suppressing the error without suppressing truth as well. But the point can be made more generally: there may be no way for a state to suppress a greatly undesired activity without also disturbing a greatly desired activity.  The law in short is limited by the tools it has at its disposal and the effects that these tools will have. Law can coerce, it can make rules, it can adjudicate, but one can only go so far with these tools. Law must seek to do the best possible with the tools available.

The ‘tool’ that limits law most severely in a practical/means-end sense is its access to knowledge. This is at the heart of Hayek’s arguments about information asymmetry and spontaneous order. Because choosing on behalf of citizens involves knowing more about what those citizens want than the citizens do themselves, it is doomed to fail (unless, of course, the legislator is omniscient), or will at the very least involve intolerable invasions of citizen privacy and restrictions on citizen liberty. 

I am not a political theorist, or if I am, I am only insofar as it assists my legal work and my jurisprudential scholarship. I am, however, a lawyer. And if people want to make a more equal society or protect the unborn or enhance family values or tax the rich or enact a cap and trade scheme, then they have to use my tools, and my tools are legal and legislative. And I have enough experience and knowledge to know when those tools tend to work and when they tend to fail.

And that, friends and neighbours, is why I am a libertarian. I am modest enough to admit that the law is a broadsword and not a scalpel, and that attempting to do complex and subtle things with it are likely to fail. Hell, the law doesn’t always protect us from force, theft and fraud, which is what everyone — on all sides of politics — thinks it should do.

Whenever someone wants to enact a law because it will be ‘good for us’, I think it is appropriate for me to reach for my revolver, and that you ought to as well. Well-meaning legislators of both conservative and progressive hues are like vampires. Invite them into your house at your peril, because once they’re inside, the bastards will never leave.

37 Comments

  1. jc
    Posted October 2, 2009 at 2:28 pm | Permalink

    I thought that anyway, LE. No problem just alerting you. thanks

  2. Desipis
    Posted October 2, 2009 at 2:44 pm | Permalink

    jc:

    What exactly is it about the Swedish school system, when compared to other regulated industries in other countries pushes it across the line into “nationalisation”. The schools are still privately owned with the profits going to those owners which seems to me to be pretty explicitly not nationalised.

    As far as nationalisation goes, I’m pretty sure Australian schools have to be not-for-profits.

    So it wasn’t voucherization and the consequarnces of failure that has achieved this in your mind.

    In my mind the consequences of failure would provide a significant improvement over a system that lack such an element. However a system where all the poor kids ended up in the low-cost poor kids school because they couldn’t afford any other school would remove the consequences for such school as the kids couldn’t go anywhere else. Thus the restrictions are necessary to ensure the benefits of competition apply across all students.

    Skid row would also apply to families

    Meritocratic outcomes apply to individuals, not families. A system that promotes people based on family connections is called nepotism.

    Fuck up the freedom to associate for one group of people…

    I guess its a matter of balancing that freedom with other important values in society such as equality, quality education, etc. Should we allow hospitals this freedom too, so they can turn away someone they don’t like and just watch them bleed out in the street? Should we abolish trespassing laws because its restricts freedom of movement? Should we allow people to yell “Fire!” in a crowded theater because to do otherwise would restrict freedom of speech?

    Legal freedoms don’t mean much when people’s freedoms are restricted by other means.

    Why don’t go one step further and do what Stalin, Lenin, Mao and Pol Potty Mouth did, which is instead of killing off a racial group do it by supposed class.

    You really need to work on understanding the concept of grey. It’s that wide place between black and white, that although may not fit well into theory, is the place where reality exists.

  3. jc
    Posted October 2, 2009 at 3:06 pm | Permalink

    What exactly is it about the Swedish school system, when compared to other regulated industries in other countries pushes it across the line into “nationalisation”.

    You yourself have made mention of the restrictions imposed. Read what you’ve said. What they’ve done is a Defacto nationalization where the schools can’t choose their students and they can’t charge any more than the voucher. They’ve basically made them answerable to the state in the most important ways. The only thing they haven’t done is bought the building and the interiors, which is even worse as it’s stolen away every other right.

    The schools are still privately owned with the profits going to those owners which seems to me to be pretty explicitly not nationalised.

    How can you say the schools are privately owned when the most basic rights of private ownership have been removed? Are you kidding? You really don’t see the difference?

