Notes from abroad

When someone ten years your junior asks you to drop your pants you know it's going to be an interesting evening.  Saturday started normally.  My partner and I were hosted by good friends, Adrian and Pat, at the final day of the Melbourne Cup Carnival.  Down a few dollars I left the track for the public transport trip to Tel Aviv.  Presumably the Qatari passport stamp sent me to be privately screened at Bangkok airport.  My satchel was taken away for an ''X-ray'' before being handed back 40 minutes later with its contents missing.  I was then taken to a private room and asked, ''Are you wearing underwear?''  Mum would've been proud they were clean as I stood for ten minutes as Israeli security inspected every part of my jeans before I reclaimed my dignity and boarded.

In Tel Aviv I met up with my media colleagues participating in the Rambam Israel Fellowship programme organised by the Australia/Israel & Jewish Affairs Council.  The comprehensive introduction to Israel included a tour of the old city of Jerusalem and the ancient fortress of Masada, and meetings with politicians, academics and journalists.  Our Palestinian guide took us to the Aida refugee camp in Bethlehem for an uneventful, educational experience about how the locals live.  The local Palestinian kids decided to perform and threw rocks at the nearby Israeli soldiers.  The soldiers also performed by firing two tear gas canisters in the sky, before one landed five metres away, bounced and laid to rest at my feet.  Sadly I couldn't find a T-shirt that said ''I was tear gassed by the IDF and all I got was this T-shirt, stinging eyes and a decongested nasal passage.''

Tear gas is nothing compared to the experience of the small township of Sderot.  If Sderot residents hear the words ''red colour'' in Hebrew, they have 15 seconds until it rains Qassam rockets sent from the Gaza strip only a kilometre away.  That isn't very long, especially as it took five for our bus to stop and open its door.  I counted.  Fortunately Hamas weren't in the performing mood the day we visited.  I only have one bit of advice if you are considering travelling to Israel:  go!

For my sins, I observe international climate talkfests annually.  This year 8,000 environmental activists, rent-seeking businesses, media and negotiators attended.  Based on the current negotiating timeline a new global carbon cutting treaty is supposed to be concluded in Paris in 2015.  I'll have to make sure I am extra sinful that year.  I wasn't expecting to be greeted by a ''Green Warrior of Norway'' handing me a condom at the Polish National Stadium.  On the prophylactic's packaging were quotes about the evils of overpopulation and overconsumption.  Thankfully even far-left green activists recognised recycling's limits by warning that the product was for ''one usage only''.

A rare joy of attending these summits is spending time with like-minded, long-suffering free marketeers from across the globe, all three of them.  A fellow lonely sole at these events is Ron Bailey from the US-based libertarian Reason Foundation.  A disappointment of my travels is that they overlapped with the C.D. Kemp lecture.  This year's lecture was delivered by the best-selling author Matt Ridley.  He quoted Bailey for his erudite definition of the precautionary principle:  ''Never do anything for the first time''.  Bailey is a good dinner companion on cold Warsaw nights, but we have very different tastes in wine.

Climate talks are rarely eventful.  Negotiations are behind closed doors.  Journalists sit in the press centre typing copy.  The real colour and light is offered by activists.  They've mastered the art of providing snappy quotes and visual stunts for a gullible and bored media.  As climate change has dropped in public importance so have activist numbers.  The usual stunts are gone.  They symbolically walked out of the conference in anger at the progress of talks while chanting ''we shall overcome''.  After spending minutes in Warsaw's November climate they walked back inside to enjoy the warmth provided by the nearby coal-fired power station.

Each year a key negotiating theme develops.  This year developing countries wanted a ''loss and damages'' fund to help them finance the costs from major climatic events.  They used the Philippine typhoon as justification.  On the third last day the UN Secretariat installed donation boxes at 5pm so attendees could individually help Filipino victims.  By 7.15pm there was a solitary donation, and I am pretty sure it was put there to prime the pump.  Australia wasn't very popular at the conference.  Disconnected-from-reality activists and bureaucrats weren't impressed we elected an Abbott government that thinks carbon taxes are for repealing, not increasing.

I went through London to get home.  Aussie expat Jason Groves and his British civil partner and celebrated classical pianist Charles Owen organised a dinner in a rather swank Belgravia restaurant with fellow expat Gordon Adams and long-time friend and former Kiwi Shane Frith.  The quote of the night came from Charles who said, ''Not many British classical musicians regularly read The Spectator.  But the truth is, as soon as it arrives, I almost wet my pants with excitement.''  Over dinner I broke the cardinal ''one Martini is all right, two is too many, three is never enough'' rule.  Packing my bags to fly home the next morning was a challenge.

Sell off the ABC and show the way

On Wednesday in Canberra, Treasurer Joe Hockey urged his state colleagues to privatise state government-owned assets to fund infrastructure spending.  That's a good idea.  And Hockey should lead by example.  He should sell the ABC.

The Coalition's commitment to the government continuing to own the ABC is like its commitment to cut carbon dioxide emissions by 5 per cent by 2020.  It's not a commitment made out of any principle — and it's not a commitment that Coalition MPs are particularly enthusiastic about.

It's excruciating watching a Liberal MP defend taxpayer funding of the ABC in a room full of Liberal Party members and supporters.

In August, Joe Hockey said (on ABC television) that the ABC was not for sale.  He said the ABC doesn't make a profit, and it's "a cost centre, so it is not worth anything for sale".  The response to this is easy.  A company doesn't have to make a profit to be worth something.  Twitter has never made a profit but after its float earlier this month it was valued at more than $25 billion.  If the only barrier to the ABC being sold is that it doesn't make a profit, then that's easily remedied.  The Coalition could allow the ABC to accept advertising, let the ABC make a profit, and then sell it.

The reason the Coalition doesn't want to sell the ABC, and the reason it doesn't even want to discuss the topic, is because the Coalition thinks there are more important things to worry about — other things on which to spend its political capital.

PRINCIPLE WANTING

This analysis would be justified if pragmatism was the only touchstone of policy.  The Coalition has been pragmatic about the ABC for 50 years.

But if the Coalition considered the issue as a matter of principle, there would be absolutely no way it could support the ownership of the ABC by the government.

A state-owned media company has no place in a free society.  A free society requires a free media to hold the power of the state in check.  The ABC's so-called "independence" is merely independence from political interference by the government of the day.  The ABC is not independent of the state because it is a part of the state.  Furthermore, as the ABC grows, it crowds out the private and independent media which are essential elements of a free society.

A media organisation owned and funded by the government will inevitably take an ideological position in support of larger and more powerful government — which is precisely what has happened in Australia and Britain.

The ABC does some very good work and produces some excellent programs.  When Coalition MPs defend the ABC they often refer to the high quality of much of the ABC's output.  But the good works of the ABC don't defeat the principle that the government should not own newspapers — or television or radio stations.

PERFORMANCE NOT THE KEY

In the same way that the good things the ABC does don't justify it remaining in government ownership, the bad things the ABC does don't, of themselves, justify its sale.

The ABC should be sold as a matter of principle, not because in the past few weeks it has gravely damaged Australia's national security interests.  The ABC's disclosure of Australia's spying on Indonesia is not the first time, and won't be the last time the ABC has acted contrary to the national interest.  However, if the ABC is going to have a news and public affairs service, then the spying revelations of the past few weeks are exactly the sort of stories a news service would be expected to run.  The question is not whether what the ABC did was irresponsible — the question is why the government owns a news service in the first place.

Clearly, the ABC is not going to be sold any time soon.  It certainly won't be sold during the current term of the Abbott government, and it won't be sold during a potential second or third-term Abbott government.  But, if the Coalition one day becomes a little less pragmatic and a little more principled, the ABC will be sold by the Coalition government that will follow the next federal Labor government.

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Regulations driving up cost of electricity

In electricity supply, Victoria is widely regarded as the most competitive jurisdiction in the world.

Supply comes from dozens of generators including from three major businesses producing within the state.

Victoria's "poles and wire" networks are all privately owned and operate far more cost-effectively than those of other states.  Indeed, former prime minister Julia Gillard, though a lifelong socialist, urged New South Wales and Queensland to privatise their networks and thereby match Victoria's cost reductions.

And yet, according to information published by the Australian Energy Market Commission (AEMC), Victorian households' electricity prices are similar to those of other Australian states.  AEMC puts this down to Victoria's retail costs being three times as high as other states.  This is paradoxical because Victoria has Australia's most competitive retail market, the only one that's fully deregulated, and competition drives down high retail margins.

One reason for higher Victorian retail costs is the rollout of "smart" meters.  The Brumby government assured us this mandatory measure will be beneficial, but it adds huge costs.  However, even after adjusting for most meter rollout costs, apparent retail costs in Victoria remain twice those of other states.

