The Gold, the Red and the Green

There has been one constant in the defining struggle in politics over the past two centuries.  That struggle has been between those who want more of their country's resources and incomes to be ''fairly'' shared on some politically determined basis, and those who want the incomes and resources to be retained by the people who earn and own them, allowing those people to consume their income and wealth with minimal restraint on the direction of such consumption.

We might best define that struggle on a collectivist-individualist axis.  Over the twentieth century and in the centuries that preceded it, insofar as domestic politics was at issue, the major battleground of the struggle was between socialism and free enterprise.

Failure of the great socialist experiments of the twentieth century demonstrated that the pursuit of individual self-interest, private ownership of property and competition in commerce has no rival in the creation of high living standards.  But, as the slogans of the Occupy Wall Street (OWS) protesters demonstrate, income and wealth ''redistribution'' remains a siren song for those who don't understand or don't care how wealth and income are created.  The OWS movement's signage is the primal scream of a new generation requiring to be disillusioned anew.  But real-life examples of the damage of forced redistribution are fast disappearing.

The OWS movement is however a sideshow, since in the past thirty years we have seen the emergence of environmentalism as a new dimension in the collectivist-individualist struggle.  This has been largely focused on the use of natural resources, with the two sides ranged against each other in terms of trade-offs between private and communal use on issues about how land and mineral development is owned and controlled, use of the atmosphere and water, and the sorts of goods and services that may legitimately be offered for sale (or free distribution).

Environmental collectivists in earlier times were, like their less successful brethren the consumerists, genuinely concerned citizens operating within the mainstream and seeking to smooth what they saw as undesirably rough edges in a capitalist system that was in most respects quite satisfactory.  But either through taking over and radicalising existing organisations (as occurred with the Australian Consumers Association) or forming new ones, these concerned citizen groups have been converted into ''useful idiots''.

The modern militant environmental activists share with the socialists a reverence for authoritative self-selected leadership guiding the general populace.  However, they differ markedly from the collectivists in the socialist mould in terms of the goals to which resources should be directed.  The socialists sought equality of incomes and developed a theory which claimed that this would also be accompanied by more efficient production.  Environmental collectivists see the struggle focused on preserving the natural environment from human use and, where possible, returning it to an arcadian pre-industrial condition.  The central goal is to have conventionally defined productive use reduced.  Some, though not all, in the movement recognise that this also means lower income levels.  Environmental collectivists see greater value in the unpriced benefits in minimising urban development, farming, forestry, fishing, water use and mining.  In some cases they prefer to see no human access to these resources.

Where environmentalists' claims have most merit is with assets that were previously so abundant that they were unowned but have since become scarcer and subject to conflicting uses.  The atmosphere is among these, as are certain seas and rivers (those where the waters are not already owned and where the ownership has imposed costs on people downstream).  Processes are required for resolving these conflicting uses where the property rights may have shifted or evolved.

In most countries the collectivist arm of this confrontation has become dominated by political movements that label themselves ''green''.  The movement's aspirations have moved well beyond the resolution of conflicts into seeking to control private property that might impinge on public goods.

In this, they share much in common with, indeed are often leading components of, the OWS movement and other political overrides of private decision-taking.  It is, as the Marxists would say, no coincidence that with socialism diminished in credibility and popularity, communists like Lee Rhiannon and Adam Bandt moved to the Greens.  In this respect the watermelon epithet which has been used to denigrate ''greens'' is more accurate than some of its original formulators realised.

With both greens and socialist collectivists, the battle lines blur over particular issues.  Thus, with some issues, green collectivists find common cause with interests that are more akin to the genteel concerned citizenry that earlier comprised the environmental movement.

This can be seen in the campaign of the London Daily Telegraph against further urban development in rural England.  In that campaign, which is mirrored in other countries, a conservative journal is seeking to redefine some individual property rights so that they are used for the benefit of others.  Beneficiaries of this are those incumbents in the areas where housing development is proposed who see use of their neighbours' land for more housing as reducing their own land values.  Other beneficiaries include recent purchasers of housing close to other areas near urban centres, who paid a premium price for their properties as a result of restraints and would see new housing depress those prices.  To a lesser degree, all incumbent owners gain from restraints since these raise the land value of all properties other than the mainly farmland that is excluded from commercial development.  The losers are the land-owners whose property rights have been partially collectivised and those who face excessive housing costs as a result of land access regulations.

This common cause between conservatives and greens on environmental matters has its counterpart in contemporary issues regarding socialist control of the means of production.  While there is no longer any plausible or large group of people calling for government ownership of the means of production, there are conservatives who share common ground with socialists in the successor agenda to this, namely areas of industry policy with what is sardonically referred to as ''winner-picking'' by governments.  This normally means government selecting promising areas of development and assisting firms in those areas.  The idea is to preserve a considerable scope for individual initiative and property rights, to bring operational efficiency, by not discriminating in favour of particular firms and, by and large, avoiding the waste inherent in direct government investment.  Even so, the success rate of such policies is very low.

The allure of planning to avoid the seeming waste of resources moving into blind alleys is long-standing.  The Institute of Public Affairs in the early part of its seventy-year history was among those conservative voices in favour of tariffs and selective industry support and the policies remain attractive to many on the right of Australian politics.  Among more recent exponents is the Australian-born chairman of Dow Chemicals, Andrew Liveris.  In his book Make It in America:  The Case for Re-Inventing the Economy, Liveris has called for government identification and support for selected industry sectors.  While not seeking in the words of the British Labour Party's Clause 4 (repealed in 1995) to seek ''common ownership of the means of production, distribution and exchange'', this does move towards such a position.

Collectivisation, whether socialisation of property or in its modern environmental dimension, generally means diverting income-producing assets to activities that will produce less value in its conventionally measured sense.  It may well have been the case that the reservation of vast parkland tracts for, say, the Great Barrier Reef brought greater benefits than if the resources were to have been left to private ownership, but each such increment adds less value.

Collectivisation of Australian land accounts directly for around 11 per cent of the nation in designated national parks, with a further 15 per cent under indigenous ownership and control.  However, land use regulation, environmental requirements, planning and heritage requirements and planning restraints for urban development mean the remaining 74 per cent of the nation is also semi-collectivised.

All of the restraints on individual use divert activities away from the uses that individuals who own the resources would prefer.  In addition the creation of the rules necessitates a bureaucracy which can be successfully overcome only through extremely costly procedures.  As an example, for those who want to build a new house on land previously used for farming, Victoria's Growth Areas Authority has identified over 500 regulatory steps that must be navigated.  This is before a house can be constructed even in an area designated as within the Melbourne Urban Growth Boundary.

The costs of inflexibilities and bureaucratic paperwork can never be accurately assessed.  However, in agriculture production has stagnated-ABARE reports that output over the past forty years has increased a mere 0.3 per cent a year.  This is in spite of massive advances in pesticides and new plant varieties-though green pressures have prevented many of these that use genetic modification being grown in Australia (and in the EU).

Much of the stagnation of agriculture has been the result of withdrawing land from production in certain areas, excluding land from clearing in pursuit of international Kyoto agreements, and denying the use of water.  With respect to irrigation, allocations are being reduced in the Murray-Darling Basin, which produces one third of Australia's agricultural output.  These restraints on water use, which are planned to increase, are motivated by chasing an illusion that we should transform the nation's most prolific ''working river'' into an environmental totem.  In fact the outcome of returning the river to some previous ideal, as well as destroying productivity, would be most unwelcome in view of its natural swings from flood to parched trickle.  Other restraints prevent the use of water in the northern ''wild rivers'' for irrigation.

Unlike agriculture, mining development has proceeded rapidly in Australia.  This is in spite of increased regulatory controls and excising of land with mineral potential through national parks, Mabo restraints and the like.  The extent of this regulatory restraint is such that it is unclear what the counterfactual would be.  It is certain that even faster development could have been possible and in this regard notwithstanding some pressures on labour supply, it must be remembered that mining employs only 1.5 per cent of the labour force.

The costs of transferring assets to collective decision-making is not always clear, especially since the damages are likely to be in the form of forgone income increases.  But the costs are real and manifest in terms of poor resource use, wasteful expenditure of government and private resources to assess the merits of particular uses, and discouragement of enterprise.  All of these mean less output for the economy and lower living standards.

These measures are proposed to be augmented by imposing special new taxes on mining activity, taxes originally proposed, with Greens support, to provide higher levels of government spending and which are now at least for the present confined to the two most important mineral products, coal and iron ore.

The Australian government, in introducing a tax on domestically consumed fossil fuels, is adopting a policy that may be unique, in that it involves the nation deliberately sabotaging its own competitiveness by shackling the industries that represent the highest value in terms of productivity:  coal and electricity.  It would be worse than the United States abandoning information technology or Denmark deciding that dairying should be phased out-worse, because of the ubiquitous nature of fossil-fuel-sourced energy in the economy and because the alternatives come with very low levels of productivity.

In the light of the impending legislation, the forward wholesale price of electricity for the fourth quarter of 2012 compared with the current year is up by $20 per kilowatt hour, or more than 60 per cent.

Proponents of the carbon tax concede, albeit reluctantly, that their policies will mean lower income levels.  They have to admit it because the Treasury modelling which lends them respectability says that will be the case.  That modelling elevates Treasury into the world of technological forecaster, since it has assumed the emergence of new technologies, such as carbon capture and storage, and low-cost wind power.  And this comes on top of the heroic assumptions, against all the evidence, that the whole world will swing behind the tax.