    In my mind the consequences of failure would provide a significant improvement over a system that lack such an element. However a system where all the poor kids ended up in the low-cost poor kids school because they couldn’t afford any other school would remove the consequences for such school as the kids couldn’t go anywhere else. Thus the restrictions are necessary to ensure the benefits of competition apply across all students.

    Face facts. That is the real hard reality of things. All schools can’t be turned into a Sydney or Melbourne Grammar. That just is never ever going to happen.

    Meritocratic outcomes apply to individuals, not families. A system that promotes people based on family connections is called nepotism.

    The point is that you really don’t support meritocracy as a meritocracy expects the slippery pole leading to the basement to be well greased too. This has consequences for families as the kids aren’t the breadwinners.

    I guess its a matter of balancing that freedom with other important values in society such as equality, quality education, etc.

    Define your values and what they mean to you. It seems your values supersede some very important freedoms. Also tell me what you would do to people that don’t wish to live under those restrictions. Would you jail them or re-educate them?

    Should we allow hospitals this freedom too, so they can turn away someone they don’t like and just watch them bleed out in the street?

    Please explain with evidence why you’re now suggesting that hospitals would turn away people when their emergency rooms are set up to cater for emergencies. You’re really not making any sense here. It’s like you’re suggesting MacDonald’s would turn away people wanting to buy a burger for no possible rational reason.

    Should we abolish trespassing laws because its restricts freedom of movement?

    No, of course not as trespassing presupposes private property ownership and the owner has a right to decide who and when people enter his/her property.

    Should we allow people to yell “Fire!” in a crowded theater because to do otherwise would restrict freedom of speech?

    That’s silly. There has been plenty written that demolishes that cheap shot.

    Legal freedoms don’t mean much when people’s freedoms are restricted by other means.

    Umm okay. So please expand a little. But please don’t list things that really amount to nothing more than a bunch of privileges or demands lefties dress up as rights.

  4. Desipis
    Posted October 2, 2009 at 4:14 pm | Permalink

    jc,

    … a meritocracy expects the slippery pole leading to the basement to be well greased too.

    I don’t disagree.

    This has consequences for families as the kids aren’t the breadwinners.

    This function of society is not meritocratic. It might be normal, driven by biology and common, but it’s not meritocratic. A meritocratic system would reward the kid on the kid’s performance, not on their parents.

    Anyway, I’m going to give up trying to argue about the definitions of nationalisation and meritocracy. You seem to have a different understanding of the words to me and as far as I can tell most other educated people.

    It seems your values supersede some very important freedoms.

    Important to you. In a democracy the importance of issues and the outcomes of any trade offs would occur through the democratic process.

    As for me I place the wellbeing of everyone as the overall goal of government, and freedom is an important (but not the only) part of that. The more subjective a particular element of wellbeing is, the more important freedom is. Elements that can be assessed in a more objective way can be handled in a more deterministic fashion.

    what you would do to people that don’t wish to live under those restrictions.

    I’d give them a vote, and the opportunity to run for political office. If the majority vote to remove a right, those that want it need to convince the majority that they are better off having such a right.

    So please expand a little.

    What use is the freedom of speech, if someone else has the freedom to follow you around and just talk over the top of you. So we limit the freedom of speech of some people (those who are motivated to talk over/silence others) a little bit (through harassment laws, etc) to ensure everyone can practically exercise their right. It’s important to understand the purpose of the rights (enabling free communication between individuals) and not just dogmatically insist their absoluteness. Just as its important to understand economic mechanisms such as markets and why they work (competition, transfer of power to the successful, freedom to innovate – which are all still present in the Swedish school system), when they don’t work (natural monopolies, tragedy of the commons, etc) and not to dogmatically insist they are the only way.

  5. jc
    Posted October 2, 2009 at 4:40 pm | Permalink

    I’d give them a vote, and the opportunity to run for political office. If the majority vote to remove a right, those that want it need to convince the majority that they are better off having such a right.

    Huh… Hitler ended winning the elections. Hamas has won a majority and their rules demand that women have to wear head dress, can’t go out unaccompanied by family and their voice is worth far less than a male in a court of law. The majority voted for that, so I take it you wouldn’t have a problem … seeing the majority voted.

    I think you’re ideas a terribly confused.

