The anti-economic rationalist genre
Some years ago, in reviewing Lindy Edwards’ book How to Argue with an Economist, I suggested that it was part of a genre of anti-economic rationalist writing. I think ‘genre’ is a good way of describing critiques of economic rationalism, because it picks up connotations of a common style as well as of shared subject matter and perspective.
There was another example of this in an article by Martin Feil in today’s Age, run under the title ‘We killed manufacturing’. It’s a vigorous polemic against economic rationalism and free-market economics, but as is usual in this genre it does not cite any actual economic rationalist or free market advocate and shows the standard lack of interest in facts.
Admittedly, indifference to evidence does have its liberating effects, allowing creativity closed to those who drearily stick to what can be substantiated. Take this claim, for example:
According to the free-market adherents, productivity improvements occur only when there is no government intrusion in the marketplace. Businesses are left to compete and only the most efficient survive. They then altruistically give their efficiency gains to consumers to grow the market. (emphasis added)
I’ve been reading anti-economic rationalist tracts for 20 years, and have read countless denunciations of free-market theories putting self-interest at their centre, but I think this is the first time I’ve seen the theory criticised for putting too much faith in altruism. Of course many people are altruistic, but it would indeed be a foolish theory that assumed business would give productivity gains away out of generosity. If it happens, it’s because business want to increase the amount they sell by lowering prices - as free market theory would predict.
Another anti-economic rationalist intellectual tic is to present commonplace economic ideas as if they were radical critiques of economics. After saying that tariff cuts were intended to improve economic growth by creating a more efficient and export-oriented manufacturing sector, Feil argues that:
The Australian economy grows for a number of other reasons. These include the creation of new industries and new products such as information technology, computer games, the internet and the mobile phone.
Economic rationalists have, of course, noted that new industries contribute to economic growth. But far from this being a compelling argument against reducing tariffs, it is one reason for doing so - instead of investors being encouraged to put their money into inefficient industries and consumers forced to pay too much for goods this money can go to other industries.
Then there is the reliance on anecdotal evidence:
Thirty years of watching the retail price of imports not fall in response to reductions in tariff barriers and the removal of import quotas has convinced me that the consumer is the last person to benefit from a reduction in either production or logistics costs.
Perhaps Mr Feil hasn’t been clothes shopping in the last couple of decades. As the RBA’s long time series of Consumer Price Index data shows, clothing prices have been held down over a long period of time. Indeed, they are cheaper now than they were in 2000. The reason? We are importing from low-cost countries in Asia rather than propping up our own inefficient clothing industry. The long-term loss of market share by domestic car makers is also clear evidence that the abolition of car import quotas and the reduction in tariffs has greatly helped car buyers purchase the vehicles they want, rather than those that Mr Feil, the car unions, and the car manufacturers think they should have.
When I Googled Feil the story behind this op-ed aquired the potential to become more interesting. It seems that he is probably an economist, having worked for the Industries Assistance Commission long ago (it was a predecessor to the Productivity Commission, back in the days when they published reports on such matters as the duty to apply to bras imported above the quota, one of my favourites from their history - and presumably the world Feil wants to go back to). That makes his misrepresentations less excusable. But I also turned up a personal crisis, a divorce in 2002 that led to this piece on middle-aged internet dating. There seems to be some link between personal crises and wacky political beliefs.
Whatever the case, Feil’s seemingly high embarrassment threshold seems to be a factor behind publishing under-researched and confused op-eds in The Age and discussing his love life - or lack thereof - in the SMH.
April 9th, 2007 13:41
I thought even by the usual anti-economic rationalist standard this offering was poor. “We killed manufacturing”, yet he then goes to describe a whole bunch of other industries that have arisen. Reminds me of a Paul Keating comment, when asked what he had to say to all those people who lost their jobs as a consequence of restructuring the economy, he said “How’s the new job going?”. (Kind of sad when you have to quote Keating).
April 9th, 2007 13:45
Dreadful article. Saved it as a permanent reminder of how silly people can be when they approach matters economic without checking facts or applying a modicum of logic and basic economics.
One paragraph I’m still not sure I understood properly: did he really suggest productivity improvements are irrelevant because we have a small manufacturing sector? The conclusion would have to be that Mr Feil thinks you can’t have productivity growth in resources, agriculture or service industries.
April 9th, 2007 13:50
Yes, that op-ed was simply terrible - Rambled on and on without any coherent structure. I am surprised how some op-eds can get onto the opinion pages so easily…
April 9th, 2007 14:21
Feil is trading on his reputation. He was a former Director of the Industries Assistance Commission. Google his name and he turns up cited by the ABC as a ‘respected trade economist’!!
April 9th, 2007 15:31
Thanks for the reminder, Jason. I remember him now. He told the radio audience that “We can’t all be professors of economics”.