Perhaps even more importantly, Treasury has not drawn its willing political supporters' attention to the fact that its modelling is circular-it shows increased productivity because this is one of the assumptions.  So no matter how heavy the sledgehammer taken to economic drivers, the model would inevitably forecast increased national income.  This would be the case if the carbon tax was at $23 or $1000 per tonne.

Although the Treasury forecasting arm tells the Labor-Greens coalition that, even with its fantasy assumptions, according to the modelling income levels will be lower, the politicians and their auxiliaries in government and among government-financed institutions don't really believe it.  They tell us about the merits of getting in on the ground floor with these new industries which will give us the incentive to develop Solyndra-like factories that will take the Chinese and Indian markets by storm twenty years hence.  Solyndra, like its smaller-scale variant, the Victorian windmill blade factory that got taxpayer funding to open up a new world-conquering infant industry, went into liquidation.  Government-created industry champions just never seem to cut it.

There appear to be constant and at times irresistible pressures to shift resources towards collectivism and politicisation of decisions that were previously under the control of individual owners or discoverers.  Rarely does the shift take place in the opposite direction.  Testimony to this is the almost inexorable increase in the share of government in national incomes.  It seems that only the onset of economic catastrophe produces the sort of wind-back of government seen in the Thatcher years in the UK and more recently in Scandinavia.  Even the imminence of disaster has sometimes not led to pressures to reverse the trend, as can be seen in Argentina over many decades and, more recently, in Venezuela.  We have not yet seen any nation reversing the green regulatory communalism that is now far more pervasive than the socialist framework of the twentieth century.

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What's wrong with ''no''?

The Government and its supporters apparently believe Tony Abbott's big character flaw is that he opposes their policies.  They make up cute little jokes about it.  Noalition.  Mr Negativity.  There is apparently an ALP pamphlet called The Little Book of Dr No.

But who is this critique supposed to convince?  Apart from people who believe the Government can do no wrong, that is.

Every government accuses those on the other side of parliament of being too negative.  When they were in power, the Coalition did the exact same thing.

''It's not the job of an opposition to be negative when it's against the national interests to be negative,'' said John Howard in 2005.  Government press releases said Kim Beazley opposed Coalition legislation ''for the sake of opposing''.  So did Simon Crean.  And Mark Latham.

While he was the workplace relations minister, Tony Abbott complained bitterly about Craig Emerson's ''feral'' opposition to any workplace reform.

Presumably Emerson genuinely thought workplace reform was a bad idea.  If so, opposing it seems to be exactly what a person in his position should have done.  And Abbott, presumably, thinks that the carbon price is a bad idea.  (At least, he does now.  He's definitely more convinced of its badness than Julia Gillard is convinced of its goodness.)

On the surface, the attack on Tony Abbott's ''relentless negativity'' is a claim that the Opposition has no values, that it is only driven by political considerations.

But the attack is guilty of the same.  It has nothing to do with the content of any of the Government's policies — just an assertion that the Opposition is getting in the way ... of what?

Abbott is a conservative, and one who understands what conservatism means.  His book Battlelines heavily cites Edmund Burke and Roger Scruton.  No fair reading would dismiss his discussion of conservatism as lightweight.  Abbott has tried to shape the Liberal Party as not simply a conservative party, but a philosophically conservative party.

For a philosophical conservative, change should be incremental and hesitant.  Even reluctant.  In Battlelines, Abbott approvingly quotes the philosopher Michael Oakeshott when he said the ''modern mindset'' is ''in love with change ...; fascination of what is new is felt far more keenly than the comfort of what is familiar.''

Abbott responds that the known status quo, with all its flaws, is preferable to a hypothetical ideal.

''Conservatism prefers facts to theory ...  To a conservative, intuition is as important as reasoning, instinct as important as intellect.''

This may seem like a deeply anti-intellectual approach, but it isn't.  Conservatism is a recognition that very smart economists working with very smart legislators can sometimes get things wrong — even though they're very, very smart, and their intentions are very, very good.

So a conservative would absolutely oppose the majority of new government programs — especially reforms on the scale of the carbon price or the mining tax.

And the No Strategy certainly is better than the aimlessness of most oppositions.  Shadow ministers under Brendan Nelson and Malcolm Turnbull would criticise the Government for being ''all talk and no action''.  A program is behind schedule!  An election promise hasn't been kept!  But a bad promise that hasn't been kept is a good thing, surely?  Before Abbott, the Coalition seemed to be arguing that the Rudd government was not being the best Rudd government it could be.

The real problem with Abbott's No Strategy isn't that it is negative.  The problem is that his negativity might not be consistent.

There's no point saying no in opposition if you're going to say yes in government.  As prime minister, Abbott will be lobbied by ministers trying to fund their pet projects.  Some of those ministers will be puppets of their departments, for whom prestige and expenditure are the same thing.  Other ministers will just want to spend their time in government divvying out cash.  Abbott knows all about the latter ministers.  He was one of them.

Unfortunately, even in opposition Abbott's negativity is selective.  When he doesn't say no — that is, when he comes up with positive policies of his own — they don't tend to be very good.  Take his expanded anti-dumping program, which requires importers to prove they're not selling in Australia below cost.  Or take his parental leave scheme and the vast increase in middle-class welfare that it represents.

Just last week Joe Hockey proposed a crackdown on foreign investment in agriculture.  This is a prime candidate for no.  But many in the National Party don't like it when Chinese companies buy farms, and Abbott doesn't want to be negative to his Coalition partners.

There's nothing wrong with no.  Abbott just needs to say it more often.

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The Difficult History of Free Speech

Last year was a bad one for freedom of speech in Australia.  It was not just the decision in the Andrew Bolt case, and calls from the Greens and others for the licensing of newspapers, that were depressing, but the obvious lack of understanding by many commentators of the history and philosophy of freedom of speech.

As with so many of the other important features of Western civilisation, the concept of freedom of speech can be traced back to the ancient Greeks.  One of the first steps on the Greek path towards allowing freedom of speech was the first involvement of ordinary people in intellectual life.  An early example came around 700 BC when Hesiod wrote his Theogeny, a theological work which considered ''the gods and the universe ...  as a matter of private interest''.  The freedom of a non-cleric such as Hesiod to write about such matters was a radical departure from the civilisations of Egypt and Mesopotamia, where ''religious subjects were treated by members of the established hierarchy''.

A century later, the Ionian philosophers were also laypeople, such as an engineer (Thales) and a mapmaker (Anaximander), ''not charged by their communities to concern themselves with spiritual matters'' but ''moved by their own desire for an understanding of nature ...  they did not hesitate to publish their findings, although they were not professional seers''.  They began to assess the origins of the world around them from first principles, not relying on received myth, thus beginning an era where matters of the religious and political order were open to debate.

This meant that the fate which befell Thersites in the second book of Homer's Iliad might not befall future generations of Greeks.  Arlene W. Saxonhouse, in Free Speech and Democracy in Ancient Athens, makes the point that Homer described Thersites as the ''ugliest soldier at the siege of Troy ...  a blathering fool'' and yet he delivers a fine speech echoing much of what the hero Achilles had said in a speech in Book One.  Thersites gets a whack from Odysseus for his trouble but, as Athenian democracy evolves, men like Thersites get the chance to be heard and judged on the merit of their argument, not their status.

In Athens, the reforms of Solon in the 590s BC extended the right of citizens to express opinions, and the concept of free speech became a more practical reality after the reforms of Cleisthenes in Athens around 508 BC.  According to Herodotus, the Athenians' dominance is directly linked to Cleisthenes's introduction of isegoria, freedom of speech in the Assembly of the Demos, as every hoplite now fought with greater valour, because he felt that collective victory served his own personal interest.

The trend towards an extremely liberal regime peaked in the age of Pericles in the 430s BC, but even Athenians had certain limits on what they considered acceptable.  While dramatists such as Aristophanes used the freedom of speech to launch spirited attacks on public figures in their plays, the gradual decline of Athens compared to rivals such as Sparta and Thebes meant that not all saw the freedoms Athenians enjoyed as an advantage.  The most famous example of this came when a popular jury found Socrates guilty of introducing false gods and corrupting the young and sentenced him to death.

The Roman republic sometimes allowed a reasonable degree of free speech for its citizens, but at other times it was repressive.  One advocate of free speech in the dying days of the republic was Cato the Younger, the chief political antagonist of Julius Caesar and the Triumvirate, and called ''the conscience of Rome'' by Livy.  Cato's name was to receive renewed reverence as the cause of freedom gathered support in the eighteenth century, when Cato was the hero of a popular London play written by Joseph Addison, which also became a favourite of George Washington.  Cato's name was also used as a pseudonym by the British writers John Trenchard and Thomas Gordon, who published a series of letters from 1720 to 1723 condemning tyranny and promoting various freedoms, including freedom of speech.

Once the Roman republic had gone, tolerance of disloyal speech varied according to the identity of the emperor, with some such as Augustus, Claudius and Vespasian being reasonably tolerant, while other such as Tiberius, Caligula, Nero and Domitian allowed no dissent, with offending authors meeting fates such as being burned alive.  The capricious nature of the state is well illustrated by the Emperor Constantine's conversion to Christianity in 312 AD.  Until then, Christians were oppressed by the Roman state;  afterwards non-Christians were.