  6. Posted October 2, 2009 at 4:53 pm | Permalink

    Anyway SL, thanks for a most thought provoking post and discussion. Hope the DPHIL goes swimmingly. Also hope you wack the finished product up on the web as I’d love to see it.

    Desipis,

    It is a waste of time discussing matters with JC. I suggest you ignore him as most people do.

  7. jc
    Posted October 2, 2009 at 4:59 pm | Permalink

    Mel:

    I think you have me confused with you.

  8. jc
    Posted October 2, 2009 at 5:08 pm | Permalink

    What use is the freedom of speech, if someone else has the freedom to follow you around and just talk over the top of you.

    I really don’t think you even understand the principle of freedom of speech.

    For the most past freedom of speech is about the right to political dissent and the right to express opinions whether in art, books or film etc. There are of course some limitations to that, some are quite reasonable like it’s illegal to display pics of minors in sexual positions etc.

    The lawyers here would be far more able to provide better definition.

    Walking behind someone, shouting and harassing them is form of assault.

    You really don’t understand it do do?

  9. Desipis
    Posted October 2, 2009 at 6:16 pm | Permalink

    Mel,

    Oh I realise that, but I was at work and this was suitably distracting.

    jc,

    There are of course some limitations to that, some are quite reasonable

    Which is my point. I think that restrictions on freedom of association for the good of the education system are reasonble.

    Particularly given that its endemic poverty and poor education that enables charismatic megalomaniacs to gain popularity and control.

  10. Posted October 2, 2009 at 7:03 pm | Permalink

    The point is that it increases social mobility which helps to get the best and the brightest into key positions in society rather than the children with the richest parents. This leads to a society that is more meritocratic and hence better run (and ‘fairer’ too).

    I’ve missed much of the ongoing discussion due to being busy with other stuff, but one last point: what I’ve quoted from Desipis can be achieved with other educational methods, and was achieved in Britain when the country had an intact grammar school system (see DEM’s earlier comments and links).

    What we are arguing about now is how to make systems that were/are already pretty good even better. It may be — as Labour discovered when they lunched the grammars — that this isn’t possible, and that we have to appreciate that there is an upper bound to reasonable educational outcomes. That may mean accepting a certain failure rate. This is not something human beings have been good at during ‘high’ points of civilisation throughout history.

  11. jc
    Posted October 2, 2009 at 8:59 pm | Permalink

    Particularly given that its endemic poverty and poor education that enables charismatic megalomaniacs to gain popularity and control.

    Sorry, but if a person is of sound mind and body there is absolutely no reason to be dirt poor in Australia.

  12. John Greenfield
    Posted October 3, 2009 at 3:00 am | Permalink

    I just wish Australia would get it’s frock enough and adopt a Sweden-like vouchers system. But like Sweden, schools who enrol a kid with a voucher cannot receive once extra cent in school fees; though I am fine with this or that school becoming richer through lamington-drives and Chippendales nights for the fathers.

    Recall, the thrust of the pro-voucher Friedman, and other libertarian schools was that with local financial schools at the local level and other local options, that very soon, what works, and what doesn’t would be become obvious.

    My otherwise wholehearted embrace of Sweden-like vouchers, private schools like Ascham, Scotch, Kings, and Geelong get 3/5 of fifth all from the voucher lolly. And yet Geelong Grammar’s VCE Results will continue to compete with Mt.Druitt School circa 1998 😉

  13. Posted October 3, 2009 at 3:00 am | Permalink

    The point being that many people are NOT of sound mind and body, jc.

  14. jc
    Posted October 3, 2009 at 7:28 am | Permalink

    Deus:

    Something like 30% of the population receive some sort of government aid. Somehow I don’t quite see 30% as being handicapped.

    Perhaps 3% are?

    I’m not even suggesting taking anything away from the legitimately unemployed either and in fact they should be compensated even more by those that choose to work in regulated labor market sectors.

  15. Desipis
    Posted October 3, 2009 at 7:35 am | Permalink

    SL, indeed it may be that way. I think the ‘progressive’ move away from a meritocratic education system is problematic. The reason I think a voucher would be a good thing is that the freedom afforded schools could help to limit these damaging top down policies.

    I would be wary of a simplistic return to an older system. The scope of education, particularly primary and secondary has changed dramatically in just the last couple of decades.

