Same-sex marriage: When did dissent become discrimination?

The politics of gay marriage have shifted radically in a very short space of time.  Until 2011, the Labor Party was firmly opposed to gay marriage.  The Coalition was firmly opposed just four months ago.

So it's remarkable that a Catholic archbishop in Tasmania is being dragged to a government anti-discrimination authority for opposing same-sex marriage — the position that was until very recently, shared by both parties.

Last September, Martine Delaney, the Greens candidate for the federal seat of Franklin, took a complaint to the Tasmanian Anti-Discrimination Commissioner that the Catholic Church had produced and distributed a booklet which "does immeasurable harm to the wellbeing of same-sex couples and their families across Tasmania".

This Tasmanian case has Australia-wide significance.  We've just had a sustained national debate about free speech, and are about to go into a national debate about gay marriage.

Polls show that about 70 per cent of Australians support gay marriage, so you might think the plebiscite is an assured success.  Indeed, Tasmania's Liberal-led lower house last week became the third state to agree to a motion supporting legislation of same-sex marriage.  But that success is not at all certain if gay marriage is perceived as the thin end of the wedge for a more general attack on the liberties of religious communities and freedom of conscience.

The booklet in question, Don't Mess With Marriage, offers the basic Christian case against gay marriage:  families are the founding blocks of society and children need a mother and father.

It's hard to overstate how moderate this booklet is.  It offers no fire or brimstone.  It's gentle and Christian, of the suburban pastoral variety.  There's much expression of sympathy for same-sex attracted people who also want to follow religious teachings that preclude their sexuality.  It is a calm explanation of a major position on a prominent political policy issue.

To be offended by the booklet is to be offended by what was, until very recently, the mainstream view on gay marriage, and one still shared by a large minority of the population.

For this reason if nothing else, the complaint ought to have been dismissed as laughably frivolous.  But this month the commission decided that the Catholic Church has a case to answer under Tasmania's Anti-Discrimination Act.

The Tasmanian law almost exactly parallels the controversial section 18C of the Racial Discrimination Act that the conservative commentator Andrew Bolt was found to have breached in 2011, and which Tony Abbott (in opposition) promised to repeal.

There are, however, two revealing differences between the Tasmanian and the federal legislation.

The first is that the Tasmanian law prohibits offensive and insulting speech not only on race and ethnicity, but on 20 different areas from sexuality to religious belief to political affiliation.

In this sense the Tasmanian act resembles the Human Rights and Anti-Discrimination Bill which the Gillard government failed to push through parliament in 2012, which would have made it unlawful to offend someone on virtually everything (including their political opinion!) in the workplace.

It is symptomatic of the spread of no-go areas in Australian public discourse.  Governments increasingly believe that protecting us from being offended — on whatever spurious grounds — is more important than allowing us to speak our mind.

The second difference is that there is no caveat in the Tasmanian act that even purports to protect free expression.  Defenders of the federal Racial Discrimination Act often point out that section 18C is followed by section 18D which provides protection for speech made in good faith on matters of public interest.  This protection is weak.  The court decided in the Bolt case that something could not be considered in good faith if, in the view of a judge, it was too sarcastic and had errors.

However, the Tasmanian legislation doesn't even offer that token concession to basic liberties.  In a parliamentary debate in 2013, the Attorney-General dismissed concerns by insisting the bill "does not impinge on free speech;  it provides protection from bullying".  All words are cheap.  The words of politicians — even when they're interpreting their own legislation — are junk.

Both supporters and opponents of gay marriage should be very unhappy with the Tasmanian case.  Even if the Catholic Church successfully defends against the anti-discrimination complaint, damage has been done.  Free-speech theorists talk about the "chilling effect" when the cost of defending oneself against baseless claims hampers the open expression of views.

And in the event that the plebiscite fails, it will be because voters feel that expanding marriage freedom to one group means limiting the freedom of another.  The date of the vote hasn't even been set, but the debate about gay marriage has already moved from the realm of public discourse to legal sanction.

The Tasmanian legislation also tells us something about the ongoing political contest over free speech in Australia.

All those human rights bodies — such as the government's Australian Human Rights Commission — that flaunt the vital protections of section 18D did not lift a finger to protest the lack of such protections in the Tasmanian legislation.  Just as they fully supported the Gillard government's 2012 bill until its absurdities became politically controversial.

When the Abbott government broke its promise to repeal section 18C in August 2014, many commentators believed a line had been drawn under the arguments over free speech and offensive speech.  Not at all.  Watch Tasmania.  This is the debate we are all about to have.

