Author: Andrew Norton

Can economic growth reduce life satisfaction?

~ Andrew Norton ~ 1 Comment

Last week Andrew Leigh linked to this paper by Angus Deaton which, using poll data from 132 countries, came up with findings contrary to previous subjective well-being research:

Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier… (emphasis added)

I’m not as convinced as Andrew that this is a good paper. The ‘life satisfaction’ question doesn’t actually directly ask whether people are satisfied with their lives, but instead asks them to imagine a ladder where the bottom represents the ‘worst possible life for you’ and the top the ‘best possible life for you’. The respondents are then asked where on the ladder they feel they stand at the present time. It would be quite possible to be dissatisfied with your life and to think that it won’t get any better, so low on a conventional life satisfaction rating but high on the imaginary ladder (personally, I’d put myself higher on the ladder than I would rate myself for life satisfaction). This could possibly explain why rich countries do well in the survey, since when things are already going well there is less scope for a better life.

And perhaps someone can explain the statistics to me, but I can’t see that Deaton has the data to show that ‘recent economic growth’ makes people unhappier. Continue reading “Can economic growth reduce life satisfaction?” →

How effective is The Climate Institute?

~ Andrew Norton ~ 12 Comments

Australia’s richest think-tank, The Climate Institute, has been carefully following the model set by board member Clive Hamilton’s The Australia Institute. It feeds the media’s love of public opinion surveys, even targeting the current election media frenzy with polling in marginal seats on climate change. It produces attention-grabbing semi-gimmick research, like their latest report which calculates superannuation costs if action on climate change is delayed (a male of my age will be $1,165.46 a year worse off in retirement, it says with all the spurious precision of economic modelling). Despite Clive’s strict insistence on leisure, both his think-tanks take advantage of slow news weekends to release reports on Sundays.

Yet despite all this the Climate Institute’s profile seems modest. The superannuation report had a bit of media coverage, but nothing like the masses of publicity the Australia Institute can often pull, particularly in the Fairfax papers and on the ABC. The Climate Institute is a new think-tank, of course, and it will take time to build a reputation. But I doubt it will ever do as well as The Australia Institute.

The basic problem is summed up in its statement of purpose:

Established in late 2005, The Climate Institute has a five-year goal of raising public awareness and debate about the dangers to Australia of global warming and to motivate the country to take positive action.

Continue reading “How effective is The Climate Institute?” →

The public’s mixed views on free trade

~ Andrew Norton ~ 69 Comments

The latest Lowy Institute poll on Australia and the world shows some now familiar patterns of belief on free trade. As I argued in Policy some years ago, while the Australian public remains protectionist, this does not mean they fail completely to understand the arguments for free trade.

For example, 72% of respondents to Lowy’s poll agreed that freer trade ‘leads to lower prices and more product choices for consumers’. 67% agreed that freer trade ‘helps to increase prosperity, both in Australia and other parts of the world’. 84% agree that it ‘enables Australian business to open new markets for Australian products’. On all these propositions, public and expert opinion is close. There is even majority support for the social and political benefits of free trade, with 64% agreeing that it ‘makes the world more stable by putting people from different countries in contact with each other’.

Yet when it comes to a specific question on a free trade agreement with China, only 38% say that on balance such an agreement would be good. Why? The answers to some of the other questions on free trade give us some clues. 68% of Lowy’s respondents believe that freer trade ‘puts Australia at a disadvantage because of our high labour and environmental standards’. 50% agree that freer trade ‘costs more Australian jobs than it creates’ and that it ‘leads to more economic and social inequality’. 42% think that freer trade ‘leads to lower quality jobs in Australia’.

People are more in favour (47%) of a free trade agreement with Japan than China. I think this parallels initial reasonably strong support for a US-Australia FTA – that Japan, like the US, is not seen a low-cost manufacturing competitor (these days ‘Made in Japan’ is a mark of quality; it used to mean what ‘Made in China’ means today, ie cheap). Support for FTAs, though short of majorities, is always well above questions that assume unilateral tariff cuts – the idea that Australia is getting something in return helps increase public support – which is probably why the largest favourable response in the Lowy survey is on opening markets for Australian business.

Many economists think that even unilateral tariff cuts are better than maintaining protection. But to carry public opinon, reducing protection through international agreements is the way to go.

Divorce politics

~ Andrew Norton ~ 21 Comments

Yesterday’s ABS divorce statistics for 2006 provide more evidence for our discussion of familist politics.

On the one hand, there is again no evidence that industrial relations changes are anti-family. The absolute number of divorces fell for the fifth year in a row. The ABS’s ‘crude divorce rate’, the number of divorces per 1,000 persons, as it mathematically must with a rising population, also fell. This is not a very good indicator of the stability of marriage as an institution, since it could reflect fewer people getting married as much as fewer people getting divorced. But comparing the absolute number of divorces with the absolute number of married persons recorded in the census shows the same trend. 1.45% of marriages were dissolved in 2001, compared to 1.3% in 2006 (though there had been an upward spike in 2001; the rate was 1.4% in 1996).

