Taxing claims hot air

From July 1 next year, Australia is going to discover a carbon tax and trade barriers have the same disastrous economic impact.

Trade Minister Craig Emerson argues that the introduction of a carbon tax ''points to Gillard Labor governing in the Hawke-Keating tradition''.

The Hawke-Keating ''vibe'' that Emerson argues the Gillard Government is channelling is that policy changes presently being introduced, including the carbon tax, will provide foundations for a more flexible, dynamic and competitive economy.

But the economic benefit of trade liberalisation and floating the dollar cannot be compared with the introduction of a carbon tax.

At its heart, the past three decades of positive economic reform led by the Hawke-Keating and Howard governments removed barriers and distortions in the economy that misallocated economic resources and stopped Australia pursuing its comparative advantage.

Or, in layman's terms, producing things that we can most competitively to reduce costs to households and be internationally competitive.

Importantly, those reforms scrapped the false foundations that tariff and non-tariff trade barriers created for protected industries.

This stands in stark contrast to the carbon tax and its successor emissions trading scheme.

A carbon tax is designed to tax out of competitiveness otherwise-viable businesses within Australia's comparative advantage, and tax into competitiveness those that are not.

It's precisely why government Treasury modelling assumes so many foreign permits will be traded into Australia's scheme.

Our lack of capacity to cut emissions is not a result of absent enthusiasm.  It's not something we are competitive at because our emissions profile is dominated by burning coal for electricity, and the tax price needed to successfully tax it out of competitiveness is absurdly high if we want to keep the lights on.

If the rest of the world had emissions trading, Australia would be one of the last developed countries on earth you would try to cost-effectively cut emissions because it would always be cheaper to do it elsewhere.

A carbon tax operates as an ever-increasing internal tariff.  A carbon tax acts as false foundations to give lower-carbon industries an artificial boost, which will escalate over time as the tax rate goes up and permits are removed from an ETS, increasing the price of emissions permits.

Trade barriers, such as tariffs, act in the same fashion as a carbon tax, by taxing out of viability imports that compete with otherwise uncompetitive domestic production.

Non-tariff barriers ranging from abused quarantine standards, rules of origin certification requirements and compulsory labelling standards to prompt consumer boycotts have the same effect as tariffs, through a less transparent economic profile.

And the havoc trade barriers caused in distorting the unsustainable allocation of economic resources in the Australian economy from World War II until the start of reforms in the 1970s will be repeated.

The only scenario where an internal carbon tariff won't cause economic harm is if every other major competitor country takes on equivalent self-flagellation.  But that clearly isn't happening.

Such proposals aren't even being discussed in the US.  A recent commissioned review panel report recommended that New Zealand engage in liberalisation of its planned phase-in of its scheme.

Only Europe has made equivalent steps in the same direction as Australia, with the massive allocation of free permits though Europe's emissions reduction has occurred from reduced economic activity from the global financial crisis, exporting industries and jobs offshore to countries without equivalent carbon prices and the purchase of permits from developing countries through international emissions trading.  But the latter isn't looking like a viable ongoing option, with the World Bank recently reporting that the international carbon market is in recession as the world waits for the elusive successor agreement to the Kyoto Protocol to be negotiated.

That's why Japan and South Korea, understandably, are holding off introducing any scheme that acts as an internal carbon tariff.

The only commonality between the Hawke-Keating reforms and Gillard's carbon tax is that through the lifetimes of the government the rates imposed will change.

But unlike Emerson's 1980s employers, who gradually phased down the rate of false foundations and misdirection of capital in the economy, the Gillard Government is set only to increase them into perpetuity.

Where the Liberals went wrong

When you change the government, argued John Howard in the last few days before the election, you do change the direction of the country.  Paul Keating's clarion call proved to be just as ineffectual the second time round.  That could perhaps be because it obviously isn't true.  Despite the high level of state economic and social intervention in Australia, the nation isn't steered by Captain Government.

Part of the problem that the Coalition faced in its final years was the unwillingness of government to grapple with key demographic and social changes.  Similarly, in industrial relations, the rise of independent contracting has been meteoric to the extent there are now far more self-employed people than members of a union -- but the cause of this change was economic, not legislative.

Between 1996 and 2007, a lot of things happened and very few of them were the consequence of Commonwealth legislation.  The "change the country" line was doubly inappropriate because of the status quo strategy of the Rudd Opposition.  Federal Labor's big-ticket items may have been climate change and broadband but fibre optic networks and carbon trading don't win elections.

