Glenn Stevens is not quite God

Alan Kohler has a piece on Crikey talking about electricity prices in Australia.  It’s an interesting piece and well worth a read, but it’s got a crucial economics mistake.  After talking about the politics and such, Alan gets down to brass tacks, telling us that:

  • Over the last two years, electricity prices in Australia have risen by 48% on average; and
  • Indeed, over the last five years, electricity prices have risen by more than 80% on average; but
  • Over the last twelve months, overall inflation has only been 1.5%, the lowest in three years.

He finishes by explaining:

That’s because the increase in power prices has been almost entirely offset by the high Australian dollar, which has produced tradeable goods deflation of 1.4% over the past year. In other words, thanks to the high Australian dollar we are getting a big improvement in energy infrastructure without an overall drop in living standards.

And thank goodness for fast rising power prices — without that, we’d have deflation. It’s true!

But it’s not true, and it’s not true for a very important reason.

Back in 1997, in the guts of of the Great Moderation (the time from the mid ’80s to the start of 2007 when US aggregate volatility was low) and before the real estate boom that presaged the financial crisis of 2007/2008, Paul Krugman famously wrote (this Economist piece is the best reference I could find in the two minutes I spent looking on Google) that unemployment was whatever Alan Greenspan wanted it to be, “plus or minus a random error reflecting the fact that he is not quite God.”

It’s popular to argue that Ben Bernanke lacks that power now that America has interest rates at zero. I disagree (see here and here), but I appreciate the argument.

Australia has no such problem. Interest rates are still strictly positive and the RBA has plenty of room to lower them if they wish.

So I have no qualms at all in saying that inflation in Australia is whatever Glenn Stevens (the governor of the RBA) wants it to be, plus or minus a random error to reflect the fact that he’s not quite God.

If the various state grids had all been upgraded a decade ago and electricity prices were currently stable, then interest rates would currently be lower too. They would be lower because that would ensure faster growth in general and a lower exchange rate, both of which would lead to higher inflation, thereby offsetting the lower inflation in electricity prices.

There’s a famous argument in economics called the Lucas Critique, named for the man that came up with it, that points out simply that if you change your policy, economic agents will change their actions in response.  It applies in reverse, too, though.  If economic agents change their actions, policy will change!

Alan Kohler ought to know this. Indeed, I suspect that Alan Kohler does know this, but it’s a slippery concept to keep at the front of your mind all the time and, besides, it would make it hard to write exciting opinion pieces. 🙂

Sensible government policy that still makes me twitchy

The Australian government is likely to start means testing the private health care rebate (i.e. subsidy).

I think that’s sensible — I generally support means testing of almost all government services — but it still makes me twitchy:

It amounts to saying that high-income households are free to choose how to spend their money, but for middle- and low-income households we’ll change relative prices so they’ll have an extra incentive to buy product X.

It’s analogous to food stamps in America — we don’t trust you to spend this welfare money on what we think you ought to spend it on, so we’re going to force you.

This is a problem of means testing in general, but I think it’s nevertheless worthwhile for three reasons:

(a) It helps minimise government expenditure;
(b) It avoids middle-class welfare, which I find fundamentally distasteful; and
(c) It provides an alternative mechanism of progressivity independent of the tax code, thereby permitting flatter (and, hence, simpler) taxes.

Don’t put a nappy on me just because you’re mollycoddling idiot #8,749

I hereby present the latest iteration of my telling the world how it ought to be run, damn it.  The topic today is:

With (very low) probability, p, event X might occur at location Y, causing offence, harm or even death to a person of type Z.

There are many examples of this sort of scenario.  Here are a few:

  • X:  Fall off a swing
  • Y: A public park
  • Z: A small child
  • X: Trip and fall
  • Y: Footpaths (sidewalks) with cracks in the concrete
  • Z: Old, clumsy or spatially unaware people
  • X: Bringing your dog
  • Y: The outside seating area of a cafe
  • Z: People that are allergic to, or just have an aversion to, dogs

Here is another, eloquently opposed by M.S. at one of The Economist‘s blogs:

  • X: Drown
  • Y: Lakes in Massachusetts state parks
  • Z: A weak swimmer

I’m sure that you, my eager and most imaginative audience, can describe any number of other examples.

