How novel are Per Capita’s ideas?

In The Australian this morning, Dennis Glover puts the case for the Per Capita think-tank because

The alternative to the CIS-Institute of Public Affairs view, therefore, has to come from elsewhere [ie, not from the Old Left]….

In the absence of a strong contest, the intellectual ideas of the Australian Right are now in danger of hardening into an ideological dogma, dominated by prefabricated and increasingly predictable soundbites.

Now the CIS is all for competition. But it is not clear to me that it is promoting ‘ideological dogma’ against the fresh thinking that might come out of a ‘new progressive agenda’ set by Per Capita.

Per Capita, for example, thinks that a huge increase in public and private investment in education will reduce poverty and increase per capita income. The ‘private’ part is perhaps controversial on the left, but the basic argument about the importance of education is orthodoxy. Every survey finds that the public wants more money spent on education.

Fresh (or at least fresher, since studying intellectual and political history suggests that genuinely new ideas are very rare indeed) thinking would be to question this orthodoxy. Perhaps for example Andrew Leigh’s research showing that we are spending more on schools but getting worse results. Or Peter Saunders’ argument that raising the school leaving age is a bad idea. Or my point that many graduates are working in jobs that don’t need university qualifications.

Perhaps we do, overall, need more spending on education. But in education policy, this is the dogma that needs testing in debate.

Per Capita is big on what it calls ‘full-cost economics’, which so far as I can tell is just another name for the economics of externalities, and the old argument that the government can encourage positive externalities and discourage bad externalities. An emissions trading scheme is an example of ‘full-cost economics’ – while certainly controversial it is not exactly novel, and is being promoted by many others on the left.

And according to Glover’s op-ed:

there is a need to defend a progressive position in the culture wars, particularly when the conflicts spill into the territory of race.

But surely the left is already too preoccupied with race, seeing racists under every bed.

I’ve thought from the start of Per Capita that their problem is finding something fresh in the social democratic tradition. Social democracy is so deeply entrenched in our political institutions that it is in the fine-tuning and adaptation phase, not the original new thinking phase.

The strengh they perceive in think-tanks like the CIS – with its profile events and regular media mentions – could just as easily be interpreted as weakness, that its ideas aren’t so embedded in mainstream political debate and institutions, and therefore the media turn to a think-tank – a tiny organisation with no direct power or influence – for some alternative to what everyone else is saying.

Update: My CIS colleague Jeremy Sammut also responds.

28 thoughts on “How novel are Per Capita’s ideas?

  1. “Social democracy is so deeply entrenched in our political institutions that it is in the fine-tuning and adaptation phase, not the original new thinking phase.”

    That must be a disappointing conclusion for a classical liberal to reach after nearly 12 years of John Howard PM. Are saying that Howard was a social democrat, or that he was ineffective in changing our institutions?

    I agree with you, by the way, about Per Capita. They are all tank and no think. Their problem is that the best and the brightest are beavering away on ministers’ staffs all doing things. The time to establish Per Capita is when Labor loses office, not when it wins.


  2. The most effective way to improve education, and possibly the only way, is to have parents back up the efforts of the good teachers to encourage the pupils to do the work they need to do. Input of public money, zero.

    On welfare and social justice issues, the people who care need to get involved either by finding some needy people and helping them (first finding out what they really need) or donating funds to appropriate voluntary agencies.

    On the battle of ideas, Glover announced that the progressives are coming out of their bunkers to get serious. But when they fire their big guns, what comes out? Flags with “bang” on them! Like recycling the old canard about Thatcher and “there is no such thing as society”. And Kevin Rudd failing to understand Hayek. See the op ed by Geoff Hogbin near the end of the Inquiry section of the Weekend Australian.


  3. Spiros, don’t get Andrew started on John Howard’s taxing and spending!
    What are the best and brightest Labor staffers actually doing?
    How come after 12 years to make plans the ALP is practically policy free (free of policies that make sense I mean).
    Sorry day. To say sorry to people who were actually saved.
    Kyoto. A meaningless gesture.
    Climate change policy. Blind panic.
    The education revolution. Three words.
    The ideas summit. Three more words.
    Tax reform?
    Trashing Workchoices. What has changed (for the better?).