Rather, it was Labor's mantra of economic conservatism that was specifically designed to repudiate Howard's argument.  To try to emphasise their credentials, Rudd and Gillard repeatedly affirmed the independence of the Reserve Bank -- as if that was ever up for grabs.  The message was simple: vote for the ALP and they won't change the country.  But if you vote for the Coalition, they will embark on another round of industrial relations reform, and the country certainly will change.

The Howard government became alienated from its own record of conservative governance.  The 2007 election re-established the status quo brand in the minds of political strategists.  It will likely go down as one of John Howard's major legacies, and it is largely a positive legacy.  With the government's extraordinarily flattering economic record, it is no wonder voters prefer more of the same.

Unfortunately, brand status quo has applied to areas which advocates of liberal philosophy -- that is, the ideological combination of limited government and the open society -- would prefer it did not.  Despite their professed sympathy with small government principles, the Coalition delivered no reduction in discretionary spending and its election promises foreshadowed no future reduction.

Along a wide range of public policy areas, the Howard government could have done more.  Industrial relations reform was used as a federal power grab, rather than as a push towards common law contracts.  Taxation reform drove yet another stake into the already terminal federal compact.

Other reforms were barely reforms at all -- the 2006 changes to media law did little to free up a stifled commercial media sector.  It is hard to avoid concluding that the government's approach to reform was about quantity, not quality.  Economic reform packages may have started out well-intentioned but when they emerged from the meat-grinder of parliament, they too often represented steps backward.

Nevertheless, elections are not won or lost on the size of government, weak media regulations, or eroding federalism.  Elections are won on appeals to the status quo, issues such as immigration, or security fears.  Federal seats are won on vacuous -- and, for federalists, deeply concerning -- issues such as graffiti, hoons and train lines.  It isn't just that voters are not interested in liberal policies.  In many cases it has proven far easier to win votes with an illiberal platform.

What role can liberal philosophy have if it can't be successfully marketed to voters?  Liberal political parties are unlikely to win future government on a platform of radical change, except in times of crisis.  The biases of the irrational voter mean that dramatic increases in immigration or a reduction in the minimum wage are hardly tickets to electoral success.  In an era of status quo politics, it appears that ideology is, on net, an electoral negative rather than a positive.

But conversely, the final years of the Howard government demonstrated what can result when a political party has no philosophical base, lacks the fiscal restraint imposed by ideology, and simply purchases the votes it needs.  Sooner or later, voters or in the case of the 2007 election, the Opposition, punish them for their directionless expedience.

Perhaps one reason why liberalism seems impossible to market to voters is because it hasn't yet been tried.  No major party has gone to an election from opposition or from government with a full program of social liberalism and economic liberalism.  The Howard government suffered from its abstract message -- economic growth is far less concrete than fibre-to-the-node and the Kyoto Protocol.

Voters may instead respond to campaigns targeting over-bureaucracy and regulation, particularly as they affect business and community life.  The record levels of regulatory and legislative activity during the Howard government provide ample scope to do so.  It is fair to say such a campaign would be a direct repudiation of the Howard record.

What is not under question is the need for liberalism in Australia, and the challenges which liberals face -- limited government and the open society remain simple and obvious goals regardless of their electoral popularity.

Cuts small, spending smaller still

What if an election was held and all that was offered was tax cuts?  During this election campaign both parties have promised to increase government spending.  Meanwhile, as all of these promises to spend more have been gradually accumulating, the various state, territory and federal governments have actually spent more than $1 billion on each day of the campaign.  No matter who wins Saturday's election, this $1 billion-plus per day habit is set to continue into the foreseeable future.

It is not easy to determine the actual dollar amounts of election campaign spending promises.  Political parties have an incentive to fudge the numbers either up or down, depending on who is listening.  Politicians want to look like big spenders when they visit a marginal seat, but on national television they want to appear as spend-thrifts.

But tax cuts are not equivalent to spending.  Spending occurs when the Government raises revenue usually by taxation and then spends the money.  Spending in this context involves the Government purchasing an asset, paying wages and salaries to its employees, or giving the money to recipients of benefits.  Tax cuts, on the other hand, involve the Government never raising the money in the first place.