In the modern world, England became the leader in liberalising freedom-of-speech laws.  While many writers hark back to the signing of Magna Carta in 1215, real progress began in the seventeenth century, particularly with the Petition of Right (1627), which meant that, at least in theory, no person could be arrested solely for disagreeing with the government.  It is no coincidence that the period of enormous political upheaval in the lead-up to the Civil War saw the first recorded use of the expression ''freedom of speech'', by Sir Edward Coke in his Institutes of the Laws of England (1628-44),

At the height of the Civil War in 1644 came the publication of one of the most important works ever written about freedom of speech, John Milton's Areopagitica.  Today, Milton is best remembered as the poet who wrote Paradise Lost.  However, he was also a partisan in the English Civil War, producing a number of pamphlets in support of the cause of Parliament and Cromwell.  In contrast to the bulk of his political output, Areopagitica was actually an attack on an act the Parliamentarians had passed in 1643.  This law sought to impose a new form of censorship on a literary scene that had exploded into life after royal censorship broke down in about 1641.

Areopagitica is a powerful attack on the evils of censorship.  The issue had become personal for Milton when his Doctrine and Discipline of Divorce was published in 1643.  Its radical arguments, including advocacy of divorce, had been almost universally condemned, with religious leaders demanding that the work be burnt, while the Stationers' Company, with more secular concerns, were upset that his failure to obtain a licence jeopardised the copyright system.

Milton argued that censorship had not been a part of ancient Greek or Roman society.  Areopagitica gets its name from the Areopagus, a hill in Athens, which was the ancient site of courts.  In the fifth century BC, the hill's name had been invoked by the Athenian orator Isocrates, who gave a speech arguing for the restoration of power to the tribunals.  Milton uses many other classical and biblical references, including St Paul in the Book of Acts, throughout the work.  In one of the cleverest passages, Milton makes fun of the fact that ''debtors and delinquents may walk abroad without a keeper, but unoffensive books must not stir forth without a visible jailer in their title''.  A key argument of Milton's was that freedom of speech should never be proscribed in advance.  Action should only take place once an offence had been committed.

Milton claimed that this censorship was a more recent Catholic import, a product of the King's Star Chamber, which had recently been abolished (1641), and which had been the principal opponent of the Protestant Parliament.  In reality, licensing had been introduced, first by clergy in the 1520s, and then formalised by Henry VIII in 1538, in response to the explosion of printed material in the wake of Gutenberg and Caxton, material which often stimulated religious debate and conflict.  Although, at the time of publication, Areopagitica did little to halt the practice of licensing, it would be viewed later as a significant milestone and one of the most eloquent defences of press freedom.  The system of licensing publications remained until 1694, when finally publication was allowed without the accompaniment of a government-granted licence.

The case of John Wilkes in the 1760s demonstrated that the issue of freedom of speech was far from settled in England, even for the privileged, such as members of parliament.  Angered by the actions of the Prime Minister, Lord Bute, in denying him advancement, Wilkes established a paper called the North Briton, which created several controversies, culminating in a strongly worded attack on the King's message to parliament.  A warrant was issued ''to search for authors, printers and publishers'', and Wilkes was arrested, but a week later, he was released by order of the Court of Common Pleas on the ground that his privilege as a member of parliament afforded him immunity from arrest.  However, further charges led to his expulsion from the House of Commons, and he was found guilty in the courts and, because he was absent when sentenced, he was pronounced an outlaw.  A few years later, Wilkes was elected as member for Middlesex and there ensued a series of contests without parallel in English history as the electors constantly returned him only for the Commons to reject the result.  The cause of ''Wilkes and liberty'' became a rallying cry for all those concerned with the promotion of freedom, specifically the freedom to espouse views the government found offensive.  In 1774, Wilkes was accepted by the Commons, a landmark win for freedom of expression.

Two decades later, an important further step on the path towards freedom of speech came when, in 1792, the parliament passed a bill known as Fox's Libel Act, named after the great Whig politician Charles James Fox, which provided in sedition trials that truth must be accepted as a defence and that a jury, not a judge, must be the arbiter.

In the nineteenth century, the arguments in favour of freedom of speech were further developed by John Stuart Mill in On Liberty.  Mill stated that ''if all mankind minus one, were of one opinion, and one, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person, than he, if he had the power, would be justified in silencing mankind''.  Mill understood that the supposed falsity being suppressed may in fact turn out to be a truth.  In his 1981 book Free Speech:  A Philosophical Enquiry, Frederick Schauer bracketed Mill with Milton as key figures in ''the argument from truth'' rationale for ''free speech''.  Other rationales have included ''the argument from democracy'', the need to hold politicians and government officials to proper account.

Schauer makes the point that both these arguments essentially ''derive their strength from some conception of what is good for society as a whole, rather than from any concern for the well-being of individuals in a narrower sense''.  He then assesses whether there are arguments that free speech is an intrinsic individual good.  He finds little evidence that this is true per se, but believes that ''Aristotelian conceptions of happiness present a stronger argument for freedom of speech as an intrinsic good''.  The good life can only be achieved through the ''complete use of the mind and the thinking process''.

As part of his assessment of this idea, Schauer cites F.A. Hayek's argument in The Constitution of Liberty that there is a tendency to overvalue the importance of ideas and communication compared to the freedom to actually do things.  Similarly tied to other freedoms is his fourth chapter on arguments in favour of free speech on the basis of individual equality and dignity.  An example of the argument here is provided by Locke's position in the Letter Concerning Tolerance when in Schauer's words he ''grounds much of his argument on the premise that solely the individual is authorised to decide questions of faith'' which applied to speech means that only the individual can determine what he or she is entitled to say.

By the time Mill was writing, England was in the final phase of liberalising its political freedom-of-speech laws.  Yet there remained controls on various forms of speech, outlawing sedition, blasphemy and private libel.  Later in the nineteenth century obscene publications became a new freedom-of-speech battleground.  Socio-moral reform organisations, such as the National Vigilance Association established in 1886, were at the forefront of attempts to ban the publication of items such as risqué postcards and to prevent their importation and, in the words of Deana Heath,

thus transformed the regulation of the obscene into a project of imperial hygiene enacted through the erection of a cordon sanitaire to keep ''unhealthy'' literature outside the geographical boundaries of both nation and empire.

While elements of English society were trying to prevent the corruption of Victorian values by Continental obscenity, in the previous two centuries progress on free speech had been slower on the Continent than in England.  However, in the eighteenth century, the French Enlightenment played an important role in expanding the notion of freedom of speech.  The best-remembered aspect of this is the oft-quoted phrase of Voltaire's, ''I disagree with what you say but I will defend to the death your right to say it''.  Now, Voltaire did not actually say these words-they were a biographer's summation of his views-but his and similar views were reflected in the French Revolution's seminal document, the Declaration of the Rights of Man and Citizen of August 1789:

The free communication of ideas and opinions is one of the most precious of the rights of man.  Every citizen may, accordingly, speak, write, and print with freedom, but shall be responsible for such abuses of this freedom as shall be defined by law.

In the same month, James Madison introduced the United States Bill of Rights into the House of Representatives of the First Congress.  The first of the ten amendments to the Constitution stated that:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof;  or abridging the freedom of speech, or of the press;  or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

While some may think that a very clear statement of intent, the fact that First Amendment issues have been the source of constant debate for the past two centuries demonstrates that the limits of free speech are never settled.  As early as 1798, a Sedition Act was passed which included punishment for ''any false, scandalous and malicious'' writing about the government and led to the prosecution of several Republican editors for criticism of the Federalist administration of John Adams.  The Act lapsed in 1801 and all those prosecuted were pardoned by the incoming President Jefferson.

In the middle of the nineteenth century, freedom of speech was an issue both in the lead-up to the Civil War, when many southern states passed laws making the advocacy of abolitionism illegal, and then during the war itself when both sides had to consider what to do about internal critics.  Overall, the Union was tolerant of its critics, known as Copperheads, who generally were able to criticise the Lincoln administration without sanction.

In the twentieth century, several landmark cases in the US Supreme Court grappled with the limits of free speech.  In 1919, Justice Oliver Wendell Holmes, speaking for a unanimous court, upheld a conviction under the 1917 Espionage Act of a man who circulated an anti-draft leaflet during the war and, in doing so, Holmes uttered his famous line about shouting fire in a theatre.  In 1964, the case of New York Times v Sullivan extended First Amendment protection to those who defamed government officials, unless the official could prove that the statement was made with ''actual malice''.  Numerous free-speech issues arose from the threat of communism, particularly in the McCarthy era.  At the end of the century, whole new types of hate speech were being assessed for their legality.  Yet, as the constitutional historian Michael Kent Curtis commented in 1995:

When they ignore free speech history, advocates of restriction have plenty of company.  With a few notable exceptions, American legal education has paid too little attention to either the history of liberty or of free speech.  In the past powerful interests have sought to limit speech by use of the bad tendency test, by use of ad hoc balancing, by treating political speech as libel, and by demanding protection from emotional distress caused by speech.  From the Sedition Act to the crusade against slavery, to the opposition to wars and the draft, elites have advanced such doctrines as justifications for suppression of speech, including political speech.

