A new blog on Behavioural Economics

Hi all

I've started a new blog on Behavioural Economics

http://behaviouraleconomicsaustralia.blogspot.com.au/

Please take a look

Mark S

Haven't they ever watched "The West Wing"?

Surely these two political leaders would be students of The West Wing. 

Surely they would have watched the presidential debate episode "Game On"

Surely they'd remember the moral of the story when Jeb Bartlett's wife Abbey cuts his tie in half moments before he goes on stage. To fire him up.

Surely they understand that passion matters in a debate!!

The misogyny poll bump

And weren't they there during PM Gillard's misogyny speech?

Of course they were there. It was fiery, passionate. You might even have said it was slightly out of control.

It generated a nearly 10 point bump for Labor in the polls as well.

Passion, fire, they work. Australians aren't stupid. We want to see the "real" Kevin Rudd and the "real" Tony Abbott.

Perversely, the hyper-controlled Abbott might just be the real thing; but this robotic Rudd?? No.

If you want us to pay attention, start believing in it - with passion. Last night was terrible :(

Let me know what you think

Mark S

Abbott's company tax cut is disingenous

First, let me make this clear, I am in favour of the lowest appropriate taxes for individuals and businesses. BUT, Tony Abbott's decision to cut company taxes in Australia by 1.5% is simply bad policy and worse, it wrongly appropriates the Henry Tax Review to justify it.

Why Abbott's use of the Henry Tax Review is wrong

The first of the key directions read:

Maintain the company income tax rate towards the lower end of the small to medium OECD economy average, with a reduction to 25 per cent over the medium term. This aims particularly to increase the level of business investment in Australia across all sectors, including foreign direct investment; promote more entrepreneurial activity; and reduce incentives for profit-shifting offshore.


So this would seem to support Tony Abbott...but wait, there's more.

Ken Henry also recommends sweeping changes to the tax system, including a land tax (and resources tax) and many other sweeping changes. So, Abbott's plan is to remove the resources tax, not add a land tax and cut the company tax rate.  That just doesn't stack up.

Abbott-nomics, Reaganomics and the Laffer curve

While he explicitly named the Henry review to support this cut, I'm more concerned about the implied throwback to the 1980s and Ronald Reagan's economic policies described by the great catchphrase "a rising tide lifts all boats". It didn't.

One of the big theories that Reagan used to support his policy was the Laffer curve.  This theory suggested that in some circumstances that a cut in tax rates would result in increased government revenues. Legend has it that one of his economics advisors, Arthur Laffer sketched this curve on a restaurant napkin.

Laffer Curve: suggests that revenue increases if high tax rates are cut

However, Laffer also pointed out that spending discipline is required in the short term, to increase government tax revenue in the long term.
The Laffer curve has been discredited for a long time. There are many papers that have been written to debunk the Reagan and Bush supply-side policies...yet Abbott thinks he can roll out the same discredited theories.

Spending cuts will be required

So, even if we put aside all of our misgivings about the Laffer curve, supply-side economics and Abbott's plan, there is one thing that can't be denied.

Spending cuts will be required. Even Arthur Laffer said so.

Tony Abbott. Be accurate. Treat us like adults. If you are going to cut revenue through company tax cuts, tell us what other revenue you will raise, or what spending you will cut. Reagan or Bush would.

Let me know what you think.

Mark S

It's an election so it's time to blog...about polls

Let's start with polls. Properly constructed polls don't lie. Yes, there are increasing challenges in polling now that people don't answer landlines but pollsters work their way around that.

However, there are differences between each of the polling techniques so that gives different results. At the moment, most of the major polls have the Coalition in front on both a primary vote and two party preferred basis.

Newspoll: L-NP 52%; Labor 48%
Essential: L-NP 51%; Labor 49%
Roy Morgan: L-NP 50.5%; Labor 49.5%
Galaxy: L-NP 50%; Labor 50%

The bounce has stopped

What's more important is that the Coalition has been in front for almost all of the past two years. PM Gillard got a fillip after the misogyny speech. PM Rudd got his recent bounce.

But there is no sustained trend. The Coalition has remained in front. One bounce does not an election win make.



How could Labor win from these polls?

There's only one way I can see for Labor to win. It comes from the Morgan Poll.

Morgan is the only firm to ask voters for their preferences. The other firms calculate it from the 2010 patterns. Morgan claims that the preferences from minor party votes will flow stronger to Labor than in 2010, and their poll has been showing a better result for Labor than the other polls as a result.

If they are right, Labor will hold seats that the other pollsters expect them to lose. If, if and if ... probably not.

From where I stand, the prospect of Tony Abbott as leader of Australia is not a pretty thought - but at least there appears no chance now of the Coalition controlling the Senate.

Let me know what you think

Mark S

"Zero tolerance" McGuire must resign

On the weekend, Eddie McGuire made the very strong point that there is "zero tolerance" for racial intolerance in response to the 13 year old Collingwood fan calling Adam Goodes an ape.  Yesterday, Eddie broke his own rules when he suggested that Goodes could be used to promote the musical King Kong.  Zero tolerance is what it says - Eddie must resign, and his comments overnight indicate that he may do that.

Toorak Eddie or the Broady boy

Eddie McGuire really has been a leader in the public debate against racial intolerance. For decades, he has been a respected businessman and media personality.  Yet, he is still the boy made good from the rough streets of Broadmeadows to the rarefied air of Toorak.

Eddie McGuire - the statesman

Playing to his audience, the lowest common denominator

Here is where the Eddie McGuire story gets murky. He is a positive role model in so many ways, but he also understands his audience because that is where he has come from. He was the successful host on the lowbrow "The Footy Show", playing the straight man to the highly politically incorrect Sam Newman. 

