Conspicuous Consumption, Conspicuous Health, and Optimal Taxation

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Is there a health-status race in Australia whereby people get joy from being healthier and fitter than others? And what are the general implications for public policy if there is? My PhD student Redzo Mujcic and myself brought out a new working paper recently on how a health status race can be good for the public purse and furthermore reduces the case for taxing work in order to give people an incentive to take more leisure time.

The abstract:

We present a simple model of status-seeking over multiple socioeconomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal income taxation, where we show an increase in concerns for conspicuous health to have an opposite effect on the marginal tax rate, compared to an increase in concerns for conspicuous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the time-era of respondents), we find evidence of a comparison health effect.

Monday Quickie – Just Like Old Times Already

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Seems Tony Abbott finally headed off to Indonesia today to have some talks. Not about the boats – he wants the focus to be on building a constructive relationship and of course building trade opportunities. Well good luck with that one mate.

For the past three years you’ve spent most Sunday arvos holding boozed up barbies in the back yard with your boof-head mates and the main topic of conversation has been your slack-arsed wog neighbours and how they’ve done nothing about the bloody fence – it’s a f’k’n disgrace – but one day you’re gunna change it. And you’ve paid sod all attention to whether they could hear you or not. Well they could. And they didn’t much like it.

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Design as a counter-narrative: Presentation to a workshop on arts participation

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Here’s a presentation I gave to a conference called – unhelpfully – Art for Art’s Sake.  It was actually about new approaches to participation in the arts, about finding ways of connecting people to the arts – and the arts to people – which go beyond the traditional arrangement of government subsidised Grand Purveyors of Culture getting bums on seats to consume High Art. The day was spent with presentations from five arts practitioners in the morning and then three people from outside the arts in the arvo.  Those three people were me, an economist, a scientist and a non-partisan political campaigner from OurSay.

When the organiser rang me I was rather taken aback that she’d want me to speak, but she mentioned her topic and I said that I’d always thought about what I did as involving careful listening to people and trying to interact with it in terms of one’s preconceptions of what made good policy – always trying to update that as one went along. She liked the sound of this and I said I could describe the construction of the Button Car Plan as an exercise in that method. She liked that idea but I wondered whether it would be quite what the arties were looking for. When I saw some of the earlier presentations from the artists I got pretty excited about what some of them were doing and decided to talk about our work at the Australian Centre for Social Innovation as you will see from the presentation above.

Other materials to help you understand the talk are the slides I spoke to (ppt) (hastily cobbled together from other slide packs I’d constructed previously) and here is the video I showed during the presentation.

Memo to Annabel: It ain’t gonna happen

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housewifeAnnabel Crabb wants us to get real about women in politics. The current carry-on is “all very interesting and thought-provoking and no doubt useful to a certain degree” but there’s an elephant in the room:

[F]or chicks, you can choose politics or you can choose having children. The odds are against you pulling them both off at the same time and if you do, life will be very, very hard. This has always been true. It is still true. And it will keep being true until society stops assuming that a man who leaves his children for 18 weeks a year is normal, but that a woman who does the same thing is an evil hell-crone.

I’m not entirely sure what a ‘hell-crone’ is, but when I did the research for this column, if I remember correctly there was basically nowhere where women’s lib, which has achieved such stupendous results in so many areas, had achieved much around the house.

In virtually all developed world cultures, while women’s labour market performance has soared, women still do the lionesses share of domestic work. I think the pattern or work continues to stick closely to gender stereotypes with women doing the ‘inside’ chores – cooking, cleaning and caring and men the ‘outside’ ones – handyman work, mowing and paying the bills (this is usually done inside, but there you go, neat categories will only take you so far before they leave you with nothing but a silly chagrin on your face - but I digress).

I proposed a little model of how this could have happened in my article though of course it’s speculative: Continue reading →

Stop the boats Westies

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Kevin Rudd got elected in 2007 by convincing people that he was a slightly younger and more vigorous version of nerdy John Howard, with similar conservative policies except that he would abolish that nasty Work Choices legislation and introduce some fairly meaningless warm and fuzzy window-dressing like apologising to the Stolen Generations and ratifying the Kyoto Protocol.

Tony Abbott just got elected by similarly convincing people that he was merely a more disciplined, authoritative version of Rudd/Gillard with very similar conservative policies and a handful of meaningless but macho slogans like stop the boats, stop the waste and build the roads of the 21st century. 11. KP: which actually seems to mean spending pretty much the same amount as Labor on infrastructure but diverting it from railways to roads so we can move the traffic jams a couple of kilometres further up the road. [↩]

It now emerges that the rather more practically significant macho slogan that Tony failed to mention was “stop the Westies from going to uni“.  Good job too! Manifestly the only way to restore flagging academic standards is to reserve university places for all those thoroughly decent chaps and chapettes from Shore, Riverview, MLC and Scotch College, while relegating the Westies to their ordained social place in TAFE- certified occupations, burger-flipping and waiting in dole queues. Ill-considered resentment on the part of the lumpen proletariat is to be avoided through early implementation of time-honoured tactics of mass distraction like firing up the Culture Wars and History Wars to get them hating arty- farty and intellectual “elites” instead of their real enemies.

Meanwhile, the vanquished Australian Labor Party is busily experimenting with pseudo-democracy by staging a rank-and-file ballot for parliamentary leadership between two almost equally shop-soiled union/factional heavyweights.  I think I might go out and buy one of those Aussie Pride T-shirts and find a quiet pub in which to reflect on my good fortune.