  16. Desipis
    Posted October 3, 2009 at 7:50 am | Permalink

    Deus, actually I was arguing that many people of sound mind and body are being kept in (relative) poverty in spite of their best efforts.

  17. Posted October 3, 2009 at 10:06 am | Permalink

    People find themselves in impoverished circumstances for all kinds of reasons irrespective of whether they have a “sound mind and body”. At the macro level here are two causes of poverty:

    -Capitalism is the best economic system available, however it is inherently prone to booms and busts- the GFC being the latest bust. During the busts people go to the wall through no fault of their own. This is a readily observable fact.

    -Dysfunctional subcultures. As an example, a child born into a remote Aboriginal community has very limited life chances. Quite literally, a short, nasty and brutish life is highly likely even if the child is born healthy and smart. No child chooses to be born into such circumstances, and once again, it is observably obvious that shrugging off the damage such a background does to one’s psyche and climbing up the social ladder is close to impossible.

  18. Desipis
    Posted October 3, 2009 at 10:49 am | Permalink

    Capitalism is the best economic system available

    I’m curious how you come to that determination.

    …however it is inherently prone to booms and busts…

    There are many, many more ways in which capitalism traps people into an informal lower class.

  19. Posted October 3, 2009 at 11:16 am | Permalink

    Somehow I don’t quite see 30% as being handicapped. Perhaps 3% are?

    Research in Scotland recently by the charity Capability Scotland puts the number of households in Scotland with one or more members effected by disability (ie. not based on receipt of benefits and regardless of severity) at one in four. You might be surprised.

    They won’t represent the full 30% of course, people can also be impoverished by debt, bad luck, non-disease deficiency of literacy and/or education and crime but 3% may be a considerable underestimate. British figures for the overall spend on sickness benefits are vastly higher than the overall spend on unemployment despite the income benefit being less than £20 a week more.

  20. Posted October 3, 2009 at 11:18 am | Permalink

    I’m curious how you come to that determination.

    Ah, because it’s the only one that works. It’s a bit like democracy; it’s the worst system in the world except for all the others that have been tried. Even the most social democratic nations in Scandinavia are capitalist; they’ve just made different decisions about tax and transfer policies.

  21. jc
    Posted October 3, 2009 at 11:40 am | Permalink

    Research in Scotland recently by the charity Capability Scotland puts the number of households in Scotland with one or more members effected by disability (ie. not based on receipt of benefits and regardless of severity) at one in four.

    When I see numbers like those, Deux, my bullshit meter immediately goes off. I’m sorry but I find it a little hard to believe that 25% of the population is incapable of working because they have a disability that makes them unable to sit say in an office and work.

    Desipis says:

    I’m curious how you come to that determination.

    Perhaps through reasonable evidence.

    You seem really hung up about this class thing and making it your prime focus. There’s a great deal of agility in our class structure and your hang ups about it seem so 18th century.

  22. jc
    Posted October 3, 2009 at 11:43 am | Permalink

    -Capitalism is the best economic system available, however it is inherently prone to booms and busts- the GFC being the latest bust. During the busts people go to the wall through no fault of their own. This is a readily observable fact.

    That not necessarily so all the time. There was the slowdown in 1998 here for instance and the tech crash in he US where masses of people weren’t effected one way or another.

    By and large we went through a 17 year expansion here with a very large rise in living standards across the board.

  23. Posted October 3, 2009 at 11:51 am | Permalink

    JC says:

    “By and large we went through a 17 year expansion here with a very large rise in living standards across the board.”

    During those 17 years of expansion the Australian rate of unemployment was AT ALL TIMES double, triple, quadruple or quintuple the rate of unemployment we had in the growth era post WW2.

  24. Posted October 3, 2009 at 11:56 am | Permalink

    Capitalism is the best economic system available, however it is inherently prone to booms and busts
    and [email protected] says it ain’t necessarily so.

    And what did that organ of hard-line socialist propaganda, The Economist, have to say back in 2007-04-01, when discussing the various instruments that would lead to the global financial crisis (yes, The Economist saw it coming for many years)

    But it is in the nature of capitalism to test new ideas to destruction and to use new instruments as the basis of speculative excess.

    (Mel.. can’t get to your blog, damn! Desipis, do you have one?)