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When ''safe spaces'' become an attack on ideas

There is something deeply reactionary brewing in American higher education.

The events at Yale and the University of Missouri over the last few weeks make plain that the movement for trigger warnings in university classrooms and safe spaces on campus has turned into a dogmatic moral illiberalism.

We should pay attention to what's happening.  With a few years lag, Australia tends to enthusiastically adopt American intellectual fashions.

At the University of Missouri, anti-racism activists announced that their protest encampment on public property was a "safe space".  A student journalist, Tim Tai, tried to report on the protest.  You can watch what happened.  In the first half of the video, you'll see the activists surround and attempt to intimidate Tai.  In the last 10 seconds you'll see no less than an assistant professor of mass media shout for "muscle" to remove another journalist for simply filming a public protest.

The Yale incident appears more trivial, but is more telling.

Just before Halloween, Yale's Intercultural Affairs Committee emailed students asking them to ensure their Halloween costumes did not involve offensive "cultural appropriation and/or misrepresentation".  In response, one Yale lecturer and associate master at Yale's Silliman College, Erika Christakis, objected that the idea that cultural appropriation was inherently wrong could stifle free speech and open debate.

Christakis' email was apparently beyond the pale.  Outrage spread across Silliman College.  An opinion piece in the Yale Herald responded that "I don't want to debate.  I want to talk about my pain."  (The piece was taken down but you can read an archived version.)  The New Yorker complains Christakis was "privileging abstract free-speech rights over the immediate emotional experiences of those who are likely to experience discrimination at the university."

In these two events, we've dramatically seen how the apparently benign movement for trigger warnings in university classes and safe spaces for students has metastasised into a more general assault on the contest of controversial ideas in higher education.

The original idea behind trigger warnings was to advise students who had experienced serious and severe trauma, such as sexual assault, that they were about to hear some disturbing content.  You can understand the reasoning behind the warnings, as a reasonable concession to the fact that some material, particularly in humanities subjects, can be highly confronting.  Likewise the safe space — say a women's room — might be seen as a benevolent amenity.

But trigger warnings have become absurd.  Some students are requesting classic literature come with warnings.  And safe spaces are morphing into places where infantilised students hide from ideas.

Now this movement has turned into a generalised attack on open discussion.  The entire higher education experience is being reconceptualised as a zone of post-trauma, in which students demand faculty protect them from the expression and thoughts of others.

Using the language of psychological harm, ideas are condemned, rather than rebutted.  Students can receive "pain" from the decision of another person to write an email.  It is wrong to "privilege" free speech, a mere "abstract right", over personal emotional experience.

It's hard to think of anything more contrary to the purpose of education — which is, in the broadest sense, the systematic exposure to ideas outside personal experience — than that.

One of the arguments in Christakis's email is worth dwelling on.  Not her main points about the benefits of provocation, or the challenge of defining what costumes are offensive, but her point that, from a childhood developmental perspective, students need to learn how to reject ideas that trouble them, rather than running immediately to ban and punish.

This accords with the most well-known argument for freedom of speech — that made by John Stuart Mill in his book On Liberty.  Mill argues that by hearing contrary ideas, if only to consider and discard them, we grow intellectually.

In this way, free speech and education are tightly intertwined.  Limit the former and you hinder the latter.  An education system where the students are excessively cushioned from the provocation of others will stifle that development.  One would hope you could graduate from Yale being able to articulate why some ideas are wrong.

But what about students who have experienced genuine trauma?  Even then, it's not clear that preventing "triggering" is the best response, as Jonathan Chait noted earlier last year.  Students who are genuinely unable to cope with incidental references to that trauma might not be ready for the window into the breadth of human experience that education is supposed to provide.  If you are triggered by the racist language in Huckleberry Finn, you are not ready to study 19th century literature.

For those who are ready, hiding from every reminder of trauma can be counterproductive.  There's a growing area of research into what's known as "post-traumatic growth", the idea that some people who experience trauma can become stronger for the experience, rather than made permanently fragile.

This isn't for everyone, of course.  Talk to your doctor.  But education is supposed to foster intellectual development.  It is not supposed to be a safe zone of comfort and emotional protection.  Campus radicals used to brag about how transgressive and provocative they were.  Now, it seems, they're more interested in policing the transgressions and provocations of others.