To argue that a tax cut is the same as spending we should consider the following simple example:  The schoolyard bully takes your lunch money every day and buys himself a pie at the school tuckshop.  One day, the schoolyard bully announces that he will not steal your money any more.  You buy a pie for yourself at the tuckshop.  To be sure you now have pie you never before had but it is not the case that the schoolyard bully bought you a pie.

Tax deductions, rebates, and other so-called tax expenditures are not classed as spending either.  In the federal budget papers they appear as reductions in revenue, not as increases in spending.  Tax expenditure can be thought of as being a targeted tax cut.  If you undertake activity X, the Government allows you to deduct part of the expenditure from your tax bill.  To take our schoolyard bully example, imagine the bully takes your lunch money, buys himself a pie and then lets you have a bite of the pie if you let him copy your homework.

Despite the media frenzy that accompanies campaign spending announcements, additional spending and tax cuts promised during election campaigns are simply not that economically important, relative to the massive spending programs that will not be touched at all during this campaign and which will continue to grow no matter who is in power.

Election spending promises are far less important than the amounts of money that will actually be spent in total during the next government's term of office.  The political significance of campaign spending announcements exceeds their economic significance and both parties (and the media, we suspect) would like to keep it that way.

This election we have seen both parties announcing tax cuts early in the campaign and then announcing increased spending.  Relative to the amount that government already spends, the tax cuts were quite small and the increased spending smaller still.

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Bell Bay pulp friction all due to Sydney's ... Green elites

Geoffrey Cousins, a well-known Sydney businessman and confidante of the prime minister, ran a campaign against a pulp mill planned for Bell Bay in Tasmania.  He enlisted the support of famous Sydney actors, playwrights, sports stars and business tycoons.  What hope did the democratically-elected government of Tasmania have of getting the proposal up, when Sydney's elite decided they knew what was best for Bell Bay?

Tasmania has long been the central battleground of forest politics and, as a result, has some of the highest environmental protection measures in Australia.  In 1989, the proposed Wesley Vale pulp mill was scrapped when then federal environment minister Graham Richardson intervened.  The Government has since increased the area of forest reserve almost four-fold.  The state now has 42 per cent of its land area reserved, up from 13 per cent in 1982.

Stringent regulations for the construction of pulp mills have been developed.  In 2004, the Tasmanian Government revised the existing guidelines and approved a new set following recommendations from the Resource Planning and Development Commission.  The guidelines specify any pulp mill needs to be either elemental chlorine-free or totally chlorine-free and operate on a hierarchy comprising waste avoidance, waste recycling/reclamation, and waste re-use.  Any marine discharge at the end of these processes must have no significant environmental impact.  Any proposed mill must adhere to the Stockholm Convention on Persistent Organic Pollutants while applying the principles of best practice environmental management, best available techniques and accepted modern technology.

The Tasmanian Minister for Planning contracted two independent consultants to undertake an assessment and review of the proposed Bell Bay Pulp Mill against the 2004 guidelines and the Pulp Mill Assessment Act 2007.  SWECO PIC, a Swedish-based consultancy, concluded 92 per cent of the guidelines are met by the project, with the remaining able to be addressed through permit conditions.

ITS Global undertook a review of the net social and economic benefits of the proposed mill and concluded the mill will add about 2.5 per cent to annual gross state product, equivalent to $6.7 billion in net present value terms to 2030.  The mill was also assessed as broadening and strengthening the industrial base of the Tasmanian economy.

Contrary to claims the mill will be built in classic Tassie wilderness country, it is to be located in the Bell Bay Precinct.  This is already the most significant industrial estate in Tasmania, with an operating aluminium smelter and powder plant, a ferro-alloy processing plant, a seafood processing facility, a power station, a sawmill and an export woodchip facility.

On August 10, a Federal Court judge rejected claims by the Wilderness Society and a group calling itself Investors for Tasmania's Future that there were problems with the Commonwealth's assessment process for the Bell Bay pulp mill.  The judge concluded the process had been fair and reasonable and the public had ample opportunity to state its views.

The Federal Department of Environment and Heritage has not identified any likely significant impacts on the marine environment from the pulp mill but has suggested it is desirable to force the developer, Gunns Limited, to do more modelling and more monitoring over and above the requirements in the 2004 guidelines, which have since been accepted as the national standard.

The mill will also help in the struggle to reduce greenhouse gases.  By reducing shipping and by producing surplus power, it will remove 1.3 million tonnes of CO₂ each year.  Until late August, it looked likely that the pulp mill would be built -- the development was being debated in the Tasmanian Parliament and appeared to have passed all environmental hurdles.