  25. jc
    Posted October 3, 2009 at 12:19 pm | Permalink

    Mel:

    When people put up a reasonable explanation you always seem to disbelieve it (and not refute), so it simply becomes impossible discussing something with you. I’ll give this a try though.

    The period just after the war to the mid 60’s was a period marked by central wage fixing when the clearing rate, that is the wage adjudicated by the arbitration commission was set below the clearing rate. The result was the labor was able to clear and we had full employment.

    That went out the window during Whitlam’s government and we ended up with a wages break out and recession. From then on wage determination was very much set well above the clearing rate and not surprisingly we ended up with a chronic unemployment problem even when the economy was growing. Recall the ling wage rackets?

    We went close to finally making quite possibly the most positive reform since federation with work choices, which would have pretty much allowed the market to determine wages and broaden employment prospects. That’s now history and we have gone back to the awards system of the 70’s. Don’t go blaming the market for high levels unemployment over the coming years or rather higher than necessary unemployment as a result of heavy-handed interventionism. Go stare at Gillard’s pic if you wish to find fault.

  26. jc
    Posted October 3, 2009 at 12:29 pm | Permalink

    Dave:

    The Economist has been crying chicken little since 2000.

    They never called the crisis accurately. In fact their charts always showed Australia as the most expensive real estate market or most certainly up there. The chart was always used to support evidence that those named were going to experience a crash.

    Australia has not experienced a crash so they’re wrong.

    There’s no point in saying that over the next 10 years country x is going to experience a recession. That’s a bullishit prediction. That’s more or less what The Economist was doing along with all those other so-called recession forecasters.

    The only people that can really lay claim to the forecast was a few people like John Paulson, a hedge fund manager that made around 10-15 billion in accurately predicting the sub prime crash and actually putting money on it.

    Robert Schiller is also a bullshit predictor too when you really get down to it.

    Schiller’s big time, golly gee forecasting methods is mean reversion. Wow! How extraordinary.

    Every 1/2 decent trader fully understands mean reversion. That’s not forecasting.

    Truth is no one… no one can accurately forecast continually as the world is far too complex.

  27. Desipis
    Posted October 3, 2009 at 12:35 pm | Permalink

    I guess I should have clarified that I was after a definition of “capitalism” and a definition of “best”, and not specifically challenging the idea. That is form a “why” of capitalism, and use that context to assess the impact of various regulations (such as those imposed on Sweden’s school system), instead of just resorting to dogmatic neo-liberalism.

    jc:

    I’m sorry but I find it a little hard to believe that 25% of the population is incapable of working because they have a disability that makes them unable to sit say in an office and work.

    The ability to do productive work is no means a ticket out of poverty. If you look at more liberal labour markets (such as the US) you will find numerous examples of people who work long hours, are good at their job, and yet still get paid bugger all. (And I’m ignoring the fact that you misread what DeusEx wrote)

  28. jc
    Posted October 3, 2009 at 12:44 pm | Permalink

    But it is in the nature of capitalism to test new ideas to destruction and to use new instruments as the basis of speculative excess.

    The Economist has a very nasty case of Keynesianism these days and someone sometime ought to get in there and beat it out of the bastards.

    They were a far better newspaper in the 90’s and these days it’s almost unreadable,

    Look the one thing they seem to be missing is that despite what most lay people think bankers aren’t gods who are able to predict their own demise.

    Lehman did not go out of it’s way to create paper which they held as a a risky an experiment. They honestly thought that the paper was “safe”. Hell the ownership culture was very strong at Lehman with 35% of the stock owned by the staff.

    90% of the the problems caused by excess can be directly traced tot the central bank whose job it is to remove the punch bowl at the right time. 3 years of interest rates at 1% in the earlier part of the decade caused the excesses and there is no getting around it.

    For the Economist to say what they said in reference to your quote basically suggests they have no idea of the impact of monetary policy on our daily lives… they think money is neutral. If you questioned them on this they would of course go into hysterical denial ………that of course they don’t regard money as neutral. In reality they do that by what they say or omit saying.

  29. jc
    Posted October 3, 2009 at 12:48 pm | Permalink

    The ability to do productive work is no means a ticket out of poverty. If you look at more liberal labour markets (such as the US) you will find numerous examples of people who work long hours, are good at their job, and yet still get paid bugger all.