April 9th, 2007 16:11
OLD AGE INDUSTRY POLICIES
I read the article and was almost moved to put pen to paper and submitt a rebuttal. I didn’t, however, because in my experience The Age is very reluctant to publish Letters To The Editor criticising their cabal of anti-economic rationalists. Indeed, my success rate in having such letters published in that paper is zero - whereas my success rate in other papers - Fairfax as well as News and CT - runs at more than 70 per cent.*
What is interesting is that whereas anti-economic rationalists such as Carroll and Manne (editors of Shutdown^) have recanted, or at least ceased to peddle, their former criticisms of economic rationalism (whatever that might be), Martin Feil and a few others continue to prophesy economic doom and gloom - and of course to misrepresent mainstream economics in the process. What’s sad in all this is not that such commentators or views exist; it is that The Age continues to give them oxygen, with little requirement for rigour and with little opportunity for contrary comment. Of course, the paper’s editorial line has long been supportive of protectionism and substantial government intervention. While its editorialists are entitled to cling to their beliefs, of course, it is about as “fair and balanced” on these issues as Fox News is on US foreign policy.
________
* BTW, we’re talking statistically significant sample sizes here - I’ve had more than 50 letters published over the years.
^ Shutdown: The Failure of Economic Rationalism and How to Rescue Australia, 1992.
April 9th, 2007 16:51
One phenomenon I have noticed (i live overseas) is how there is some sort of memory of high prices built into Australian industries that were formerly protected. THis is especially the case in TCF.
April 10th, 2007 00:10
Andrew Norton wrote:
There seems to be some link between personal crises and wacky political beliefs.
So spill Andrew, what horrifying personal crisis led you to believe that public schooling was the greatest mistake of the 20th century? Or does the criticism only apply to left-wing commentators?
Didn’t you also publically admit to dating problems on this blog?
April 10th, 2007 12:45
I read the article by Feil and felt rather ill. Some straight factual as you point out - over the past few years too the price of equipment coming into Australia has fallen.
But why does the Age publish this tripe? It really is becoming one of the worst newspapers in the country. Biased and unreliable.
April 10th, 2007 17:12
It reads like he wrote it in a taxi on his way to (Sydney) airport.
April 11th, 2007 09:39
On watching the retail prices of imports not fall, has anyone noticed the trend in the price of printers, scanners, digital cameras etc in recent years. And clothing, it often seems they are giving it away for the price of the raw materials.
And (paper) note books for students.
Have Carroll and Manne actually recanted or just shut up? Documentation would be appreciated:)
April 11th, 2007 09:50
Carroll did recant.
April 11th, 2007 10:17
Rafe wrote:
On watching the retail prices of imports not fall, has anyone noticed the trend in the price of printers, scanners, digital cameras etc in recent years. And clothing, it often seems they are giving it away for the price of the raw materials.
Scanners and digital cameras you would expect to get cheaper over time (or better for the same price).
Printers? Yes they are cheaper but the cost of consumables for them has risen - the companies changed their business models to match Gillette (when it gets cheaper to buy a new printer than to buy a cartridge for your old one, you know something is wrong).
Clothes? Yes - at least kids clothing the price hasn’t changed much over the last 10 years which is a welcome development of cutting the clothing industry loose.
However, is it all built on the house of cards that is cheap transport? It seems that we have switched entirely to an economy based on the price of oil.
April 11th, 2007 10:22
Clothes are the most relevant example here, because Australia never had an industry making the other products, so any tariff would just have been a de facto sales tax rather than an attempt to protect jobs.
April 11th, 2007 11:36
David, I’m a bit confused by your comment. The tone of your comment appears to be supporting Feil’s argument but then you say:
“Scanners and digital cameras you would expect to get cheaper over time (or better for the same price).”
Why? Perhaps because Feil is wrong - the consumer has benefitted from a reduction in production or logistics costs. As for the price of oil, the price of electronics has fallen in nominal terms (and clothing has fallen in real terms) over the last 9 years, notwithstanding a sextupling (6?) of the oil price.
April 11th, 2007 14:01
Rajat wrote:
David, I’m a bit confused by your comment.
I think Feil is largely wrong. However, he is grasping at the edge of something interesting (competition rather than altruism drives markets). Companies don’t like competition, but consumers do. I don’t understand why Andrew Norton resorted to a personal attack to try to make his point when there was lots of lower hanging fruit to be picked off.
Clothing prices have fallen dramatically as their production has shifted to low wage countries, so the component of the price that is transport has become more significant (although I may be very wrong on this point - the efficiency of a container ship is relatively high).
More interesting to me is that while clothing is relatively essential, digital cameras etc. are not, so I don’t really care whether they get cheaper. Housing, food and water don’t seem to be getting much cheaper.
April 11th, 2007 14:07
One other point. Car unions do not decide the product mix of their employees companies. The car companies are their own worst enemies when it comes to product choice, and scream long and hard for protection and handouts whenever things look bleak (or they’ve been building the wrong cars - something that’s been a specialty of the local industry, Mitsubishi being the worst offender)
April 11th, 2007 14:37
“However, he is grasping at the edge of something interesting (competition rather than altruism drives markets). ”
This is important, but it is not interesting. It’s been obvious for centuries, and so he should not be ‘grasping’ at it.