Of course, the debate about freedom of speech is not just about political speech.  In the third quarter of the twentieth century a lot of the debate about free speech in many countries related to the removal of censorship of previously banned works, in England most famously relating to D.H. Lawrence's novel Lady Chatterley's Lover.  On the fiftieth anniversary of the 1960 trial Geoffrey Robertson wrote that of all Old Bailey trials ''none has had such profound social and political consequences as the trial in 1960 of Penguin Books for publishing Lady Chatterley's Lover'':

The verdict was a crucial step towards the freedom of the written word, at least for works of literary merit (works of no literary merit were not safe until the trial of Oz in 1971, and works of demerit had to await the acquittal of Inside Linda Lovelace in 1977).

Australia followed a similar pattern to England and the United States, with greater controls being legislated in the 1880s, and then a similar path towards liberalisation of censorship laws in the 1960s, particularly in the period of the Gorton government when Don Chipp was Minister for Customs and Excise.  Chipp removed the existing bans on many novels and allowed the sale of Playboy magazine.  He also oversaw the introduction of the R certificate for films in 1970, which allowed previously banned films to be shown to adults.  Yet, as Peter Coleman explained in his landmark history of the topic, Obscenity, Blasphemy, Sedition, Australia had a much longer history of control of political speech, ''arriving in effect with the first printing press''.

However, the First World War was the catalyst for increasing censorship and when the Hughes government lost its wartime powers it beefed up the Customs Act to keep out subversive political works.  This manner of control via Customs reached its apogee in 1933-34 when well over 100 political books freely circulating in Britain were banned in Australia.  As in the United States, the threat of communism created much of the freedom-of-speech controversy in the middle decades of the twentieth century in Australia.  One of the most celebrated cases was that of the Czech communist writer Egon Kisch, who was refused permission to enter the country by the Lyons government in 1934.  The government tried to declare him a prohibited immigrant because he failed a dictation test in Scottish Gaelic, but this was subsequently ruled invalid.  As so often happens, the move to silence Kisch only added to his celebrity.  The Australian Dictionary of Biography sums up the situation:

While relatively few Australians had any sympathy for communists, the ''Kisch Affair'' created widespread fears that, by using the Immigration Act to curtail free speech, the government was resorting to tactics similar to those undermining democracy in Europe.

Robert Menzies, who was the Attorney-General in the Lyons government at the time of the Kisch affair, tried unsuccessfully as Prime Minister in the early 1950s to ban the Communist Party.

Also in the Menzies era, the federal parliament took the extraordinary step of summoning the editor and publisher of the Bankstown Observer before the Bar of the House to defend a charge that they had breached parliamentary privilege by publishing an article alleging that a member of parliament was involved in an immigration racket.  The parliament voted overwhelmingly to incarcerate both men and they ended up spending three months in Goulburn jail.  Frank Browne provided an eloquent defence of his position, when he addressed the House, placing the parliamentarians' actions in an historical context:

I say that, if this Parliament establishes a precedent and takes the right of punishment into its own hands, the rights that have been fought for since 1215, and even before, are seriously endangered.  The right of free speech is endangered.

Fortunately, while Browne was right about the threat that the parliament's action posed to free speech, it has not established a precedent, at least not a direct one.

Yet journalists themselves have not always been paragons of virtue when it comes to free speech.  The 1970s and 1980s saw attempts by sections of their profession, particularly in Britain, to make journalism a closed shop.  At Barnsley in Yorkshire in 1977 some members of the National Union of Journalists tried to ensure that representatives of other unions did not provide information to non-union journalists.  In the same year, printing unions tried to prevent the publication of articles they considered anti-union.

The same article which reported these threats to freedom of speech actually felt 1977 had been ''the best year for free speech since Queen Victoria grudgingly accepted the abolition of the newspaper stamp tax in 1853'', on the basis that an election in India had enabled 600 million Indians to again read uncensored newspapers.  There have regularly been wins and losses in the battle for freedom of speech.

So, while in Australia 2011 was a bad year for free speech, at least the debate about it might lead to a greater understanding of the issues involved.  A good place to start would be getting recognition that fighting for freedom of speech has meant fighting for freedom from state control, not using the state as umpire to regulate speech to some communally accepted standard.  The ability to verbally attack one's rulers, and other citizens with whom one disagrees, is the product of almost three millennia of thought and struggle by advocates of the most basic human freedom.  Their efforts need to be defended as vigorously as possible.

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What your bookie is predicting for 2012

It is that time of year when people get asked to make a few predictions as to what will be happening in the coming year.

The problem with this exercise is if people were any good at forecasting the future they'd be forecasting the winning lottery numbers.

The future is both risky and uncertain.  Risky in that more things can happen than are actually going to happen.  Uncertain in that some things that do happen will be completely unexpected.

Going into 2012 we know that something very interesting will be happening in Europe, the United States and, of course, here in Australia.  That's not to say that nothing else interesting will be happening, but we know where to start looking.

The Europeans face some challenging political economy problems.  Their societal organisation structure is financially unsustainable.  They work too little and spend too much while the tax burden they impose on themselves is too high.  People have known this for a long time, but as Adam Smith famously said, ''There's a lot of ruin in a nation''.  What has brought the problem to a head is the single currency, the Euro.  Our European friends face an old-fashioned debt crisis.  They have borrowed too much in what is effectively a foreign currency.

Okay — so what is going to happen in 2012?  The Europeans can continue to muddle through with more of the same — even more spending and promises of fiscal responsibility and so on — the kinds of things that got them to the current impasse.  Or some member states could begin to exit the Euro.  This is a largely a problem involving risk.  We can imagine an outcome — exiting the Euro — and then assign a probability to that outcome.

The question is how to assign that probability?  You can give a guess, or follow the wisdom of the crowd and look at betting markets.  Markets are pretty good at collating information and establishing prices.  Betting (or prediction) markets provide pretty good guesstimates as to the probabilities of events occurring.

Looking at one of the better known prediction markets (Intrade), there is a 32.5 per cent probability that, at least, one country will exit the Euro in 2012.  That figure rises to 51 per cent by the end of 2013.  To my mind that suggests, on current expectations, that Europe will continue to muddle through.  The market also suggests a 78.4 per cent probability that France will lose its AAA credit rating by June 30, 2012.  On the other hand the probabilities of Germany or the UK losing their AAA ratings are in the low 30s.  On those figures, I don't see any resolution to the European crisis in the short-run.

The Americans are having a general election in November.  This is a risk problem — something must happen on the first Tuesday (after the first Monday) in November.  Either Barack Obama will be re-elected or his Republican challenger will be elected.  According to Intrade there is a 51 per cent probability that Obama will be re-elected.  Right now, it's fairly clear who his Republican challenger will be;  Mitt Romney has a 79 per cent probability of securing the nomination.  All other contenders — despite all the excitement about Newt Gingrich and Ron Paul — are in single figures.  The joint probability of Romney both being the Republican nominee and winning the White House is 40.6 per cent.

It is very early days in the US presidential race.  The thing to watch will be the performance of the US economy.  If the economy doesn't improve — dramatically — Obama will find it difficult to get re-elected.  Sure he inherited a poor economy but, rightly or wrongly, American voters judge the incumbent on economic performance and I expect that the probability of Obama winning will decline over the year.

That then brings us home to Australia.  Our local betting markets and the New Zealand ipredict website provide a lot of useful information.  Ipredict, for example, places the probability of Kevin Rudd departing as Foreign Minister before July 1 at 43.2 per cent.  The probability of Julia Gillard departing as Prime Minister before July 1 is 29.5 per cent.  By contrast Centrebet has a 53 per cent chance that Gillard won't be ALP leader at the next election — that honour goes to ''Any other candidate''.  Those two results can be reconciled by the expected date of the next election — according to Centrebet it is most likely to be in the second half of next year (2013).  When that election does occur, there is almost a 70 per cent probability that the Coalition will win.

What's happening to interest rates?  Well ipredict has slightly more than 51 per cent probability that rates will come down by at least 25 basis points in February, and again in March.  The ASX Interbank cash rate futures market suggests rates will be down to 3.25 per cent by November.  That isn't actually good news — if the Reserve Bank is lowering rates to that extent this year, the economy will be in serious trouble.

Keep an eye on the debate about fiscal responsibility — 2012-13 has been promised to be a budget surplus year come hell or high water — and there will be a debate about raising the Commonwealth debt ceiling.

While looking at prediction markets is very informative, and fun, it is important to remember that market prices can change very quickly, and new price-sensitive information comes along at random.  So a price today is today's best guess of the future.  By tomorrow that best guess could be horribly wrong.

The prediction markets, however, don't tell us the important things in life.  This year many babies will be born, loved ones will die, heterosexual couples will get married (homosexual couples will have to wait), children will start school, some will start work, others will retire and, despite the challenges and excitement of a new year, people will get on with their lives.

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And you, sir, are no libertarian

Last week, the New York Times editorialised the Ron Paul newsletters could ''leave a lasting stain'' on libertarianism and the libertarian movement.  Who knew the Newspaper of Record was so concerned about the reputation of small government and individual liberty?

Yes, the newsletters matter.  Libertarians mustn't pretend they don't reflect poorly on Ron Paul himself.  But, no, the actions, or even views, of a presidential candidate 20 years ago don't discredit a philosophy of government.