  4. the intellectual ideas of the Australian Right are now in danger of hardening into an ideological dogma, dominated by prefabricated and increasingly predictable soundbites

    I don’t know about this. My good friend Tim Wilson was on QandA proposing a workable gay-marriage model a few weeks ago. Where was Per Capita? After nearly two years what have they got to show? One research paper and one op-ed saying there is a gap in the market.


  5. I kind of find that BOTH the Australian Right and the Australian Left mostly say predictable things now. I mean, there are exceptions, such as Tim Wilson from Sinclair’s post and of course (don’t mean to flatter you Andrew) this blog, but chances are when I start reading a right wing columnist’s post I know pretty much what they will say and the same with a left wing columnist. The same goes for when I start reading an Alan Moran op-ed or one by Ross Gittens. But I suppose that is the whole point, in the end if you are pushing a particular idealogical perspective, and especially if you are organised into a think tank, then you will sell your message by repeating it over and over again, or at least repeating the same themes over and over again. I expect that it would be a sign of success if after a while people know what to expect when they read an op-ed by a person affiliated with Per Capita or the new left they are working to establish – It means that they are hammering home their key themes over and over again in the hope that they get heard and implemented. If people didn’t know what to expect, then I reckon it could be sign of failure.


  6. Rafe you are destined to spend your life in a cycle of perpetual anger (when the party you don’t vote for is in office) or perpetual disappointment (when the party you vote for is in office), all overlaid by perpetual cynicism.

    You must be a joy to live with, not.


  7. My response to Glover’s article was ‘Is that it!’ Surely Per Capita and the so called progressive Left can do better than this. For example, where is the evidence that ‘massive’ increases in spending on education will reduce poverty and increase per capita income? Poverty has many causes and spending significantly more on education can divert resources away from tackling other causes. Nor is more $$$ necessarily the right approach to reducing poverty. Many poor aboriginal communities have adequate schooling, but they can’t get the kids to attend.
    Increased public spending on education isn’t necessary and may be harmful to increasing per capita income. Most of the studies I have seen on the link between education spending and economic growth don’t distinguish public and private spending. They only show that more education spending, public or private, can contribute to economic growth. Public spending however requires taxation and taxation has ‘dead weight’ losses of at least 25 cents for every $ raised. These ‘dead weight’ losses can have a negative impact on economic growth, so a massive increase in public education spending could harm to per capita income, not increase it. If Per Capita wanted to make a truly original contribution to this debate they could commission some decent research into the impact of high taxation on Australia’s economic performance. There is very little good work in this area.

    PS. Spiros’ comment about John Howard and your response illustrates a big misunderstanding by many. John Howard wasn’t a liberal Prime Minister! He was a traditional big government conservative like all previous Liberal Party Prime Ministers. Can the Liberal Party be charged for false and misleading advertising? 🙂


  8. “[Howard] was a traditional big government conservative like all previous Liberal Party Prime Ministers.”

    Sure thing Johno, but Andrew reckons Howard was not merely a big government conservative, but a conservative social democrat. Andrew’s thesis is that Howard expanded social programs, especially those that were consistent with conservative social values, such as Family Tax Benefit B, which encourages mothers to stay at home rather than get (paid) work.

    Andrew’s is correct about Howard. if you define social democracy to be the same as social spending. I disagree. You can’t have social democracy without some measure of socialism, and there was none of that with Howard. He either did (Telstra)or tried to (Medibank Private) privatise every remaining government owned business, and he significantly tilted the balance of bargaining power away from workers towards bosses (Workchoices).

    Howard was no socialist and therefore was no social democrat. A commitment to a welfare state is not enough to make someone a socialist. If it is, then Bismarck was a socialist, which he was not. A commitment to big government is not enough to make someone a social democrat. If it is, then George W. Bush is a social democrat.


  9. Spiros – Social democracy isn’t socialism. Social democrats would I think would largely regard the relative merits of public versus private ownership as an empirical matter in the context of their goal of reducing inequalities. Ownership of banks, airlines, phone companies etc is irrelevant to this goal, and so selling them is defensible in the context of social democracy. There is a thread of Howard’s thinking that is concerned with inequality, and certainly his policies were strongly redistributive. It seems mostly motivated by concern for ‘social cohesion’, rather than an inherent dislike of inequality, but social democrats often talk about ‘social cohesion’ or ‘social inclusion’ as well.