What should we do when confronted with these scenarios?  Most people think that the world positions itself along a line separating, at one end, complete government regulation and at the other, zero government regulation and, instead, the use of tort law and civil suits to restrict the “bad” behaviour.  This is poor logic, however, because it is overly simplistic; it presupposes that we need to do anything at all!

I favour a midway point between regulation and tort law, but more importantly, to my mind, we usually don’t need to do anything when confronted with these possibilities. Life inherently has risks and, while we should act to avoid exacerbating those risks, we should not necessarily seek to remove them altogether.  There are three reasons for this:  First, because removing all risk is simply impossible and it is usually the case that reducing risk in one area causes it to rise in another; second, because exposure to some risk is crucial in the development of well-adjusted people and a properly-functioning society; and third, because to restrict people’s choices in order to lower the risk they face is to deprive them of their basic liberty to choose whether to accept that risk for themselves.

Let me summarise my view in this not-even-remotely-to-scale little plot. Think of the horizontal axis as a measure of how easy it is to demonstrate harm to a point of warranting action by “the authorities.”

There are 10 dots of each colour.  Broadly speaking, Australia and the UK have chosen the government regulation approach.  In Australia, every major political party seems to agree that the “solution” is always more (they would say better) regulation.  In the UK, the Lib Dems and Tories make occasional mutterings suggesting that they might agree with me, but for the most part they’re in lock step with Labour (UK), which likes the status quo.

America is a bit more varied.  By and large, they have adopted the approach of letting tort law and the fear of civil suits induce the effect of (remarkably strict) regulation, but when America does use explicit government regulation, it tends to be something of a light touch.  Democrats seem to want to move closer to the British/Australian model, while Republicans seem to either like their status quo or wish to move to the Libertarian ideal.

Small government / Libertarian idealists typically want no government regulation and, to the extent that things need to be dealt with at all, they want everything to happen through the courts.  Although they want small government, what government they do want, they want to be strong (e.g. in the enforcement of the law).

Speaking about America, M.S. in the above-linked-to Economist entry writes:

I would gladly join any movement that promised to do away with this sort of nonsense. For example, Philip K. Howard’s organisation “Common Good” (TED talk here) works on precisely this agenda. Common Good’s very bugaboo is useless, wasteful legal interference in schools, health care, recreation, and so on. But what you quickly note with many of these issues is that they’re driven by legal liability concerns. You have a snowblader in Colorado suing a resort because she crashed into someone. You have states declining to put up road-hazard signs because the signs prove they knew the hazard was there, which could render them liable for damages. You have the war on children’s playgrounds. The Massachusetts swimming ban, too, is driven by liability concerns. The park officials in Massachusetts aren’t really trying to minimise the risk that you might drown. They’re trying to minimise the risk that you might sue. The problem here, as Mr Howard says, isn’t simply over-regulation as such. It’s a culture of litigiousness and a refusal to accept personal responsibility. When some of the public behave like children, we all get a nanny state.

Which is exactly what I’m saying about America in my summary, but I think (at least, from my reading) that M.S. is assuming that the opposite of a litigious society is personal responsibility.  That’s not true, I’m afraid.  The level of personal responsibility is orthogonal to whether your society chooses litigiousness or state regulation.

Nevertheless, I suspect that M.S. (and Matt Yglesis) and I are on the same side in this debate.  Let people decide for themselves; they’re adults, or should be.  Don’t put a nappy (diaper) on me just because you’re mollycoddling idiot number 8,749 over there.

The Australian Election: Explaining the result

Less than a year ago, the Labor government in Australia, then led by Kevin Rudd, seemed unassailable.  Now we are stuck with a hung parliament.  What happened?

Chronologically, here’s my (fairly long, if not actually detailed) take on what when wrong for the Labor Party:

The Global Financial Crisis (GFC) and Australia’s response

Australia was perfectly placed to weather the storm of the GFC.  Thanks partly to the now-shown-to-be-enlightened banking policies of Paul Keating and partly to the swift and innovative actions of the RBA in the crux of the crisis, Australia’s big four banks were not overly exposed and the fall of some minor banks did not seriously threaten the Australian financial system.  The economic downturn that was triggered by the crisis took some time in coming for every country and Australia was granted an extra delay in its attachment to China.  As a result, the Australian authorities knew well in advance what was coming and even, roughly, how bad it was going to be.  Furthermore, both fiscal and monetary policy were perfectly positioned to act, and act dramatically, to lessen the pain:  Interest rates were already quite high (to avoid inflation in the pre-crisis boom) so there was plenty of room to lower them and, thanks to Australia’s booming mining exports, the government was in surplus with little-to-no debt so there was plenty of capacity to temporarily increase debt-funded government spending.  The RBA performed their role admirably, cutting interest rates early, hard and deep.  The Federal government also deployed a near-perfect fiscal stimulus, with large cash hand-outs to almost every household (with a focus on the low-income households with a higher marginal propensity to consume and a lower propensity to buy imports) and the acceleration of longer-term spending.