Published in the late 1980s and 1990s under titles like The Ron Paul Survival Report, they purported to be written by their namesake.  Some of them are foul.  They're racist and homophobic and shrill.  Like ''We can safely assume that 95 per cent of the black males in [Washington DC] are semi-criminal or entirely criminal''.  Or ''I miss the closet.  Homosexuals, not to speak of the rest of society, were far better off when social pressure forced them to hide their activities''.

There's a lot more of those quotes.  They're no better — often worse — when read in context.

Until recently libertarianism was a niche philosophy.  Its tenets have been held by few, and professed by even fewer.  The content of Paul's old newsletters reflects a strategy by some libertarians in the 1990s to build a coalition with cultural conservatives — to bring those cultural conservatives to radical free market economics.

This paleolibertarian strategy was formulated by Lew Rockwell and the economist Murray Rothbard, both friends of Ron Paul.  Writing in 1990, Rockwell said the ''Woodstockian flavour'' of contemporary libertarianism was off-putting.  It was time for libertarians to abandon the ''Age of Aquarius'' and ground themselves in religion, the family, Western culture, and the middle class.  Libertarianism and libertinism are not the same thing;  paleolibertarianism was supposed to sever whatever connection there was between the two completely.

That was the theory.  The practice was the reactionary racism seen in the newsletters.  Many libertarian commentators believe Rockwell ghost-wrote the most incendiary material.  It is fairly well established Paul did not, and few believe he holds — or held — any of the views attributed to him by the newsletters.

Yet that isn't quite an excuse.  Paul may not have written the newsletters personally, but he signed off on the paleo strategy, gave his name to it, and handed his byline to its advocates.  He didn't write them, sure, but they went out with his blessing.

Strictly, libertarianism is only a philosophy of government.  It does not offer a vision of the good or moral life.  A libertarian can, in theory, hold any social belief they like.  All they have to do is oppose the government forcing those beliefs on others.

Yet it is hard to square the racism of the newsletters with the understanding of human worth that underpins libertarian philosophy.  It does not make sense to place individuals at the centre of your politics then to denigrate people based on their group membership.  Ayn Rand famously said racism is the most primitive form of collectivism.

And libertarians have always emphasised the role of markets promoting toleration, because toleration is a good thing.

So the paleo fusion was awkward.  Re-read the quotes at the start of this column.  They're not remotely libertarian.  Society was better off when all gay people were in the closet?  How do you reconcile that claim with a belief in the moral autonomy of free individuals?

And as a political strategy, it didn't work.  Libertarianism isn't now popular because Lew Rockwell decided to play on white resentment.  It is popular because it is the only philosophy of government that takes individual liberty seriously across all policy areas.

The issues animating the libertarian resurgence in 2012 are ''cosmopolitan'', not paleo.  Keynesian economics and the response to the global financial crisis.  Drug law reform.  The expansion of presidential power.  Just last week Barack Obama authorised the indefinite detention without trial of US citizens suspected of terrorism.  Not even George W Bush did anything so draconian, yet Ron Paul is the only presidential candidate opposed.

As Ed Crane, president of the Cato Institute, wrote in the Wall Street Journal on Saturday, Paul is the sole contender who believes in constitutionally limited government.  All candidates have talked big about small government;  only Ron Paul means it.

And Paul's arguments on civil liberties (on, for example, the Bradley Manning case) have meant that his political base is now college students, not survivalists.

Paul's most questionable policy views are the ones calibrated to the latter audience.  His opposition to the North American Free Trade Agreement is less about the virtues of bilateral trade deals and more about ''sovereignty''.  In 2006 he claimed NAFTA was a stalking horse for a North American Union that would have a common currency, international bureaucracy, and ''virtually borderless travel''.  This is conspiracy theory stuff.  The newsletters are full of it.

Views like those detract from the seriousness of Paul's other messages.  A recent feature on the Daily Beast of ''10 Outrageous Ron Paul Quotes'' lumped his NAFTA allegations with his support for property rights and drug reform, as if they were all equally crazy.

It's disappointing that Paul's run crowded former New Mexico governor Gary Johnson out of the Republican debates.  Johnson doesn't have a paleo bone in his body.  He has none of Paul's baggage.  In many ways he is also more libertarian.  Johnson switched to the Libertarian Party in December.

I wrote earlier that the past actions or views of a candidate don't discredit a political philosophy.  That's not quite true.  It's never the scandal that hurts, it's the cover-up.

Yes, many progressives have jumped on the newsletters to attack Paul while excusing the appalling civil liberties record of the Obama administration.  Such is politics.

But if those who support Ron Paul in 2012 pretend the newsletters are no big deal (or worse, try to rationalise them) it will suggest to others intrigued by the philosophy of freedom that there is a relationship between racism and libertarianism.

There isn't.  And libertarianism is about more than Ron Paul.

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Obama still on the ropes

You'd never know it from his recent visit to Australia, but with the US presidential election 10 months away, Barack Obama should be in serious political trouble.  That ''hopey-changey stuff'', to coin a Palinism, has not worked out as planned.  Unemployment remains stubbornly high.  The debt mountain is of Himalayan proportions.  Home foreclosures continue to swell.  And polls show widespread pessimism about America's future.

The Democratic Party base, meanwhile, remains annoyed at Obama for his failure to shut Guantanamo and to implement a carbon tax.  His hawkish attitude to Afghanistan and drone strikes has sent some left-wing bloggers into a complete lather.

No wonder the President's job-approval rating has been languishing in the low to mid-40s range — well below the levels George W. Bush, Bill Clinton and Ronald Reagan had a year before they were re-elected.

Yet the Republican contest for the right to face Obama later this year remains highly volatile.  And most seasoned observers in Washington say the President's weaknesses are softened by the flaws of his opponents, which have become increasingly evident in the lead-up to tomorrow's Iowa caucuses.

They're uncharismatic, uninspiring, gaffe-prone, scandal-plagued, serial flip-floppers:  all these barbs have been hurled at a plethora of unorthodox candidates that reminds one Washington Post columnist of ''that famous bar scene in Star Wars''.

In reality, this primary race has always been a contest between two competitors:  Mitt Romney (the front-runner and GOP establishment candidate) versus Anybody But Romney (the right-wing insurgent who doles out ideological red meat to the rank-and-file warriors).

All the available evidence indicates that, in an election against Obama, the smart, handsome and malleable Romney would have the best chance to win over crucial independents in swing states.

But his candidacy carries risks in the primary bouts, and not because of his Mormon faith.  (He once rebutted accusations of supporting polygamy by pointing out that he's the only GOP candidate to have had just one wife.)

Romney's problem is that the Tea Party conservatives won't stomach him.  When he was Massachusetts governor, for instance, he signed into law a state healthcare plan not dissimilar to ''Obamacare''.

The Anybody-But-Romney candidates have included former House speaker Newt Gingrich, pizza company executive Herman Cain, Texas Governor Rick Perry, Minnesota congresswoman Michele Bachmann and even, at one point, property tycoon and reality TV show host Donald Trump.

All have effectively crashed and burned, although the twice-divorced Gingrich could redeem himself in primaries later this month in South Carolina and Florida where he remains popular.

The way this campaign has cycled so rapidly from one candidate to another means that another ABR contender — Rick Santorum, a Christian conservative and former Pennsylvania senator — is now surging in the Iowa polls.

There is one other complicating factor:  Ron Paul, the Texas congressman who sounds like Noam Chomsky when he rails against neo-cons, a Pax Americana, the Iraq invasion and any pre-emptive strike against a nuclear Iran.  (He also defends WikiLeaks founder Julian Assange.)

His low-tax and civil libertarian views, combined with his anti-war activism, may resonate with a solid group of young limited-government advocates in Iowa.  But it will spook the GOP faithful with the prospect of turning the party over to fringe elements.

Paul can be safely ruled out of winning the nomination, though there is always a risk he may run as a third-party candidate in the election.  Any independent candidacy, of course, will likely help Obama by sucking away votes from Republicans.

Despite all this, Obama is still on the ropes.  Why?  Well, for one thing, any field of primary opponents always looks weakest at precisely this moment when the infighting is at its worst and nobody looks really presidential.

That could change, as it so often does, during a long election year.  Trial by fire, as Obama himself remembers from his 2008 duel with Hillary Clinton, can make a candidate stronger.

We've all heard the 1992 campaign mantra, ''It's the economy, stupid''.  That is especially true in 2012.  The economy is very weak and, given Europe's fiscal crisis, it's unlikely to experience a robust recovery by November.

True, there are a few tentative signs that the bleak unemployment outlook could improve.  But the jobless rate stands at a lousy 8.6 per cent.  And few economists believe it will fall fast enough to reach the 7.4 per cent rate that prevailed in 1984 when Reagan was re-elected in a landslide.  Not since the Great Depression has a president faced worse unemployment.

Add to this the fact that the key independents who favoured Obama in 2008 have turned against him in key battleground states such as Florida, Ohio and Pennsylvania, and it appears that the President's prospects are perilous.

To be sure, Obama is in the enviable position of having no real intraparty opposition and his team has plenty of campaign cash to help run a negative campaign against the Republican nominee.  Still, whoever wins tomorrow, it would be foolish to overstate the President's re-election prospects.

The good news is, the news is getting better all the time

Europe is on the brink of collapse, the Arab Spring has taken an illiberal turn, Chinese growth might be faltering, and North Korea's future is questionable.  But there are a lot of reasons to be optimistic about 2012.