    WorkChoices is the main Howard policy that does not fit with this interpretation, though in the end it was so gutted by the Coalition itself that in practical terms it was a minor exception.


  10. Not angry or disappointed Spiros, try smug. There is some quiet pleasure in seeing how the conditions and prospects of people around the world improve to the extent that the principles of classical liberalism are put into practice.


  11. Andrew, I agree that social democracy isn’t socialism, but social democrats don’t exclude on principle the idea that government ownership might be a good idea in some circumstances. As you say, it’s an empirical matter. Howard did exclude on principle that idea.

    “the conditions and prospects of people around the world improve to the extent that the principles of classical liberalism are put into practice.”

    Rafe, ROFLMAO and Duke of Wellington.


  12. I even found WorkChoices to not be a really “Liberal” policy, in that it used more regulation and big government as the major tool to tilt the balance of bargaining power away from workers towards bosses. I definetly don’t think it was social democratic either, but it could be viewed as anti-liberal in many senses – For example the various restrictions it put on what can and can’t be in an employment agreement. What I don’t understand is why so much of the Australian Right, of course not everybody, were such fans of Howard’s when he wasn’t a true manifestation of what they believe in. Was it just because he won elections and kept the Liberal Party in power? It’s sort of like the socialist part of the Australian Left being massive fans of Paul Keating -They weren’t!


  13. Rafe (3) asks the question “What has changed (for the better?)”
    Leaving aside more conjectural issues such as Howard’s failure in his last two terms to renew economic reform, minimal policy development, setting back genuine workplace reform – an issue which I sincerely hope does change is trust and honesty in government!

    Look at Howard’s appalling record – the introduction into our political lexicon of core and non-core promises; the “children overboard”episode; the evasive, shabby behaviour of the (then) government in the AWB affair; the flagrant exploitation of ‘fear’ to drive an issue; the failure to enforce even basic ministerial standards; the blatant use of staffers to defend ministerial action or inaction as the case may be (the so-called “they didn’t tell me” defence). I could go on but that is more than sufficient to make the case that dishonesty was an intrinsic component 0f the Howard government’s modus operandi!

    We are yet see how Rudd performs, but we can only continue to hope that there is still room for political morality in contemporary democratic politics!

    That, Rafe, would be a “change for the better”.


  14. The question was, what has changed for the better in industrial relations?
    The new Act of 700 pages and several hundred pages of regulations hardly counted as deregulation, but what is the Rudd government planning that will promote employment, choice, productivity and flexibility in workplace arrangements?


  15. If, unlike WorkChoices, the new IR laws don’t prescribe what can or can’t be in voluntary agreements between employers and employees, then they will certainly promote choice and flexibility, and probably promote employment and productivity.


  16. Rafe, I may have misinterpreted your wording – and for that I apologise – however that does not alter the thrust of my comments re Howard’s cynical political immorality.

    However, if we take a moment to examine Work Choices in the context of both economics and the then government’s credibility then again the evidence mounts against Howard.
    You would no doubt recall Howard (and ACCI) advertising the ‘ïndependent’ research carried out by Econtech stating that the scrapping of Work Choices will cause interest rates to increase by 1.4%,business investment to fall by $11 billion and Oz standard of living to fall from 8th to 14th in the world. The central feature of this statement is not the substantive part- which itself is highly problematic – but its blatant dishonesty. Econtech was asked to model the scrapping of ALL industrial relations reforms back to ’93 – not modelling the scrapping of Work Choices. Note that the Keating government in 1993 changed the IR system from centralised wage determination to one of enterprise bargaining. The actual conclusions from Econtech indicated that much of the economic benefits of labour market deregulation came from the introduction of enterprise bargaining not Work Choices. Also note that the report was commissioned by Peter Hendy of ACCI – ex Peter Reith staffer!
    Quite apart from the substantive aspects of this statement what concerned and dismayed me – and I’m sure many other people – was the blatant dishonesty demonstrated by Howard.

    I believe Howard’s capacity for (political) dishonesty is incontestable – but that in itself should not prevent sensible debate re the merits of his government’s policies.

    In light of that, my personal view is that, on balance, Work Choices probably increased employment levels, reduced labour costs and slowed productivity growth.