Most of this discrepancy is illusory.  It stems from comparing the prices of the 20 per cent of Victoria's consumers who have stayed with their original retailer, and not taken advantage of better price offerings, with those in other states where everyone's price is regulated.

The Victorian Essential Services Commission has sought to make allowances for this.  It has suggested that AEMC measured average prices charged in Victoria might be overstated by as much as 14 per cent.

Even with this adjustment Victorian retail margins are high.  This is because Victorian regulatory measures raise the costs of doing business in the state, costs that have to be recouped, including:

• "CONSUMER protection" requirements that no retailer may charge late fees and difficulties imposed on retailers seeking to disconnect non-paying customers.
• HIDDEN costs of the "smart" meter rollout, with retailers required to move from four meter readings a year to 17,520.
• COSTS associated with the operations of the energy Ombudsman in Victoria, who has been particularly receptive to complaints.  Retailers incur all the Ombudsman's costs as well as internal complaint handling costs.
• THE low $20 maximum early contract termination fee which compares with a cost reflective fee proposed for NSW at $45-$130.

Politicians and bureaucrats fail to understand that costs loaded onto firms do not simply mean lower profits.  Firms that cannot recoup those costs go out of business.  We are seeing this with energy intensive firms that compete with overseas rivals unencumbered by Australia's various carbon imposts.

But electricity retailers face only domestic competition so regulatory burdens emerge as higher customer prices.

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A reputation for competence must be earned

Tony Abbott wants everybody to know he's running an "adult government".  This is a mistake.

That story is responsible for the strangely flat-footed response to the two scandals the Coalition has faced in government so far:  expenses and spying.

To both, the Prime Minister's defence has been a variation of "that's just the way the world works".

For nearly six weeks, Tony Abbott tried to bat the expenses scandal away.  His colleagues suggested that weddings were more business than pleasure.  But the ride-it-out, nothing-to-see-here strategy didn't last.  After letting the expenses issue fester for more than a month, the Government announced a crackdown in mid-November.

And Tony Abbott's first response to the reports Australia had spied on the Indonesian political leadership was, "That's hardly a surprise.  It's hardly a shock."

In other words, the adults already knew.  And adults don't apologise for doing adult things.

This is an audacious new crisis management technique.  Don't deny the scandal.  Don't deflect.  Instead, openly admit it.  But admit it with a knowing shrug.  Spies spy.  Some expenses are questionable.  So what?  That's just how it is.

It's audacious, but it hasn't been particularly effective.  The Indonesian government found our Prime Minister's reaction somewhat inadequate.

You may have missed it, but the Carbon Tax Repeal Bill was introduced to the Parliament on Wednesday last week.  Just think how frustrating it must have been for Coalition strategists to watch the Indonesia spy scandal unfold at the exact time they're trying to execute a political manoeuvre they've been preparing for four years.

The Liberal Party sent around campaign-style emails to inform its supporters of the tax's impending repeal.  Abbott made a YouTube video trying to goad the Senate into action.  The Coalition is working hard to pin high electricity prices on Bill Shorten.

Despite all that, the carbon tax repeal has been overshadowed by Jakarta's unhappiness.

The whole adult government thing was only ever supposed to be a critique of Labor's internal turmoil.  The point wasn't that Tony Abbott and his team were particularly mature.  It was just that the Labor Party was uniquely immature.

Recall that the best explanation for the otherwise inexplicable June 2010 spill is still that Kevin couldn't get along with the other kids in the playground.  This diagnosis became a big part of Coalition thinking.  An internal Liberal Party document described Kevin Rudd as a "self-centred two-year-old in an adult body".

It's a mistake to assume a story that works on the campaign trail makes sense in government.

The Abbott government is full of former Howard government ministers.  But most of them made their careers in the later years of that government.

They received their senior leadership roles after John Howard had held office for many years, after he had been firmly entrenched as an incumbent government, after he had built a degree of trust — that is, after he had proven to the voters that he and his team were adults.

A reputation for competence has to be earned, not assumed.  The Abbott government is trying to skip this crucial step.

Sure, scandals come and go.  They chip the edges off a government but rarely damage the foundations.  A few months from now nobody will remember the expenses affair.  The Indonesian relationship will recover.

The Coalition's stubborn attachment to its campaign narrative could have more important longer-term consequences.  Just ask Malcolm Fraser.

Fraser also came to power after a frenetic, unpopular, dysfunctional, and short-lived Labor government.  His story in 1975 was the same as Tony Abbott's in 2013.  To vote Coalition would be to vote the adults back in power.

Yet once the Coalition was back on the Treasury benches they drifted.  The aim had always been to aggressively break apart the Labor government, not develop an agenda for reform.

The Fraser government is now chiefly remembered in Liberal circles for missing the opportunity to open up the Australian economy.

Under Fraser the Coalition was slow and methodical.  Take its approach to the stiflingly over-regulated financial sector.  Malcolm Fraser first announced he would hold an inquiry into the financial system at the 1975 election.  Yet it was only in 1983 that his government begun the process of opening the Australian market up to foreign banks.  By that time it was too late.  Paul Keating had to do it for them.

Tony Abbott has repeatedly promised to take any big reform proposals to the next election, rather than springing them on an unwilling public.  Again, this only makes sense in comparison to Julia Gillard's broken carbon tax promise.

Yes, the Coalition needs to get out of the shadow of the last government.

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Climate talks mired again in rhetoric

The direction of UN climate change talks is repeating the mistakes of the failed 2009 Copenhagen conference, with serious implications for Labor if they continue to support the carbon tax.  The latest round of UN talks concluded yesterday in Warsaw, Poland.

While there are always declarations of "breakthroughs" and "progress", the seemingly uneventful talks were focused on technicalities and broad themes to inform the conclusion of a post-2020 international carbon-cutting treaty by the 2015 summit in Paris.

Successfully negotiating any new international treaty is difficult.  Negotiating windows always narrow as multiple, competing agendas are proposed by the 190-odd participating countries.

Treaties to cut greenhouse-gas emissions are not just about countries adopting emissions targets — they impact on competing economic, financing, energy, social, environmental, governance, security and sovereignty interests, to name but a few.

Nor are governments the only players.

Formal processes now include the views of different "constituencies" that attend the talks.

In Warsaw, big-business interests were pushing for governments to provide them with subsidies and the creation of speculative 'green' financial products that they can profit from, under the disguise of saving the planet.

Meanwhile, activists are pushing additional agendas on to the table, including climate change and health, equity, gender equality, human rights and development.

Every additional agenda included in negotiations adds costs and reduces the capacity for a deal to be struck.

Competing agendas ultimately led to Copenhagen's collapse.

A draft document released at this conference of "indicative elements" of the post-2020 agreement includes shifting the costs and obligations of cutting global emissions on to the developed world.

Under the banner of equity, developing countries expect countries such as Australia to shoulder most of the cost of reducing global emissions, even though developing countries are the source of future emissions growth.

That proposition is increasingly wearing thin.

Last year, Canada, Japan, New Zealand and Russia walked away from taking on new emissions reduction targets up to 2020 under the Kyoto Protocol because it didn't share the cutting load.

Similarly, the expectations on developed countries to financing the $100 billion-a-year Green Climate Fund to aid developing countries in adapting to a changing climate dogs negotiations.

Australia alone is projected to tip $2.4bn into the fund, but it doesn't end there.

As an observer of the Warsaw talks said this week:  "If you want to know where the negotiations are heading, follow the money."

This year's conference included formal discussions for another fund for "loss and damages" caused by climatic events.

The G77 negotiating bloc of developing countries and China staged a conference walkout because those expected to finance this new fund — Australia, the EU and US — want discussions to be left off the table until after 2015.

Like the Green Climate Fund, developing countries want a financed "loss and damages" fund as a tradeoff for developing countries to take on obligations in a post-2020 agreement.

With two years to go, the unresolved issues keep mounting.

In response, the UN Secretariat is trying to build momentum in the lead-up to the Paris summit to push a deal over the line.  Instead, it is looking more like Copenhagen, where negotiations were pushed over a cliff.

For domestic politics and policy, Bill Shorten should be learning from Labor's past mistakes.

Despite the forewarning that the conference would fail, Kevin Rudd married the introduction of his emissions trading scheme closely to the success of the Copenhagen international climate talks.

The talks were supposed to usher in a new agreement, where countries would discard national interest in favour of the internationalist objective of cutting global greenhouse-gas emissions.

Once Copenhagen imploded, the remaining legitimacy of Rudd's ETS quickly faded in the lead-up to the 2010 election.

Copenhagen's collapse also validated the Coalition's opposition to carbon taxation.

Despite the best efforts of the UN, outside of the lofty rhetoric and protestations of green groups there's little momentum for an agreement in 2015.