On the other hand, could perhaps a declining divorce rate mean that the massive family handouts of the Howard government are having a positive effect? Though the proportion of divorces involving children has been stable since 2002 on 50%, it is down from 54% in 1996, and the overall drop in divorces means fewer kids are having their lives turned upside down by divorce. There were 5,000 fewer kids whose parents divorced in 2006 compared to 2001. It is of course very hard to isolate the effects of family payments, but there is no new evidence against family spending in these numbers.

Or perhaps, as is suggested in the SMH, these improving numbers are just a ‘blip’. The average duration of marriage before divorce is rising, but that may not affect the proportion of marriages which eventually break up. Closer examination of the divorce statistics shows that divorce rates are dropping for those aged 44 and below, while rising for those aged 44 and above. But at least this means fewer couples with children still in the home are ending their marriages.

The starstruck broadsheet press

~ Andrew Norton ~ 77 Comments

It’s election time, the season of celebrities and worthies adding their names to open letters and political advertising. A range of them have put their names on an ad designed to pressure Environment Minister Malcolm Turnbull to change his mind on Gunns’ Tasmanian pulp mill. And why wouldn’t they? When it comes to this kind of thing the Fairfax press especially is as starstruck as Who magazine’s celebrity-obsessed readers, with The Age giving their opinions prominent front page coverage this morning. According to The Age,

Among the signatories are film director Phillip Noyce, actors Bryan Brown and Rebecca Gibney, playwright David Williamson, celebrity chef Kylie Kwong, Fairfax Media deputy chairman Mark Burrows, Rowena Danziger, a member of the Publishing and Broadcasting board, and Leo Schofield, a former director of the Sydney Festival.

But why should we care what any of these people think about this issue, or indeed on anything else except on things related to their narrow area of achievement or expertise (and perhaps not even that)? Would-be serious papers like The Age should show far more scepticism than they do.

The only signed advertisement I have liked appeared in the SMH a month ago. It was a full-page memorial for Ken Dyers, leader of the wacky Kenja cult, who killed himself rather than face (yet more) charges of sexually assaulting under-age girls. No need for too many tears in this case, I expect. But the signatories were, I thought, unwittingly but amusingly subversive of the whole signed ad phenomenon. Take these examples: Simon Winn, qualified carpenter; Linda Beachley, receptionist; Stevana Geurreiro, Dip, Make-up Artistry; Shane Grant, baker; Chloe Pape, hair stylist; David Pilkington, refrigeration tech; Eoin McGettrick, locksmith. All good, if unintentional, satire on the idea that occupations confer authority on opinion.

Are voters tiring of tax and spend?

~ Andrew Norton ~ 7 Comments

Three years ago I wrote a paper on a reversal in 30 years of public resistance to higher taxation, which I argued was largely the result of prosperity. When household budgets are less tight, I suggested, people want to buy more or better goods and services. But for services that are largely provided by government, such as health and education, it is hard to purchase better services without the large financial leap involved in going private. A small increase in taxes for the government to improve services is, for these people, the cheaper option. This was why the polls showed trade-off questions between reducing taxes and spending more on services trending in favour of services, and why surveys assuming there was a surplus found large majorities in favour of extra spending.

For example, in January 2004 a Newspoll asked

If the federal government has a large surplus, should this be spent all or mainly on health and education, on personal tax cuts, or both?

72% of respondents preferred the surplus to be spent all or mainly on health and education, 9% wanted tax cuts, and 16% wanted it spent on both equally.

In the last few months, there are signs that public opinion is shifting away from tax and spend. In April, an ACNielsen poll found that two-thirds wanted income tax cuts to be included in the May Budget. About a week later Newspoll came to a very similar result.

Neither, however, directly asked about a trade-off with services, though support for tax cuts dropped to 36% when respondents were told that tax cuts might push interest rates up.

Today’s Galaxy poll reported in the News Ltd tabloids again finds the two-thirds in favour of tax cuts previously recorded by ACNielsen and Newspoll. Continue reading “Are voters tiring of tax and spend?” →

What is a ‘conflict of interest’?

~ Andrew Norton ~ 11 Comments

Twice in recent months I have become involved in blogosphere debates about claimed conflicts of interest. First I disputed James Farrell’s argument that ABC TV news needed to disclose the fact that finance presenter Alan Kohler also operates a financial advice newsletter, which in turn is partly financed by a firm that had links with companies that Kohler reported on for the ABC. Then this week I questioned Andrew Leigh’s suggestion that Westpac CEO Gail Kelly had a conflict of interest when she was reported suggesting that the RBA would not increase interest rates again this year. According to Andrew L:

nowhere does the journalist mention the key commercial conflict: people who expect a rate rise will be less likely to buy a Westpac variable rate mortgage.

