Catallaxy Files

PETERSON: Well I think it’s necessary to contrast what’s happened in the interim. I don’t see how we can talk about that without comparing it with the interim period. Now you talked earlier about the fact that during the last fifty years we had squandered some of our inheritance of freedom, and I believe during the last fifty years we really have improved our freedom. I spent over half that time working for one of the world’s largest industrial companies, the Dupont Company, deeply involved with the launching of new ventures; and got to know the free enterprise system well, and have a very healthy respect for it. But during that interval, and particularly during the last few years when I have been more involved with government and with environmental matters, I have become convinced that our freedom was improved when the people are allowed to add to their freedom in the marketplace, the freedom to vote with their ballots in the polling place, to put some restraints on the excesses of the marketplace, particularly when you’re concerned with such things as the long-term impact on our health from the pollution of our environment, the introduction of carcinogenic materials, or the radiation of our people with nuclear products.

FRIEDMAN: What about putting some restraints on the excesses of government. Hasn’t that become an ever more serious problem? How is it that a government of the people, supposedly, does things which a very large fraction of the people would really prefer not to have done, such as overtax them, over govern them, over regulate them. I think you’re looking, again, at one side and not the other. And, of course, I agree we have to look at what’s happened in the interim. We’re better off than we were fifty years ago. Never would deny that. But we stand on the shoulders of the people that went before us, and we have to look at how much they achieved from where they started, and that was the period in which you had the tremendous influx of immigrants from abroad, millions and millions and millions of them, when you opened up a new continent, when you had achievements.

McKENZIE: Milton, are you saying, though, that there’s any sense, in which you’d rather go back to those circumstances where there are no regulations of factory work, no hours, limitations of hours worked. Do you want to return to that or do you say that was a stepping stone to where we are now?

FRIEDMAN: It depends on what you mean by circumstances. I don’t want to have to go back to using a horse and buggy instead of an automobile, but I would prefer to go back to the kinds of governmental regulations, or absence of regulations, the greater degree of freedom which was given to individuals to pursue one activity or another, which prevailed then, than which prevails now.

Julia Gillard has been talking about over-spending on infrastructure:

She said state and territory leaders must join Tasmania and the ACT in signing up to a national energy retail law to give consumers greater choice and information on household energy plans.

The states must also revise costly plans to build unnecessary “poles and wires” infrastructure, or the federal government will give market watchdogs more regulatory powers.

It sounds to me that Gillard is referring to something called the Averch-Johnson effect.

The Averch–Johnson effect is produced when fair rate of return regulation encourages a firm to invest more than is consistent with the minimization of its costs. This can happen when the allowed rate of return exceeds the cost of capital, since the difference between the two represents pure profit. Detailed descriptions of actual regulatory processes may be useful in suggesting guides for action, since actual outcomes depend as much on political and bureaucratic necessity as they do on economic analysis and ‘rational’ benefit–cost estimates.

I’m not sure that over-investment is happening but I don’t believe that more regulation is the solution.

If the government is concerned about power prices they should look to their own propaganda.

What the PM is talking about relates to the network costs. What Alan is talking about below relates to the Wholesale costs. I don’t want to say that reforms cannot be pursued in those areas, but it is the carbon tax and also ‘Retail, customer service and programs for energy efficiency and renewables’ that should be considered to generate cost savings – especially the programs for energy efficiency and renewables.

Stephen Koukoulas relates a great anecdote:

When I was working in Treasury a few years ago, a colleague told the story of his official visit to China. He was speaking to his Chinese counterpart in the economic forecasting section and was marvelling at the accuracy of the economic forecasts of the Chinese government. He said to his Chinese friend, “your forecasts are remarkably accurate. For GDP and inflation you are never out by more than 0.1 or 0.2 percentage points. Quite often, you are spot on. How do you do it?”

Without an overt hint of discomfort or irony, the Chinese economist answered: “John – not only do we make the forecasts, but we also compile the data.”

Paul Kelly has a good piece in The Australian.

The truth is that progressive political values are being transformed. Once progressives would have endorsed Voltaire (defending to the death your right to say it) but no longer. This value is subjugated to the new gospel that your speech must reflect progressive values and beliefs as part of legislating desired social behaviour and respect for human rights. Abbott’s argument that Australians want freedom to be “obnoxious and objectionable” violates this tenet yet is closer to popular sentiment.
…
It is true that Gillard Labor has been subject to many unjustified media attacks. Exactly the same can be said about John Howard in office. The difference lies in the response: Labor seems prepared to retaliate with new laws.

I’m not convinced that the Gillard government has been subject to unjustified media attacks and Kelly doesn’t suggest an examples but the principle remains correct. The ALP government intend to use the power of the state to advance their own political agenda to the exclusion of everything else. They cannot or do not differentiate between their interest and the national interest.

Via Twitter I got directed to a site that purports to watch the deniers. It turns out that climate change deniers are prone to believe in vast conspiracy theories and are anti-Semites to boot.

So how do we know? Well it turns out that David Evans has written a paper where he relates the origin of banking back to medieval goldsmiths. Anyone who has done first year economics knows the story.* So what does our denialists are conspiracy theorists correspondent say?

In Evans reasoning is that “goldsmiths” from the medieval period – let’s be frank he is clearly talking about Jews – founded a “paper aristocracy” that secretly rules the globe.

Gold.

Smith.

Got it?

Do I really need to spell it out?

Actually, yes – you do have to spell it out.

That sort of thing actually undermines the opening disclaimer:

Statement by WtD: let me state I do not equate climate change denial with holocaust denial. The term “denier” is used to refer to one who denies a consensus position in science. This includes climate change, evolution and Einstein’s Special Theory of Relativity. All three scientific theories continue to elicit opposition.