If the Opposition Leader allows the carbon tax repeal, he will go into 2016 with a clean political slate.

If not, he is likely to face an election nine months after the failure of yet another major climate summit wedded to an economically damaging and environmentally ineffectual carbon tax without the necessary global legal framework to justify or support it.

History need not repeat itself, but that requires Shorten to learn from Rudd's mistake.

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Problems Of The Real World

Institutional Economics:  Property, Competition, Policies
by Wolfgang Kasper, Manfield Streit and Peter Boettke
Edward Elgar Publishing, 2012, 608 pages

Recent generations of economists have been trained under the neoclassical approach to economic thought, providing distinctive perspectives concerning both the principles of economic behaviour and practical implications as to how to view, and indeed, change the world.

The most recognised, and arguably most controversial, feature of neoclassical economics is its paradigmatic conception of human conduct.  The quest to allocate scarce resources to fit needs and desires efficiently is easily managed when people are assumed to possess perfect knowledge about given relative prices, cost conditions and resource availabilities, when the transactions people make are costless, and when everybody is depicted as a "representative" agent (say, a household, producer or government).

Expressing the challenge of organising production, distribution and exchange in these reasonably straightforward terms tends to reduce economic problems to something akin to that found in engineering, or a discipline of the physical sciences.  In other words, all that representative economic agents have to do to achieve their ends is to maximise their preferences subject to the constraints placed in front of them.

It is not unreasonable to suggest there has long been a sense of disquiet about these principles animating the neoclassical paradigm, from a variety of perspectives.  One of the more powerful critiques was provided over many decades by twentieth century classical liberal Friedrich Hayek, who poignantly observed that neoclassical assumptions effectively strip away any rationale for economic conduct, as practically observed.

If humans are truly perfectly knowledgeable, that economic data is a given and transactions are conducted without cost, Hayek asked, then why do we observe real world economic coordinative processes that contradict everything that neoclassical economics holds to be true?

Partly in response to the Hayek question, economists engage in a slight tweaking of the strong neoclassical assumptions, here and there, to supposedly add some semblance of realism to their narrative.

The outcome of these tweaks, more often than not, is an extensive catalogue of scenarios in which decentralised markets supposedly "fail" to arrive at efficient resource allocations.  According to this line of thinking, if representative agents interacting in the market fail to dissipate inefficiencies then other representative agents, i.e. politicians and bureaucrats, should step in to assist helpless producers and consumers realise efficiency.  While pervasive as an intellectual train of thought within neoclassical economics, the market failure construct has not gone completely unchallenged.  In essence, two complementary critical perspectives have emerged.

First, Hayek and Ludwig von Mises pointed to the inability of political actors to allocate resources efficiently, when the freedom to acquire and dispose of private properties has either been extinguished or distorted by policy choices.  Second, public choice theorists, such as James Buchanan, referred to the capacity of political actors to conduct policies in ways inimical to the economic interests of the community at large.

In light of the limitations of neoclassical economics, there is a need to move toward economic paradigms characterising economic agents as fallible, yet capable of efficiently allocating resources even through enterprising behaviour, and duly acknowledging the prospective damage rendered by coercive state action to highly functional economic coordination by fallible, yet capable, beings.  Australian economist Wolfgang Kasper, together with fellow economists Manfred Streit and Peter Boettke, make serious strides toward a systematic account of economic phenomena, without the neoclassical downsides, in Institutional Economics:  Prosperity, Competition, Policies.

Following the path breaking first edition, which sold many thousands of copies internationally including in China, Institutional Economics provides the reader with an insightful exploration of topics, such as property rights, entrepreneurship, dynamic market competition and institutional evolution, not generally covered in mainstream economics textbooks.

The great mystery of economics concerns how it is that billions of strangers can manage to coordinate the production, distribution and exchange of resources.  Attaining a solution to this mystery has occupied the thoughts of successive generations of economists, at least from the time of Scottish moral philosopher Adam Smith in the late eighteenth century.

For their part, Kasper, Streit and Boettke offer an integrated account of human action in the economic realm, leading us toward a framework for solving the economic coordination mystery.  As the authors explain with a rare sense of clarity, billions of fallible, yet capable, people over the span of the globe manage to successfully coordinate with each other, generating wealth and prosperity in the process, because of a lack of centralised planning of economic arrangements.

How is this so?  How is it that people get fed, clothed, housed, transported and entertained, becoming wealthier as a result, without a Central Economic Planning Committee pulling the strings?

As thoroughly explained in Institutional Economics, changes in relative prices and profitability signal to market participants both the availability of resources and the intensity in demand for the resources.  Alterations in these signals also spur incentives on the part of producers to justly acquire resources, and transform them in highly specialised ways to create value for consumers.

All of these productive behaviours are crucially guided through a set of informal and formal institutions, ranging from trading customs and norms right through to government economic policies.

As Kasper, Streit and Boettke note, regions of the world characterised by honesty and courtesy in private dealings, protection of property rights, freedom of contract, monetary stability, low taxes, efficient government spending and streamlined regulations tend to be more prosperous than others which do not respect these institutional standards.

High taxation represents a more intensive extinguishment of property rights, reducing the rewards associated with productive economic conduct, whereas prescriptive regulations can artificially direct entrepreneurs towards less productive lines of action.  Wasteful expenditures by government, particularly for redistribution, reduce opportunities for private sector agents to direct resources for their own priorities and may encourage people to divert their attentions away from serving others and towards seeking political favouritism.

There can be no overstatement of the influence of quality institutions underpinning robust economic performance, and the precarious nature of retaining sound institutions.  Regrettably, these are painful lessons that ordinary Australians have become accustomed to in recent years.

Readers schooled in the neoclassical tradition of economics might be caught off guard by the interdisciplinary approach of Institutional Economics, which generously delves into aspects of other social sciences, such as history, law, and sociology.  For example:

Culture and civilization the values and institutional system, as well its more tangible elements constitute an important part of a society's capital.  It has important consequences for the effectiveness or otherwise of how physical resources of labour, capital and nature are converted to serve peoples' wants and aspirations.

Such an approach, however, is necessary given the ways in which real economies are affected by non economic perturbations.  In any case, this outstanding attribute of Institutional Economics conforms with Hayek's often overlooked, but essential, observation that one cannot be a good economist by confining oneself to economic studies.

There are numerous intellectual suitors to replace neoclassical economics, some being more persuasive than others.  The blend of Austrian economic insights with lessons from public choice, and other aspects of institutional economics, ensures that Institutional Economics is firmly at the forefront of the unfolding development of an economics that places realistic conceptions of human action at the centre of investigation.

The first edition of this book, published in 1999, has deeply influenced my thinking on some of the most complex economic questions of our time, and this revised and updated edition, released late last year, is already proving to be at least as intellectually engaging.

Should economic thought continue its trajectory away from the excessively simplistic foundations of modern neoclassical economics, there will be little doubt that books such as Institutional Economics will be shown to have played a significant role in the revitalisation of economics.

Liberty Understood

Realizing Freedom:  Libertarian Theory, History and Practice
by Tom G. Palmer
Washington: Cato Institute, 2009, 532 pages

On the inside cover of this book, Tom Palmer, a recent guest of mine in Australia, is introduced as someone who has lived his life by one ideal:  "Liberty is for everyone".  In addition to fuelling his academic life, the pursuit of this ideal has pushed him to smuggle books into the Warsaw Pact and the Soviet Union, and in recent years to lecture across the oligarchies and new democracies of the Middle East.  Realizing Freedom:  Libertarian Theory, History and Practice is a collection of essays, papers, submissions and articles that Palmer has written defending the concepts of individual liberty and free market capitalism.

The book is divided into four sections:  Theory, History, Practice and Books and Ideas.

Theory, the first, is the least engaging of the four sections, however it is still interesting and Palmer's intellect shines through.  Palmer is a libertarian, and this section features his works outlining libertarian philosophy and the dangers that collectivism and statism pose to the freedom of the individual.

The most important of these is his essay "No Exit:  Framing the Problem of Justice", which critiques the views of the influential communitarian John Rawls and the threats to liberty and justice his ideas would lead to.  Though not as important, the most entertaining is "Twenty Myths About Markets", where twenty common criticisms of the free market are articulated ― views everyone has heard countless times ― and dismisses them point by point.  It is arguably the most enjoyable essay outside of Practice.

Although Palmer touches on many ideas critical to liberalism, the most constant theme of Palmer's collection is the importance of the protection of property rights, and this is very present in the Theory section.  Palmer believes property rights are both the key to an economically free and productive society and the most misunderstood concept of the free market system.

Misunderstood in the sense that collectivists often confuse the idea of "limited government" in liberal thought as meaning "weak government".  Government should be limited, says Palmer, but it should not be weak.  Weak governments can be persuaded against protecting the property rights of those it represents, and if that is allowed to happen, the economic freedom of the individual is lost.