The result was only a single quarter of economic contraction in Australia and therefore the avoidance of a “technical” recession (typically, but not formally, defined as two consecutive quarters of negative growth).  Ironically, this spectacular feat made the authorities in general, and the government in particular, into victims of their own success.  Since they never saw a real downturn in the economy, the Australian people questioned the need for all the stimulus in the first place.  The Coalition opposition, cynically in my opinion, jumped on this and told tall tales of looming mountains of government debt, all since shown to be wildly overblown scare mongering.

Home insulation and libraries

Some of spending of the stimulus money was poorly managed.  For example, new money for schools to construct new buildings was not permitted to go towards any building on a school’s long-term plan.  If a building isn’t already on the school’s long-term plan, why do they need it?  But the big kick in the teeth for Labor, and more particularly, Rudd, came in the handling of problems that came from the subsidies for home insulation.  The surge in demand for insulation lead to new installation companies emerging, not all of them run by people with years of experience.  Some of the roof insulation, which included a thin metal layer, was occasionally accidentally stapled to electrical wires.  Some electrocutions occurred.  That was a tragedy and should have been treated as such.  Rudd ought to have deplored the dodgy operators and come out with a crack-down on safety standards in the construction industry.  Instead, it appears very much as though there was an attempt to sweep it under the carpet.

Climate Change, the ETS and Copenhagen

One of the major 2007-election policies of the Labor party was legislation to fight climate change.  The Rudd government signed the Kyoto protocol very quickly once it came to power.  An Emission Trading Scheme (ETS) was devised and passed in the House of Representatives, but rejected in the Coalition-controlled Senate.  In an attempt to get it through, Rudd watered down the ETS, much to the frustration of the Greens and green-leaning supporters of the Labor Party.  It was still not successful.

The Coalition, by this point, was in complete disarray.  It’s then-overall leader, Malcom Turnbull, fully supported the ETS and believed the matter of climate change to be above party politics, but the leader of the Coalition in the Senate, Nick Minchin, is a climate change skeptic (to say the least).  This turned into a leadership contest and although he won an initial spill, Turnbull was defeated on the 1st of December, 2009 and replaced with Tony Abbott, nicknamed “the mad monk” for his socially conservative views and his earlier start in training to the Catholic priesthood.

The anti-ETS side of the Coalition thus won a debate on whether Australia should pass the ETS before the Copenhagen conference on climate change — we would wait and, it was felt, only pass a law to the extent that we were obliged to under any agreement reached.

As it happens, Copenhagen was a debacle, with China and, to a lesser extent, India sabotaging the negotiations.  With the momentum lost, the Rudd government put climate change into the too-hard basket.

Many (many!) people in the green-leaning side of the Labor party had thought that Rudd should use the ETS as a double dissolution trigger prior to the Copenhagen summit, with the idea being that a) public support at the time was in favour of action against climate change; and b) with the Coalition in such disarray, a Labor victory would be (almost) assured.  For my own part, I believe that Rudd was genuinely scared of running a campaign entirely on this one issue and had hoped to use Copenhagen as the definitive, externally-supplied, moral argument.

Tony Abbot’s budgie smugglers and Kevin Rudd’s desperate attempts to appear true blue

Not many people I know agree with me on this one, but I believe that this event is when many Australian people stopped just being queasy with Rudd and started actually liking Abbott.  Tony Abbott, you see, at the age of 53, is a sports nut.  He is incredibly fit.  He does Ironman triathlons.  He’s a surf lifesaver, which in Australia is only two steps to the side of sainthood.  We love our lifesavers in Australia; they’re all volunteers, perform an essential role and are very, very, very much part of our collective self-image.