April 11th, 2007 14:48
Andrew Norton wrote:
It’s been obvious for centuries, and so he should not be ‘grasping’ at it.
Somebody should have told the Liberals when they were drafting Workchoices.
April 11th, 2007 18:12
Andrew, thanks for the steer on Carroll, can someone help on Manne? Actually I think Carroll was the ghost in Manne’s machine, when Manne edited The New Conservatism he just said he knew nothing about economics.
David, what point were you trying to make about Feil “grasping at the edge of something interesting”?
April 11th, 2007 21:44
David, what point were you trying to make about Feil “grasping at the edge of something interesting”?
Feil strikes me as another commentator who starts with conclusions and ends up with his argument - entirely missing the point. I think there’s a major disconnect in the attitude on both the right and the left in mainstream Australian politics with the mechanics of the market. The left feel that an antagonistic stance (regulation and more regulation) towards free market capitalism will somehow soften it’s impacts on the least fortunate. The right talk about giving free reign to market forces to allow self interest to achieve efficiency, but don’t have the political will to make it happen. Feil tries to make the point that altruism isn’t to be expected from self interest (and he’s right) but he’s entirely wrong in the assessment that the free or deregulated market should work that way, and so is John Howard as a specific example (how surprised he was at companies taking advantage of Workchoices to sack people!). Either way, we’re getting nowhere - neither side really seems to trust an entirely free market.
April 11th, 2007 23:30
David R, your personal question directed to the host of this blog was unfortunate.
“More interesting to me is that while clothing is relatively essential, digital cameras etc. are not, so I don’t really care whether they get cheaper. Housing, food and water don’t seem to be getting much cheaper.”
Sorry, I don’t understand where housing and water come into this. They’re not easily created and transportable goods. Clothing can be cheaply produced in mass quantities and transported between countries.
April 11th, 2007 23:33
Who has ever wanted an entirely free market, free of enforceable rules against the use of force and fraud? Who can you quote on “giving free reign to market forces” apart from leftwing critics of markets? Actually I think you mean free rein.
Markets are not disembodied forces, they happen when people trade, “letting the market decide” means letting potential buyers decide. I still don’t understand the point you are trying to make.
April 11th, 2007 23:44
Food has been getting cheaper for decades and the cost of food for home consumption has been a declining part of the family budget. Some of us can remember when eating out was a rare treat, now some people seem to eat out more often than they eat at home.
As for the cost of housing, bear in mind that the size of the average home has doubled in about thirty years and most of the cost of city houses is the land component.
April 11th, 2007 23:46
Perhaps that comes down to a definition: the meaning of “free market”. Some people may think that you could have fraud and the ability to use force in “an entirely free market” while others may think it means that there are enforceable rules against fraud and the use of force.
April 11th, 2007 23:47
An aside - is it just an urban legend that some inner-city apartment don’t have an effective kitchen?
April 12th, 2007 01:03
Sacha Blumen wrote:
David R, your personal question directed to the host of this blog was unfortunate.
I was (crudely) trying to make a point (obviously not very effectively).
Rafe, why not “free reign” - as Bob Dylan sang, you gotta serve somebody.
I honestly think the rhetoric about free markets not matching the substance of policy is grossly dishonest (the last ten years being a real standout). If the majority of us are comfortable with big government conservatism or regulated and expensive markets, we should have them with all the consequences. I don’t like the idea of being sold the stallion of market ideals and getting the mule.
April 12th, 2007 05:22
STRAW ECONOMIC MEN
DR said “I honestly think the rhetoric about free markets not matching the substance of policy is grossly dishonest”
The problem, David, is that most of the misleading rhetoric comes from the left. Witness Michael Pussey’s characterisation of economic rationalism as being about “money, markets and materialism”, or his assertion that economic rationalists believe that markets are always better than government intervention, when no or virtually no economist believes that. Feil’s article is just another in a long line of commentary from the left that knocks down straw economic men. Read any Productivity Commission report, or anything out of Treasury, and you’ll find plenty of times where economists advocate government intervention in the marketplace.
April 12th, 2007 09:36
Tom N. wrote:
most of the misleading rhetoric comes from the left
That might be true Tom, but most of the dishonesty in policy not matching rhetoric has come from the right (although this may just be a feature of the Liberal party). Why, for example, can’t we let the market decide what the best mechanism is for cutting greenhouse emissions, rather than “picking and sticking” with Nuclear when it’s just one of the options available? Why do we continue to prop up or subsidise car manufacturing and forestry product industries? These positions make (twisted) sense from the (economic) left but none from the (economic) right. Yet when it comes to areas like education and health, where it’s far less clear that the current ideas on deregulation will work equitably, we have gung-ho progress. It makes no sense to me.
April 12th, 2007 10:25
David has a point about what happens to free market ideology once it gets into the hands of practical politicians.
The long-dormant youthful Marxist in me, though, says to look for the class interest here - those bits of the ideology that suit particular interests will be progressed, those that don’t will not be.
April 12th, 2007 16:11
A partial admission of error from Manne.