Then Geoffrey Cousins decided to run his campaign, which gained traction in the national media on the basis that the pulp mill had been fast tracked and that the mill should be relocated to a less pristine site.  Mr Cousins does not claim to have a particular knowledge of the Tasmanian forest industry or the timber communities dependent on it.  In July, he published a book called The Butcherbird.  It is being marketed as a boisterous thriller set in the boardrooms, yachts and waterfront mansions of Australia's most decadent city.

Geoffrey Cousins' campaign against the Bell Bay pulp mill is targeting Malcolm Turnbull, the federal environment minister, because voters in his Sydney seat of Wentworth are very concerned about environmental issues, including those in Tasmania.

Cousins' fictional Wentworth residents, with their penchant for fast cars, Botox and casual sex, don't seem the sort that would be greatly concerned about environmental issues in far-away northern Tasmania.  Nonetheless, Turnbull delayed giving approval for the mill, pending yet another review.  In other words, a long and tedious approval process for a pulp mill planned for an industrial precinct in Tasmania was put on hold because Sydney's elite believed they knew what was best.

On October 4, Mr Turnbull approved the pulp mill but as a consequence of Mr Cousins' campaign there will be an extra 24 conditions at a cost of $2 billion.  Perhaps it would be easier to build the pulp mill in Sydney.

ALP bid to control the economy can't work

Industry policy has an entirely disreputable history.  But undaunted, in April, the Labor Party released its new directions for innovation, competitiveness and productivity paper.  This sets out its vision for industry policy under a future ALP government.  Industry policy is, in essence, a supply-side conspiracy through which government and industry collude against the consumer.

A reading of the ALP's policy suggests it has something akin to the now discredited Japanese Ministry of International Trade and Industry in mind for its industrial policy.  MITI was created in 1949 with the task of co-ordinating Japan's international trade.  It also co-ordinated Japanese industrial policy by providing loans, grants, licences, permits and subsidies to favoured firms, and tax concessions to favoured industries.  Just as Australian prime ministers are expected to have previously held the office of treasurer, Japanese prime ministers were expected to have been MITI minister.  MITI played an extremely important co-ordinating role in the Japanese economy.  Over time, however, the forces of economic liberalisation caused its power to wane and, in 2001, it was reorganised into the Ministry of Economy, Trade and Industry.

Aping MITI, a future ALP government will create an uber-department of industry, science and research with a network of industry innovation councils.  These councils will comprise high-level decision-makers from the private sector, the science and innovation sector (presumably universities and the CSIRO) and government.  In other words, ALP policy proposes a producers conspiracy.  The policy is also littered with boondoggles such as the 10 enterprise connect centres which, as the policy notes, will help firms find and adapt the latest research and technology and have their business benchmarked against best practice and get help in solving identified problems.

One wonders how firms were able to innovate or compete at all without taxpayer funded bench-marking.  But stripped of these expensive decorations, the new ALP industry policy is just like the old.

The ALP proposes a 10-point plan to ensure Australia's continued prosperity.  These 10 points can be condensed into three points:  pick winners, throw money at universities and streamline government.

Picking winners has such an appalling track record that it is surprising politicians still think they can get away with proposing it.  The ALP proposes building a culture of innovation, focusing incentives, accelerating the take-up of new technology, developing innovation priorities and using government procurement to support and encourage innovation.  Motherhood stuff.  The old chestnut of improving maths, science and engineering skills comes up, too.  The ALP commits to providing our children with world class education and training.  Yet, the education unions and State governments claim this occurs already.

The ALP also wants to promote an Australian green car.  They aim to purchase green cars for the Commonwealth fleet if Australian car manufacturers can create value-for-money, environmentally-friendly vehicles.  Yet, the current government already offers environmentally-friendly vehicles in the Commonwealth fleet.  Throwing money at universities is, of course, bipartisan policy.  It is not clear, however, what return the taxpayer gains from this strategy.  My backgrounder Back to Basics:  Why government funding of science is a waste of our money demonstrated that taxpayers gain very little from publicly-funded research.