Nevertheless, Australia also has a strong spirit of being wary of politicians that try to grandstand on a national icon for their own purposes. The former leader of the NSW Liberal party, Peter Debnam, was ridiculed for donning a pair of budgie smugglers (hey, we used to call them DTs —  d**k togs — but that wasn’t allowed by the PC brigade) and swanning around for a “completely casual, not at all staged” photograph or 20 as he ran up and down on the beach.  Here’s Tony Wright describing the affair:

It was disastrous; his appearance was roundly declared “disturbing” and poor Debnam found himself hobbled with the moniker Deadman. His obsession with budgie smugglers prompted Deputy Premier John Watkins to accuse the unfortunate fellow of offending common decency.

So when Tony Abbott was photographed emerging from the water in his own DTs, Kevin Rudd couldn’t help making a few snide little comments:

“You know something. If there was a referendum tomorrow between budgie smugglers and boardies, I think I’d be voting for boardies,” Mr Rudd said on Thursday.  “I think there are certain things the Australian people should be protected from and one of those things is national political leaders so attired.  “What is it about the Libs and swimming gear, it seem to be a bit of a pattern,” he said, referring to former NSW Liberal leader Peter Debnam before his defeat in the 2007 state election.

This backfired massively against Rudd, for reasons that seem obvious to me looking back, but apparently weren’t to him at the time.  He was the Prime Minister.  To stoop to this sort of criticism is below the dignity of the station.  Australian’s will accept it if it’s done well (i.e. it’s funny), but when it’s just a cheap shot, we see it for what it is.  And since the subject of the cheap shot was actually (and not cynically) doing something that we, as a people, truly admire, then we were always going to side with the dude with his wang on display.  It’s just the way we are.  This whole thing made Rudd look petty and out of touch.

Actually, I think this episode was just emblematic for Rudd’s rather pathetic attempts to present a persona that the “average Australian” could relate to.  He never seemed more out of touch, more awkward, than when he was exaggerating his accent, and trying to shoe-horn a string of Australianisms into his speeches.  I’m hardly the most Australian of Australians, but if I could tell he was faking it so badly, you may assured that everyone else did too.  In a way, I think this was his greatest failing.

The mining tax

This was the final nail in Rudd’s political coffin.  In May this year, Kevin Rudd announced the Resource Super Profits Tax, based on one of the recommendations from the Henry Review.  The particular details of the proposal aren’t important here (although, for the record, I support the mechanism in general, but I’m not tied to any particular headline tax rate and I think the money should not go into general government revenue but instead into a sovereign wealth fund).  Instead, what I want to focus on is the spectacularly ham-fisted way that the proposal was introduced.

It was atrociously sold to the Australian public.  The scheme, as originally envisaged, would amount to a subsidy relative to the current framework for small mining companies.  Why didn’t Rudd have 50 CEOs standing beside him when he made the announcement?  The mining companies claimed, falsely (although that is counterintuitive), that it would lead to job losses in the mining industry and were never successfully rebutted in the public sphere.

Instead of recognising the errors made in introducing the proposal and attempting to correct them, Rudd doubled-down.  In response to the (perfectly predictable) advertising campaign by the mining companies against the proposal, he broke one of his own campaign pledges and started spending government money to run advertisements in favour of it.  Instead of speaking about the essential role that mining plays in the Australian economy and how the proposal would actually increase the mining output of the country, he derided mining CEOs as rich fat cats that need to be taxed down to the same level as everybody else.  That is old, old, old school Labor and Australia has moved beyond that sort of thinking now, although apparently not all politicians seem to have realised it.

Rhetorically, the mining companies and the Coalition (that naturally sided with them) won easily, and the Labor Party knew it.  There were negotiations between the government and the mining companies on a compromise, but they were happening very, very quietly behind closed doors while the shouting went on outside.

The removal of Rudd and the rise of Gillard

The Australian Labor Party has long had some brutal factional politics happening behind (and sometimes not-so-behind) the scenes.  Throughout the knock-down fight with the mining companies, Australia’s then-Deputy Prime Minister, Julia Gillard, repeatedly stated that she was not interested in challenging Kevin Rudd for leadership of the Labor Party (and hence the Prime Ministership of Australia).  However, in late June 2010, the internal factions swung massively against Rudd and he was replaced by Gillard in a move that was whiplash-inducingly fast.

Gillard immediately ceased the government’s advertising campaign and promptly announced a compromise agreement with the mining companies, which granted her something of a honeymoon period in an electorate that was highly skeptical of the way that Rudd was deposed.  Rudd’s supporters in the Labor party felt particularly gypped by the action, and view Gillard as something of a careerist rather than an idealist.

