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Gittins makes an important point [in the video]– from a macro perspective, the total amount spent on discretionary goods will stay the same unless consumers decide to borrow more to purchase goods.

But that is exactly why macroeconomics and microeconomics are considered separate fields. Firstly, people can spend more on retail than on other sorts of consumption. And they can switch their consumption from service-free online retail to bricks and mortar retail stores whose competitive advantage lies in their ability to offer personalised service to customers. If customers want to shop on weekends, then penalty rates which restrict retailers offering weekend shopping at equal prices is artificially limiting physical store’s competitive advantage relative to online shopping. Plus, you can make arguments about the non-monetary benefits of spending time with family, but there are also the non-monetary benefits of going to the bank or the post office on weekends rather than taking time off work. Or of being able to go shopping with friends on weekends.

And that is why Ross Gittins should stop writing about economics. Or at least get a degree in economics before continuing as the Herald’s chief economics columnist. Assuming that discretionary spending is equal to retail spending is just a huge logical error that ought not be forgiven.


Is Australia suffering the curse of supermarket duopoly? The layman would probably answer with an emphatic yes. Practical experience affirms our intuition. Whenever an independent competitor arises, Coles and Woolworths quickly stamp them out. With Coles’ latest campaign to halve fresh fruit prices, Australian farmers are crying poor once again and the evidence is mounting for what we all know. Or what we suppose we know.

You see, the question is entirely wrong.  There is no such thing as a single ‘supermarket’ market – it is an aggregation of several sub-markets loosely labelled as a market. Whether it is anti-competitive for Woolworths to drop its milk prices is a very different question from whether it is anti-competitive for Coles to drop its fresh food prices. The supply chains are different; the competitors are different; consumer demands are different. Whilst Woolworths was on pretty firm legal and economic ground by dropping milk prices, Coles may be on shakier ground.

Coles and Woolworths hold a massive market share in staple foods, but a much smaller market share in fresh food. The reason for this is obvious when you think about it. Fruit and veg from Coles is simply of a lower quality than from independents. Or, to put it in econo-speak, it’s a heterogenous good and the large chains’ quality control simply isn’t as effective as a small fruit store owner who inspects fruit himself and buys the best. Milk, on the other hand, is a homogenous good.

Coles may be seeking to drop fruit prices now, then when the mum and dad stores are bankrupted, it can raise them again. Or, Coles’ strategy may be to get people in the door more frequently; you only buy staples once or twice a fortnight; you buy fresh fruits far more frequently. The first strategy is anti-competitive; the second is pro-competitive. We just can’t tell which it is.

Coles’ clearly has market power in the sub-market for staple foods. It is using this market power to gain market share in another sub-market in which it doesn’t have as much market power, fresh foods. Whether this use of market power breaches the Competition and Consumer Act will turn on details I simply don’t have on hand.

Wow – I was going to write a research paper on exactly this issue when I studied copyright law last semester:

The legal issues are complex for aggregators. An aggregator, which by definition copies a copyrighted work, is committing a breach of copyright. Ordinarily, however, providing an RSS feed would seem to provide an implied licence to that breach (ie there is consent). That implied licence may be modified by an express licence, such as a Creative Commons licence.

I never ended up writing the paper, but I did notice that Creative Commons prevents uses that are for ‘commercial purposes’. What this means has never been tested in a court of law. It would seem that a news aggregator who profits from advertising is in breach of that licence.

(There are many other complex copyright issues that arise from the issue)

Education policy has been a pet topic of mine, even if I haven’t mentioned it on this blog. The Atlantic writes an interesting analysis of the Finnish model, which has become rather fashionable in education policy circles of late.

Basically, the article says the Finnish focussed on giving every student an identical experience – having no private/public divide, by providing equal services to everyone like individualised counselling, free lunches etc. What was the result? The Finns top the PISA league tables (international standardised tests that allow comparisons between educational performance in different countries)

Without knowing too much about the Finnish system, isn’t this just a result of simple math? If the American system selects the very brightest kids and gives them the best training to the detriment of the less bright then the rules of mathematics tell us that we should expect lower test scores compared to Finland which seeks to improve every child. For example, if we start with an 80% average grade for two countries, and in America the smartest 20% are trained so well they achieve a 100% mark whilst the mediocre students keep the same mark, the average mark will drift upwards by a tiny bit to 84%. Whereas, in Finland, if every child’s mark goes up by 5% then obviously the average will rise to 85%. And yet, it would be a miracle if the US could get an entire 20% of its population to score perfectly in such standardised tests.

To put it more simply, two factors will keep the US from performing better in the rankings. The improvement of marks in the smart students is diluted by the lack of improvement in mediocre students, whilst any improvement in the average Finn translates into a direct improvement in their PISA scores. Furthermore, there is a ceiling on what smart students can achieve – noone can achieve a 110% mark.