There have been few productivity gains in teaching.  The founder of Christianity had 12 disciples, implying a staff:student ratio of 1:12.  Using 2005 Department of Education Science and Technology data, I estimate the staff:student ratio in current Australian tertiary education to be approximately 1:25.  Two thousand years of technological progress has led to a doubling of teaching productivity.  Universities complain that this ratio is too high.  While education outcomes are poorly defined, government education spending, especially on higher education, could easily become a bottomless pit.

Streamlining government functions is politically populist.  Everyone sees apparent waste in government.  Of course, there is much waste.  Much duplication, however, can be justified on the grounds of diversity and the benefits of federalism.  To the extent that government tries to cater for different needs, it is likely bureaucratic and apparently inefficient processes will arise.  Governments that adopt a one-size-fit-all, take-it-or-leave it policy will have simplified processes.

In terms of the ALP's policy, however, it is nonsense to argue it could simultaneously reduce government waste and create an uber-department and industry innovation councils.  Although the composition of the bureaucracy may change, the overall size will expand.  It is simply not credible that any simplification would occur.

The ALP's new directions are very much like the old directions.  The only phrase missing is commanding heights.  The Japanese MITI experience ended badly.  It is not obvious that this approach would end any better than it did in Japan.  Government adds value by enforcing property rights and maintaining the rule of law.  Government has failed to add value when making business decisions.  The ALP wishes to impose political control over the economy via its industry policy.  This is both poor economics and poor politics.

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Single desk monopoly has to go

Many Liberal MPs bemoan the failure of Malcolm Fraser's government to reform the Australian economy in the late 1970s.  A key example is Fraser's failure to deregulate airlines, instead sponsoring a cosy duopoly for TAA and Ansett that made flying across Australia as expensive as flying across the world.

Wheat deregulation has become the two-airline policy of the Howard Government.  Like the two-airline policy there is no economic or national interest justification for the continuation of a single desk for wheat.  The decision is purely political, the protection of powerful vested interests, in this case the discredited AWB and its political partners, the National Party.

A single desk is an anathema to the principles and benefits of a free-market economy.  It protects vested interests at the expense of Australia's broader economic interests.  And the AWB has already demonstrated it is not up to the job by corruptly selling wheat with kickbacks to Saddam Hussein and now trying to breach sanctions against Iran.

Why should wheat growers be any different from cattle producers, dairy farmers or horticulturists who export successfully without a single desk?  Only full deregulation of wheat exporting fits the idea of a government committed to free market principles.  No minor tweaks, such as leasing out the single desk for three-year terms, can be justified -- especially as this model will guarantee AWB retains the desk.  In no other industry are sellers forced to sell to a single exporter.

One of the ironies of this whole debate is that all wheat growers who export also profitably grow barley and canola for export without a single desk.  Whether wheat producers are compared to manufacturers or to other farmers, no case can be made that wheat is exceptional and merits exceptional treatment.

What would be the reaction if all the small exporters selling their wares via the internet were forced to deliver their goods to a publicly-listed export company?  These are small businesses not much different in size to a viable family farm, successfully exporting all sorts of things, from toys to computer modems.  And there are countless examples of small Australian enterprises selling their products through myriad distributors who then undertake the exporting.  There is no special case for wheat.

Most wheat growers may want to retain a single desk but it has never been demonstrated that most exporting growers want the single desk.  Much of the wheat grown in Queensland, New South Wales and Victoria is consumed in Australia.  By contrast, most West Australian and South Australian wheat is exported.  Yet the biggest push to retain the single desk is coming from Queensland and NSW growers, particularly those in National Party seats.

It is morally wrong to force exporting wheat growers to sell their wheat into a national pool if they do not want to.  Industrial relations reform is not popular but it is a vital economic reform.  The unions don't like the reforms but the union movement is a constituency of the Labor Party and were always going to oppose the reforms.  Yet even if business was critical, as it was with the introduction of the GST, industrial relations reform was the right thing to do.  But what is the difference with wheat marketing?

The test is not whether some wheat farmers support a single desk.  The test is whether it is the right thing to do.  Failure to act on wheat marketing brings to mind the potent attacks by Prime Minister John Howard on his predecessor Paul Keating as beholden to vested interests.  Howard was initially elected on the slogan "For All of Us".  This slogan is a repudiation of special interests in favour of national interests.  In the case of wheat, the broader and much more important issue is the merit of policy, not the level of opposition by special interests.