Bad geopolitical news and economic indicators cloud good news and omens.  Disasters — whether economic, social, environmental — are rarely as bad as predicted.  And there is no reason to believe that our long-term trajectory of higher living standards, better wellbeing, and more riches will change.

Better health alone should give us reason to be optimistic.  The World Health Organisation says global life expectancy has increased by two years for men and three for women in the past decade.  The poorest countries have seen the greatest increase.

Fewer newborns are dying:  from 29 per 1000 live births in 2000 to 24 in 2009.  Maternal deaths have decreased from 3.4 per 1000 to 2.6 in the same time.

There is less tuberculosis and HIV.  Malaria has taken a dive.  Recession or not, things will improve — we now have seven billion people to develop cures and prevention.

Wars are getting rarer and less violent.  Actually, it's better than that.  In his book The Better Angels of Our Nature, Steven Pinker makes a bolder claim:  globally, violence itself is declining.  There is less corporal and capital punishment.  Less torture.  Less crime targeting gender or sexuality.

In 1993, there were 55 countries classed by Freedom House as ''not free''.  Today there are 47.

Since 2005, 19 million people have migrated from one country to another.  This is great.  They've found new opportunities and more work.

Half of the world's population now lives in cities.  Urban environments offer stronger job prospects, more accessible services, cheaper transport, and more varied human relationships.

Humans are getting better at coping with natural disasters.  Food prices are going down after recent highs.  The prices of rare earth metals — used in virtually every electronic device — have fallen too.

And in 2011, people had more of what they want.  Ignore the prattling about consumerism.  Surely the fulfilment of human desire is a good sign.

Small medical clinics can now buy a hand-held ultrasound machine, connected to a smart phone, for about $7000.  A team at Stanford University has learned to ''program'' the cells in living organisms to act as computers.  Implications range from fighting cancer to managing fertility.

Google is testing a self-driving car.  Fifty million people now use Twitter every day, forging bonds across the world.  E-books have made reading cheaper and easier.

Even economic crises have their upsides.  Productive people kicked out of jobs are forced to be creative.  Sure, a cloud with a silver lining is still a cloud.  But economic turmoil can spark innovation from those compelled by circumstance to take risks.  Less foreign aid has spurred economic reform.  Africa is now the world's fastest growing continent;  Ethiopia grew by 7.5 per cent last year.  Many analysts claimed the developing world would suffer most from the economic crisis.  They were wrong.

Humans tend to equate short-term problems with long-term ones.  If there is an economic downturn, we imagine it indicates a deeper, systemic problem with society and capitalism.  If food prices go up, we imagine it's the end of cheap food.

In the early 1990s recession, the United Nations held a conference in Rio de Janeiro where it was claimed that ''humanity stands at a defining moment in history'', and the world is ''confronted with a perpetuation of disparities within and between nations, a worsening of poverty, hunger, ill health and illiteracy''.

Yet, as Matt Ridley writes in his recent book The Rational Optimist, the next decade ''saw the sharpest decrease in poverty, hunger, ill health and illiteracy in human history''.

So, yes, the euro is stuffed and China might sneeze.  Both would be bad.  But there's still every reason to be optimistic.

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The socialist calculation debate

The great debate in political economy isn't between Friedrich Hayek and John Maynard Keynes, but between Friedrich Hayek and Oskar Lange.

This debate began in the 1920s and focussed on whether it was theoretically possible for a socialist country to plan its economy, as advocates of socialism suggested.

Could a socialist planner allocate scarce resources efficiently?  How would they decide whether to send rubber to Tyre Factory 12 or Hose Factory 7?  In a market economy, the factory that needed the rubber most would be willing to pay the highest price.  But there is no natural price system in socialism -- consumer prices are decided by the planner, and rubber allocated according to their diktat.

Hayek thought socialist planning was practically impossible -- the information to choose without prices was too hard to get.  His mentor, Ludwig von Mises, also believed planning was theoretically impossible -- without market prices, the necessary information simply wouldn't exist.

On the other side was a group of socialist economists, led by the Polish Oskar Lange.  Lange argued all the information buried in prices would be accessible to socialist planners:  they could carefully watch inventories to ascertain supply and demand and therefore where goods should be allocated.  Lange's views firmed in later life as he recognised the power of computers, writing just before his death in 1965 the market process was just ''a computing device of the pre-electronic age'' and therefore ''old-fashioned''.  Computers could do everything a market does, and do it fairer.

Such was the theoretical debate.  Lange and his contemporaries lost twice:  first with the fall of the Soviet Empire, and second with the left's apparent embrace of the market.  The same Australian Labor Party that damned Hayek during the global financial crisis can't stop praising the virtues of market pricing when talking about its emissions trading scheme.

But both sides of the socialist calculation debate spoke in ideal terms.  Lange and his contemporaries imagined a unified and purposeful socialist commonwealth.  And, however critical they were, Hayek and Mises assumed the same.  The question was whether socialism could work in theory -- not whether socialism worked.

Actually existing socialism was nothing like Lange's ideal model.  In a 2004 book, The Political Economy of Stalinism, the economic historian Paul R Gregory dug through the Russian archives to see how socialist planning worked in practice.

It was chaotic.  At best, resources were allocated throughout the Soviet Union ''by feel and intuition''.  Stalin had an enormous bureaucracy at his command but there was little delegation.  Even the smallest economic decisions were pushed up to the Politburo, and to the dictator himself.  Should the state buy an oil tanker?  Should they sell 200 trucks to Mongolia?  Should steel pipes be imported or produced domestically?  It was not disinterested planners working towards efficiency, but Stalin and his senior colleagues who decided such things.

This extreme centralisation was not some Stalinist aberration, as Gregory points out.  Any political order that wishes to plan for national uniformity inevitably has to concentrate power.  Stalin was not overworked because he was a totalitarian leader, but because he was a socialist one.

There was a great irony in Oskar Lange's faith in the power of computers to resolve the calculation problem.  The development of a Soviet computer was itself a case study in the inability of socialism to efficiently produce and innovate.  While the West had pushed ahead with the development of computers after the Second World War, the Soviet hierarchy apparently saw little need to do so until the mid-1960s.

When a native computer was finally mass-produced, it was so poorly built it was virtually worthless.  And the central plan called for the production of lots of computers, not for them to be well maintained or integrated.  The USSR was never able to implement the technocratic ideal.  It was constitutionally unable to do so.

Central planning failed not because it was logically impossible, but because it couldn't deal with the ignorance and self-interest that characterises all human activity.

This is still the basic problem in public policy.  Governments no longer comprehensively ''plan'' their economies.  Yet they now try to supervise them.  We are often told the debate between Hayek and Keynes is the great question in political economy.  But whether governments can spend their way out of recessions is just one element of the larger debate about the coordinating power of markets.

Lange believed economic calculation was just a matter of throwing enough computing power at the problem.  Today's regulators believe the same thing -- extensive risk models purport to give regulators enough information to manage the private sector.  The global financial crisis demonstrated that those models are elaborate fictions.  Yet the response from regulators has been to double down and insist on greater powers and more complex models.

The calculation problem is endemic in highly regulated sectors like health, where it is not the price system that coordinates resources, but bureaucrats and politicians.  Every government proposes to reform health but the sector will remain unreformable until this basic problem is recognised.  In the meantime health will continue to be dominated by rent-seekers and rife with inefficiency.

And the calculation problem shapes the debate over tax and spending.  Social democrats claim in certain circumstances governments can spend money more rationally, more efficiently than taxpayers could.  But this claim relies on a belief that bureaucracies have enough knowledge to do so, and can surmount the political and commercial interests which flock to the centres of power.

Much has changed since the 1920s but the basic problem in political economy has not -- ignorance.  We should not be talking about Hayek versus Keynes, but Hayek versus Lange.

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The ''indispensable country'' struggles to hold its place

The year 2011 marked two very different anniversaries for the US.  Ten years ago, the horrific terrorist assault on the twin towers and the Pentagon had occurred.  Ten years earlier, the Soviet Union had imploded, ending the long conflict of the Cold War.

Each event profoundly shaped American behaviour in the decade that followed.  In contemplating what the future holds for the US, it is worth recalling the character of these two very different decades.

In the 1990s, the US emerged the victor from the Cold War without a shot being fired.  It achieved global hegemonic status, not by assertive or ambitious action on its own part, but by the self-induced collapse of its rival.  It had no plan in place to exploit its unexpected dominance, nor did it adopt one during the decade.

The man who was to be its president for the next eight years, Bill Clinton, showed little interest in foreign affairs, had no grand doctrine and insisted that the economy should be the country's main preoccupation.

Certainly, the armed forces were maintained at a high level, but their commitments were kept limited in time and scope.  The US military often seemed more concerned with having effective exit strategies in place than with implementing ambitious, open-ended, foreign policy projects.

By the end of the decade, the secretary of state, Madeleine Albright, was able to boast that the US was ''the indispensable country''.  As Thomas Friedman of The New York Times summed it up:  ''Today's era is dominated by American power, American culture, the American dollar and the American navy.''

But what was more striking was the extent to which the comparative restraint of the new hegemony allowed its dominance to be accepted with comparatively little complaint.  The French foreign minister of the day, Hubert Vedrine, reflected the conventional wisdom when he said:  ''American globalism ... dominates everything.  Not in a harsh, repressive, military form, but in people's heads.''