April 12th, 2007 18:22
I think Manne’s admission is more satisfying than Carroll’s (in the Age article), which is just praise for John Howard for how he has managed the economy. Manne actually admits that economic reform didn’t do the bad he predicted while Carroll does not tackle this issue directly.
April 12th, 2007 21:32
So is Clive still fighting the good fight?
April 12th, 2007 21:47
David, at the risk of being a bore I want to keep asking you what you are trying to say about the free trade/economic rationalist agenda. I think even people like Manne and Carroll now admit that the deregulation initiated by Hawke and Keating has been a good thing. At the very least they have admitted that they were wrong to predict disaster.
Are you trying to make a point about the desirability or undesirablity of free trade policies, or are you just saying that the Coalition has not been very active or effective in pursuing them?
So let me ask you the simple question, are you in favour of free markets? And if you are not in favour, why not?
If you are just saying that there is a (dishonest) gap between the rhetoric and the reality of supposedly free enterprise politicians, then recall that (a) the Coalition did not have a majority in the upper house until three years ago (and not really a majority even then) and (b) there is still a very articulate (if incoherent) body of opinion, represented by Mr Feil, that can be mobilised anytime that serious free trade policies are mooted.
April 12th, 2007 22:21
Rafe, sorry to but in, but don’t you think that Manne and Carroll are likely to be still just as critical of the philosophy, or mindset, behind economic rationalism, even though they’ve retreated from the debate about numbers?
I suspect they both still think that economic rationalism involves pushing too much of life into an amoral market system, that it’s a system run by the rich mainly for their own benefit, and that’s it fruits (accelerating environmental damage and tasteless spending on junk) are despised ? And that it’s still early days … maybe a few more downsides will become apparent as time goes by.
When you say free markets, you don’t mean totally free do you?
April 12th, 2007 23:24
Russell, thanks for your comments. It helps to see economic rationalism as a part of the classical liberal agenda which has at least three strands of policy (1) free trade, (2) the rule of law and (3) a moral framework including things like honesty, compassion, civility, self-reliance and community spirit.
Economic rationalism offers something for everyone, rich and poor, like the opportunity for all able-bodied people to work. As for the amorality of markets, a market is something that happens when people trade goods and services. It is a category error to talk about the morality of markets.
As for the environment, there is a rich literature on free market environmentalism, demonstrating the ecological downside of public ownership. Property rights give people a vested interest in looking after the property. Sensible pricing tends to force people to economise with scarce resources.
The downsides that you mention are either non-existent or they are the result of people using their freedom to do things that you don’t like (spending on junk).
I have already pointed out in a previous comment that free markets are supposed to operate under the rule of law to minimise force and fraud.
I would be interested to see Manne and Carroll actually engage with the philosophy and mindset behind economic rationalism.
See the link for some choice examples of the abuse thrown at economic rationalists 20 years ago. http://catallaxyfiles.com/?p=2745
April 12th, 2007 23:38
Rafe - I heard this tonight:
That’s the sort of thing that seems to happen with markets because they amplify self-interest. What do you think?
April 12th, 2007 23:49
That is an indictment of certain practices, not the policies of economic rationalism. Unless you are a utopian you have to expect that some people will act in undesirable ways some of the time. However the evils of unprincipled marketeers are minor compared with the largescale exploitation of consumers that happens when political interventions favour special intersts.
Self-interest is a constant, it is not a product of markets, nor is it aggravated by markets.
April 13th, 2007 01:24
Rafe wrote:
Are you trying to make a point about the desirability or undesirablity of free trade policies, or are you just saying that the Coalition has not been very active or effective in pursuing them?
I’m saying the coalition has been ineffective at pursuing free trade. Perhaps this was a function of a hostile senate, more likely they currently do not have the courage of their convictions. A perfect example for me is the “fair pay commission” - what is the point of replacing arbitration of minimum wages when deregulation of employment should entail the removal of minimum wages altogether. The coalition know this would be politically unpalatable, but they insist on swapping one working system for an unproven one.
For the record, I know free trade works for tradeable commodities but I’m less convinced where it comes to more widespread social benefits that flow from safety net health and education systems. I have been, in the past, a blind faith supporter of markets (an active consumer of private schooling and health - I worked for a merchant bank for 11 years), but ended up troubled by both the poor value I received and the growing inequity that is palpable in international cities I’ve seen over the years. I know difference, envy, self interest are powerful motivators but no longer believe that the twisted consumerist mentality that has been harnessed and fostered by their pursuit will lead to anything resembling a civilised society.
April 13th, 2007 04:01
If you are saying, David, that the Coalition claims to be a free trade party but isn’t, then I can certainly agree - at least with the last bit.
But Martin Feil’s attack was on economic rationalists, free marketeers and economists; not on the Coalition. That is where this debate started. How, or why, you finished up where you did is not immediately apparant.
April 13th, 2007 09:19
Tom, it ended up there because you stated “most of the misleading rhetoric comes from the left” - both sides have been equally bad and given the coalition have occupied the corridors of power most recently, their self serving deceptions are more obvious.