So the question ceases for a while to be a practical question and becomes a moral question. Do we want to ensure equity of education to every child? Or do we want to ensure the smartest kids can reach their full potential?

We cannot divorce practicalities from our analysis. My example assumed the top-performing students were ‘the smartest’, but the American  education system doesn’t favour the smart. It favours the rich and the lucky. Even in Australia and Britain, with their selective public schools, standardised entry tests are only a rough proxy for true intelligence. On the other hand, society only requires its future adults to have a minimum level of knowledge. Every society must have its janitors as well as its professionals. (Again, the moral question arises – Shakespeare is no more useful to an investment banker than a janitor). And a failure to perfectly identify the smartest students doesn’t mean we should abandon the quest to give the smartest students the best opportunities to foster their learning.

I can’t let this pass without mention, even if I am on holidays. Barry O’Farrell had promised pre-election to have an independent committee assess whether it was appropriate to introduce recall elections in NSW. The Committee has now recommended that they do allow it.

I’m not against the idea in general, but it must be very carefully designed. If you need x% of the population to sign a petition to remove a government, then if x% is too low then a minority lobby group can prevent any government attacking its pet project.

Democracy is about more than mere voting. Its also about not allowing entrenched minorities unduly influencing the democratic process. To allow them to threaten a sitting government with an election would stop governments being able to make tough decisions that are unpopular in the short term but are beneficial to the state in the long term.

If x% is too high, then it becomes a meaningless exercise. The last I checked, countries only ever fell into the two extremes. They never quite hit the sweet spot. I personally would rather x% be higher than lower.

There is also the theoretical risk that if x% is, for example, 25%, either of the major parties could drum up that many signature quite easily. Although party members may not constitute 25% of the population, roughly 25% of the population will be strong supporters of the Labor/Liberal Party. I say theoretical because this has yet to prove to be a problem, even in highly partisan California.

And, of course, there’s the more technical constitutional issues in drafting any such bill which will be difficult to navigate, but which can be surpassed by sufficiently good draftsmen.

The SMH has an excellent profile of Andrew Bolt in last weekend’s copy of Good Weekend.

I’ve always found Andrew Bolt an intriguing personality; he’s one of those people I can respect despite wholly disagreeing with his views. People often pair him with Piers Ackerman, his Sydney counterpart at the Daily Telegraph, but the contrast between the pair could not be starker. Having watched both of them on the ABC’s Insiders program on Sunday mornings, I’m inclined to believe these wild generalisations are made by those blinded by their own ideological leanings or who haven’t really listened to what either man has to say.

Piers Ackerman, I’ve always found, has a genuine mean streak and he’s genuinely partisan. He will never give ground in a way favourable to the ALP, and his views often seem disingenuous in the way they so illogically defend the Liberals even when they’re clearly in the wrong. His views are so distorted as to make me doubt his capacity for logical reasoning.

Andrew Bolt, on the other hand, has a very elegant and earthy manner of expression. He has a knack for exposing the weak points in arguments that I personally believe in. Even where I disagree with him, I tended not to fault his abilities as a logician or a debater. It is true that he often plays the man and not the ball, that he often distracts from the matter at hand by attacking side-issues or raising side points. And I think Bolt does believe what he preaches; there’s a wholesome consistency to what he says. The SMH article makes this point plainer than I am able to.

Bolt, however, has gotten a darker cast to his personality in more recent times. He’s become more like Piers, especially in global warming debates, more likely to be vicious for the sake of being vicious or appearing more partisan. I had attributed it to bitterness at his (left-wing) critics; a tender soul’s stubborn refusal to bend to the pressure of his foes. The SMH attributes it to a change of government from Liberal to Labor, requiring a more aggressive stance. I don’t know which is the truer explanation; perhaps a little of both. I must say, whatever the explanation, I respect him less.

That does not mean we should discount the valuable role he plays. I’ve always strongly believed in assessing the weaknesses in our own arguments. I believe strongly in multiculturalism rather than assimilation, for example, but it is helpful to read Bolt’s well-reasoned arguments about ghettoisation. They challenge us to rethink and reformulate our views. Yes, black Americans may ghettoise (in the sense of forming communities separate from the wider society), but that is the nature of society – it divides uncleanly into separate communities, whether by race, class or even just location. Freakonomics, for instance, demonstrates that even though a poor black child is statistically disadvantaged at succeeding in life, a poor white child living next door to him is equally disadvantaged (according to the statistics). Society naturally divides into communities; racial communities are simply more visible. And these communities are porous – sure, Asians may stick together but they are forced to interact with other races in their workplaces, schools and social lives.