For my own part, I am led to believe that the compromise with the mining companies was settled in the week prior to the leadership challenge and the Labor party power brokers made a decision along the lines of “Rudd is toxic.  If he announces the compromise, it’ll look like a back down.  He will absolutely have to go before the next election and Gillard will absolutely be his replacement.  Far better to have Gillard announce the compromise so as to look like she’s magnanimous, give her a honeymoon period and then have the fastest possible election to ride through on that wave.”

The election in general

Speaking purely tactically, I think that Labor made the right decision.  Whether he was any good as a technocrat or not, Rudd was politically toxic as the face of the party.  There was a genuine bump to Labor from the compromise and a rapid-fire election was the morally correct thing to do following such a sudden leadership change.  Had that been all there was to it, I believe that Labor would have narrowly won.

Many people were angry that it was such a dull election, with no new policies being advocated.  I think that is silly.  The policies were clear:  Labor was for the compromise mining tax, the NBN and (albeit with the stupid citizen’s committee thing) eventually the ETS.  The Coalition was against all three.  The Greens were supported stronger, more forceful versions of all three.  That was the election.  All three are major policy decisions.

The leaks

In the second week of the campaign, somebody from within the Labor cabinet (i.e. not just a Labor MP, but a cabinet member) leaked some very damaging information about Gillard, showing her to have taken positions contrary to the ideals of most Labor party supporters.  To my mind they just reinforced my belief that Gillard believes far more in real politik than do most people, but I very much appreciate the harm they did to her image.  But there’s an obvious question here:  Why?  Why would a Labor Party insider do such a thing?  To my mind, there are only two options:

  1. They were so offended by the removal of Rudd and his replacement by Gillard that they didn’t care what effect the leaks would have on the election so long as Gillard was hurt.  Even to a cynic like me, this sounds implausible.
  2. They were confident that Labor would win the election and wanted to rough Gillard up a bit so that in the post-election aftermath she’d be forced to rely on the pro-Rudd factions instead of sidelining them (as would be traditional).

If it was the latter, as I believe, the person made a terrible error and dramatically underestimated the harm the leaks would do, not just to Gillard, but to the Labor party as a whole.  Still, the effect of the leaks on the polls was rather short-lived, and it appeared in the last week of the campaign that Labor were back in the lead, albeit barely.  I suspect that had the campaign gone on for another week or two, the effect of the leaks would have faded further and Labor would have (just barely) fallen over the line.

The state Labor Parties

Finally, we come to the topic du jour in the Labor Party soul-searching:  it looks very much as though, unlike in previous federal elections, people’s opinions of state labor parties had a strong influence in how they voted for the national labor party.  Simon Jackman, an Australian professor of Political Science at Stanford University, has produced this breakdown of seat-specific swings, grouped by state.  See how the swings really do seem to group together by state?  Labor suffered large swings against them in NSW and QLD, a moderate swing against them in WA, and moderate swings towards them in VIC, SA and TAS.

Possum has taken this further, pointing out that the state-specific swing correlates very nicely with people’s views of the Labor party in that state.  Here’s his diagram:

He’s put the axes around the wrong way for my liking, but it doesn’t matter.  The horizontal axis shows the swing toward or away from the Labor Party in the federal election, while the vertical axis shows the two-party-preferred margin enjoyed by the state Labor parties in their respective states.  As you might expect, Anna Bligh and Kristina Keneally (the premiers of Queensland and New South Wales respectively) are not particularly popular in the broader Labor Party right now, and are mounting a vigorous internal defence of their political performances.

The Result

So, that’s where we are.  There was still quite a significant aversion to the Coalition in the electorate (the memories of John Howard are still fresh), so it’s entirely fair to say that Labor have lost their position rather than the Coalition having won the improvement in theirs.  Have a look at the total vote counts by party from the Australian Electoral Commission.  Here’s how the swings in first-preferences look:

  • Labor : -4.9%
  • Coalition : +0.6% (a rough average of the Liberals, Nationals and LibNabs in Qld)
  • Greens : +3.6%
  • Informal (i.e. deliberately invalid) : +1.6%

That tells it all, really.  The Coalition was no more appealing to the electorate this time than they were in 2007 (that they picked up seats came via lower preferences).  Labor lost a bunch of supporters.  Most of them went to the Greens, no doubt upset by the perceived failures on the ETS and the mining tax, but a fair whack of people were just sick of politics altogether and deliberately spoiled their vote.