April 13th, 2007 09:34
Russell, one common complaint of less regulation is that people can be unfairly dealt with moreso than with more regulation - but people can be nasty or unfair, or try to get around whatever constraints there are, in any system, and human nature is such that some people will. What you need, then, is to have enforceableTrade Practices Acts so that unfair practices can be dealt with.
April 13th, 2007 11:21
Rafe and Sacha: “Self-interest is a constant, it is not a product of markets, nor is it aggravated by markets” - I disagree, when publicly owned institutions are privatised the motivation for providing the service changes (ie to profit) and the consumers become more exposed to people who want to take advantage of them. Eventually you can’t have dealings with organisations that treat you as a citizen, rather you’re seen as a target to be exploited.
David: “For the record, I know free trade works for tradeable commodities” - what if the French want to protect their agricultural sector because they want to protect that way of life, the form of society they have …. isn’t it reasonable for them to make that choice? If the Japanese particularly value food security over cheaper imports, why shouldn’t they protect their agricultural sector?
April 13th, 2007 11:33
Russell - do you think that publically-owned organisations can’t treat people poorly? I understand that the motivations of publically or privately-owned organisations might (or then again, might not) be different, but at the same time, people may be more interested in the outcomes those organisations produce.
I know people in the NSW public service who tell me that, in some parts of the NSW public service, it doesn’t matter how or if one performs, as there’s no need to. The stories I hear are just incredible. One difference between profit and and public organisations is that a public organisation doesn’t usually cease to exist if it doesn’t make money.
April 13th, 2007 11:33
A subpoint about this is that profit-driven organisations need to perform to survive, while publically owned organisations don’t.
April 13th, 2007 12:01
Russell, the Japanese do not protect their farmers for food secuity, it is a matter of getting the rural vote, so the people in the cities have to eat the most expensive rice and meat in Asia.
Contra to treating customers as targets to be exploited, private sector firms in a free market who want return business (and good word of mouth publicity) have to keep customers happy in a way that monopolies (public or private) do not.
April 13th, 2007 12:03
I don’t think that’s so - public organisations have to justify their budgets to ministers who would be happy to use the money for other things.
The profit motive as a need to perform leads to ruthlessly exploiting market power to drive out competitors, corrupting public officials, covering up damage, environmental or otherwise - I could go on - and if they do go broke these organisations can cause huge hardship and distress for their investors - Enron?
April 13th, 2007 12:05
Rafe: “people in the cities have to eat the most expensive rice and meat in Asia.” - seems they can well afford to, so the policy couldn’t be doing too much damage to their economy. What about the French?
April 13th, 2007 12:14
Didnt the publically owned SA state bank go belly-up?
April 13th, 2007 12:18
Russell - in the public sector, there isnt the outside discipline that may effectively force it to be better and more efficient at what it does. Politicians may try to make it more efficient (remember the “efficiency dividends” required by the Hawke govt to make budget savings?). Because those outside competitive pressures dont seem to exist in the public sector, it doesnt really matter if it underperforms.
April 13th, 2007 12:55
Sacha - did the deposit holders of the bank suffer catastrophic personal loss, or was it spread over the whole community?
The head of our Health Department is paid over half a million $$ a year because apparently we had to have someone from the private sector, and pay to get them. Can’t we assume that he will be managing the Health Department as efficiently as any private enterprise CEO manages their organisation?
April 13th, 2007 13:17
Russell - so people in Japanese cities pay more for rice than they otherwise would. Wouldn’t that effectively be a regressive tax that is redistributed to rice farmers?
April 13th, 2007 13:19
I don’t know what happened to the deposit holders of the SA bank. My understanding is that the entire community had to pay for the the failure of management, which then led to the SA Govt being heavily defeated.
April 13th, 2007 13:24
But why should we care … the Japanese have a democracy and that’s the way they choose to do it.
” then led to the SA Govt being heavily defeated” - competition (political) at work!
April 13th, 2007 13:32
Russell, the Japanese had (I dont know if its recently changed) a malapportioned electoral system which favoured rural voters.
April 13th, 2007 13:47
So it’s on that basis (our evaluation of their electoral system) that we can tell the Japanese what to do?
How about the French?
April 13th, 2007 13:58
Russell wrote:
If the Japanese particularly value food security over cheaper imports, why shouldn’t they protect their agricultural sector?
Because in the long run it’s counter productive. They get more expensive food and the price of food security is never under competition. It’s quite simple for a consumer to select (say) beef from a particular country for food security reasons as the beef is marketed that way. Those concerns may carry a cost (i.e. the producers can differentiate their products - Australia certainly does in the Japanese beef market) - something the consumer should be able to determine at the time. You could argue that Japan would culturally be poorer for losing it’s home grown agriculture, but Australia would be nowhere if that were true. Somebody always loses when you’re subsidising or protecting industries, and it’s usually the consumer. Japan will probably always have a boutique industry, but tariffs are not the way to secure it’s long term future, and an illusory way to ensure food security (mono cultures are especially dangerous in food security terms).
April 13th, 2007 14:12
David - I don’t follow. If the Japanese or anyone else want to be able to be self-sufficient in food - some grain, some meat etc - in case of being cut off during a war, how are they going to have this local food production if they don’t control what’s coming in from cheaper producers?