Race and IQ: how can we dismiss the correlations?

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Suppose you wanted to believe, as I do, that intelligence and vague ‘racial groups’ are, on the whole, unrelated from a long-run perspective. What would you then have to believe about genetics and IQ, as well as the long-run effects of socio-economic circumstances on IQ to rationalise the overwhelming evidence that there is a strong correlation between IQ and ‘race’? That evidence is extensively discussed in this excellent blog by Ken Parish, alluded to in several references on this wikipedia page into IQ heritability, and pushed hard in this book I co-reviewed recently? I will argue in the below that the main thing you must then dismiss is the hypothesis that a strong correlation between the outcomes befalling identical twins ‘demonstrates’ the importance of shared genes. In turn, that forces you to re-evaluate a lot of medical and biological studies in many other fields.

Consider the basic evidence that the ‘Bell Curve’ adherents have to argue their case: they argue that starting from the darkest places in Africa with IQs around 75 you move away from the equator and see an increase in both wealth and IQ, passing over the US with an IQ of 100, ending up with Japan and South Korea where average IQs are around 110 and health and wealth are concomitantly high. Within rich countries too, the basic empirical relation is that the whiter the ethnic group, the higher the IQ scores. And everything that is desirable is positively related with IQ, including length of life, wealth, low crime, etc. The ‘Bell Curve’ adherents point to all these correlations and say they are causal and that, furthermore, there is a genetic component to IQ since IQ is strongly heritable within families: the IQ of identical twins who were separated at birth turns out to be pretty close, usually taken as evidence of genetic causality.

So the mountain to climb is to rationalise all those correlations without buying into genetic causality at the level of ethnic groups, loosely labelled as ‘race’ (and yes, I know we are talking about clouds of genes here that vary more within than between!). Find below my best efforts, allowing for the fact that I am of course mainly a consumer of this literature, not a fully up-skilled producer! Continue reading →

Saturday Quickie – Sovereign Borders, not so Sovereign Nation

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According to Mike Seccombe, at the Global Mail, under the Abbott government, Australia will be open not just for business, but open to costly multi-national law-suits:

On the eve of the election, the Coalition released its trade policy, which includes a commitment to “remaining open to utilising investor-state dispute settlement (ISDS) clauses as part of Australia’s negotiating position” in future trade deals.

In saying it was “remaining open” to ISDS clauses, the Coalition was being cunningly understated, as was made clear elsewhere in the document.

 

Under ISDS, as Seccombe explains earlier in the article, corporations can bring law suits seeking damages form governments which harm their financial interests. This reverses a position taken by the ALP government in 2011 which rejected the use of ISDS in trade agreements because it was of no benefit to Australian business and could seriously compromise national sovereignty. More often than not, as Seccombe clearly lays out, litigation under ISDS is conducted in effective secrecy, so governments can potentially find themselves with large debts to multi-national corporations with the citizenry left completely in the dark about the issue.

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There are none so soft minded as those that think themselves hard headed

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AKA “Intellectual vanity and policy poseurs”

AKA “Contorting sophistry in favour of contractionary monetary policy”

AKA “The global Serious id hrumphs again”.

Part 3 of a series (1, 2).

Via Matt Cowgill I see weak corporate governance beneficiary [1] Richard Goyder humphs a hrumph about interest rates.

trollgill

Really, what (if any) process of logic is behind this?

A monetary policy stance that targets consistent low, but positive, inflation is largely targeting a level of output that is at “capacity” (given current technology, laws, people etc.).

By definition we can’t produce more than capacity, because we don’t have the capacity to produce it. We’d just have inflation instead.

If you’re achieving consistent low, but positive inflation, your monetary stance is neutral.

Promoting monetary policy that is tighter than this, your policy is putting artifical contraints on an economy producing what it is enitrely capable of.

Naturally, producing what we can is reliant on not being prevented from doing so.

Subsequently I present Mr Goyder’s wisdom on a few other topics.

Dr Goyder, sports scientist:

I’m urging the coach to resist putting the fullback’s leg in a cast. We should promote players that can adapt to football and don’t rely on having unbroken legs, which can have unintended consequences.

Richard Goyder, anti poverty expert:

I’m urging DoCS to resist removing the lock from the poor’s kitchen cupboard. We should target a population that can adapt and is not reliant on eating the food they have available, which can have unintended consequences.

Herr Doktor Goyder, Zeppelinist.

I’m urging other Zeppelinists not to release any sandbags or tethers. We should target Zeppelins that can adapt and are not reliant on being allowed to float freely, which can have unintended consequences.

 

If only these disciplines had been endowed with the hard headed realism that dominates board rooms before. Hrumph!

 

[fn1] A special class of employees largely unanswerable to their nominal employers, with considerable power to set their own wages and responsibility. Also known as “executives” and, somewhat inexplicably, “businesspeople”.

Tonight Only – A Free Shot of Xenophobia with Every Order!

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It was around six thirty on a cold wet Melbourne Day. A long day for me, including a mid-morning appointment with a new psychologist. First appointments are all about background – what your condition is, personal and family history and all that other stuff that they need to know to get a useful idea of who you are and where you came from.

So I spent near an hour giving her the $100 tour of my dark places – even, for the sake of expediency, a quick glimpse of the very darkest one which I’ve rarely revealed to friends because they’re entitled to their faith in human nature. Or something like that: it’s a distressing little story to tell and it distresses people who hear it.

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