    You have the evidence to support your claim in the US is basically Malawi and Switzerland all mixed into one.

    I’m sorry, but, you’re totally out of your depth. The ticket out of poverty is working work, not sitting around
    waiting for the next social security cheque. You’re simply wrong.

  30. Posted October 3, 2009 at 1:44 pm | Permalink

    When I see numbers like those, Deux, my bullshit meter immediately goes off. I’m sorry but I find it a little hard to believe that 25% of the population is incapable of working because they have a disability that makes them unable to sit say in an office and work.

    Read again JC, I said NOT based on receipt of benefits or severity. My point being that disability is far more common than most people think so numbers of those where the severity is high enough to interfere with working is also likely to be somewhat higher than expectation.

    You’re right in that social security is NOT a route out of poverty (or at least what our ‘relative’ definition of that term – real poverty with starvation, disease and homelessness has by and large been solved thanks to the Welfare State and good civil governance). The rules are drawn up to make sure that can’t happen (and where not, often achieve the same thing despite being meant to address other issues), but while working provides the opportunity to succeed, a successful outcome is not guaranteed which I think is what Des is getting at. We’ve been analysing the phenomenon of the working poor for over a century now, pretty much since the lady fabians did their research in London published as the excellent “Round About A Pound A Week”.

  31. Posted October 3, 2009 at 1:51 pm | Permalink

    [email protected]: The inevitability of a crash given the lack of responsibility (risk) that comes with risk and returns, a sad characteristic of what I’d call financialism, rather than the traditional risks and rewards of investment in equity, was what The Economist was railing about. The timing is unpredictable. Just as with a cancer, you cannot give a time-to-live, only a probability of dying within a given timeframe. Incidentally, The Economist has been worried from about the same time as I was working on a trinomial (rather than binomial) algorithm for options pricing, and realized that the guaranteed influence and returns using derivatives was not reflected by the traditional risks of loss.

    Modern finance seems to me as faithful to the ideas of the fathers of the free market as the Borgia Popes did to the ideals of their nominal prophet, or indeed, most communist states to Marx.

    As for Australia, we are still awaiting the consequences of years of significant current account deficits, just as our key exports (carbon) are about to become more expensive. We remain highly vulnerable. How do you see the national debt being repaid, without a massive change to production of things the world will pay a premium for, or such a tightening of our belts that the blood no longer reaches our legs and we lose the ability to stand unaided? Default? An international safety net?

    Thus I wonder how the past (and likely future) methods of the IMF and World Bank differ from the methods of a nanny state… but a very harsh nanny at that.

    The differences between the two forms of the “nanny knowing what is good for you” are perhaps only in the proximal intent ( whether to prevent harm to individuals, or to guarantee at least some return to international creditors) and whether the imposed constraints are on the lifestyles of individuals or entire populations.

  32. jc
    Posted October 3, 2009 at 3:35 pm | Permalink

    Thanks Deux… Good points.

    Dave:

    J[email protected]: The inevitability of a crash given the lack of responsibility (risk) that comes with risk and returns, a sad characteristic of what I’d call financialism, rather than the traditional risks and rewards of investment in equity, was what The Economist was railing about.

    I think you really need to explain this a little more, Dave as I’m not sure what you’re trying to say. It’s not accurate to say that risks don’t match rewards in the strict sense as the management that failed all lost their jobs. Perhaps the shareholders should have suffered a little more, however the group I see getting the special hand out at the banks were the bondholders, as they should have come down to the equity level first before the government stepped in. If there was excessive speculation blame the Fed for setting rates too low and blame the SEC for raising the leverage allowed to be taken on I-bank’s balance sheets at the start of the decade allowing them Ito go to 35:1. I also have a good reason why that happened if you want me to explain it.

    The timing is unpredictable. Just as with a cancer, you cannot give a time-to-live, only a probability of dying within a given timeframe. Incidentally, The Economist has been worried from about the same time as I was working on a trinomial (rather than binomial) algorithm for options pricing, and realized that the guaranteed influence and returns using derivatives was not reflected by the traditional risks of loss.

    You don’t think vol is properly measured by black scholes? Note I only really use the applications and don’t know the math behind it.