I don’t believe that; the term ‘denier’ is an explicit smear. One of many smears and lies that have ultimately undermined the alarmist case.

* See also Ludwig von Mises’ The Theory of Money and Credit.

I have  the following piece in the Australian today.  Gillard is attempting to blame the state government owners of poles and wires for electricity price increases and in doing so is even prepared to renege on a lifetime of hostility to private ownership.   Odd that she did not think of this when Labor was running NSW and Queensland.  A hypocrite plumbing new depths.
However in raising the issue she opens the way for further genuine  reform and privatisation.  Here is the piece.

IN an attempt to deflect blame for electricity price increases from the carbon tax, Julia Gillard has drawn attention to the high cost of state-owned enterprises’ poles and wires businesses and associated profiteering.

NSW households have seen their electricity prices rise by 18 per cent both this year and last. Other states have seen comparable increases.

Half of this year’s increase was due to the carbon tax and renewable energy requirements, some of which were introduced by former state ALP governments. The other causes were those identified by the Prime Minister: increased charges for the price-regulated poles and wires networks.

All governments are fearful of copping the blame for electricity price increases. State governments in Queensland and NSW are also conscious of being particularly vulnerable to a share of this criticism since they own their states’ network businesses. Gillard has just turned up the heat on them.

Because they face no competition, government-owned monopolies such as the networks businesses are highly susceptible to cost padding. Prices in the NSW and Queensland state-owned electricity supply networks compare unfavourably with those in the Victorian and South Australian private systems.

Distortion through government ownership and generous decisions by price regulators on monopoly networks is compounded by regulation of prices at the retail level. Direct government control of retail prices amplifies concerns of a political backwash from electricity price increases.

In NSW and Queensland 50-60 per cent of households are on government-regulated retail tariffs. South Australia also has regulation of household electricity prices but at a relatively high level. In Victoria, retail prices are totally unregulated.

Recently Queensland sought to update its government-regulated household tariffs, a process that brought the Newman government into conflict with the state’s largest electricity retailer, Origin Energy.

To fulfil election commitments that would keep this year’s price increases on these tariffs to a level attributable to the carbon tax — about 11 per cent — the government provided $60 million compensation to retailers.

Most electricity retailers considered this to be inadequate and, while operating within the letter of the law, Origin initially announced higher increases for customers on similar tariffs to those that are regulated.

The government saw this as a breach of faith and launched a media blitz critical of Origin, which quickly revised its tariffs.

From the vantage point of his state’s highly competitive and unregulated market, Victorian Energy Minister Michael O’Brien was recently moved to lecture other state ministers against price caps, which he said “keep costs down temporarily but don’t promote efficient investment” and bring an inevitable catch-up.

Queensland and NSW have not seen the robust competition experienced by Victoria, but they are open markets with a dozen different retailers. Governments can facilitate competition in them by providing price comparators and Queensland already has a “ready reckoner” that enables easy assessment of different firms’ offerings.

However, putting the spotlight on alternative retail tariffs, while potentially valuable, can only work if competition is allowed to do its price-reducing job.

And if the poles and wires part of the supply system, which accounts for half of the costs of electricity supply, is not well managed, these costs will swamp any that might become available from more intensive retail competition.

In contrasting the cost performance of state government-owned businesses with those of their private sector counterparts, the Prime Minister has abandoned a lifelong antipathy to privatisation.

Her “road to Damascus” conversion might be self-serving in seeking to draw attention away from the carbon tax, but it also offers the prospect of bipartisan support for full privatisation of the electricity supply industry.

This green light to the governments of NSW, Queensland and WA should be grasped. Privatisation won’t counterbalance the cost impositions from the carbon tax but it will help.

Private shareholders, whether in competitive supply industries or in monopoly networks, place far greater downward pressure on costs than government shareholders, whether or not price regulation is in place.

Julia Gillard:

When the government priced carbon, we forecast an electricity price impact on consumers of around ten per cent – a forecast which has now become reality.

Treasury:

The carbon price leads to an average increase in household electricity prices of 10 per cent over
the first five years of the scheme.

This is day 39 of 1825 days and already we’ve hit the 10 per cent Treasury forecast.

A SEX worker has won an anti-discrimination case against motel owners in a Queensland mining town who refused to rent her a room.

Okay – refusing to rent someone a room on the basis of their profession is discrimination. But I would have thought that subletting a room would be violation of contract. So the motel owners rent a room to person A who in turn effectively rents it to her clients.* There would be nothing wrong with the individual managing her business from the room, i.e. calling clients and making appointments etc., but actually conducting her business there can be thought of as subletting.

If an individual hired a room and set up a convenience store the owners might be annoyed too.

If the owners are happy to sublet that’s fine, but many property owners place restrictions on subletting and I don’t think that is unreasonable or discriminatory.

* Then there are trespass laws, many hotels have rules against visitors at particular hours.
(HT: Andrew Bolt)

Update: Gab points us to the actual judgement.

The Anti-Defamation League (ADL) is the pre-eminent group in the United States for protecting the rights of Jews and to counter misinformation such as the denial of the Holocaust.

Yet the ADL works within the free-speech laws of the US. It does not have a campaign to change or repeal the First Amendment of the US Constitution. It knows that free speech is vital for the protection of minority groups such as Jews.

The ADL is well resourced and highly influential. It works through education and persuasion. It fights anti-Semitism effectively through a range of methods, while respecting the free-speech of its critics (after all, there are more Holocaust-denial websites in the US than in Australia).

That is the model Michael Danby should be advocating in Australia, not using the racial-vilification laws to silence Holocaust-deniers.