On Triple M, he knows he is talking to largely the same audience as the Footy Show, and his role is to pepper the show with humour, even lowbrow humour. This is the unfortunate background to his comments yesterday - the environment in which he operates is one in which an off-the-cuff racial comment is commonplace.

Eddie on The Footy Show with Sam Newman and Trevor Marmalade

Eddie's slip of the tongue is clearly racist and his audience are too

Eddie understands the depth of his error.  Unfortunately many of his listeners do not.

Reading the comments to his official statement posted on Facebook is simply depressing, and reflects the ingrained racism and lack of understanding of these people...

Liz Gazeas I didn't think the comment was racist at all. Not Eddie's comment nor the young girls'. If the comment was racist to me I believe that would mean I think ALL indigenous people look like apes. I don't think that so to me the comment was not about race.

Sandi Pike This whole Adam Goodes issue...is a joke...freedom of speech...have a shave Soft cock Goodes because you look like an APE...

Zac Godfrey Eddie wasn't being racist. He was making a tongue-in-cheek reference that has been received badly. What if an indigenous 13 year old girl had called Goodes an ape? Are people from different races allowed to say different things? That doesn't seem right to me. I lovingly call my nieces little monkeys all the time...

...and on and on they go, demonstrating the incisive truth of what Collingwood player, Harry O'Brien said yesterday that casual racism is ingrained in parts of our society, who simply do not acknowledge their racist content.

Eddie, you are not a racist, but what you said was racist

You have been a great role model, but what you said was unacceptable by your own standards and you must set an example by standing down.  You need to reach out to those commenting on your club's own page to make it clear that they are missing the point. 

Australia is developing an unfortunate reputation as a racist country, and you can continue your good work by reaching deeper into your own audience.

Let me know what you think

Mark S

The truth will set you free, Lance?

Lance Armstrong is right that the truth will set you free, but what will it free him of?

No more money

First, it should free him of his money. All of it. We have a range of laws that require people to be recompensed for wrongs done against them and the list of those who have been wronged by Armstrong is very, very long.

As he is an American, those who have been wronged won't be bashful in suing him to get their rightful money back. By the time it is all finished, there shouldn't be any money left of his fraudulent wealth. 

Trust and relationships

The truth also sets him free of any trust he has in most of his close personal relationships. His children and family will never trust him.

It won't matter what he does or says or how long he does it for, that trust will never return.

Many of those relationships are gone forever. They will never return. He is free of them. 

Lance as you knew him is gone

Lance, you are still delusional if you think people will forgive you. If you want the truth to set you free, you need to let go of the entire lie that your life has been. 

That means not expecting anyone to forgive you. It means going to jail. It means accepting that you are not who you thought you were, and tried to show other people you were.

This really would set you free. If you leave the old fake person behind. 

It won't happen.

My bet is that most of this won't  happen. Lance won't tell the whole truth. Lance won't own up to his deceit to himself. Lance will keep trying to spin a story. Lance will never be set free. 

But I do hope he goes to jail. We need justice in our world for the rest of us to retain our trust. 

Let me know what you think?

Mark S

The end of get-rich-quick schemes (for now)

The last 20 years has been pretty unusual.  There has been a lot of opportunities to get rich quick (or get poor if you messed up). There was the Internet boom and bust, a few stock market booms, rising house prices, rising commodities prices, low unemployment, a housing boom and huge wages for mining workers.

Source: Reserve Bank of Australia

So, whether you were white collar or blue collar, there have been plenty of ways to get rich if you took a few risks.

It's over!

Back to the old days - do things that people want

What is going to happen now is simple. If you offer products or services that people want, they will be bought, at a fair price. If you are a healthcare worker, there is a lot of demand for your services - you will be able to get work and charge a fair price for it. If you are a manufacturing worker in Australia, there is less demand for your services.  You will need to be one of the best manufacturing workers, or reskill, or do something different.

More importantly, as a society, we need to think about what people want, and create those products and services.  Before mobile phones, few people thought that having a mobile phone would be a necessity. They were a luxury item.  In hindsight, we can see how useful they are, and mobile phone companies have done very well.

Before the washing machine, the idea of having a mechanical way to do laundry wasn't obvious. But once the washing machine was invented, every washing person (mainly, women) wanted one. (Watch Hans Rosling's great talk for more on this). And increasingly, we are happy to pay for the services of others to do other cleaning for us.

What happens next?

Now, it is up to us, to identify what the next washing machine is.

Ask yourself, what do I want? What does my neighbour want?

Ask yourself, how can I do what I already do better, faster, more effectively?

Ask yourself, how can I "sell" my great services better.  I know that what I offer to my firm, or my customers is valuable.  I need to communicate that value better.

Every transaction has to offer value to both sides.

Ask yourself, am I doing something that nobody wants or needs any more? If you are handwashing clothes, while everyone else is using a washing machine, sooner or later, your customers will politely stop paying for your services.  Make sure that you keep up with the times.

We will get wealthier as we continue to be more productive

By doing all of these "normal" things, we will get a little more effective every day.  Our incomes will grow a little every day, and our standard of living will grow a little every day.  It won't be a get-rich-quick scheme.  The improvements will often be so small that you won't notice it - much like healthy eating - one day you look back and realise that you have taken off weight.

So, in 2013, let's all get rich moderately quickly.  Let's all try to do just a little bit better in what we do, or change what we do and choose something different. When we all do that, we all benefit.

In 2013, let's be innovative, productive, and creative.  By the end of the year, you will notice the difference.

Let me know what you think

Mark S