In light of the unambiguous fact that the single desk for wheat creates a government-sanctioned monopoly, it is surprising the only voice within the parliamentary party supporting deregulation is Wilson Tuckey's.  Just because Tuckey is easily dismissed by many of his parliamentary colleagues is not a reason for those with economic reform pretensions to go missing from this debate.  Tuckey is right on this and should be supported.

It is a sad state of affairs when reformers such as Peter Costello, Nick Minchin and Ian Macfarlane have only Tuckey arguing the need for comprehensive deregulation of wheat.  Where are the young guns of economic reform to demand this anachronistic policy failure is removed?  History is watching the Liberals on the single desk.

Rudd liberal with his Labor ideals

Ever since Work Choices was proposed by the Federal Government the Labor Party and unions have campaigned hard, claiming the demise of the old industrial relations system would impose unfairness and injustice on working people.  But Labor leader Kevin Rudd now seems to concede at least parts of the government's industrial relations changes are acceptable.

Rudd says a Labor government would create a national industrial relations system -- but only for the private sector -- make strike pay illegal, require compulsory secret ballots before strikes and prevent unfair dismissal action against small businesses employing fewer than 15 people for the first 12 months of employment.  These represent important steps for the Labor Party.

Labor is accepting that, when unfair dismissal damages are imposed against a small business, it is the individual business owner who pays.  Small business people usually have their homes mortgaged to finance the business, so unfair dismissal payouts are in effect paid from the mortgage.  In these instances, it is one little guy (the employee) taking from another little guy (the employer).

Now, the difference between the government and Labor relates to the size of a small business when it suffers and how long they have employed people.  The policy step may be small but the conceptual shift is larger.  The embracing of a national industrial relations system is a further big step.  It recognises the confusion, cost and complexity of having eight different sets of labour laws in an integrated but modest economy that must compete internationally.  However, the restriction of Labor's national system to the private sector creates a new twist.

Does this raise the possibility of differing labour rights for public sector employees as opposed to private sector employees?  Who will have better rights?  And will public sector employees be unfairly exposed to exploitation by their state government employers, who can write the industrial relations rules to suit the state governments?

Labor's requirement for secret strike ballots and the banning of strike pay are also a significant move towards consensus.  A political divide seems to have vanished concerning the right to strike.  Labor perhaps accepts that the old rules enabled workplace agitators to artificially create problems which most employees didn't support.

This appearance of an emerging tentative consensus holds a risk for Rudd.  He accepts many unionists aren't happy with his plan and that he may suffer dissent at next week's ALP national conference.  But in moving towards coalition policy on some issues, he gives legitimacy to coalition claims its labour law reform agenda is vital to Australia's future.  Is this a bad thing?

The economy seems to be achieving a miracle, with astonishingly low and declining unemployment and no breakout in wage-induced inflation.  It is hard not to give considerable credit to Howard's labour reforms for this.

Certainly the economic powerhouse that is the minerals industry is loud in claiming two decades of cutting-edge labour reform delivered the productivity and efficiency gains that enabled it to exploit the China boom.  Perhaps some political consensus on labour reform could help the troubled manufacturing sector replicate the focus evident in the minerals sector.  It's a worthwhile thought.

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9-11 theories in overdrive

Despite long and expensive inquiries, thousands of eye witnesses, and conclusive video, sound and picture evidence, more than five years after the attacks, sceptics continue to challenge every part of the official story of what happened on 11 September 2001.  Unsourced photos, quotations taken out of context and confused eyewitness accounts have inspired complex and often bizarre conspiracy theories.

Rather than a terrorist attack, on that day in 2001 the Pentagon was in fact struck by a missile, the World Trade Centre buildings were brought down by a controlled demolition, Flight 93 never actually crashed, and some of the hijackers are still alive in Pakistan -- a logistical feat planned and executed by the US government using remote-controlled planes.

September 11 conspiracy theories generally fall into two categories.  Either US government agencies knew that the September 11 attacks were going to occur and failed to act, or, alternatively, the government was directly involved in planning and executing the attacks.  A MIHOP is, therefore, someone who believes that the government Made It Happen On Purpose while a LIHOP believes the government Let It Happen On Purpose.  A large and growing number of people subscribe to these theories.

A poll taken by the Scripps Survey Research Centre in September 2006 found that 36 per cent of American respondents thought it was very likely or somewhat likely that the government either took part in the attacks or allowed them to happen.  Meanwhile, 16 per cent thought the destruction of the World Trade Centre was aided by explosives.  Other polls have reflected these results around the world.