In the History section, Palmer critiques the Marxist interpretation of history and explains how a liberal interpretation is more accurate, as well as outlining how the modern concept of liberty has been cultivated over time.  Palmer sees history more as a struggle between the individual and the state rather than class-based, focusing on the separation between church and state, the limiting of the powers of kings and the rise of constitutionalism as essential developments in human history.  These are summarised in an article on mankind's biggest achievements of the last millennium, written by Palmer in 1999.  Though that article certainly comes close, it is Palmer's 1990 article on the collapse of socialism in the Soviet Union which is no doubt the standout of this section.

Those sections are enjoyable to read and well argued, but it is the Practice section of the book that is the most illuminating and reflective of Palmer's skills as a writer, thinker and campaigner.  This section includes Palmer's writings on the state of liberal thought in the modern world, and because of his extensive travel and experiences, he offers an insight extremely few people can hope to match.

For example, his article "Six Facts About Iraq" was penned after having "been to Iraq three times since the fall of Baghdad".  Whereas any writer could criticise the Egyptian government for imprisoning a student for blogging, Palmer's article is different because he had met and was in contact with the blogger, knew the background of the story, and had extensive knowledge of Egypt's political climate from his travels within the country.

This section also includes a speech Palmer delivered to members of the Iraqi National Assembly in 2005 on the problems of implementing democracy on a nation not used to it.  It is an incredibly interesting article that is intelligent and nuanced, but it stays with the reader for the envy it inspires towards Palmer's life.  What an existence it must be to travel from oppressed people to oppressed people and helping to fight for a system of governance that allows individuals to pursue happiness without fear of a tyrannical government.

The fourth and final section of the book, Books and Ideas, is a mix of reading guide and more libertarian theory.  The first article of this section is a collection of books Palmer believes is essential reading for students of classical liberalism.  It is an exhaustive list and Palmer has clearly put deep thought into it.  The rest of the articles are book reviews, though not mainly for books he likes.  These do turn into defences of libertarianism and individualism, however they are separated from the works in Theory because these are far more conversational in prose, and are at times exceptionally funny when exposing half-baked collectivist and statist philosophies, and nonsensical attacks on libertarianism.

Overall, Realizing Freedom is a book which serves as a glowing testament to a fierce campaigner for individual liberty and economic freedom.

A Conservative Titan

Edmund Burke:  Philosopher, Politician, Prophet
by Jesse Norman
London: William Collins, 2013, 320 pages

British Conservative MP Jesse Norman has written an excellent book about Edmund Burke.  It is a book in two parts, the first a reasonably straightforward biography of the subject and the second an analysis of his ideas, with a diversion into Norman's own political manifesto.

Norman joins a number of British MPs who have written biographies of former politicians, Roy Jenkins and William Hague being the best known.  Another recent example was Bill Cash whose biography of John Bright I reviewed in October 2012.  Cash tried to convince his readers that the demonstrably liberal Bright was a conservative;  Norman has the simpler task of justifying his view that "Burke is not a liberal".

Norman is essentially correct that despite occasional flashes of liberalism, Burke was a conservative.  He was influenced by the Enlightenment but never really of it and, as Norman puts it, Burke's "extraordinary achievement to be the first and greatest critic of modernity itself".

However, at the same time it is important to recognise that Burke was a Whig and many of the positions he adopted during his career were indeed quite liberal.  Burke was sympathetic to free trade, winning praise from Adam Smith;  he opposed British oppression in Ireland and India;  and he supported the American Revolution.  He also had an understanding of the role of a member of parliament way more sophisticated than many of his modern counterparts for, as he told the electors of Bristol in his famous 1774 victory speech, "your representative owes you, not his industry only, but his judgement;  and he betrays instead of serving you, if he sacrifices it to your opinion".

Burke served in the House of Commons for 29 years from 1765 to 1794, and while he only held office for a brief period, his career demonstrates that holding office and having lasting significance are two entirely different things.  Given his comparatively humble Irish roots, it was a tribute to Burke's intellect and writing skills that he came to be seen as a potential gained access to some of the leading cultural groups in London, mixing in clubby fraternity with the likes of Samuel Johnson, Joshua Reynolds and David Garrick.  However, his key patron was to be the Marquis of Rockingham, who engaged Burke as his private secretary, and then a few months later secured Burke a "pocket borough" in parliament.

At that time, Rockingham was in government, but he was not to be there for very long, being out of power for the next 16 years.  Norman gives great weight to the return of Rockingham and his Whig followers to government in 1782 describing it as "an extraordinary moment not just in Britain's political history but that of the world".  The fact that a parliamentary grouping, which had been on the opposition benches since 1766 had remained intact, remains in Norman's eyes "a remarkable and woefully under-recognised achievement".  This oversight is probably explained by the fact that Rockingham himself died within months of regaining the Treasury benches and, without him, the grouping fell apart, with the faction headed by Charles James Fox, and still including Burke, ending up in coalition with the dreaded Tory Lord North.

Norman describes Burke as the "main architect" of the Rockingham Whigs but, when the proto-party finally collapsed, it was because Burke walked out on it.

The party ended on 6 May 1791 when Burke announced to the Commons that his friendship with Fox was at an end, due to their wildly differing interpretations of the French Revolution.  Fox saw the French attempting to accomplish what the English had achieved in the Glorious Revolution of 1688 and ensure the end of tyrannical monarchical rule.  He believed that the Whigs had a duty to "support the transition to a new and stable constitutional order".  In contrast, Burke saw something radical and sinister, a case he made in his most famous book Reflections on the Revolution in France which was published in 1790.  Events in the next few years in France seemingly vindicated Burke, but the fact that the French Revolution got diverted into Jacobinism does not mean that this was the inevitable outcome.

To engender sympathy for Burke's position on the French Revolution, Norman paints it in the colours of Jean-Jacques Rousseau.  Thus Burke's views are juxtaposed against one of the least palatable philosophers in history.  Of course, this leaves out a vast range of positions, particularly liberal ones.  What lifts Norman above the role of pamphleteer is that he has the decency to point out to his readers that "in some ways the two men [Burke and Rousseau] had more in common than either might have cared to admit".  In similar vein to his use of Rousseau, Norman selects Jeremy Bentham as the apogee of liberalism, an odd choice, but one which allows him to what he clearly regards as the most favourable representation with Burke's conservatism.

Another disappointing characterisation comes when Norman tries his hand at some American political history.  He describes it as "astonishing" that, as Secretary of State, Thomas Jefferson undermined President George Washington and later tried to destroy the reputation of his former friend President John Adams.  He fails to mention that Jefferson had highly principled reasons for his concern about Washington, who had become overly influenced by the centralising Alexander Hamilton, while it was hard not to take strong issue with Adams when he was promoting the Alien and Sedition Acts, gross violations of civil liberties.

Late in the book, there is a whole chapter which is only tangentially about Burke.  Rather it uses Robert Putman's ideas about "social capital" as the launching point for Norman to outline his personal political philosophy.

Norman is smart enough to understand the benefits of liberal individualism, but also conservative enough to find fault with many of them and, intriguingly for a conservative, attacks liberal individualism for being Westerncentric.  According to Norman, "liberal individualism mistakes the true order of priority between the individual and society".  It does so because it places too much emphasis on rationalism when other factors, such as emotional attachment to our own community or country, or respect for habit and custom, should be given precedence.  It is another false dichotomy.  One can be a liberal individualist and also recognise that Burke's "little platoons" are a valuable part of making society work cohesively and enjoyably.  It is just that liberals do not want to make membership of little platoons compulsory.

For Burke and Norman, a free society is the product of a well-ordered society, not as liberals would see it being the other way around.  Given the number of well-ordered societies which have not had much liberty, history would hardly seem to support their case.

Norman generally handles the interaction of the public and private Burke well.  He is alert to some of Burke's faults, such as his reputation as a bore, relating that he gained the nickname "dinner bell" for his ability to clear the House of Commons when speaking.  Only once do his writing standards slip, which occurs when explaining why Burke was not a catch for his wife, as he had few prospects just "warmth, energy and talent" but, in a seeming attempt at chick-lit, comments that "the beautiful thing is that this was all she needed".  However, he redeems himself for this soppy sentence by writing a brilliant line about one of the most famous Tories of all, Benjamin Disraeli of whom he observes that "faithful to the principles of a lifetime, Disraeli then reversed himself completely".

While only having been an MP since 2010, Norman, who had previously worked in banking and academia, had already had a political impact with books such as Compassionate Conservatism (2006) and The Big Society (2010) earning him the description of "the preeminent intellectual theorist of Cameronism".  Yet, in his parliamentary career, he has led the biggest backbench revolt against Prime Minister David Cameron over reform of the House of Lords, resulting in a spirited altercation between the two men which helped win Norman the award as Spectator Parliamentarian of the Year for 2012.