The character of American behaviour in the first decade of the 21st century was also determined by an unanticipated event, the terrorist attack of September 11, and the character of a new administration.  The attack on September 11 created pressure for immediate and drastic action.  But unlike his predecessor, the new President, George W. Bush, was not inclined towards the careful weighing of policy options.  Nor were he and his advisers alert to the dangers of unintended consequences.

The Bush doctrine of preventive war, democracy promotion and aggressive unilateralism encouraged the belief that the US could impose its will and leadership across the globe.  As one White House adviser told journalist Ron Suskind in 2005:  ''We are an empire now, and when we act we create our own reality.''

Two US wars brought down Saddam Hussein in Iraq and the Taliban tyrants in Afghanistan, but in the process they have cost the US dearly in credibility and prestige as well as blood and treasure.  Meanwhile, Washington's reckless spending policies and lax financial regulation, along with the Federal Reserve's loose monetary policies, helped set the scene for the subprime mortgage crisis, stubbornly high unemployment, gut-wrenching stock market volatility and skyrocketing national debt.

How do things look at the beginning of the third decade of the post-Cold War era?  A mere decade ago US military power was universally considered awesome in its scope;  today the world is much more aware of its limitations and costs - and less impressed.  The US was widely hailed as the miracle economy, but there are no surviving illusions on that score.  As last July's brush with default showed, serious doubts have been raised about whether Americans remain willing and able to pay for any grand, activist foreign policy.

True, Barack Obama was dealt a bad hand by Bush, whose radical, grand strategy to transform the Middle East with military force and massive social engineering dramatically increased the level of anti-Americanism around the globe.  But it is not so much that the US is hated.  What is more serious is the loss of credibility and consequently a reduced ability to lead and influence.

The US's famous capacity to rebound from adversity is going to be put to a severe test in the next decade.  Whether it can rebound could be the key question of our time, bearing in mind recovery should mean a return to confidence and clarity along with those Clinton principles of prudence, discrimination and an understanding that the world does not conform to American expectations.

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Opposition to coal seam gas doesn't hold water

New technology has allowed coal seam gas (CSG), previously known as the menacing cause of mine explosions, to become prominent as an energy source.  In the US over the past 10 years CSG, together with shale gas, has grown from zero to 20 per cent of total gas supplies and new export terminals will reverse the country's traditional position as a gas importer.

Australia's east coast reserves of CSG may comprise 275,000 petajoules, far more than the 160,000 petajoules estimated for conventional natural gas.  They are set to supplement the already substantial North-West Shelf gas exports unless governments strangle the industry with regulations and that peculiarly Australian device of rolling ''moratoriums''.

In most of eastern Australia, gas prices have been relatively unaffected by global prices due to the lack of an export link.  Australian east coast prices have averaged about $3 a gigajoule, while overseas prices have ranged up to $10 and more, but the global recession has brought prices sharply down.  Once Australian CSG export facilities are built, local prices should converge with those overseas (although Australian consumers will benefit from avoiding ocean shipping and liquefaction costs).

Gas would receive a competitive lift if there is a carbon tax.  It is already a cheaper source of electricity in countries that do not have Australia's low coal prices, but for it to become cheaper than coal in Australia would require a carbon tax of about $50 a tonne.  However, even without a carbon tax, according to work by ACIL Tasman, if CSG is approved, not only will Australia gain valuable export markets, but gas prices will fall 6 per cent in Queensland and 15-20 per cent in the southern states.

The promise of CSG riches has brought out anti-growth activists and NIMBYs campaigning against development.  Much misinformation has accompanied these campaigns.  Some activists have even suggested that the water used to pressurise the gas out of the coal seams could threaten to deplete the Great Artesian Basin.  In fact, this would require the peak development of coal seam gas to be sustained for 600 million years.

Other confected concerns have already led to bans on benzene, toluene, ethylbenzene and xylene (collectively referred to as BTEX), chemicals used in minute quantities in the lowest-cost extraction processes.  Banning these chemicals means a productivity loss of about 15 per cent.  Activists have sought to justify the bans on the basis that, of the tens of thousands of wells in the US, which have been subject to the most stringent analysis, one has shown possible evidence of the presence of these chemicals in the local groundwater.

Added to these concerns are those of people who want to preserve areas for farming and hobby farms and are mistakenly of the view that gas recovery is incompatible with this.

Confronted by NIMBY groups and a strong campaign by Alan Jones, the New South Wales government has been highly resistant to the industry.  More so than in Queensland, NSW politicians generally are placing increasing numbers of reviews, delays and special regulatory barriers in the path of any development.  The opponents clearly see these as measures that will add costs to development and perhaps see it stopped entirely.

Already the inhospitable political approach in NSW has allowed Queensland to forge ahead.  Gladstone is about to become one of the world's most prominent gas hubs, with BG, Santos, Origin and Shell all building export facilities.  As a result, Queensland rather than NSW stands to gain hundreds of millions of dollars in royalties as well as the investment the industry attracts.

Any successes of the CSG industry's opponents will adversely affect Australian prosperity.  Even if projects are allowed to proceed, the increased regulatory measures by states and the Commonwealth will ensure that the costs of development are excessive and doubtless thwart some otherwise valuable projects.

CSG seems to be facing the same chorus of dissent from vociferous elements within urban communities that all too frequently thwart novel opportunities.  Opposition towards new ventures by Australia's southern urban elites is contributing to areas outside of the north and the interior of the continent becoming the ''two-speed'' economy's slow gear.

The politically powerful in southern capitals are holding back potential developments with rafts of regulations.  Though primarily targeted at urban and near-urban areas, much of this regulatory morass also has an impact on resource projects in the more remote areas, endangering the resource-based resilience that so far has enabled Australia to weather the international recessionary storms.

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Convergence Review: complete, spectacular failure

The Convergence Review ''has assembled what could be a workable model for regulating the converged media environment,'' said Greens Senator Scott Ludlam last week.

Really?  The review's interim report, released on Thursday, is a lot of things but ''workable'' isn't one of them.

The Convergence Review's purpose is to reshape communications and media law in light of the rapid technological changes over the last decade.

And if its interim report is anything to go by, the review has completely, spectacularly failed.

Just take one of the most prominent examples of its entirely unworkable suggestions.  The report recommends imposing minimum Australian content requirements on all ''Content Service Enterprises'' that provide audio-visual services.  Those Content Service Enterprises include websites.

The extent of regulatory intervention to do so would be extraordinary.  The effort to distinguish Australian websites from international websites would be significant.  The incentives to avoid these new regulations would be enormous.

Certainly, the Interim Report says ''emerging services, start-up businesses and individuals should not be captured by unnecessary requirements and obligations''.

Yet that one-sentence caveat begs more questions than it answers.  Who draws the line between an ''emerging service'' and an established one, and according to what principle?  And why, exactly, is it that start-ups and individuals should be excluded?  What theory of media regulation distinguishes between old and new companies, between companies run by one person and companies run by two, between companies doing innovative things and those which are not?

So that caveat, rather than suggesting the Convergence Review has thoughtfully engaged with the complexities of its task, reveals it has been unable to devise a coherent model of communications regulation which makes sense in an online world.

This failure is a particular disappointment because the Convergence Review was supposed to be the real game.  Yes, it is just one of a bunch of reviews into media law.  But only the deliberately naïve think the Independent Media Inquiry is anything but a political attack on hostile newspapers, and the National Classification Scheme Review is too constrained by its limited brief to recommend any serious reform.

The Convergence Review, by contrast, had scope and ambition.  Scope:  it was to look at all media from broadcast television to blogs to newspapers.  Ambition:  it was to take the communications revolution seriously and construct a regulatory framework which could last 20 years.

And it asked the right question.  Now that you can listen to the radio on your computer, browse the internet on your TV, and read newspapers on your phone, why should the law treat each service and each technology differently?  Forget whether News Limited gave the stimulus package a fair go, or whether Rob Oakeshott is being quoted accurately.  This is the most important media policy question right now.

In The Drum in September I argued media convergence necessarily implies deregulation.

It is impossible to impose on the internet the same complex, technocratic, micromanaging regulations which have governed Australian broadcasters.

And even if it were possible, it would not be desirable.  Any limit or imposition on what an organisation can publish or broadcast is a restriction on freedom of speech.  In Crikey last week, Bernard Keane wrote the Convergence Review ''represents the most far-reaching proposals for internet regulation since the Howard government banned online gambling'' -- much more substantial and threatening than the internet filter ever was.

It follows that if we are to have a new framework regulating all services consistently, broadcasting regulations should be lowered, not internet regulations raised.

Yet such genuine reform would require challenging the obsolete content regulations which have built up over the last half-century.  The idea ''Australian voices'' need to be protected and subsidised is anachronistic -- since the rise of home video, television networks or regulators stopped being able to dictate what media content we watch.  More than ever our media consumption is about choice.  If Australians want Australian content they will seek it out.  If they don't, they won't.

The Convergence Review goes boldly in the other direction.  Drawing on a ''wide range of views'', the report concludes there ''is an ongoing need for government intervention to support the production and distribution of Australian content''.  This claim makes it impossible for the review to meet its brief.

Not to say they haven't tried.  One option for Content Service Enterprises, if they can't produce Australian content themselves, is to support ''a converged content production fund''.  In practice, that seems to be a tax on websites to fund Australian television production companies.