    The Australian Election (3 days past and the ball is still in the air)

    [For any non-Australians, in the absence of Bryan Palmer and his once-magnificent-but-now-absent ozpolitics.info, John Hempton’s “guide to the Australian election for non-Australians” gives a fair overview]

    [Update 25 Aug 2010: If you’re looking for reasons why the Labor Party did so poorly, I’ve had a go a listing them in my next post.]

    A week and a half before the election, I noted (with no originality) that things weren’t looking good for Labor.  In the days immediately before, with the polls having started to improve again for Labor, I was predicting a narrow Labor win, possibly with the Greens taking the balance of power in the Senate (although I was skeptical on that front — I actually put the higher probability on the Coalition still having control in the upper house).  Perhaps I should have paid more attention to the polls!

    As I type (AEC website updated at 24/08/2010 7:40:18 PM), the Australian Electoral Commission (the fully independent body that decides on electoral boundaries and conducts Australian elections) is estimating the results as:

    • 70 : Australian Labor Party
    • 72 : The Coalition (Liberal Party, Liberal National Party of Queensland, The Nationals, Country Liberals)
    • 1 : The Greens
    • 4 : Independent
    • 3 : Too close to call : Brisbane (QLD), Hasluck (WA) and Corangamite (VIC)

    The ABC’s ever-superb Antony Green (a nerd’s nerd of the highest calibre) is currently making the following prediction for the final result:

    • 72 : Labor
    • 73 : Coalition
    • 1 : Greens
    • 4 : Independent

    The four independents are Bob Katter, Tony Windsor and Rob Oakeshott (all ex-National Party) and Andrew Wilikie, an ex-Military and Intelligence official.

    Tony Abbot has made a claim that since the Coalition got the most primary votes, they should be allowed to form government.  The counter argument is that in Australia’s system of preferential voting, to the extent that national vote tallies matter at all, it should be the two-party preferred total that counts, and on that basis Labor is in front (numbers here).

    At first glance it would seem like the three ex-National Party independents will allow the Coalition to form a minority government, but it is not that simple.  For one thing, infrastructure in general, and telecommunications in particular, have long been issues of key concern to to National MPs.  Labor’s NBN plans would provide greatly improved services to those constituencies, while the Liberal’s policy would largely ignore them.  Farmers are not exactly enamoured of the mining industry, either, and so I suspect wouldn’t have the same opposition to the natural resource tax as the Liberal party.  Rob Oakeshott is also making noises along the lines of reforming parliamentary democracy as we know it in Australia:

    Continuing his call to reinvent the parliamentary system, Mr Oakeshott said his preference was for a cross-party cabinet and indicated he may not support either side of politics if a cross-party cabinet could not be formed.

    When asked if his fellow independents shared his view on “consensus politics” and his example of Kevin Rudd serving as foreign minister in an Abbott government or Malcolm Turnbull serving in a Gillard government – he said he would find out “in detail” today and how hard he would be pushing for the idea.
    […]
    Looking ahead to today’s talks, Mr Oakeshott said “if we are just fluffing around, if we are just building a minority government with a bit of plus plus plus from the cross benches I’m not interested”.

    “This is about trying to get to at least 76 and yes, if this doesn’t happen, if it doesn’t fly, if consensus can’t be reached we will go back to the position of three [independents] and Adam Bandt as well, making a decision on red team or blue team getting across the line in that context I’m not interested, I’m not going to play,” he said.

    However, Mr Oakeshott would not rule out a cabinet position if consensus could be found.

    Mr Oakeshott said elevating the role of committees, imposing deadlines on response times to recommendations and allowing private members bills to be brought to vote were critical issues for him.
    […]
    Private members bills should be voted on and added he also wanted to see private members business “having some authority within the parliamentary time table”.

    “If there is some sentiment for exploring creative options where this is about not political parties, not a red team or a blue team, this is about 150 members of parliament, building a majority with a focus on being able to get through some of the key national issues in this country, I’d be interested in having a conversation,” he said.

    Mr Oakeshott called on the “traditional arch-rivals” to stop “pretending to be fighting to the death over ideology when they are actually more often than not in agreement on most issues”.

    There is no love lost between the Coalition and Andrew Wilkie (who resigned from the Office of National Assessments in 2003 over (alleged) misrepresentations of the case for war in Iraq and Afghanistan), either, so they’re unlikely to be able to count on him.  But with Mr Wilkie’s strong stand against Pokies, he’s not likely to be all that keen on Labor, either.