    Modern finance seems to me as faithful to the ideas of the fathers of the free market as the Borgia Popes did to the ideals of their nominal prophet, or indeed, most communist states to Marx.

    Well yes that’s true. In fact most Wall Street types are democrats …. They belong to the (Dem)olition Party.

    As for Australia, we are still awaiting the consequences of years of significant current account deficits, just as our key exports (carbon) are about to become more expensive.

    Dave, we have an absolute advantage in this stuff. I wouldn’t worry too much as our exports will do okay and if they don’t we can adjust through the exchange rate like we did this year.

    We remain highly vulnerable.

    Which is why out floating exchange rate serves us well.

    How do you see the national debt being repaid, without a massive change to production of things the world will pay a premium for, or such a tightening of our belts that the blood no longer reaches our legs and we lose the ability to stand unaided?

    If our growth rate is high then it will fall as a percent of GDP so it may be okay. In any event until now nearly all the debt was private so I don’t owe anything for what the RIO board has cooked up and neither do you.

    Default? An international safety net?

    We can only really only default on what Rudd and Swandive are cooking up.

    Thus I wonder how the past (and likely future) methods of the IMF and World Bank differ from the methods of a nanny state… but a very harsh nanny at that.

    Dunno. What do you mean by that?

    The differences between the two forms of the “nanny knowing what is good for you” are perhaps only in the proximal intent ( whether to prevent harm to individuals, or to guarantee at least some return to international creditors) and whether the imposed constraints are on the lifestyles of individuals or entire populations.

    Perhaps. However don’t be too concerned as there is a lot of private equity investment coming in.

  33. Desipis
    Posted October 3, 2009 at 3:57 pm | Permalink

    The ticket out of poverty is working work, not sitting around
    waiting for the next social security cheque.

    I’m not saying that welfare is the desired way, I’m saying we need a system that rewards those who work hard, innovate and produce the wealth, instead of one where the rewards go to those in the positions to exploit others.

    90% of the the problems caused by excess can be directly traced tot the central bank whose job it is to remove the punch bowl at the right time.

    Not to defend the low interest rates, but I think you’re greatly overstating the influence of the central banks over the problem(s), and understating the over-reliance of the banks on “the market” to assess risk for them. At the end of the day the market was wrong, and the banks were caught short.

    (Dave, nope no blog. Never had the discipline to keep things going.)

  34. Posted October 3, 2009 at 4:48 pm | Permalink

    [email protected] on options pricing: Black-Scholes is based on probability on a given day that the price will go up v down (binomial). I was working for a prof at RMIT that included a probability of it staying the same as well as the other two (thus trinomial), a refinement of the BS (sic). The maths on paper is elegant, but implementing it accurately enough for academia (approximations verboten) to show the differences between the two models on a day-by-day basis, with long (not!) floats on the 16-bit computers of the day, was ugly, while non-lossy integers blew up with the factorials in the Taylor series. Oh for a modern 128 bit mainframe with 256 bit longs!

  35. John Greenfield
    Posted October 4, 2009 at 12:06 am | Permalink

    JC

    Comoared to Sydney Grammar, Melbourne Grammar is like Summer Height’s High. Sydney Grammar'[s more natural competirtors are Eton, Winchester, Westminster. I don’t think there is even one school in Victoria I’d send my cleaning lady. And has QLD always been so baxckward edfucationally.

  36. jc
    Posted October 4, 2009 at 8:58 am | Permalink

    Comoared to Sydney Grammar, Melbourne Grammar is like Summer Height’s High.

    Really? LOL Dunno much about Sydney schools.

  37. John Wilson
    Posted November 2, 2009 at 10:12 am | Permalink

    I too have no political agenda or preference and tend to have a degree of cynicism based on life experience. However I would like to tell this story.
    My son married an English girl and her father was a staunch unionist, yet, when it came to voting he voted Liberal.
    The reason? He said only the aristocrats could handle the countries money as they were born to it. workers are not.
    What a mind set. Some of the world’s greatest rogues have come from the “aristocracy or the rich.
    However, we have to accept that was how he was reared and conditioned.
    He was a very nice man, pleasant and a hard worker but not one you could say was a thinker.
    Just thought this little tale demonstrates how people think politically and choose their politics and what influences them into making their decisions. Decisions may be based on ambition, greed, power, etc., and the people who want to work for the people and so on.

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