While liberals will take issue with many of Norman's arguments, this is a well-written and thought-provoking book, highly recommended for anyone with an interest in the development of political ideas.

Dawn Of A New Class

Liberty's Dawn: A People's History of the Industrial Revolution
by Emma Griffin
Yale University Press, 2013, 320 pages

We can thank Charles Dickens for the way the term "Industrial Revolution" brings to mind the image of a grimy-faced Oliver Twist or a hungry David Copperfield roaming the mean, dirty streets of London.  In fact, Dickens' portrayal of the miserable life of the poor in Victorian England is now so entrenched that the term "Dickensian" has become a byword to describe that period of history.

It certainly makes for a good story.  The characters of Dickens' novels leap vividly from the pages ― wicked industrialists, petty criminals, cold bourgeois women, virtuous labourers and suffering children all trying to get by in times of great social and economic upheaval.  There can be little doubt the novelist deserves his place among the great literary masters.

Yet how accurate are Dickens' novels when it comes to reflecting the human experience of the Industrial Revolution and its aftermath?  If we take Dickens' word for it (and most people seem to these days), the lives of the working poor during this period were miserable indeed, with few redeeming features.  As it turns out, however, many people who lived through the Industrial Revolution tell quite a different tale about their experiences, a fact we now know thanks to a controversial new book by Emma Griffin.

Liberty's Dawn examines the autobiographies of nearly 350 working class people who lived the majority of their years between the end of the eighteenth century and the middle of the nineteenth century in Great Britain.

What Griffin uncovers in the crumbling, yellowed pages of these varied works is a unheralded fact:  the Industrial Revolution actually helped lift people out of poverty and delivered a better quality of life.  It may seem obvious, but it is a key fact that is too often overlooked in the bleak narrative usually painted about the lives of the poor during this time.

Of course, this is not to say that people, particularly children, didn't experience hardship or exploitation during the Industrial Revolution (Dickens' novel David Copperfield was, after all, partly autobiographical).  But the overarching theme that weaves its way through the tales of these autobiographies is that of self improvement ― that life finished up better than it had started and that the writers were able to take up new opportunities for both economic and social participation that had never presented themselves to the previous generation.  In short, things were getting better.  The mere act of writing their autobiographies demonstrates that these people were not so down-trodden and marginalised as we may believe.

The common experience of the men who left the land for work in the factories and warehouses of the nascent industrial hubs was that the work they performed there was "better than the labour which had consumed their fathers' energies ― and often their own early labours as well," according to Griffin.  There is a certain romanticism associated with pre-industrial rural life that leads us to believe people's lives were simpler, healthier and better than the lifestyles brought on by mechanisation and industrialisation.  The problem with this view is that it is not reflected in the first hand accounts of workers who experienced the change.  For our autobiographers, "rural roots were something to escape, not glorify".  Throughout the book we hear stories of the dissatisfaction of rural life.  Jobs were too few, and what jobs there were paid too little.  Agricultural wages were unreliable, hard to come by and barely enough to eke out the most basic existence for a man and his family.

These works, both published and unpublished, paint a rich and detailed picture of the lives of working people during the Industrial Revolution.  It says something about how little attention has been paid to the voices of these ordinary people that many of the autobiographies, before Griffin turned her attention to them, were "locked away gathering dust in the strongrooms and vaults of local history libraries and country record offices."

The harsh reality of rural life helps explain why so many people abandoned villages and hamlets for the industrial towns and cities springing up across the country at this time.  Factory work was not pleasant or easy, particularly by today's standards, but it paid well and importantly, it paid regularly.  It seems our autobiographers did not find work in the big city to be so objectionable as we might think.  As Griffin writes, "implicit in the accounts of good wages and plentiful work is a relative judgement about the alternatives that were available."

Industrialisation had two very important effects on the economy that are often neglected in the tales of woe about Victorian workers.  The first is that the new urban workforce, armed with better wages, created unprecedented demand for consumer goods.  They needed food, clothes, housing and the other staples of life ― and so new jobs sprung up to create and bring these goods to the cities.  Skilled workers enjoyed an increase in their demand for products.  As one autobiographer who was the son of a shoe-maker wrote, the trouble with the poverty of pre-Industrial Britain was that there were "plenty of feet requiring comfortable shoes, though too little money in circulation to pay for them".  Industrialisation fundamentally transformed this equation.  The barriers to entry into the skilled professions began to break down.  Once the craft of the privileged few, opportunities to enter the ranks of the carpenters, shoe-makers and other artisans were opened up to more poor people than ever before with the advent of industrialisation.

The second effect that is often largely ignored is the shift in employee/employer relations that occurred at this time.  The scarcity of employment opportunities before industrialisation left workers with little choice but to submit to the whims of their employers.  Many of the autobiographers describe an almost master-servant relationship with the landowner for whom they worked as an agricultural labourer.  Industrialisation shifted this power balance significantly.  Many of the autobiographies tell tales of young men leaving a position of employment to seek better wages or better conditions.  In fact, many of the autobiographers paint the leaving of one job to seek a better one as a watershed moment in their lives.

Walking away from a job, however awful and low-paying, was unheard of before the Industrial Revolution got going.  Once it did, deference and submission gave way to autonomy and independence ― things which the working poor rarely achieved while struggling under the yoke of rural poverty.  We should not underestimate the powerful social changes unleashed by this shift in the balance of power.

Of course, not all sections of society benefitted immediately and to the same extent as some of those whose positive experiences are documented in the book.  Women, for example, made up few of the autobiography writers and there is little evidence to suggest that industrialisation changed the rates of female workforce participation or increased wages for women at that time.  It must be pointed out, however, that this was largely the result of enduring cultural norms relating to marriage and motherhood, rather than factors arising due to the Industrial Revolution.  Griffin contends that women were unable to take advantage of the opportunities presented by industrialisation due to "the weight of existing social structures and cultural expectations".

Similarly, the experience of the Industrial Revolution by children certainly offends our modern sensibilities of what a childhood ought to be.  The image of young children working long, tough hours on the factory floor is one that has captured the imagination of many and contributed to the bleak picture that comes to mind when we think of early industrialisation.  As with women, however, child labour is more a function of Victorian era culture than any unique features of the Industrial Revolution.  Certainly the number of children working grew rapidly as a result of industrialisation, but Griffin points out this is a result of the fact that there were now more opportunities for parents to send their kids to work ― a tendency they had already exhibited before the onset of the Industrial Revolution.  Sadly, there was nothing new or particularly remarkable about sending young children to work at that time ― the difference the Industrial Revolution made was that there were more jobs to go around.

The dark and grim palate usually used to paint the Industrial Revolution leads us to mostly overlook the enormous social change it unleashed.  All too often we ignore the fact that while women and children certainly suffered before and during the Industrial Revolution, it was industrialisation that fundamentally transformed our societies and made them what they are today.  The concepts of feminism and child welfare simply did not exist as we know them until industrialisation paved the way for radical social change.

Liberty's Dawn highlights how this radical social change, wrought by the Industrial Revolution, increased the social participation of working class people.  This was partly due to a "flowering of new educational opportunities".  Night schools, Sunday schools, mutual improvement societies and mechanics' institutes sprung up during this period and provided new opportunities for working class people to gain literary and numeracy skills.  More than that, though, they provided opportunities for self-advancement.  These organisations, rudimentary though some were, required some organisational capacity.  Someone had to manage the day-to-day running, and that meant new chances to learn new skills.  Keeping books, managing enrolments, teaching your peers ― these are just some of the skills and knowledge picked up by the working class people who became involved in these organisations.  In short, these organisations didn't just provide education ― they provided leadership opportunities.  It's hard to overstate just how important this was to improving the social participation of working people.

It's no coincidence, then, that this period also coincided with the birth of political engagement by working class people.  It's often assumed that working people mobilised into a political force at around this time in response to poor working conditions.  Griffin provides a counter-narrative to this idea, arguing that such mobilisation would never have been possible before industrialisation unleashed new opportunities for social and political participation for working people.  She writes that "the flowering of clubs and societies at this time was not a symptom of the workforce's growing discontent but of new levels of freedom, confidence and autonomy."

Griffin points to the story of Thomas Dunning to illustrate this point.  Dunning was born to a poor single mother with few prospects of social mobility.  A kindly stepfather took pity on the young boy and taught him the craft of shoe-making ― allowing him to take advantage of increased demand for shoes and get by.  What's remarkable about Dunning though, is his modest rise through various political activist organisations in his area ― making secretary of his local branch of the Chartist Association, and becoming involved in many other causes to represent the interests of local working people.  Griffin points out that Dunning's story "captures nothing less than a social revolution".  A man like Dunning would never have been able to avail himself of such opportunities had he been born in the same conditions a century earlier.

