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Kindergartens as Engines of Economic Growth

I was flicking through the OECD’s Education at a Glance 2014 to get a quick understanding of how Australia’s education system compares to the rest of the industrialised world. Australia mostly did well in the indicators compared to the OECD average, especially for university education. Although, it was a bit worrying to see that Australian school students’ educational scores stagnate. But there was one indicator that caught my eye, and that was the very low enrolment rates of Australian children in pre-school education (less than 20%) compared to around 75% for the OECD average. This places Australia the 5th lowest for pre-school enrolments in the OECD, with only Indonesia, Turkey, Switzerland and Greece being ranked lower. This caught me by surprise because there is pretty strong education and economic research that demonstrates the long-term benefits of early childhood education.

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Housing Bubbles as Economic Policy

 

I’m curious why governments around the world are fond of pursuing higher house prices as economic policy. Not that I have anything in principle against higher house prices. I understand why governments want to do it, housing is an important concern for many people and a significant contributor to an economy. But all of that is wasted if the policies stimulate a housing bubble that eventually bursts leaving people poorer because their main asset drastically falls in value. But I’m concerned that governments introduce significant economic risk to the whole economy by promoting housing bubbles. We saw this with the recent Great Recession that consumed the US and much of the world in 2008-09. Yet governments continue to inflate housing bubbles. In the end, we are worse off when a housing bubble pops. I’m no ‘economic girly man‘ when it comes to risk, but surely as stakeholders in the global economy (and voters, depending on where you are) shouldn’t we be cognisant of the risks that our governments introduce? That way if we know about it, we can demand our governments to manage or even prevent these risks. This post will attempt to identify the key ways that governments have introduced risks into our economies in order to stimulate housing bubble.

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Soil Carbon: Can We Have Our Cake and Eat it Too?

A key part of the Australian Government’s Direct Action Plan to presumably reduce emissions is to encourage the sequestration of carbon in soil. Given that the government has ‘axed the tax’ and plans to scale back or abolish the Renewable Energy Target, soil carbon sequestration is a key part of Australia’s carbon abatement policy. Soil carbon sequestration offers the alluring possibility of reducing Australia’s emissions without ‘clobbering the economy’. Instead of penalising businesses for emitting carbon, the Australian Government, through the Emissions Reduction Fund, will provide direct incentives for businesses to be rewarded for reducing carbon. Farmers will be a key beneficiary by producing carbon credits that polluters can use to offset emissions. This will allow Australian industry and consumers to operating as we always have without the associated economic restructuring caused by de-carbonising our energy sector. (more…)

Government as Risk Manager: Should We be More Worried?

The Productivity Commission (PC) recently released a draft inquiry report into ‘Natural Disaster Funding Arrangements’ in Australia. For those that don’t know, the Productivity Commission is an Australian Government independent agency that provides advice on economic reform. To my knowledge, I’m not sure if other national governments have a similar agency. The only one that comes close is the OECD, but that is a multilateral agency. The PC has a strong reputation of furnishing ‘frank and fearless’ advice to successive Australian Governments. So it is with some interest that I read this report. I have worked on the role of government in managing risk, so I was interested to learn the PC’s perspective on natural disaster risk management. (more…)

Climate Change Scepticism: It’s the Economy, Stupid

I’m sceptical that climate change scepticism is simply a matter of scientific ignorance. While it may be true for some climate change sceptic individuals, I don’t think it is representative. The scientific community doesn’t agree with me. Scientists think the answer to this knowledge ‘deficit’ is to provide even more scientific information. This ‘deficit model’ of scientific communication assumes that climate change sceptics are ignorant and will change their views if they are simply plied with more information. However, it does not take into account that all people interpret scientific information in subjective ways, usually in ways that reinforce their prevailing views on the matter. Essentially, scientific information does not deal with people’s concerns on how climate change policy measures would impact their economic well-being. (more…)

Are You Ready to Manage Energy Price Risk?

Check out this post I wrote for Carbontel:

Now that the Federal government has ‘axed the tax’, energy prices should plummet now, right? Actually, reports from Federal Government agencies don’t see it that way. In fact, there are key economic drivers to expect energy prices to rise in the future. In this article, I will explain why energy prices will rise and what you could do to manage or ‘hedge’ energy price risk. (more)

Ebola and Market Failure

You have probably heard about the deadly progress of the Ebola virus in West Africa. It is spreading at an alarming rate and does not appear to have any cure. To make matters worse, Ebola has a high fatality rate of 70% according to the most rigorous statistical studies. So far, it has claimed over 2000 lives and has now spread into Africa’s most populous nation of Nigeria. There may be unconfirmed reports that Ebola has found its way into Australia. According to the Oxford University professor, Adrian Hill, a vaccine is “doable” but ‘Big Pharma’ has not developed a vaccine because there was no business case. This situation sounds like a classic case of market failure. (more…)

Ross Garnaut: No Link Between Economic Growth and Pollution

Last night I went to see Prof. Ross Garnaut speak on ‘China’s Energy Transition: Effects on Global Climate and Sustainable Development’. Me and Ross go back a long way. Not personally of course, but my career in economics has somehow become enmeshed with his. His report on ‘North Asia’s Economic Ascendancy’ was the first government report I read when I was a callow youth at university. It set out a path for Australia to exploit the economic opportunity of North Asia (i.e. Japan, South Korea, China and Taiwan). It wasn’t about resources, instead he said we should aim to be an exporter of ‘elaborately-transformed manufactures’ – i.e. advanced manufacturing goods that require significant use of Australia’s design expertise and creativity. It was a report that inspired me to think how economics could be used to guide governments. (more…)