    Just to make things more interesting, even if Labor does form government, they won’t be able to pass any of their signature pieces of legislation for the better part of 12 months anyway, as even though the Coalition lost the balance of power in the Senate to the Greens, that won’t take effect until 1 July 2011.  If the Coalition forms government, you can therefore expect an absolute flurry of legislation between now and 30 June 2011 as they try to squeeze through everything they want before being forced to negotiate with the Greens in the Senate.

    The Australian Election

    Thoughts?  Predictions?

    Prior to the leaks, I was predicting a bland victory for Labor and nominal legitimacy for Gillard as PM.  The leaks really do seem to have hurt her, though, and it now seems like a nail biter.

    Betting markets are putting the probability of a Labor victory at 62% and falling fast.

    Polls are (just) giving it to the Coalition.

    I was really surprised by the leaks.  The content didn’t concern me, but the fact that they were leaked at all floored me.  An MP from the Labor party — and not just any MP, a cabinet member — deliberately leaked details that were damaging to Gillard in the middle of a campaign!  They either (a) thought that a Labor victory was assured and wanted to rough Gillard up a bit so she’d be rattled and less likely to lord it over the cabinet after the election; or (b) wanted so badly to hurt Gillard that they didn’t care if it lost Labor the election.

    The first possibility sickens me a little (although my inner cynic asks why I was so surprised) and the second horrifies me a little (because it’s safe to assume that no other party is any better, which suggests that Australia is being led by a collective equivalent of Emperor Nero crossed with Machiavelli crossed with a two year-old child).  Should Labor still win, surely Gillard will to be tempted to find the person responsible and stomp hard on their political neck.  If she can’t find who it is, I can imagine the modern political equivalent of “nobody gets to play until the person who broke the window owns up” happening and Gillard firing two-thirds of the cabinet.

    British vs. Australian electoral systems

    How the Australian electoral system is better than the British

    • Mandatory voting
    • A democratically elected upper house
    • Preferential voting in the lower house, proportional in the upper (no first-past-the-post)
    • The electoral commission adjusts the electoral boundaries every cycle
    • Elections are always on a Saturday so that everyone has time to get to the polling stations
    • Elections in all seats are administratively run by the Electoral commission

    How the British electoral system is better than the Australian

    • The electoral cycle is longer.  Australia’s 2-to-3 years is too short.

    How they both suck

    • Variable term limits.  There should be fixed term limits.  4 years in the lower house, 8 years in the upper (half re-elected each time).

    The perverse incentives of Queensland traffic law

    In the Australian state of Queensland, a violation of traffic law is punished by a fine and the awarding of points.  Points for a conviction stay on your licence for three years.  If you ever have 12 points at the same time, you’re in trouble.  I’ll come to that in a moment.

    Somebody I know, let’s call him Semaj, has recently got himself up to 11 points.  He doesn’t dispute that he broke the law for all of them; he did.  Most of them came from speeding, but the last three points came from driving through a yellow light.  In Queensland, just like everywhere else on the planet, you must stop at a red light; but for a yellow light, you must stop if you are safely able to do so.  Some people believe that the yellow light should just be to warn drivers that the red is coming and have no penalty tied to it, but that’s not what I want to focus on.  To really rub salt in the wound, the light was still yellow when Semaj left the intersection and the only other car in the area was that of the police officer that booked him.  That’s what those in the business call a “dick move” by the cop, but it’s not what I want to focus on either.  What I want to focus on is …

    ***

    Perverse incentive #1

    The punishment for not stopping for a yellow light when you were safely able to is the same as that for not stopping at a red light:  AU$300 and 3 points.  This is absurd, because it fails to make the punishment proportionate to the severity of the crime.  By doing so, the government offers an incentive to people to treat them as equivalent.  To illustrate the point, let me take the idea embedded here in Queensland law to a logical, but ridiculous conclusion:

    The violation of all laws should be punishable by the same penalty. A serial rapist-murderer should be locked away for life. Therefore, overstaying your parking for just one minute should lead to your being locked away for life.

    See?  Absurd.  Clearly there are gradations of severity and, just as clearly, there should be corresponding gradations of punishment.  If the punishment for running a red light is a fine and 3 points, then the punishment for running a yellow should be a smaller fine and 1 point.