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Loosening China's infamous one-child policy unlikely to fix gender imbalance

China's decision to relax its infamous one-child policy is unlikely to reverse its looming demographic problems, with major consequences for our region as a whole.

Recently the Central Committee of the Communist Party of China announced the end of the country's one-child policy, which has been mandatory (though with some exceptions for minority groups) since 1980.

The statement issued by official press agency Xinhua read, "China will allow all couples to have two children ... the change of policy is intended to balance population development and address the challenge of an ageing population".

Although this decision was widely praised in Western media it should not be construed, in any way, as a concession by the Communist Party in the virtues of personal liberalism, in this case the fundamental and intimate right of individuals to start and grow their own family ties.

Rather, the slight easing of this pernicious restraint over the reproductive lives of Chinese people is based on a cold, calculating assessment of the economic and social consequences of one of the most venal expressions of state control in living memory.

Partly as a consequence of the one-child policy it is widely anticipated that China will experience accelerating population ageing, with some demographers quipping that the country, presently home to about 1.4 billion people, will grow old before it gets rich (in per capita terms).

During the "Great Leap Forward" of forced agricultural collectivisation and industrialisation, from the late 1950s to early 1960s, the Chinese total fertility rate stood at around 5.7 births each woman, and reached subsequent highs of about 6.2 during the mid-1960s.

By the time the one-child policy was being enforced by Deng Xiaoping, estimates of the total fertility rate in China had fallen to about 2.8 births each woman, which were consistent with regional and global trends.

With the one-child policy motivated by the spurious fear that population growth will overwhelm available resources, Chinese fertility rates have been driven down even further to now range between 1.2 and 1.6 births each woman, depending on which source is relied upon.

The effects of such change are long lasting and transformative in a demographic sense with estimates suggesting the policy, brutally enforced by coerced sterilisations and forced abortions, tragically prevented between 200 and 400 million unique individuals being born.

It is often said that "demography is destiny" and the anti-natalist stance of the Chinese government has precipitated the almost sure-fire result of a rapidly ageing population stock which cannot be economically or fiscally sustained by a declining working-age populace.

By 2020 it has been estimated that the numbers of the elderly in China will increase by 60 per cent whereas the working-age population will fall by about 35 per cent.

Looking a little farther out into the future, the United Nations has previously forecast that by 2050 one-third of the Chinese population will be over 60 years of age, with a little more than half of the population of working age.

For comparison, the latest Intergenerational Report forecasts about 23 per cent of the Australian population will be over 65 years of age about mid-century, whereas 60 per cent of our total population will be aged between 15 and 64 years.

The exercise in demographic misanthropy over a 35-year period is also contributing to a disfigurement of China's population composition, of a character unlike that seen anywhere else in the world.

Even though advanced economies with a greater preserve for civic and personal freedoms are also experiencing declining fertility rates below the replacement threshold level of 2.1 births each woman, they are unlikely to see a generational population distribution as skewed as that emerging in China.

In particular there is growing reference to the "4-2-1"phenomenon of a typical extended family consisting of four grandparents, two parents, and the one child who is pampered, as if a "Little Emperor/Empress", but equally pressured to perform well in school and attain a high-paying job to support ageing relatives.

The one-child policy combined with deeply ingrained patriarchal norms contributed to horrifying femicides of untold numbers of very young girls, leading in turn to a peculiarly skewed gender imbalance in Chinese society.

Although estimates of the skewness in gender do vary, it is generally accepted that there are about 117 males for every 100 females in China with worries that up to 30 million men will never find a female partner to marry, should they be thus inclined.

Arguably the most ironic element of this draconian population policy which, incidentally, still remains largely in place given the reluctance of the Chinese government to allow its own people to freely reproduce, is that fertility rate reductions would likely to have come anyhow.

The experience of a falling fertility rate within its freer domicile, Hong Kong, aptly shows that educational attainment and income growth leads many families to want to have fewer children of their own accord but, then, invest more resources into each child than ever before.

Over the last few years Australian governments have placed very great stock on the realisation of a so-called "Asian Century", arguing we should reorient the weight of our economic ties with East Asia in particular.

But China's ageing population is likely to contribute to more subdued output growth and cost competitiveness pressures, including as the smaller pool of working-age people seek out wage premiums, so Chinese prosperity will not necessarily be limitless.

In fact, the future growth of the Chinese economy will be very heavily constrained by the heavy-handedness of its demographic central planners.

Perhaps the Communist Party may have sealed its own fate in this case, since it will find itself unable to maintain the economic growth rates and, incidentally, the revenue base to fund the state-sector patronages necessary for ongoing political support as the population ages.