Not quite the radical, principled rethink about media regulation we were hoping from the Convergence Review.

But a sad reminder of how hard it will be for regulators and legislators to ever come to grips with the communications revolution.

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Why have an ABC at all?

Alan Kohler makes an important point about the on-going Finkelstein media inquiry.  It is all about making life uncomfortable for News Ltd and providing some or other intellectual underpinnings for government support of the ABC.

In my last article for The Drum I indicated that there was no reason for the Australia Network to be put for tender because the government already had an agency to do the work.  I also indicated that perhaps the whole of the ABC could be put out for tender.

That latter line caused some consternation in the comments.  Many readers were outraged.  But putting the ABC up for tender simply raises a more fundamental issue -- why have an ABC at all?

A lot of people think of the ABC as being a public good.  By that they usually mean a good provided by the government on behalf of the public.  People also tend to think of schools and hospitals and the like in the same terms.  Other times people think of public goods as being those things that are good for the public.

Economists, however, have a somewhat different definition of public goods.  To qualify as a public good the good or service must be both non-excludable and non-rival.  So nobody can stop you from using a particular good or service and my use of the good or service doesn't prevent others from using it too.  There are remarkably few goods and services that meet those criteria.  Remember, to qualify as a public good both conditions must be met.

National security and the rule of law are usually held out as examples of public goods.  Public broadcasting, however, may be good for the public but it isn't a public good.  Of course, that shouldn't be the end of the discussion.  That is just quibbling over definitions.

Adam Smith had a less technical and more intuitive definition of public good.  Those goods and services, ''which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.''

That suggests a two-prong test;  a public good must be advantageous to a great society but must be inherently unprofitable.  Note there is a difference between being a non-profit organisation and being inherently unprofitable.  The ABC is the former but, perhaps, not the latter.  No doubt there are many who would argue that the ABC passes the ''advantageous to a great society'' test.  The ABC has some excellent programming and many fine employees.  Yet so too do its competitors.  Therein lies the rub.

There may well have been a time when the provision of broadcast media was too expensive for the private sector and required some level of government ownership and/or subsidy.  If there ever was such a time it has long since passed.

But perhaps it isn't the organisation itself that is important, but rather the content.  For example, it may well be that the ABC carries material that the for-profit media will not broadcast.  Those niche markets that we deem to be important for non-economic reasons could be covered by the ABC.  To be fair, there are some areas where the ABC does perform well -- lawn bowls on a Saturday afternoon, and coverage of religion on a Sunday are niches that other might not cover.

Yet are these niche markets enough to justify the entire organisation?  A cheaper solution might be the restructure existing local content rules that the government already imposes on all other media.  Conversely to lift those rules on the private media and insist the ABC undertakes more of those activities.

If the government wants intellectual support for its ownership and funding of the ABC it should think carefully about what needs doing that the private sector either can't do, or won't do.  That approach rather than a private media bashing exercise will result in better policy outcomes.

Right now the best argument for the ABC is that it already exists.  While status quo is a powerful argument for preservation of any institution, the point remains that the ABC is a billion-dollar government program.  Getting the best value for money requires more careful thought than simply following a more of the same policy.

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How the Red Cross virtually lost the plot

As long as human beings have been creating fictional worlds, moralists have been denouncing their creations.  But the news that the Red Cross might prosecute 600 million video gamers for war crimes was still pretty ground-breaking.  A daily bulletin of the organisation's annual conference two weeks ago recorded an ''overall consensus and motivation'' to act ''against violations of international human rights law in video games''.

The conflicts simulated in games like Call of Duty, Battlefield and Metal Gear don't rigorously comply with the Geneva Conventions.  Game developers are understandably more interested in playability than legal realism.

But the bulletin had been written ambiguously.  A week later, the Red Cross clarified that ''serious violations of the laws of war can only be committed in real-life situations''.  It just wants to ''engage in a dialogue with the video gaming industry''.  So we can all breathe a sigh of relief.  Log back on to Xbox Live.  Reinstall the iPhone games.  Plug the Playstation into the TV again.  But the very fact that the Red Cross decided to investigate video games is deeply, almost incomprehensibly, absurd.  It is about as sensible as objecting to slasher movies because murder is against the law.

This year has been one of the most important years in human rights in decades.  Yet the supreme deliberative body of the biggest human rights organisation in the world thought now would be a good time to discuss how international law is portrayed in entirely fictional settings.  This suggests that some human rights activists are animated not just by an admirable defence of individual rights around the world, but by an all-encompassing moral crusade.  Sure, the Red Cross does a lot of great work, but does it really think fictional violence, in games played mostly by those who will never enter a combat zone, is an urgent problem?

The liberal philosopher Richard Flathman talks about the pervasive tendency in politics towards moralism.  Handwringing, showy and excessive moral judgmentalism infects democratic debate around the world.  It's driven by politicians and professional moral activists.  They're extremely confident in the rightness of their cause.  They're deeply earnest.  They have a belief in an ideal world -- they're on a quest for purity.  And they believe that to achieve the pure goals stipulated by their moral vision, they need to force change on the rest of society.

For those stirred by such moral fervour, even fictional depictions of the world -- in video games, movies, novels -- are a challenge to their vision and an opportunity for action.

It was this sort of moral activism which gave us the famous film codes in the mid-20th century.  These insisted married couples could not be seen in the same bed, and no evil could be depicted as ''attractive'' or ''alluring''.

And in our century, the same passion motivates the public health activists trying to ban cigarettes in movies, anti-consumerists denouncing product placement in television shows, and religious groups picketing Harry Potter book launches.  Sometimes they want the offending material banned.  Other times they just want to ''work with'' the transgressing filmmakers and artists.  Either way, moralists believe that society should be engineered to make it more moral, more ethical, more clean.  And they appear to have infiltrated the otherwise clear-headed and respected Red Cross.

There's hardly any better example of this moral self-seriousness than the 2009 research report which sparked the Red Cross' video games discussion.  Playing by the Rules, produced by a Geneva-based advocacy group, pedantically scrutinises popular games according to a strict legal criteria.

For example, in 24:  The Game, a terrorist is killed after he surrenders.  The report concludes that this is a violation of Article 3(1) of the Geneva Conventions, and Article 8(2)(b)(vi) of the Rome Statute of the International Criminal Court.  Then one of the terrorists -- sorry, ''alleged'' terrorists -- takes a hostage.  This is a clear breach of the 1979 International Convention against the Taking of Hostages.  Of course, there is no cause to believe the game developers approve of terrorists taking hostages.  Or that gamers will be convinced hostage-taking is an admirable thing to do.

In one edition of the Call of Duty franchise, set during the Second World War, players can use flamethrowers.  Such weapons were used in that conflict, but were technically illegal according to the 1907 Hague Conventions.  So, the report meticulously points out that this too is a human rights violation.

Such absurdities are apparently enough to get the world's peak human rights watchdog in a flurry.  Certainly, the Red Cross has a remit to ''promote respect'' of the rules of war.  But the elimination of war crimes will not be furthered one bit by changing video game content.  No person has ever believed that Castle Wolfenstein is a guide to just or unjust behaviour.  Yet the Red Cross still solemnly claimed that ''600 million gamers'' may be ''virtually violating'' international human rights law.  If this is not an attempt to stoke a moral panic, then nothing deserves that title.

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Should alcohol carry warnings?

Proposals for government-mandated health warnings on alcohol treat Australians as if they are too stupid to look after their own health, and are unlikely to work.

Alcohol is already taxed highly in an effort to discourage consumption, most children are taught about its harmful side-effects in school and we're bombarded with responsible drinking advertising, funded by our taxes.  So yet another message from the ''Nanny State'' about the evils of alcohol is unnecessary.

And the details of these proposals are ludicrous.

For example, in the Blewett Report handed to the Government in January this year, recommendation 27 suggested that pre-mixed drinks should ''comply with all general nutrition labelling requirements, including disclosure of a mandatory Nutrition Information Panel''.

Is there one person in Australia who thinks that alcohol is nutritious and who would reconsider their purchase of that four-pack of sugary vodka because it had too many kilojoules?

There's no clearer evidence the public health lobby has gone completely off the rails than the proposal that government-mandated health warnings adorn everything from an alcopop to a bottle of Penfolds Grange.

As public health lecturer Dr Michael Keane argues, public health used to be about protecting people from the harmful activities of others.  Governments sensibly took action, for example, to prevent the pollution of our water supply.  But these new proposals are not about protecting us from each other, but advocate laws that seek to protect us from ourselves.

It's firmly from the ''government knows best'' school of policy.  It stems from an outdated notion that a group of experts is better placed to judge what is good for us than we are.

Of course, advocates of this world view are careful to couch their arguments in more sympathetic terms.

We're told that alcohol warning labels are necessary to protect children, particularly during pregnancy, as if parents are too dumb and careless to exercise caution when starting a family.

Mothers and fathers who don't care about the risks of alcohol consumption to their kids are not going to change their behaviour because of a warning label.  No law can protect children against bad parenting.

And just as we have seen with tobacco, what seems like an innocuous proposal at first to help ''inform the public'' or to ''protect children'' almost always subsequently morphs into something much more draconian and oppressive.

Australians aren't stupid.  Most of us know how to enjoy a drink or two without harming our health.  And those who don't won't change because of a government warning label.

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