Confusing polling on tax

~ Andrew Norton ~ 1 Comment

The latest tax poll from Essential Research, published on Pollytics blog, shows again that question wording effects make opinions on tax and spend hard to read.

In this latest poll, a question which did mention bigger tax cuts for high than low income earners, but did not mention the deficit or any spending trade-offs, found that 60% of respondents approved of the 1 July tax cuts. 23% disapproved.

The disapproval rate is only half the 47% of Newspoll respondents in early May who thought the tax cuts should be cancelled to reduce the deficit.

I don’t think that opinion could have changed that much in two and a bit months. Rather, question wording can highlight the otherwise not top-of-mind link between the size of the defict and the tax cuts.

Some strange human capital economics

~ Andrew Norton ~ 18 Comments

Australian governments typically offer human capital or ‘equity’ justifications for public investment in higher education. So what should we make of claims for tuition subsidy that would reduce the value of Australia’s human capital?

In a follow-up Age story to the weekend article about full fees for TAFE students who already have higher qualifications, the paper reports that:

Malcolm King, who directed the program from 2000 to 2004, said most degree-educated students could not afford to pay another $8000 a year to study at TAFE.

Many of the students who enrolled in the creative programs formed part of Melbourne’s “cultural milieu”, fuelling the writing, film, media and advertising industries, he said.

“RMIT is freaky in that it always attracted high-calibre students like ex-doctors and lawyers who produced very fine work and have had a huge impact on cultural life in Melbourne,” Mr King said. [emphasis added]

So what Mr King is arguing is that we should offer public subsidy to divert people from an occupation of serious shortage (doctors) to an occupation (creative writing) in which supply always vastly exceeds demand – in the process wasting the $150K plus that taxpayers will already have spent training a doctor.

King has unwittingly highlighted another argument in favour of the Victorian government’s reforms.

When should education subsidies stop?

~ Andrew Norton ~ 15 Comments

In yesterday’s Age, Sarah Blackman, who already has university degrees in arts and education, is reported as complaining that she will have to pay full fees for an RMIT course on writing and editing (this one, I think). This makes it about ten times more expensive than a subsidised place.

The requirement to pay full fees is, as I understand, part of the Victorian government’s reforms to their vocational education system. They have lifted quantity constraints on places available to students taking initial or upgraded qualifications, but are not subsidising people taking lower qualifications than those they have already.

Higher education also has restraints on subsidies. Sometimes these relate, like Victoria, to the student: limits on the number of years of subsidy. Sometimes it relates to the course, with most postgraduate coursework degrees being offered on a full-fee basis only.

In principle, these seem like fair ways to ration limited resources. In Victoria, the savings from not subsidising a would-be triple-dipper like Ms Blackman are being redirected to people who have had far fewer opportunities. People with postgraduate qualifications have typically already enjoyed significant subsidy and are in a better position to finance further study.
Continue reading “When should education subsidies stop?” →

Has the High Court imposed spending constraint on the Commonwealth?

~ Andrew Norton ~ 11 Comments

In the Fairfax broadsheets this morning, constitutional law academic George Williams gives his reading of the High Court’s judgment in Pape v Commissioner of Taxation and the Commonwealth of Australia.

As readers may recall, earlier in the year UNE academic Bryan Pape challenged the constitutional validity of the government’s tax bonus payments. Unlike the whinging cultural offspring of the welfare state who missed out on it, Pape was among other things seeking an injunction stopping the ATO paying him the money.

The High Court decided against him, but as is common in constitutional cases there were many different arguments made. Williams argues that though the Commonwealth persuaded the Court on enough of these to get a verdict in its favour, comments made by the judges on their other arguments raise questions about the validity of other Commonwealth spending.

The issue here is that the Commonwealth has long spent money on things for which it has no legislative power under the Constitution. Various additional spending powers have been read into the Constitution as relating to the executive power of the Commonwealth or an implied ‘nationhood’ power. As Justice Mason put it in 1975: Continue reading “Has the High Court imposed spending constraint on the Commonwealth?” →

Off the happy planet

~ Andrew Norton ~ 10 Comments

Yesterday the SMH gave some publicity to the latest version of the so-called Happy Planet Index, another of those dubious indexes that combines incommensurable things – in this case a nation’s life expectancy, life satisfaction, and ‘ecological footprint’ – into a single number.

According to the SMH article,

The results turn our idea of progress on its head,” the report said.

“It shows that a good life is possible without costing the earth.”

Alas, not only is the methodology dubious but the results don’t support the conclusion reached. They show how hard it is to achieve life satisfaction on low levels of consumption (as measured by the ‘ecological footprint’). Only a dozen of the top 50 ranked countries achieve ‘normal’ 7+ (out of 10) life satisfaction ratings. And all but three of these twelve are in Latin America, which repeatedly scores much better on life satisfaction and happiness scores than other places with comparable economic, political and social development. You can be poor and happy, but only in one part of the world.