The difference between their own lives and those of their parents and previous generations was a key reflection of many of the autobiographers.  It is striking how similar these reflections are ― they celebrate what they see to be significant and material progress in their lives.  They are upbeat and proud of their achievements.  Liberty's Dawn is controversial only because we can draw only one conclusion by studying these primary sources ― that the Industrial Revolution brought "immediate and tangible benefits for large sections of the labouring poor".  These benefits do not just include significant increases in the quality of life they experienced, although this was certainly significant.  These benefits also included autonomy, independence and a level of social and political participation unknown to these classes before industrialisation.

The Industrial Revolution marks a key turning point in history.  From the revolution to today, people have come to expect to see a level of material progress within their lifetimes.  Before industrialisation, progress within and between generations was painfully slow.  As one of the autobiographers concludes, "I only wish [my parents] had each lived to enjoy and to see the improvements I see".  Another writes he wishes his ancestors could "revisit the earth and see the domestic alterations, commercial improvements, and the wonderful and astonishing activities of life."

These are not the words of men who have lived miserable, down-trodden lives.  These are the words of confident and proud people who appreciate that the world they live in has improved immeasurably over the course of their lifetime.  That is the true legacy of the Industrial Revolution.

What is Tony Jones really worth?

There is currently much ballyhoo — in the Murdoch Press at least — about the release of secret files on the salaries paid to the top talent at our ABC.  Tony Jones, for instance, pulls down A$355,789, making him a one-percenter, as we used to say.  (Occupy Ultimo, anyone?)

But what are Tony Jones and the rest of the ABC mob really worth?  Economics can help with this question.

Karl Marx once said "From each according to their ability, to each according to their need."  It's a fine and noble sentiment that works well in small-scale societies, such as a hunter-gatherer tribe, or within the family.  Yet in the real world the problem with this mechanism is it is not what economists call incentive compatible.  People have an incentive to understate their abilities, and to overstate their needs.

When I taught economics of social issues I had a strict rule in my classroom about the four-letter F-word.

If you thought that something was as it was because it was "fair", or that something was wrong because it was "not fair" you were sent out of the class.  That's how children speak, not economists.  Yet many of what I presume are adults (in the various letters to editors, blogs, twittering) have argued that these wages paid to the ABC talent are not fair.  Or that criticism of the ABC is not fair.  That's not going to get us anywhere.

In modern economic theory, people are paid what they are worth.  In a competitive market, you are worth your marginal revenue product.  That's the additional value to the company's revenue that your additional labour adds.  Theoretically, a well-run company will keep hiring up to the point where the wages of the last person hired (the marginal cost) equals the added value to revenue that they produce (their marginal revenue product).

Now this is a theory and in practice all sorts of other considerations come into it.  But it provides a framework for thinking about what a particular unit of labour is worth.  So what about this ABC talent?  What is its marginal revenue product (MRP)?

Here's the thing:  we don't know that because there is no revenue from which to figure this out.  Public broadcasters don't sell into a market.  When the commercial broadcasters pay their talent the big dollars they do so because they do know their MRP.  They know that adding Johnny Bigsmiles to the breakfast line-up will bring in 100,000 extra viewers, which they can sell to advertisers for A$10 each, making Johnny's MRP A$1,000,000.  In a competitive market for media talent, that is also Johnny's wage.

But in public broadcasting, there is no way to figure out the MRP, and so no basis for figuring out the proper wage, other than by comparison with the market generated price.  So Jimmy Seriousface at the ABC gets a wage that is based on some comparison with Johnny's wage.

Note this is not just a problem for the ABC, but affects the whole of the public sector's pay scales, none of which have access to true prices from which to figure out MRP and thus wages based on economic worth.  Back when people thought market socialism might work, the same problem arose.  The theory was that every country could be socialist except one (Switzerland, say), which would need to remain capitalist so that it could figure out the correct prices to be copied by all the other countries.

The real question is about the legitimacy of the comparison with the market-determined wages.  Here the economics gets trickier.  The theory of efficiency wages suggests that motivating efforts requires some degree of comparability.  The theory of compensating differentials means that because of the perks of public sector work (greater job security, for instance), public sector work will be less well remunerated compared to the private sector.  In the economics of information, high salaries can serve as a screening mechanism to encourage people to invest in revealing their true talents and capabilities, which may mean investing many years working for very low wages in order to have a shot at the top jobs.

Another theory is that public sector wages need to be "competitive" in order to attract top talent.  But that's a sly argument, because it's zero-sum:  the talent attracted is now no longer available in the private sector, where it may have added greater value.  A Tony Jones at the ABC is no longer available to produce the great work in the market media environment, which is presumably the poorer for that.  Competitive wage claims based on attracting talent may make us all worse off (except for Tony, of course).

The point is that while we may know in theory how to figure out what someone is worth, in practice this is extremely difficult, and doubly so where we cannot rely on the marginal contribution to firm revenue.

So how should we figure out what Tony Jones is really worth?  The reality is that in a market economy we can figure that out, but in a non-market economy (such as the ABC operates in) we can't.  Selling the ABC and seeing what extra value we get for Tony is probably the only sure fire way we can resolve this dilemma.

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Queensland party crackdown out of control

Every government has a reform program of some description.  The reform program of Campbell Newman's Queensland government is to expand, to a ludicrous and dangerous extent, the powers of the police.

Admittedly, the title of the Police Powers and Responsibilities and Other Legislation Amendment Bill doesn't have the same sort of grunting aggression as the Vicious Lawless Association Disestablishment Bill, which was passed earlier this year to target bikies.

But for all the absurdities of the anti-bikies legislation, the bill currently being considered by the Queensland parliament is probably worse.

The bogey-man in this bill is "out-of-control" parties.  No doubt you can conjure up such a threat to public order in your mind.  Hundreds of drunk teenagers spilling out on the street and damaging nearby property.

But according to the draft bill, a party is a gathering of twelve or more people.  And it is considered out-of-control if three people at that party do something like be drunk in a public place, cause excessive noise, unreasonably block the path of a pedestrian, litter in a way that might cause harm to the environment, or use "indecent" language.

The punishment for holding a party that gets out-of-control?  A $12,000 fine or a year's jail.  In other words, a party host is punished for the actions of party guests.  For good measure, the bill allows police to enter property uninvited without a warrant.

Out of control parties are a classic moral panic.  They involve teenagers.  They involve alcohol.  They involve new technologies — house parties are now being organised on social media.  This apparently makes them worse than they used to be.

Of course before Twitter and Facebook there was the text message.  People panicked about text message parties too.  And before text messages?  Well, teenagers clearly found some way to organise wild parties that ended in arrests.

Modern police forces have existed since the nineteenth century.  For two centuries parliaments have been loading the criminal statutes up with new offenses.  According to the government, "the ever increasing size, frequency and societal impact of these out-of-control events in recent times has necessitated the development of specific legislation".  Yet everything that makes an out-of-control party out-of-control is illegal already.

It is already illegal to be drunk and disorderly.  It is already illegal to riot.  It is already illegal to harass pedestrians, use indecent language, breach the peace, be a public nuisance, threaten another person, throw a bottle, damage property, assemble unlawfully, supply minors with alcohol, fight, show your private parts in public, be a hoon, light fireworks, endanger the safety of another individual, litter, trespass, and be excessively noisy.

A recurring feature so many legislative proposals in our modern era is that they mirror existing offenses.  At best, this makes them redundant.  At worst — as in this anti-party bill — they offer prosecutors and law enforcement officers a menu to pick and choose whatever charge will meet with the greatest punishment.

In other words, they vest police officers and prosecutors with enormous discretion to act, arrest, and charge however they like.  It has to.  There's no way the Queensland police could enforce the law, as written, on any of the innumerable parties that occur every weekend across the state.  Three people swearing at a party of more than a dozen guests that annoys the neighbours?  Hard to imagine a party that wouldn't fit this criteria.

A basic tenet of liberal democracy is that politicians — the representatives of the people — write the laws to shape the society they want.  The permanent, administrative arm of government merely enforces those laws, neutrally and consistently.

That's the ideal, anyway.  But not all statutes are enforced equally.  The police, and their prosecutors, have an enormous amount of discretion about what laws they chose to focus on.  (Hence the periodic "crackdowns" on jay-walking or speeding.  If all laws were enforced at all times, there would be no need for crackdowns.)

No matter how many rules we impose on police work, discretion is inevitable.  Inevitable but not desirable.  A liberal democracy is a government of laws, not a government of men, as James Adams said.  As far as possible, we don't want to trust justice and our liberty to the judgment of fickle individuals.