Given that multiculturalism is such an important issue to our modern polity, it is entirely inappropriate that Bolt should be silenced by Anti-Discrimination laws which are far too widely drawn. In Eatock v Bolt, Bolt was stripped of various defences to both the Anti-Discrimination Act and defamation law by ‘malice’ (and a lot of fudged/wrong facts). Fair enough.

But the judgment went further; the judge made a finding of fact, by listening to the testimony of the plaintiffs, that the mixed-race Aboriginal plaintiffs each genuinely believed they were Aboriginal since they were of a young age and never made a deliberate choice to identify as Aboriginals to gain scholarships etc. I know findings of fact are not binding precedent, but if the same approach is followed in later cases doesn’t that prevent anyone from making the same argument as Bolt with stronger evidence?

Whether or not you agree with Bolt’s concern that mixed race Aboriginals with more white than black blood are identifying as Aboriginal with the result that they get certain advantages, you must believe that it is an argument that can be validly raised without being racist. I disagree with that concern; a white-skinned Aboriginal may face less discrimination than a black-skinned Aboriginal with the same proportion of white/black blood, but they still face many forms of discrimination including the socio-economic disadvantages faced by most Aboriginals.

Is this argument so different from the concern that those benefitting from Aboriginal scholarships tend to be from richer Aboriginal families; the sons/daughters of Aboriginal lawyers or academics, who would have gone to university regardless of whether they received this scholarship? Shouldn’t these scholarships be reserved for those most disadvantaged rather than anyone who is disadvantaged?

These are tough questions; I don’t presume to answer them for fear of being sued. But they are questions that ought to be able to be asked in a free society. We may permissibly ban them if they are unfounded in fact, or if they are asked maliciously. But to ban them merely because they are ‘insulting’ to some people is an outright attack upon free speech in matters of race. That portion of the Anti-Discrimination Act must be repealed.

The Gillard Government and, moreover, Gillard herself have been criticised for passing the carbon tax and Malaysia solution bills side by side. The government could have had a wonderful week in which it won a major policy victory. Instead, it was overshadowed by this great defeat in immigration. Some even argued it was risky for the Government to take the risk of a constructive no confidence motion.

I wonder how airtight this logic is. The carbon tax is deeply unpopular, the benefits from having a win in Parliament would be swiftly overwhelmed by the Liberal’s attack dogs. A whole week of whinging about the great big tax. Instead, the Gillard government swept those headlines away with a kiss and an ability to brand Abbott as Dr No on the most crucial issue in bogan Australia. Plus, she healed divisions with the Left. I call that a win.

When I last blogged on the Tea Party, I expressed sympathy for their goals but I believe the results they demanded were unrealistic, factually inaccurate,and that they didn’t understand the consequences of what they were saying. I also observed the rich intellectual history and tradition behind the Tea Party, a revolutionary undercurrent within the Republican Party that has always existed throughout US history. It taps into the thinking of some Founding Fathers, like Thomas Jefferson (before, as President Jefferson he vastly expanded the reach of the executive government) or Patrick Henry. It taps into the thinking of Milton Friedman, Hayek and their ilk.

I have the same sympathy for the Occupy Wall St protests. But what’s striking is that these protesters lack the intellectual oomph that the Tea Party had. Yes, yes. It seems odd to call a movement whose mascot is Sarah Palin ‘intellectual’, but isn’t the point of a team mascot to be a party balloon filled with naught but hot air? And yes, ironic also given the scorn with which the Tea party holds for ivory tower intellectuals.

I don’t mean that individual complaints lack substance or theory. Take, for example, the complaint that “[t]hey have perpetuated inequality and discrimination in the workplace based on age, the color of one’s skin, sex, gender identity and sexual orientation”. I imagine that if you spoke to the protesters, they would wax eloquent about the problems with privilege. Its an intellectual theory, it has substance even if I personally believe its intellectually flimsy and indefensible.

These individual complaints have yet to coalesce into a broader message which can seize the mind and thrill the heart. When Martin Luther King marched on Washington, he brought with him a dream and a Bible. He spoke of equality, tapping into the rich discourse about individual rights and about loving thy neighbour. Just as importantly, these mass movements must present a compelling alternative. The Tea Party presented a coherent alternative – a low-taxing, unintrusive government. The problem was that we were unwilling to abandon the social safety net which the government provides us. The Occupy Wall St movement has no alternative. Do they want greater regulation around each of the areas they outlined? We just don’t know.

The failure to present a plausible alternative is not a new phenomenon for the Left. Ever since Marx’s theories were discredited by reality itself, the Left failed to show its followers how to live a virtuous life. Meanwhile the Right demonstrated how a capitalist life could enrich the world. By being selfish and improving yourself, you improve the economy and lift the living standards of the very poorest in the world. How can the Left compete with that? Their current conception is to throw away your life by volunteering in Africa or by joining hippie protest movements. The answer is much simpler. It’s to present a vision of a community of peoples. People joining volunteer organisations in their local neighbourhoods – making friends whilst doing good. Becoming community organisers like a younger Barack Obama.