A simple web search on September 11 conspiracy comes up with hundreds of websites and groups devoted to the topic.  Some are simple websites set up by individuals but others are the work of complex organisations such as The 9/11 Truth Movement which is a collection of individuals, researchers and collections of people who are working together to reveal the conspiracy.

Another group, known as the Scholars for 9/11 Truth, believes September 11 was a psychological operation to launch somewhere from 50 to 100 years of aggressive warfare against Middle Eastern and Central Asian countries.  That the official account of 9/11 is a lie and that 9/11 appears to have been an inside job is no longer a matter of serious scientific debate.  Many of the experts used by the Scholars and other conspiracy theorists to explain why it would be impossible for the World Trade Centre to have collapsed the way it did, have very little scientific training apart from watching a couple of cheaply-produced videos on the Internet.

Conspiracy theorists co-operate tightly, despite the contradictions that may arise.  One theorist who claims that a missile was fired into the Pentagon will associate himself with another theorist who thinks that a remotely controlled plane flew into the Pentagon.

With every new video posted on YouTube, or book published, or website launched, there arise new opportunities for the theorists to quote each other and therefore claim to have overwhelming evidence of the conspiracy.  This has led to the popularity of videos such as Loose Change, which had 10 million views in 2006 alone.  The producer of Loose Change supposedly originally investigated the attacks to make a fictional story about the attacks being an inside job, only to find evidence that there was a real cover up:  That 19 hijackers are going to completely bypass security and crash four commercial airliners in a span of two hours, with no interruption from the military forces, in the most guarded airspace in the United States and the world?  That to me is a conspiracy theory.

Most of the September 11 theories are about as credible as a belief in Nazis on the moon.  And although the theories are a form of entertainment and fantasy for many people, it isn't just boredom driving the conspiracy theory movement.  Psychologists believe humans are compelled to conspiracy theories, particularly for world-changing events such as September 11.  The authors of Debunking 9/11 Myths, a comprehensive rebuttal published by the engineering magazine Popular Mechanics, argue conspiracy theories share a basic thought pattern:  great tragedies must have great reasons.

A conspiracy theorist will look at an event such as September 11 and quickly conclude it is impossible for a small handful of terrorists to inflict widespread death and destruction against the world's most powerful nation.  Conspiracy theorists then proceed to find supporting evidence.  At this point, science and conspiracy theory split.  Whereas science makes an evaluation of the truth based on all the available evidence, conspiracy theories generally look for evidence to support conclusions that have already been established.  Other evidence is either ignored or discredited.

For the conspiracy theory to gather a popular following, it needs to explain elements of the story that the official account is unable to explain easily to a lay person.  In the case of 9/11, it was strange the World Trade Centre building 7 also collapsed, despite not being directly hit in the attacks.

Similarly, many find it strange that the Pentagon was so easily attacked, and even more bizarre that not one of the planes was shot down by the military.  Many people also find it impossible to believe that the World Trade Centre could fall in such a uniform fashion without that being the result of a controlled demolition.

Conspiracy theorists also often connect unrelated information and sources.  September 11 conspiracy theorists, for instance, claim the World Trade Center buildings could not have collapsed because of a plane impact as temperatures inside the building would not have been high enough to melt metal.  This is true but is disingenuous.  Although it is true steel's melting temperature is 1500°C and that temperatures in the World Trade Centre would not have likely exceeded 1100°C, steel heated to over 1000°C softens and is reduced in strength to 10 per cent of its room-temperature value.

September 11 conspiracies all suffer from serious factual and logical flaws.  How could anyone have possibly prepared a controlled demolition in the World Trade Centre without being noticed?  Why would the government go to so much trouble planning such a complex conspiracy using foreign terrorists?  Why were black-box recorders and bodies found at the Pentagon if a 747 didn't crash there?

September 11 is the most watched event in history and one of the most important events of our lifetime.  The 9/11 Commission produced a 571-page report that explains the events in full.  The National Institute of Standards and Technology also produced 10,000 pages of evidence on how and why the World Trade Centre buildings collapsed the way they did.  It could find no corroborating evidence for alternative hypotheses suggesting the WTC towers were brought down by controlled demolition using explosives planted prior to September 11, 2001.  Certainly there is strong evidence to suggest there were serious errors made by the Bush and Clinton administrations in the lead-up to the September 11 attacks.  But suggestions that the United States Government, or aliens, or the X-Files' Cigarette Smoking Man were involved in the tragic events of our past have little basis in reality even though they might feed some deep-seated psychological need for operatic complexity.