Several countries in the top 50, including Bangladesh, Nepal, Armenia and Yemen, score below 5.5, suggesting that much of the population in these countries is very unhappy. That the ‘planet’ might be happy at the low levels of consumption in these places is not likely to be much consolation.
—
Will Wilkinson isn’t impressed either.

Do governments assume citizen rationality and self-control?

~ Andrew Norton ~ 15 Comments

The latest Per Capita paper summarises the research on various cognitive biases (loss aversion, endowment effect, etc) and makes suggestions for policymakers about ‘choice architecture’ that helps people make better, less irrational, decisions. For example, default options of sensible choices where people have to opt out to avoid them preserves freedom to choose while encouraging decisions that will benefit most people.

It’s the kind of argument Cass Sunstein has been making for years, and on which he co-wrote with Richard Thaler a widely-cited 2008 book called Nudge: Improving Decisions About Health, Wealth and Happiness (which is strangely not cited in Jack Fuller’s Per Capita paper; if Sunstein did not coin ‘choice architecture’ he’s certainly its main populariser).

I don’t doubt that these cognitive biases exist, or that their negative effects can be reduced by ‘choice architecture’. But I do want to take issue with another example of the annoying rhetorical strategy of setting up straw man opponents:
Continue reading “Do governments assume citizen rationality and self-control?” →

Political xenophobia

~ Andrew Norton ~ 9 Comments

The SMH this weekend devoted a large article in its news review section to profiling Chinese businessman (but Australian citizen) Chau Chak Wing, Australia’s largest ‘foreign’ donor to our political parties over the last decade (not online, but there was also this news story).

They claim that ‘unease about foreign donations is growing’, but that legislation to ban them is stalled in the Senate.

I’ve recently been looking at this issue from the perspective of NGOs, because this bill would also ban foreign-sourced donations to NGOs if the money was to finance political expenditure such as expressing views on candidates, parties, or election issues. My draft paper says:

Most major social, environmental and economic reforms and Australia over the last few decades are local versions of changes also occurring in other Western countries. Why assume that foreigners seeking to seed or support political activity in Australia will detract from Australian democracy, rather than adding interesting or useful ideas to local debate? ‘Made in Australia’ is no more a guarantee of quality in politics than in any other field.

If it passes, this legislation could make things very difficult for international NGOs like Greenpeace or the World Wildlife Fund.
Continue reading “Political xenophobia” →

Does winning the lottery make you more happy, or less stressed?

~ Andrew Norton ~ 11 Comments

This week’s $100 million lottery prize prompted ABC radio to ring me about the research finding that winning the lottery doesn’t make you happier. I declined the interview after discovering that I would be talking live to the nation’s insomniacs at 4.20am next Sunday morning (though did suggest a solution to this problem – find an overseas interviewee in a day time zone).

Though one early paper – which is cited in books on subjective well-being published up until a few years ago – did find some evidence for negative effects of lottery wins, it was never an especially strong finding. Winners in the sample experienced lesser ‘mundane’ pleasures than members of a control group, but their present ‘general happiness’ was higher. The authors of this paper also stressed that their survey was at a single point in time, and could not do genuine before and after tests of happiness changes.

This later paper by Andrew Oswald was able to use the British Household Panel Survey to do a genuine before and after examination of lottery winners. It found that
Continue reading “Does winning the lottery make you more happy, or less stressed?” →

Are foreign students at high risk of death?

~ Andrew Norton ~ 6 Comments

I’d never seen any data on the deaths of international students while in Australia, so I was interested in this story in The Age this morning reporting 54 deaths in the year to November 2008 (though annoyed at the beat-up elements – claiming the information was ‘suppressed’ by the coroner, when there is no evidence of anything other than reluctance to publish possibly unreliable data).

Obviously 54 deaths is 54 too many, but so far as I can work out this a death rate below that of the general population. Though there are statistical problems in working out the base population for overseas students (because the number of overseas students who will be in Australia at some time during a year will give a too-high number, due to short courses, mid-year starts and finishes etc), my estimate is that this gives a death rate of about .02%.

For a local comparison, I looked at deaths of 20-somethings in Australia. That works out at around .04% of the base population, or around double the death rate of overseas students. On the other hand, perhaps the relevant comparison group is Australian students – if we assume that the local death rate is increased by including the kinds of risk-taking and underlying illness that is under-represented in the student population. (The death rate of Australian students is not ‘suppressed’, it is just not recorded.)

Indians appear to be over-represented among the deaths, so perhaps another comparison point is the death rate of young Indians of similar backgrounds in India. I would have thought that the risk of death from accidents or disease was much lower here.

4 July update: Coroner to improve statistics on international student deaths.