But forget the detail - whether it’s food security, or maintaining a way of life, or avoiding GMO’s - why shouldn’t a country be able to decide to trade off price benefits for the other benefits they want? Why is the object 100% economic gain, all the time?
April 13th, 2007 14:39
Russell wrote:
Why is the object 100% economic gain, all the time?
That’s the entire point of food production - do it as well and as cheaply as possible. There are few other measures that are meaningful when talking about food.
April 13th, 2007 14:54
David - man doesn’t live by bread alone. I don’t think the entire point of food production is cost.
April 13th, 2007 22:02
Russell, you can subsidise any industry you want, or have whatever trade arrangements you want. The point is that these may well have consequences. For example, if Japanese consumers pay more for rice than they otherwise would, well that may effectively constitute a regressive redistribution of income from consumers to farmers.
I don’t know if anyone is telling the Japanese or French what to do, except if it’s part of some trade negotiation.
April 14th, 2007 00:13
Team,
What follows doesn’t invalidate at all any of Sacha’s and Rafe’s points about agricultural subsidies being a regressive tax. And it in no way supports Russell’s contentions.
But I’ve been living in Tokyo for six months now, and something that quite astounds me is how cheap food here is compared to prices back on the east coast of Australia. You can have a full meal for lunch - admittedly bits and pieces of things, but including ricey treats - for around the equivalent of A$3. You can have a good dinner for around $6.
I expect prices would be lower if the agricultural protection were removed. But, as an economist by trade, I’d love to get to the bottom of this apparent paradox. Perhaps, with a market of 120 million to service, the economies of scale are sufficiently large to allow this outcome?
Just speaking generally:
Tuesday night, I was speaking to an English actuary who has been working here for around two years. He too is astounded at how the Japanese can produce such high quality goods and services for such low prices. At the top of the market, goods and services are tremendously expensive. But there is a substantial ‘middle quality’ section that is more than reasonably priced. And the Japs manage to produce all of this with a service culture that is quite eye-popping. I doubt anyone could move through Tokyo and not run into some employee waving their arms, talking at customers, etc. as part of the sales effort. Walk into a store and seven people will shout ‘Welcome’ to you - quite a contrast to my visit to Myer in Sydney a couple of weeks back, when the staff insisted on conversing about their weekend plans and completely ignored their customers.
Don’t even start me on the metro rail system, as compared with what passes for a service in Sydney.
The market system here is just as ruthless as in Australia - if not moreso. But the culture in which it exists is completely different.
April 14th, 2007 00:50
When I was in Manhattan during Christmas in 2004, you could get meal-like lunches for $5 all over the place. It seemed extremely like an extremely competitive market.
Jeremy, something I remember from Japan was the enormous amounts of labor in the department stores - my experience in the food hall in one department store was that each counter sold its own goods and you couldn’t buy its goods at any other counter. I remember that the doors to one department store in Ikebukuri (phonetic spelling!) must have opened at, say, 8:30, sharp - and the store manager was there bowing to everyone as they came in, and all the workers at their counters also bowed to us as we walked in, maybe because the store had just opened.
April 14th, 2007 01:52
Sacha,
Yes, Japanese businesses are labour intensive, relative to those in Australia.
But that’s part of the puzzle, and what the actuary and I were wondering about - how are they able to employ all these charming people to do jobs that can’t possibly justify the wage they are earning - and yet still bring their goods to market at highly competitive prices.
It may have something to do with the large amounts of capital relative to labour, and the resultant low rates of profit. But if it is, then I’m glad for it.
The department stores here really are a marvel - oh no, I’m suffering from (gasp) affluenza!
April 14th, 2007 01:56
Continuing on …
You’ll be greeted with a bow and a pleasant ‘Irasshaimase!’ (Welcome!) wherever you tread in a Japanese department store, and in all other stores you’ll at least get the Irasshaimase.
It’s a completely different culture, and approach to one’s work and one’s customers.
April 14th, 2007 12:38
In small French stores it’s really nice the way you’re expected to say hello and goodbye (merci, au revoir) when you enter and leave the store. Much nicer than in oz.
April 14th, 2007 21:25
Oh, those wonderful Japanese department stores … a little disturbing Jeremy that you seem so keen on staff bowing to you though…. Anyway I visited the horror of Bunnings on myself this morning and they also have staff who greet you (who would be better employed at a till, and are only standing at the door to make sure people don’t steal stuff).
Are wages in Japan low, at the lower end ? I just wonder because they live in such tiny spaces - Australians have vast houses (and cars) filled with stuff, and are constantly ‘renovating’. Japanese don’t seem to do this, and I remember that many offices also seemed dingy with really old furniture - nothing like the stylish swish spaces we work in.
One contrast with Perth I remember was their train stations. Ours was ‘redeveloped’, probably cost millions, but the platforms being open under a huge canopy, are boiling hot in summer, freezing in winter. In Japan you could often sit in one of several little cafes that faced onto the platform enjoying a cup of tea while you waited in comfort, and on the platforms they had these crummy looking long little rooms you could sit in, that appeared to have been constructed from old windows from somewhere, with an ordinary airconditioner bunged in at one end, which kept you perfectly comfortable.