However, as the historical record and contemporary experience abundantly illustrates, there is no better promoter of prosperity, and not to mention stabilising population growth, than greater economic freedom itself.

It is in this regard that China could avert the dire economic consequences of its self-induced demographic crunch as best it can, with an encouragement of much greater foreign investment and migration key among the policy changes it should make.

If the East Asian giant could further liberalise its economy to inject new capital and alleviate labour shortages into the future, then both the peoples of China and Australia would stand to benefit immensely.

Reform debate: put low taxation on the table too

The pity is that as John Hewson has got more left-wing over the years he's forgotten how good he once was and he's mis-remembered what he tried to do.

On these pages last week Hewson wrote how "Turnbull can succeed where I failed" (AFR, November 5).  But what Hewson tried to do, and what Malcolm Turnbull and Scott Morrison will likely do, are two entirely different things.  Hewson tried to cut tax and the size of government.  That's not what Turnbull and Morrison have they said they want to do.

On the first page of his economic policy package Fightback! dated November 21, 1991, Hewson's goal was clear:  "It is vital to reduce tax and simplify the tax system if the energies, talent and initiative of the Australian people are to be encouraged and fulfilled."  On the second page it says, "The size and cost of government in Australia are excessive.  Under a Coalition government both will be reduced."  And so it goes on — for another 343 pages.

Twenty-four years later Hewson has repudiated most of what he once stood for, which is a shame because Australia needs the 1990s version of John Hewson more than ever.  Measured by the tax it collects, the federal government is now 10 per cent bigger than it was at the time of Fightback!  Sadly, now Hewson talks of things like increasing taxes on superannuation and raising the GST.

It's not just John Hewson who's changed.

In recent weeks the Prime Minister and the Treasurer have made a number of substantial speeches on tax reform.  Not once did either mention the need to reduce the overall tax burden.

'DEFEAT FOR THE RIGHT'

Worried Liberal MPs aren't the only ones noticing what's happening.  Some are delighted by the turn of events.  Ben Oquist, former chief of staff to Greens leaders Bob Brown, now executive director of the centre-left Australia Institute, said something perceptive a few days ago.

"Swapping a progressive tax on income for regressive tax on consumption would itself lead to unfairness — unless the overall compensation package and, more importantly, an increased spending package joined it.

"Importantly though, the new PM is not arguing for the traditional conservative position for a decrease in the overall tax take.  In fact, no one is.  This is a significant defeat for the right in Australia.  Sure, there is pressure from many not to increase overall taxes but no one is credibly arguing for a decrease.  That debate has been won."

Oquist is half right.  Yes, the voices wanting higher taxes and bigger government are winning.  But they haven't won yet.  And anyway, not many debates are ever permanently won or permanently lost.

A few people are in fact arguing for tax cuts — but they can be counted on the fingers of one hand.  I have explained in detail how to reduce taxes, cut the size of government and promote economic growth.

It's fallen to free market think tanks and a handful of independent economists and commentators to argue for lower taxes.  That's partly because they're not in thrall to government or government funding.  Practically every other voice in the public debate is.  Those who once would have brought a degree of disinterested analytical rigour to such a debate have become barrackers for bigger government.  Until John Fraser arrived as its new boss, the Treasury Department was among the loudest spruikers for higher taxes.

The discussion paper Treasury issued in March started this tax debate on entirely the wrong basis, which perhaps explains why it is going so wrong.  The paper claimed "Australia's overall tax burden is relatively low compared to other developed countries."  That is precisely what everyone who wants higher taxes would have the public believe.

Maybe the junior Treasury bureaucrat who wrote that line was engaging in wishful thinking.  The trouble is the line is wrong.  As the Productivity Commission has acknowledged, on a like-for-like basis Australia's tax burden is actually now higher than the average of other developed countries.  Once, John Hewson and the Coalition thought prosperity was achieved by reducing taxes and letting people keep more of their own money.  Hewson doesn't believe that now.  What the Coalition believes, we'll discover in the months ahead.

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Turnbull's weak media reform plans aren't fit for the modern age

One of the pleasant things about being prime minister, I suppose, would be pursuing your own little hobby horses.  Especially when those hobby horses had been cruelly stymied by your predecessor.

And so the Turnbull Government looks to be pushing ahead with the reforms to media ownership and control that had been quashed — or at least shelved — by Tony Abbott when Malcolm Turnbull was communications minister.