Police officers are no better or worse than the rest of us.  There are bad eggs in law enforcement, as there are in the general public.  And good eggs can sometimes have bad days.  Queensland's anti-party legislation empowers good eggs and bad eggs alike.

As does the anti-bikies legislation, which is so over-blown that it borders on surrealism.  Such laws invite the sort of miscarriages of justice that a liberal democratic legal system should strive to avoid Australians who don't live in Queensland should be paying attention too.

One feature of Australian federalism is that states learn from each other.  A law in one state is apt to be copied by another state.  We saw anti-bikies laws replicated across the country earlier this decade.  No question that all state governments will consider imposing Queensland-style laws themselves.

Defending his out-of-control parties bill, the Queensland Police Minister has argued that "the majority of people who do the right thing have nothing to fear".  Well, that's not the way the bill is written.  Not if the letter of the law is enforced.  No free society should rest their liberties on the discretion of the agents of the state.

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Why we must save more and the government must spend less

As well as establishing the Commission of Audit to ferret out savings, Joe Hockey has foreshadowed a sweeping inquiry to commence next year into Australia's financial system.

Such reviews in the past have focused on how to get a more level playing field between different financial institutions and how to overcome regulatory distortions.

However, in announcing the future inquiry, the Treasurer stressed that, "one of the main terms of reference will be to focus on how we as a nation can fund ourselves without relying on borrowing from the rest of the world".

Matching our aggregate levels of savings and investment (which is different from avoiding foreign investment) is a reasonable approach for a nation at Australia's stage of wealth and development.  A recent Deloitte report suggested we are not saving enough in superannuation by about 50 per cent, given retirement lifestyle aspirations and projected longevity.

The Commonwealth has commitments to higher levels of spending on education and disability in addition to the inexorable rise of health spending that an ageing population entails.  These factors appear to tilt expenditures further away from saving and towards consumption.

Maybe the Commission of Audit will help reverse this but that would represent a huge turnaround.

On average over the past 30 years, we have supplemented domestic savings by net capital inflows equal to about 4 per cent of national income.

These net capital inflows add to our income levels, though not, of course, as much as if we increase domestic savings by lowering our current levels of consumption.  Moreover, although the Australian economy has performed quite well over recent years, it has not done so over the longer term, nor compared with Korea, Taiwan, Singapore or China.

Since 2006, Australia's national investment has averaged a little under 28 per cent of GDP.

This is relatively high by sybaritic Western world standards, but low compared with many less wealthy countries (in China, savings are more than 50 per cent of GDP, while in Korea, Hong Kong and Taiwan they are more than 30 per cent).  These high savings levels by both rich and poor nations, contradict assertions that Australians cannot afford to save more.  In fact, one implication of the Deloitte's report is that we have to do so.

One reason we are under-saving is that the tax code favours consumption over savings.  "Earned" income is taxed at source and income on the part that is saved (representing consumption tomorrow) is taxed again.

A neutral regime would tax income only when it is spent and would not tax the interest or dividends on that part saved.

This was a central issue of the Henry Tax Review.

Ken Henry pointed out, "If you impose a 30 per cent tax on the returns to both work and saving, the effective tax rate on consumption, if you consume immediately, is 30 per cent.  But .... if you defer consumption for 10 years, the effective tax rate rises to around 40 per cent.  If you defer consumption for 20 years, it rises to around 50 per cent.  When inflation is taken into account, the compounding effect of the tax rates is, of course, even more extreme."

Tax concessions feature prominently in those nations with high savings rates.  Among other savings incentives, India allows the first 10,000 rupees ($171) tax free, (a significant sum when average incomes are only 72,000 rupees);  China has a concessional 20 per cent on interest, dividends etc and Japan, during its high- growth era.  effectively had no tax on household savings.

Australia also has lower taxation on certain savings.  Superannuation contributions incur a 15 per cent flat rate on voluntary contributions of $25,000 to $35,000 per annum depending on age and on the 9.25 per cent compulsory superannuation levy.

That compulsion on savings is in place because many Australians, like people in other wealthy nations, would choose to save less than they need.

This reflects most people's perceptions that an aged pension will be paid to them from future income earners.  Equity issues aside, current income earners' lower savings levels diminish future revenues that would enable this.

To adjust the fiscal regime away from one that taxes savings and future incomes means a considerable but welcome rejigging of the tax system to provide tax shelters for savings.

In addition it would require a marked reduction in government outlays, which are overwhelmingly allocated to current consumption.

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Australia steps off road to a climate dead end

After six years of negotiating for Europe's best interests, the Abbott government has sensibly aligned Australia's position in international climate change talks to the national interest.

Recently the Abbott government announced it wouldn't be lumbering Australia with more burdensome emissions cuts at this week's climate change negotiations in Warsaw, Poland.

Instead the bipartisan 5 per cent cut of emissions off 2000 levels would remain and no further tax dollars would be on offer for emissions reduction financing programs.

It's difficult to overstate the strategic realignment of the new government's sensible policy change.

To increase their clout and aid the negotiating process countries combine to create negotiating blocs.  The developed world breaks into two main blocs — the European Union and the loose Umbrella group of non-European developed economies.

The negotiating trajectory of the Brussels-led delegation has been to argue for a binding international agreement while progressively putting more ambitious proposals to cut emissions on the table in the hope that both rich and poor countries will follow their leadership.

REALITY CHECK

Since its foundation after the negotiation of the Kyoto Protocol, the Umbrella group has largely served as a counterbalancing reality check on Europe's ambitions.

Broadly, the Umbrella group has argued for a voluntary approach to cut emissions using policies that suit each country's national interests, while also insisting that developing countries that are the source of rising emissions also carry their share of the carbon cutting load.

Yet despite being chair of the Umbrella group, under the Rudd and Gillard governments Australia drifted toward the European position.

The absurdity of Australia's break with Umbrella group countries was highlighted at last December's negotiations surrounding the extension of the lapsed Kyoto Protocol.

On December 31 last year the first phase of the 1997 treaty expired.

In the second phase, European countries signed themselves up to cut emissions by 20 per cent off 2000 levels by 2020.

The current round of climate change talks is to secure a successor to Kyoto by the end of 2015 to then become operational after 2020.

The response from almost all of the Umbrella group countries to the European Union's "leadership" was to book flights and go home.

Having not ratified the first Kyoto phase, the United States did nothing to correct its course.  Countries that had previous ratified the Kyoto protocol, including Canada, Japan, New Zealand and Russia, followed the United States' leadership.

DEEPER CUTS

The Gillard government did the reverse and extended Kyoto and signed up to deeper cuts.

Worse, the then-opposition, keen to avoid the climate change wedge that the Rudd opposition rammed between itself and the Howard government in 2007 about ratifying the original Kyoto Protocol, lined up with the government.

Even after the election, the Climate Change Minister, Greg Hunt, reaffirmed the newly commissioned government's policy of following through Labor's plan to extend Kyoto arguing "in opposition, we gave in-principle support, in government, we still have in-principle support".

Hopefully the renewed wariness of the Abbott government to international climate talks may prompt a reassessment.

Despite the heavy cost that the struggling European continent is imposing on itself, having imposed burdensome emissions cuts the European negotiating position does make a modicum of sense.

Once the heavy cost of policies to cut emissions is imposed, Europe's interest is squarely to get other countries to commit themselves to comparable action.  If they don't, Europe shoulders the cost of cutting emissions while global emissions continue to rise.  Meanwhile, Europe has met its emissions targets through a mix of economic collapse during the global financial crisis and buying cheaper emissions cuts from developing countries.

But it appears that even Europe's position is fracturing.  Major coal producing and consuming countries are increasingly voicing their concern about the path Brussels is leading them down.

Recently the Polish environment minister was reported saying "this concept of leading by example is not delivering" and follows earlier Polish vetoes against Europe increasing its emissions cuts.

Not that Poland is alone.  On Friday last week, the Japanese government formally confirmed its previously hinted decision to reduce its 2020 emissions reduction target from 25 per cent to only 3.8 per cent.  Both economic and environmental factors are at play in Japan's decision;  the most notable being their choice to use coal, oil and gas for stationary energy to replace nuclear power post-Fukushima.  Japan's act is a salient reminder to green groups that opposing nuclear power and demanding higher emissions cuts is an oxymoron.

It's also a clear signal that despite the backdrop of hefty rhetoric from Labor and green groups to the contrary, the Abbott government's disengagement to burdensome targets is closely aligned to like-minded countries.

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Policy failure led to loss

The election of the Abbott government a little over two months ago heralded the end of arguably the worst government in modern Australian history.

While injurious political leadership changes and subterranean shifts in internal political alliances unquestionably contributed toward instability of public administration, the fact is that innumerable policy failures, unfolding over six years, were the key causes for the change in government in early September.