What happens when you ban smoking

Smoking bans seem to have strong public support and are being rolled out all over the world.  In Australia, graphic warnings have been introduced on cigarette packaging, and many states have banned smoking on public transport and at tram, bus and train shelters.  Already, in Victoria, more than 330 on-the-spot fines have been issued to commuters since the bans came into effect on March 1, 2006.  On July 31 this year, smoking was made illegal in Western Australian pubs and clubs.  Victoria, South Australia and Tasmania will ban smoking in clubs and bars in 2007 and bans have applied in NSW for more than 12 months.

But policy-makers need to consider the consequences of this unprecedented government intervention being imposed on our lives.  Smoking is, after all, legal.

It is questionable whether smoking bans inside venues will even have their intended effect.  A paper published by the Australian National University's Centre for Economic Policy Research this year found that while taxes on cigarettes had a significant impact on reducing passive smoking, banning smoking in public places had, on average, no effect at all.  Instead, bans can adversely increase people's exposure by displacing smokers to private places where they contaminate non-smokers, primarily children.  It seems perverse to be shifting smoking back into the home, particularly considering that 94 per cent of the $5 billion spent on health care costs relating to passive smoking were spent on children.

Bans on popular activities like smoking always have unintended effects -- it is hard to stop individuals from doing the things they enjoy, legal or illegal.  One of the more unexpected problems from the smoking bans that has already been noticed in some venues is problems from the smoking bans that has already been noticed in some venues is problems with sweat and other odours.  According to Scotland's Sunday Mail, nightclub owners are pumping scented smoke on to dance-floors to deodorise sweat and flatulence smells which were formerly masked by cigarette smoke.  From personal experience in Sydney nightclubs, where bans are already in place, it seems that Australian clubs are having a similar problem, and clubs in Melbourne are spending money preparing their venues for this consequence.

In New Zealand, where bans have been implemented since 2004, the New Zealand Press Association reported in September that illegal bars have been set up in garages and basements with people taking advantage and charging for admittance.

In Calabasas, in California, smoking was effectively banned in all outdoor places.  No doubt Australia will move towards regulations such as these in the future.  But governments should remember that while they can make any regulations they like, they can never predict the consequences of such regulations -- such as body odour and flatulence problems.

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Govt to blame for high home prices

Federal Treasurer Peter Costello recently drew attention to high house prices preventing young people getting a foot on the home ownership ladder.  He suggested this might have adverse effects on family formation.  Although there was some initial reaction to the suggestion that land prices were being pushed up by government rationing its availability, other material has been since issued by the Urban Development Institute that corroborates the facts.

Bricks and mortar elements of house prices have barely moved in real terms over a 33-year period.  By contrast, prices of the land component have increased by between a factor of two (Melbourne) to eight in Sydney and as much as 10 in Adelaide.  A block of land on the periphery of Sydney sells for $460,000 with Melbourne being the cheapest of the major capitals at $112,000.  Such price levels are only possible because government regulates land availability by preventing land owners from building houses on their land or selling to others to undertake the building.

This throttling of the availability of land for housing has grown at an accelerating rate over a 50-year period.  It owes nothing to the availability of land -- in Australia urban areas account for only 0.3 per cent of the area.  Nor is it anything to do with infrastructure costs.  The excessive costs are purely due to government rationing of land.  Australian state governments have been progressively increasing the up-front development charges imposed on new housing developments.  HIA put this at over $60,000 for Sydney and the UDIA, using a different accounting methodology put it at twice this level.  The upshot is that government regulations and taxes are forcing up the cost of new houses which are now, in real terms more than twice what they were 30 years ago.

In doing so, the prices of existing houses are boosted making those of us who already own our homes richer compared to those not yet on the ladder:  many of whom, unless policy is changed, will never get a toehold into property ownership.  Present policy is highly discriminatory, and exploitative, towards younger people, few of whom own houses.

The policy changes required include a considerable increase in the land cleared for housing development.  Longer term, all planning restraints, except those preventing land owners from being adversely affected by developments on adjacent properties, should be removed.  In the interests of smaller government, restoring landowner property rights and restoring affordability for those without their own homes governments must accelerate land releases and must cease the discriminatory taxation of new homes.