Now the communications minister is Mitch Fifield and the Government is talking about a media reform package being announced this month.  Perhaps even this week.

Yet it is striking how limited the reforms being publicly discussed actually are.

The Government has floated eliminating the reach rule (which prevents firms from owning commercial television licenses that cover more than 75 per cent of the population), eliminating the two-out-of-three rule (which prevents a firm from owning more than two of a commercial television licence, a radio licence and a newspaper in the same area) and abolishing television broadcast licence fees.

Each of these reforms could have been done by any government in the last 20 or 30 years.

In his recently published diaries, Peter Reith records a Howard cabinet debate about eliminating cross-media ownership rules all the way back in April 1997.  (An unhappy Reith, who wanted more comprehensive liberalisation, complains "we are busily contemplating a highly interventionist approach".)

The media landscape is completely different in 2015.  Here's what the ABC's page looked like then.  Just 13 per cent of Australian households had home internet access in 1998.

Anyway, we all know how much technology has changed over the last decade.  But even in a much shorter time-span the media environment has changed dramatically.

The last time I wrote about the prospects for media ownership reform was in March 2014, when Turnbull first floated the idea of regulatory reform.  Since then our viewing choices have expanded to the streaming services Stan, Netflix and Presto.  We've seen the launch of Buzzfeed Australia, Daily Mail Online Australia, and Huffington Post Australia.

Even the way we conceptualise media has shifted.  A larger and larger number of media consumers use Facebook as their primary news source.  Wikipedia's page on "binge watching" was only created in September 2013.

All those technological and social changes materially affect the old arguments for media regulation.  Populist fearmongering about press barons and broadcast moguls might have been effective in the 20th century, but only fantasists claim the media is monopolised today.

Nothing prevents media consumers voting with their feet.  Nothing prevents consumers migrating rapidly onto new services and shifting their allegiance to more interesting news organisations.  Consumers do not lack for choice.

These transformative changes make the Turnbull Government's proposed reforms look embarrassingly modest.  Even the Greens support the elimination of the reach rule.  The two-out-of-three rule is absurdly anachronistic.  There's something comic about a regulation in 2015 that conceives of the media as divided between print, radio and television.

As to the elimination of television licence fees, this is more fraught.  The Government apparently believes broadcast licences are effectively worth zero, and that charging for the use of a valueless asset is unfair.

It's certainly true that electromagnetic spectrum rights are worth less than they were.  But they're not worth nothing.  It's a big leap from "traditional broadcasting is no longer special" to "traditional broadcasting is worthless".

Anyway, if the Government really believes that, then where's the proposal for a fourth free-to-air commercial television network?  Or a fifth?  The incumbent broadcasters, no longer benefiting from the valuably scarce spectrum, would have no cause to complain.

One "high level spokesman" was quoted in The Australian yesterday saying that "if the Government believes one law needs to go, then they all need to go".  Indeed.  The technological changes that make some media reform possible also allow for more dramatic media reform.

For instance, anti-siphoning laws, which regulate the broadcast of sporting events, should be eliminated.  The spectrum should be privatised, not licensed at no charge.  Local content requirements — those archaic remnants of cultural protectionism — should be removed.

Each of these existing regulatory constructs assume a media world where content is scarce, where production and distribution is expensive, and where consumers are locked into free-to-air broadcasting.

Not a world where we browse Twitter on our iPads while Netflix plays on that screen in our lounge room that we still call a television but is really a computer monitor.

Parliament always lags behind technological and social change.  But the Turnbull Government wants to be all about innovation.  Boldness, not timidity, in media reform would be a good place to start.

Church Social Justice mired in strange agendas

The fact that Australia's mainline Protestant Churches are near collapse doesn't seem to have deterred them from aggressively pursuing a number of dubious social justice agendas.

Recently, Anglicans have been busy loudly condemning coal as the new evil, questioning the conduct of Australian border security and encouraging local parishes to use dolphin-friendly tuna and vegetarian options at all church gatherings.

This begs the question, what should Australia's churches actually be advocating as social benefits for our community, particularly from denominations that are numerically, financially and spiritually disconnected from mainstream Australian life.

Pope John Paul II has given a powerful focus to the central issue that is confronting Australian society in the 21st Century in his encyclical Laborem exercens (English:  On Human Work), highlighting the dignity and value of human work.  Australia has not been immune from recession, the restructuring of manufacturing and the constant need to compete and adapt to global markets.