    ***

    Anyway.  Moving on.  Semaj now has 11 points on his licence.  The oldest of his points is only one year old, so he has two full years before any of them are removed.  If he gets even a single point over the next two years, he will be faced with the following choice when he turns up at the Department of Transport to pay his fine:

    • either give up his licence for three months;
    • or go on a probationary licence (with a limit of two points instead of 12) for a full year.

    After this, he will be returned a regular full licence entirely clear of points.  Hopefully you can now see …

    ***

    Perverse incentive #2

    Semaj is in a position where he would be better off by breaking the law.  The government is giving him an incentive to break the law.  If Semaj follows the law, he will have a one-point buffer for two years, then a three-point buffer for a year before returning to a full licence.  That’s three years in total.  If he deliberately gets caught for a one point infraction tomorrow, he can have a two-point buffer for one year and then go immediately to a full licence.  The cost to him will just be the fine for tomorrow’s infraction; maybe $100.

    Who wouldn’t take that option?  It’s crazy.  If you’re going to have a point system with the possibility of a probationary licence, then the length of the probationary period should be long enough that someone in Semaj’s position wouldn’t actually prefer to be on it.

    ***

    As I’ve said before, I believe that all fines issued for misdemeanours should not be for a fixed amount, but for a percentage of the transgressor’s income. When faced with the prospect of a $400 fine, somebody earning $20,000 a year will pay attention, but somebody earning $200,000 will not care nearly as much.  The two people therefore face different incentives when it comes to obeying the law.

    Of course, none of this comes close for the most ridiculous traffic law in Queensland.  That most dubious of prizes goes to this piece of nanny-state-run-amok trash:  Drivers on P-plates (that’s a “provisional” licence) “under 25 years of age can only carry one passenger under the age of 21 years who is not an immediate family member, when driving between 11pm on a day and 5am on the next day.”

    For reference, the very earliest that somebody in Queensland can move from a provisional to a full licence is at the age of 20.  That is two or three years into university.  Most Queenslanders, if they go to university and don’t take a gap year, would turn 21 in their fourth year.

    The “peer passenger restriction” of provisional licences is designed to prevent distraction (from drunk louts in the back seat) to the driver and so, presumably, lead to fewer accidents and thus fewer fatalities.  Whether it ultimately succeeds in reducing road deaths is an empirical question.  I don’t have access to the data, but to my mind there’s a fair possibility that we’ll actually see more road deaths from this, because …

    ***

    Perverse incentive #3

    By forcing university-age people to not share a car, the Queensland government is:

    • abandoning the idea of a designated driver; and
    • encouraging more traffic onto the roads at just the time of day when people are least likely to pay full attention to the road (what, did they think that those kids would stay home?).

    Both of those effects will serve to push up the accident (and thus, fatality) rates.

    If you want to keep drunk 20-year-olds off the roads, then give them a way to avoid them.  Improve public transport.  Lift the licencing restrictions on taxis.

    ***

    Idiots.

    I am Britralian

    … being both British and Australian.  It only took seven and a half years of living in Ol’ Blighty to do it.  The ceremony took place in the chambers of the Camden Council Hall — all dark timber and green leather.  There were about 30 of us in the ceremony.  Roughly half chose to swear their allegence by God, and half to affirm it without any religious reference.  Now I get to wait six weeks before getting my British passport.

    Party discipline in the Republican Party

    Inspired by this post by Cam Riley … Any observer of U.S. politics could not have failed to notice the incredible level of party discipline that the Republicans, particularly in the Senate, have achieved over the last year or six.  This may be something new to Americans, but it’s rather common to Britons and Australians, who generally get more excited when somebody — anybody! — breaks the party line.  The party discipline of the Australian Labor Party, in particular, is phenomenal.

    I understand that the generally accepted explanation for the differences between the USA and Australia in this regard focuses on the sources of funding for campaigns.  In Australia, all campaign funds come from the party — individual candidates cannot raise money directly — where as in the US, there’s a combination of party-supplied and individually-raised funding.

    That then suggests two possible reasons for the new-found Republican discipline:

    • Republican congressional candidates have started to take a larger fraction of their total campaign funding from the party itself; and/or
    • Advocacy groups that support policies we stereotypically associate with the Democratic Party have not been giving any money to Republicans.

    If it is the second reason, then that is a tactical error, and a foolish one, on the part of those advocacy groups.