In no particular order, arguably the five worst economic policy failings overseen by the Rudd and Gillard governments were as follows:

Carbon tax and climate change

After three years of policy uncertainties over the timing of an artificial emissions trading scheme organised by government, Julia Gillard became central to one of the more infamous episodes in Australian political history when she introduced a carbon dioxide tax, in direct contrast to an August 2010 pre-election statement not to do so.

The Labor government also extended the Howard government's scheme of mandating the use of renewable energies in Australia's energy mix by 2020, giving emphasis to the installation of subsidised solar panels and solar water heaters by households.

To administer the Rudd-Gillard green leviathan, the government employed over 1,000 staff in a Climate Change Department, a Climate Commission publicity body headed by climate change alarmists, and a gamut of smaller agencies dedicated to doling out corporate welfare subsidies and loans to wind and solar power companies.

Determinations of allowable price increases by state electricity regulators have shown that about eight per cent of average retail residential electricity bills is accounted for by the carbon tax, with the renewable energy target and other green schemes raising costs by another four per cent.

Fair Work Act (FWA)

The erection of a centralised workplace relations regulatory apparatus, under the Rudd-Gillard FWA, was arguably the greatest concession accorded to the trade union movement for its astonishing $30 million in financial support for Labor's 2007 election campaign.

The capacity for individual employees and their employers are arrive at their own bargains over working conditions has been severely curtailed under the Rudd-Gillard workplace relations regime.

In addition, representatives of trade unions have been legislatively granted unprecedented "right of entry" into private sector workplaces.

Under the sprawling Fair Work bureaucracy, including a Fair Work Commission with significant arbitral powers, decisions such as rising minimum wages, elaborate penalty rates, and recent hikes in economy — wide regulated wages for apprentices threaten the capacity of young people and the unskilled to attain secure employment.

Unemployment had risen in trend terms over the life of the Rudd and Gillard governments, remaining consistently at about one percentage point higher than under the predecessor WorkChoices regulations.

While many factors inform unemployment outcomes, there seems little doubt that implementation of a centralised workplace relations system, which has fuelled rising labour costs in recent years, would be one of these.

Fiscal mismanagement

One of the more enduring policy failings during the Rudd-Gillard government was its deliberate destruction of Australia's sound public financial management settings, and its repeated, but tragi — comically unfulfilled, promises to return the federal budget to surplus.

Deeming discretionary interest rate reductions, exchange rate depreciation and automatic fiscal stabilisers as insufficient to rescue Australia from widely — held pronouncements of economic doom during the 2008-09 global financial crisis, the Rudd government plunged the budget into deficit and became a global frontrunner in the race to rack up public debt.

Rather than saving the economic structure of Australia, the stimulus package distorted our economic structure by prioritising political objectives, such as the desire to tide over unionised construction workers for several months, in some cases years, by refurbishing or constructing primary and secondary school buildings, over private sector priorities.

As is well known, some of the stimulus programs were also implemented at a heavy human cost, such as the tragic home insulation program originally proposed by Bob Brown and the Greens.

Leaving behind a budget deficit of some $30 billion, and gross public sector debts perilously close to the $300 billion mark, the former government has left behind a legacy of fiscal imprudence and waste which is likely to take many years to resolve.

National Broadband Network (NBN)

With much fanfare prior to the 2007 election, Kevin Rudd proposed a NBN providing high-speed broadband internet services, at a cost to the Australian federal taxpayer of about $5 billion by 2013.

Originally intended to be undertaken in partnership with the private sector, in early 2009 the government announced it would itself spend up to $43 billion replacing Telstra copper wire infrastructure with fibre optic cabling.

Whereas the projected costs of installing the NBN have blown out astronomically, the rollout and customer targets had been dramatically curtailed by the former government over time.

In 2010 the government promised that the NBN would be available to 1.3 million premises, and servicing about 500,000 people, by June 2013, however the latest information reveals that the network has passed only 207,500 premises and less than 34,000 households were actively using the service.

Labor's broadband policy clearly represented a throwback to the period prior to telecommunications deregulation, as taxpayers are forced to bear the costs incurred by a governmental monopoly, NBN Co, charged with rolling out the network.

The Rudd-Gillard government has lumbered taxpayers with an infrastructure white elephant of colossal scale which, in the absence of corrective actions, will deliver internet at slower speeds than other countries and at much higher costs.

Live cattle export ban

There is never any delicate manner in which cattle can be slaughtered to provide nutrients for the masses, but the suspension of the month-long live cattle trade to Indonesia in mid-2011 has simply been an unwarranted economic disaster for an efficient and reputable agricultural industry.

Inspired to act by sensationalist reporting by Australian state-owned media about animal welfare practices overseas, the Gillard government's temporary halting of live cattle exports to Indonesia deprived hard — working cattle producers in northern Australia of an ability to generate incomes.

The ban also severely disrupted elements of the beef supply chain in Indonesia, and has needlessly strained economic and diplomatic relationships with our northern neighbour.

The adverse combined effect of these, and other, policy positions adopted during the terms of the Rudd-Gillard government were manifold, and included the declining cost competitiveness of business, reduced job opportunities especially for those on the fringes of the labour market, and, more generally, reduced economic freedom for all Australians.

Unless what is left of the former crop of Labor government ministers and backbenchers concede the gross errors of their policy ways from 2007 to 2013, they are at risk of being left on the political sidelines as the Abbott government gradually takes credit for correcting past policy mistakes.

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Ultimate sacrifice should not be politicised

Paul Keating said that when you change the government, you change the country.

But if you're Paul Keating you get to keep on changing the country regardless of the fact you lost government 17 years ago.  If you're Paul Keating, the nation's tax­­payer-funded cultural institutions give you a platform for your views on politics, history, and all that's wrong with Australia.

This week the ABC started broadcasting its interview series with Keating.  Why the public broadcaster should provide Keating the privilege of talking about himself for four hours in prime time is a question the new Coalition government will probably be too afraid to ask.

When you change the government it seems you don't get to change the ABC.

It's one thing for the ABC or our public universities to indulge Keating — that's what you'd expect.

But for the Australian War Memorial to give Keating a stage for his partisanship and politicking is a travesty.  The War Memorial is an institution that must be above politics and it must be seen to be so.

On Monday, Keating delivered the Remembrance Day commemorative address in Canberra at the War Memorial.  In it he gave the classic leftist interpretation of Australia's history, which is of our past as the march towards an inevitable social democracy.  This interpretation of our history is what the national curriculum now requires to be taught to every school student.

After the address, a bronze plaque at the entrance to the Hall of Memory was unveiled.  On the plaque is inscribed the text of the Remembrance Day speech Keating delivered at the War Memorial in 1993.  Also unveiled was a new inscription on the Tomb of the Unknown Soldier — "He is one of them, and he is all of us" — words taken from Keating's speech 20 years ago.

The decision of the Council of the War Memorial to venerate Keating in such a way is more than inappropriate.  It besmirches the memory of those the memorial commemorates.

A few weeks ago it was revealed the War Memorial Council had originally planned to not only put Keating's words on the Tomb of the Unknown Soldier but also remove from the tomb the inscription "Known unto God".

Following the intervention of the new Coalition government, a "compromise" was agreed.  Keating's quote would still be added to the tomb but "Known unto God" would stay.

Such is the way the left operates.  It makes an ambit claim that swings the pendulum of what is acceptable two degrees to the left.  Then, in the name of compromise it agrees to swing the pendulum only one degree to the left.

When Tony Abbott next lays a wreath at the Tomb of the Unknown Solider, Keating's words will stare him in the face.

The only compromise the Coalition should have provided to the War Memorial Council after the council's plans were discovered was to offer to accept the resignation of the council members rather than have them sacked.

There's no justification for the reverence given to Keating's 1993 speech.

Parts of it are moving and noble, but other politicians have also made moving and noble Remembrance Day speeches.  John Howard in 1997 talked of those Australians "whose lives were lived in deeds, not years, in sacrifice, not heartbeats in service ...".

Keating's "He is one of them, and he is all of us" is nearly as trite as Julia Gillard at the ALP national conference in 2011 declaring "We are us".

Significantly, not in his speech in 1993 nor on Monday did Keating once refer to the freedoms at stake in our country's conflicts.  In contrast in 1997 Howard spoke of those who fought to ensure our "freedom to think, to move, to speak, to worship, to have a say in the election of governments ... [and] to raise a family and to educate our children".

The words of neither John Howard nor Paul Keating should appear at the War Memorial.

It is not for any politician, living or dead, Liberal or Labor, to take ownership of the sacrifice of those who fought and died in Australia's wars.

It is not within the gift of any member of the Australian War Memorial Council to give a politician such ownership.

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