Sacha I know that protection or subsidies will have consequences - I just wonder why its always assumed that cheapest is best. I don’t really know the price of food that I buy - I look for freshness, local produce, organic, quality… and despite what Rafe says I expect to be lied to: this morning I bought some cashews - the manufacturer proclaimed on the packet that they were bringing me “the fresh taste of Australia” it was a “product of Australia”, but in small letters it has ” made with imported product” - in other words cashews from Vietnam. BTW those cashews were $32 a kilo - I know the price of those because they’re about 3 times the cost of the cashews you now find everywhere - but they are same quality cashews that used to be sold everwhere. Food has gotten cheaper but only for cheaper quality. Clothes have gotten cheaper, but for cheaper quality.
April 15th, 2007 09:39
Russell, when did I ever say it was all about price and economics?
http://www.the-rathouse.com
We started off talking about economic policy which is very much about prices and choices, and limiting the damage inflicted on consumers by special interests using political influence. It is also about the efficient use of natural resources.
April 15th, 2007 20:59
Rafe, very nice first paragraph on your link. I only mentioned your name above in relation to duplicitous merchants - and I will still have to buy those cahews because they are the only ones worth eating!
“the efficient use of natural resources” what does this mean? I want food to be produced sustainably, humanely and by local communities. You know how they used to use the phrase ‘animal husbandry’ - I want food producers to look on their work as husbandry. Efficiency isn’t my first priority.
April 15th, 2007 21:08
“damage inflicted on consumers by special interests using political influence.” - Could the same have been said of Wilberforce and the Evangelicals who lobbied to outlaw slavery? (I’ve just been reading Windschuttle’s article on slavery in Quadrant.)
April 15th, 2007 22:46
Russell - why introduce a red herring? Do you think that no damage has been inflicted on consumers by special interests using political influence?
April 16th, 2007 07:54
Russell, what has eliminating slavery got to do with reducing the opportunities for special interests to exploit consumers? Do you expect to be taken seriousy?
April 16th, 2007 10:28
Russell - have you read former Senator Peter Walsh’s political autobiography “Confessions of a failed Finance Minister”, published with additions in 1996 or 1997? Regardless of whether you agree with his viewpoint, it’s interesting to read his description of what he sees as special interest groups attempting to gain benefit at the public’s expense. It’s a very interesting book.
April 16th, 2007 11:51
The reason I quoted Rafe’s remark ““damage inflicted on consumers by special interests using political influence.” was to make the point that the damage to consumers may not be as important as the reason for doing the thing. Consumers may have had to pay more, but to lobby for change was still the right thing to do. The ‘benefit’ of cheaper prices to consumers isn’t the only thing to consider.
Sacha - haven’t read it - I never could stand Peter Walsh, John Dawkins et al. Always seemed to me arrogant and mean.
April 16th, 2007 12:05
I recommend that you read it - Walsh came across to me as someone interested in the overall public interest as opposed to the interests of sectional groups.
April 16th, 2007 12:30
Sacha, what with this blog, Quadrant and the wretched Policy magazine I have hardly any time for Eureka Street and Green Left Weekly. Since I still need further improving (I haven’t read ALL the classics yet) I doubt there’ll be time for Peter Walsh….
April 16th, 2007 12:33
*laugh* It sounds like you’re reading lots of anti-left forums - are you intrigued?
Aren’t all the Green Left Weekly editions basically the same?
April 16th, 2007 12:57
Intrigued? No, there’s good writing and good ideas/criticism from all over. Take the issue of Quadrant I was reading - although I’ve heard Windschuttle on the radio and thought he sounded insane, he has a good little article there, and Ron Brunton’s article on the Single Noongar claim over Perth was good (and new) but the article on obesity is just tripe. Counterpoint tonight has something about diet - it’ll be interesting to see if it’s as bad as that article. (Rafe has an article in there too, but I didn’t read that.)
April 16th, 2007 13:47
Ah - I’ve only read one issue of Quadrant about 6 years ago.
April 16th, 2007 21:28
“… and that’s fair enough, they’re in business”. Anyone hear that said on Counterpoint tonight?
April 17th, 2007 09:52
Sorry Russell, what’s Counterpoint?
April 17th, 2007 13:28
Sacha - Counterpoint is a program that Radio National puts on so that we left wing listeners can be reassured that the right is as dumb as we think it is.
http://www.abc.net.au/rn/counterpoint/
Last night they had a moron who has published a book called Diet Nation (try to find even one review in a quality journal). He was criticising those who had ‘an agenda’ to promote the idea that there’s something wrong with you - so that you need their pills or diets or whatever - but then sort of became aware that he was criticising good old free enterprise, so said of what they do “…and that’s fair enough, they’re in business”.
It reminded me of our discussion here: does the right to make money trump social responsibility?