Many commentators have observed that the protesters have not made concrete demands about what policy changes they would like to see, or that their message cannot be reduced to soundbite format. Too true. But my complaint goes deeper. There is no broad intellectual message behind all of these disparate complaints that go deeper than “corporations are too greedy”. I knew that already.

The Tea Party and the Occupy Wall St movements have touched a raw nerve. Economic turmoil causes pain; that pain has found expression in freedom of expression and protest. Mass movements, however, cannot be carried on emotion alone for any budding film director knows the impossibility of sustaining one emotion for too long.

So far, the Occupy Wall St movement has brought out a list of vaguely worded c0mplaints. Many of these are highly contestable or outright wrong (“They have poisoned the food supply through negligence, and undermined the farming system through monopolization”  – how can they have done this, if agriculture isn’t a monopoly or even an oligopoly?).

Without a message or alternative vision or facts to substantiate their arguments, the Occupy Wall St movement is vulnerable to the charge that they are hipsters, chasing the latest cause de celebre. Until they can articulate what they are protesting about, how are we supposed to know what to do about it? They might as well have asked us to imagine no possessions and a brotherhood of man.

I’ve been looking into the marriage power in the Constitution for an assignment, and its a surprisingly interesting question from a conceptual point of view.

Question: Can a stream rise above its source?

A constitutional lawyer would express horror at the mere thought; Parliament plainly cannot expand its own legislative powers by passing an Act which defines its powers. And yet, how are we to construe s 51, which grants Parliament “power to make laws… with respect to… marriage”?
If Parliament were to pass a law in 1910 that permitted gay marriage, contrary to all the mores of that time, would it be valid? If Parliament in 2011 were to pass a law that permitted polygamy or bestial marriage, would that be valid? Wouldn’t these laws be invalid, unless Parliament could enlarge the ambit of the marriage power by passing an Act defining marriage as including a union between a man and a man?

There is obiter suggesting they can:

“Under the power to make laws with respect to marriage, I should say that the parliament could prescribe what unions are to be regarded as marriages”

– Higgins J, AG(NSW) v Brewery Employees Union (1908) 6 CLR 469 (Affirmed by Windeyer J, AG(Vic) v Cth (1962 ) 107 CLR 529; by the Full Family Court in Cth v Kevin & Jennifer [2003] FamCA 94)

This must be wrong, according to any constitutional analysis. s 51(xxi) must be characterised first, then we must ask if the Gay Marriage Act falls within that characterisation. Brennan, Mason, Deane JJ in Cormick and Cormick v Salmon (1984) 156 CLR 170 make this point.

The word ‘marriage’ would have a meaning separate to that in the Marriage Act. That word and that power evolves over time, just as the external affairs power and the aliens power have evolved in very distinctive ways. Those powers, however, may be controlled by reference to events external to Australia (such as making of the Balfour Declaration and the passage of the Statute of Westminster and the Australia Acts).

The marriage power must be referable to social indicia, like the community’s acceptance of gay marriage (or polygamy and beastiality). Those are murky waters for the High Court to plumb. It makes the Court political.

It also acknowledges the power of the common law to shape the Constitution itself, which is a thesis that Sir Owen Dixon has advocated for. As Brennan J said in Cormick, the meaning of marriage is “ascertained… by reference to the customs of our society, especially when they are reflected in the common law.

A contrary view might be that s 51(xxi) might be an exception to the ordinary rule that international law cannot be used to construe the Constitution. The High Court might very well have reference to treaties and international case law to ascertain how acceptable marriage is in the wider community.

Needless to say, I agree with the Dixonian view. The question is not what marriage means according to humanity or the international community. The Constitution asks what marriage means in Australia, so international law can only be evidence at best.

This blog wrote a series of lengthy posts on NSW Labor party reform and the introduction of US-style primaries.

The Australian Labor Party and the British Labour Party are thinking of following suit. (I’m posting from my phone so I may post links later).

One crucial aim of this reform is to shake off union ties or diminish their influence. You will be unsurprised to know that I substantially blame the decline of both ALP and British Labour to union influence. Ever since Ed Milliband was elected as Labor leader, despite losing the popular vote amongst party members due to the union vote, he’s had trouble shaking off the ‘Red Ed’ label; its stopped him taking the fight to the Conservatives. And we know the travails of Ms Gillard in Australia, the PM installed by union bosses.

Party reform is needed to bring new members into the party. But it is also needed to break the union dominance over the ALP and the culture of patronage it brings.