  17. and slowed productivity growth.

    You really don’t understand economics, do you Spiros. Of course productivity would look like it slowed all things being equal. Adding marginal workers would adversely effect the aggregate. However it would have no impact on the productivity of workers that were there before and after the new laws were introduced.


  18. Per Capita is a catchy little name. Perhaps they could look at trends in the real per capita cost of government (ie tax revenue) and recommend a price inquiry. After all if tax is the cost of civilisation we should be concerned that civilisation is becoming more expensive.


  19. G’day Andrew and friends,

    Enjoying following the conversation.

    Following on from Sinclair’s remark, I thought I’d alert you all to the five Per Capita papers published since last October:

    The Full-Cost Economics of Climate Change (Hetherington) July 08

    Union Futures (Coats) June 08

    Quality of Work and a New Politics of the Quality of Life (Coats) June 08

    Unlocking the Value of a Job (Hetherington) May 08

    Memo to a Progressive Prime Minister (Hetherington, Cooney) Nov 07


    Michael Cooney
    Policy Director,
    Per Capita


  20. I don’t know about Spiros, but JC’s view that regulatory changes in the workplace don’t impact “the productivity of workers that were there before and after the new laws were introduced” is a trifle mysterious – perhaps only understood and appreciated by JC.
    There are, of course, many factors affecting productivity growth – both macro and micro in nature – which makes it extremely difficult to isolate the contribution of one particular factor. That we have had much improved productivity performance in the 80s and 90s as a result of microeconomic reforms is not really in dispute, but any attempt to draw a direct link between particular reforms and economy-wide improvements tends to be a little problematic.

    However, there seems to be little doubt that deregulating the labour market – in particular, implementing enterprise bargaining in ’93 – was a significant factor. What is extremely doubtful is the existence of any real linkage between individual employment contracts which underpinned Work Choices and improvements in sectoral or national productivity!

    Reducing labour costs – yes.
    Reducing unemployment – probably yes
    Productivity enhancement – no evidence in support – probably a mitigating or negative factor.


  21. JC’s point is that putting on marginal (inexperienced and unskilled) workers is a positive, even though it lowers the average productivity of the workforce (other things being equal). This is a situation where the average is a meaningless figure. Indeed it is worse than meaningless because it can be used uncritically to imply the opposite of the reality.

    The total productivity of the nation is increased, the productivity of the newly employed workers is increased (from zero) and as they gain experience and skills on the job their productivity increases further.

    BTW Is anyone seriously prepared to argue that linking payment to performance will not tend to enhance productivity? Clearly the proportion of the workforce on AWAs is too small for productivity improvements due to AWAs to appear in aggregate figures, especially in view of the multitude of other factors that influence productivity.


  22. In the same way that the average productivity of the workforce is reduced by putting on marginal workers, the average income of a room full of people increases when Bill Gates walks in the door!


  23. To be fair, I was having a dig at JC’s rather cumbersome phraseology in endeavouring to explain his concept of productivity. Actually , productivity is a far more complex concept than the simplistic construct JC depicted – both in causes and measurements. (I did allude to some of these above.)
    Re your statement that linking payment to performance can only enhance productivity. Intuitively you might think that would be the case but the literature suggests that it is not necessarily so.
    Having personally spent close to 15 years as a consultant installing performance management systems in the mining and chemical industries (and occasionally in government departments) I can assure you such a simple direct linkage does not exist. Unfortunately, most performance payment systems are not effective – with the exception of piece-work and profit sharing arrangements.
    A more effective “incentive”system seem to be those associated with good performance measurement tied into goal-setting and review arrangements. Not particularly exciting (or faddish) but nevertheless effective.


  24. Per Capita won’t make an impact until it is confident enough to question the “smelly little orthodoxies” of its own side. For example, I’ll believe it is useful when it starts prescribing interventions to reduce educational inequality that the teachers’ unions won’t like (eg good teachers are simultaneously awarded a large pay rise and compulsorily posted to disadvantaged schools). Though ennui is right about the harm done by naive performance pay systems.

    I disagree with most of what the CIS produces, but I do think its independence is its best feature and really raises the level of argument. The contrast in quality of output with, say, the IPA is very clear.


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