I can say one thing nice about Counterpoint: good music. Played a bit of Peggy Lee last night which reminded me of the excellent Dean Martin show on TV in the 60s - Peggy was often a guest. (See, not a popular culture snob).
April 17th, 2007 14:42
Thanks Russell - I don’t listen to Radio National (I listen to the local ABC station in the morning). Glad to hear you’re not a popular culture snub
(BTW My partner tells me I’m a popular culture vacuum - probably because I don’t read the social pages much - I read more on politics and economics!)
About your question - “does the right to make money trump social responsibility?” I suppose that the starting point to think about this is to work out everyone’s responsibilities. What are everyone’s legal responsibilities? If one can legally do something (eg make money) then is it some kind of ethical consideration as to whether you make money in what others might think is a slightly unethical way? Should ethics be legislated for? How would one legislate this way?
April 17th, 2007 14:43
Perhaps its the distinction between what one can do and what one might do?
April 17th, 2007 21:22
Well Rafe was going on about “reducing the opportunities for special interests to exploit consumers”, without allowing for any complexities. If I want to try to influence politicians to ban battery hens in tiny cages, even though that’s the cheapest way to produce eggs, I think I’m entitled to - perhaps even morally obliged to if I think keeping hens that way is cruel.
If I were selling eggs from hens kept in perfect conditions, and campaigning against battery hens, Rafe might say I was only hoping to force my competitors and their cheap eggs out of the market - but again, if I believed that hens should be kept in more natural conditions, I would be following my conscience in trying to outlaw the tiny cages.
April 18th, 2007 00:12
Russell - I’m honestly not sure how to respond to this. (And I mean this honestly!)
The reason I say this is, that while I understand the logic in what you write, I *feel* that this last comment is taking something to a logical conclusion of some sort, whereas in reality, logical conclusions are not taken. In logic and pure mathematics (in using proof by contradiction), one might use an argument appealing to the logical conclusion of an argument, but I feel that this is not authentic in politics (and economics).
I feel, without speaking on his behalf, that Rafe’s argument is about special interests using their situations to benefit themselves selfishly at the expense of the general public, and there are innumerable examples of this happening.
April 18th, 2007 09:47
Russell, I am prepared to handle any degree of complexity as it arises. Sacha has got it spot on in his last sentence.
The greatest dangers are state-protected monopolies where the issue is quite clear-cut. The are potentially bad and dangerous in all sorts of ways.
When you get into things that involve the possibility of cruelty and inhumane actions then of course moral and ethical issue need to be considered along with the economics of the case and maybe in defiance of the economics. Slavery is an obvious case and you need to realise that classical liberals are not just concerned about markets, we are also concerned about the rule of law and the moral framework as well.
April 18th, 2007 13:37
“classical liberals are not just concerned about markets, we are also concerned about the rule of law and the moral framework as well.”
Moral as in describing political inteventions that favour special interests as “evil” (comment 38).
Are the French rural communities ’special interests’, and is their favouring by the government evil? In answering that, what factors would you take into account?
April 18th, 2007 17:25
Like Martin said in the internet piece:
“Data and events in our memory banks that don’t support our position or emotional state meet the fate of all such data, regardless of the analytical application.”
It’s a pity that he gets such a good run in the Age. No matter what the subject I always like to read contrarian views - but only if they have something to offer. In this case, I’m afraid it just ain’t so.
April 19th, 2007 08:16
# 88 “evil” was too strong in the context, read “downside”. What has to be taken into account is how many people you want to see supported in a lifestyle that is no longer economically viable - consider the bullockies of a hundred years ago. I don’t have a simple answer and I am not a utopian so I don’t expect that there is a simple answer, certainly there is no solution that will make eveyone happy.
The situation in France is that there are a lot of farmers on very small plots of land and they need to be propped up by the taxpayers at large. Incidentally to get over the shortage of land at home, French wine interests have invested bigtime in South Australia.
What factors would you take into account if you were planning to argue in favour of raising the tariff on cars, shoes and clothes to their previous level? And if you are not prepared to make that case, why not? The makers of cars, shoes and clothes will love you!
April 19th, 2007 23:02
“I don’t have a simple answer” - I suppose that’s all I wanted to hear really, because (back to the topic) it seems to me that economic rationalism is far too simplistic: market forces are best, free trade is best, continually reducing government is best etc.
I’m looking at container deposit schemes at the moment and it’s the usual depressing story - the packaging industry says it’s a cost and opposes them, the environmentalists say the cost is worth it for the benefits. Some people know the price of everything and the value of nothing.
As to cars and clothes - a bit complex for me, but I would support activities based partly on their importance: a car industry is important because we wouldn’t want to lose all the knowledge and advanced technical skills, in all the industries, that go into making cars - - as long as we need cars.
Making clothes is a simple skill that individuals can learn for themselves - as many do. I guess that you could fairly easily resuscitate a footwear industry if you had to, but not a car industry.
May 12th, 2007 23:33
[...] oil. Indeed there was a society dedicated to promoting the policy which was run by people like this one whose unreflective protectionism has since demonstrated what looked pretty obvious at the time – [...]