The basic problem behind the concept ‘conflict of interest’ is that the different roles people play can have different interests attached to them. There is said to be a ‘conflict of interest’ where a personal interest might be put ahead of the interests of those relying on the person’s words or actions.

The ‘interests’ in conflict often have different definitions. The personal interest seems almost always, as it was in the two blog cases, to be related to financial or material gain, for the individual, or those associated with the individual. Other personal interests don’t seem to classed as potential conflicts, even if they could be seen to be bad for other reasons. If someone offers commentary on interest rates because they like getting their name mentioned in the media, that isn’t going to be seen as a conflict of interest, despite that person’s interest in publicity.

The interests with which the personal financial interest is conflicting are far more varied. Continue reading “What is a ‘conflict of interest’?” →

The incoherent policies of the National Union of Students

~ Andrew Norton ~ 30 Comments

The National Union of Students rallied today for its usual assortment of not entirely coherent causes:

Remove Full Fee entry places,
Reduce exorbitant HECS increases,
Relieve student poverty and
Repeal VSU

That’s right, students should not be allowed to pay for their tuition (remove full-fee places) or should pay less (reduce HECS), but they should be required to pay for services they do not want, such as political rallies attracting a few hundred people (repeal VSU).

I’m not sure that NUS fully understands the implications of their no full-fee places policy. When they used an AFR story earlier in the week about increasing numbers of full-fee students to call for the phasing out full-fee places, they probably did not realise that many of those places were at private higher education providers, dozens of which since 2005 have acquired access to the FEE-HELP income-contingent loan scheme. So does NUS now agree that private higher education should be funded the same way as public higher education? Their comrades at the Australian Education Union might have something to say about the precedent that would set.

NUS may find that rather more students are showing an interest in full-fee place than show an interest in NUS (the media has been slack on this one – NUS claims to represent students, but how many students have voluntarily joined a student union?). Continue reading “The incoherent policies of the National Union of Students” →

Interest rates past and future

~ Andrew Norton ~ 5 Comments

Last week ACNielsen reported on the public’s retrospective view of interest rates, finding that 49% of its respondents thought interest rates would have been the same had Labor won, 31% thought rates would have been higher, 7% lower, and 13% couldn’t say. Today’s Newspoll results report on a prospective question:

John Howard or Kevin Rudd – who do you think is most capable of keeping interest rates lower?

The wording is a bit odd, lower than what? But again the biggest single group are those who can’t or won’t choose, 39% (22% neither + 17% uncommitted), followed by Howard on 34% and Rudd on 27%. Clearly Rudd’s 27% is a big improvement for Labor on the 7% who couldn’t imagine Mark Latham keeping interest rates down, but notably less than half of people (48%) intending to vote Labor were prepared to back Rudd on this issue. There is no significant Ruddmania here; with interest rates lower than they are now Kim Beazley scored 23% in a Newspoll in June 2006 (though the question was different; asking which party would better handle interest rates). It looks like most of the people who previously backed the Coalition in Newspoll surveys are heading to the undecided column rather than to Labor.

Noting the bad results on the interest rate survey, a slip in Coalition support on the which party is better to handle the economy question, and a decline in the PM’s satisfaction levels, Dennis Shanahan concluded that ‘the latest interest rate rise appears to have dented the Coalition’s economic credentials’.
Continue reading “Interest rates past and future” →

Do private schools save taxpayers $4.9 billion a year?

~ Andrew Norton ~ 68 Comments

As reported in today’s Australian, the Association of Independent Schools Victoria today released research showing that private schools saved taxpayers $4.9 billion in 2004-05, reflecting the lower subsidies paid on behalf of students at private schools compared to students at government schools. That’s very similar to a claim I made in a post last year.

Having done a lot of work on ‘big government’ since, I am no longer sure that this is quite the way to look at it. This is because while technically all students at private schools are entitled to more heavily subsidised places at government schools, we cannot assume that all students would switch even if private schools received no government money at all. Before state aid for private schools was introduced in the first half of the 1960s, nearly a quarter of students were in private – mostly Catholic – schools. It was trending down, and the Catholic schools were facing serious problems as the supply of brothers and nuns prepared to teach for a pittance shrank. But we cannot assume private school enrolments would have inexorably dropped without state aid. Not all private schools at the time even took the money straight away.

Nearly half a century on, in a much more affluent society, in which education is of greater significance for a child’s future, there would surely be considerable demand for private schools even without any subsidy. Some private schools recieve subsidies that are a fairly small percentage of government school subsidies in any case, and a smaller still percentage of total revenue per student.

A more accurate way of expressing the point would be that to fund private schools on the same basis as government schools would in 2004-05 have cost taxpayers another $4.9 billion, which is why I do not support a standard Friedmanesque flat voucher scheme. Sometimes there are tensions between introducing markets and keeping taxes down.