The Australian government is sharply focused on a free trade agenda that will go a long way to ensuring our continued prosperity, particularly in our trading relationship with Asian neighbours.  This is a good policy.  Nevertheless, there are Australian workers, urban and rural, whose employment has been affected or eroded by international competition.  In many cases there are limited opportunities for alternative employment.

Whilst churches also talk a great deal about poverty reduction, they are usually silent and blind to the obvious;  gaining employment and holding it is the key platform for human fulfilment.  Employment is the foundation of the whole social justice agenda.  It is the means to provide for marriage and family, the ownership of a home and the resources to raise and educate children.  It also allows for all of us to contribute to the welfare of our nation beyond our family and friends.

But the demands of the modern economy must not destroy employment or the dignity of the worker.  As John Paul II noted, Jesus spent most of his life working, hence, the Pope's call for worker support whenever employment is threatened or lost, care for their families and a strong emphasis on new employment as central to our community life.  (Laborem exercens, No 8)

The world of work changes;  that is the one constant reality of work.  Nothing stays the same and adaptation is the key.  All businesses must be focused on continued improvement and all workers on the need for adapting and developing skills.

In Australia, employment issues are directly related to the health of all Australian States.  It is not just South Australia or Tasmania in which this is keenly felt.  States unable to support their population with long-term employment which encourages individuals to build lives over a sustained period, will simply lose population to states which can.

Some churches also need more honesty surrounding the benefits that flow from free-enterprise.  The generally socialist ethos of church pronouncements is often restricted to the idea that business is motivated by profit alone.  Broader notions of wealth which include physical, psychological, moral and spiritual benefits almost always stem from the world of work.

Australian business has overwhelmingly allowed Australians to participate in the benefits and goods that define our humanity and has made an irreplaceable contribution to our society.  The Business Council is making a powerful call to lower company tax and personal income tax.  Currently, Australia is at severe competitive disadvantage against our Asian neighbours, whose average corporate tax rate is around 22% compared to our 30% rate.

However, let's not expect our churches to get on board with this soon.  The real challenge facing young employed Australians is the need for more political engagement and greater social justice.  I know, lets hold a sustainable, multi-cultural rally in aid of Animal Welfare!

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Australia wins at the global creative game

I like a good index, and the University of Toronto-based American economic geographer Richard Florida has been my main supplier for a few years now.

His super-popular Creative Class products are all made of the same three progressive ingredients:  Technology, Talent and Tolerance.

The label on the bottle tells an uplifting story of how great American cities are not made of steel mills anymore, but of gay-friendly citizens, great universities, and bicycle paths.  Like Helen of Troy, his ideas were of such inestimable beauty that some 1,000 city government plans were launched to create, at very least, some of these university-flavoured bicycle paths.

Dr Florida's idea is that you take these policy prescriptions, then you wait (it was never actually specified how long — some say 10-15 years) for the effects to kick in.  What will happen is that first you will start to feel creative, and then later prosperous.

So I always look forward to my latest delivery of creativity index.  This year's product (from his fine research group) does not disappoint — being a Global Creativity Index no less!

We're #1!

And guess what?  Australia is number one!  We win at the global creative game!  Ozzy, Ozzy, Ozzy!

NZ is number three — suck that NZ and your stupid Rugby World Cup — and the USA is rather pathetically only number 2.

(An entirely predictable list of Canada, some bicycle path-ridden Nordic countries, Singapore, and some other overeducated quasi-Nordic countries make up the rest of the top ten.  The 11-20 spots are mostly occupied by the good coffee precincts in the Eurozone.)

Australia wins because of its consistent performance over all of the measures.  Most countries fall down on at least one.

Australia is 7/112 on the Technology index component.  (South Korea, Japan and Israel make up the top 3.)

Australia is 4/136 on the global tolerance index, a mix of attitudes to gays and lesbians and racial and ethnic minorities, only just behind the world-class tolerance of the Canadians.  But they also gave the world Justin Beiber, so should probably lose some points for that.

And get this:  Australia is 1/134 on the global talent index.  (This is a mixture of creative class density, and educational attainment.) That's amazing — we win over education powerhouses of Finland, Singapore, Denmark and the US because of our proportionally higher ranking in the creative class measure, which in many ways is a reflection of the high past quality of Australia's education.

Yay!  Now what?

So, what would be an appropriate way to celebrate this great and deserved win?  Let me suggest with a few hearty rounds of deregulation.

If these index findings are indeed true — and I have no reason to doubt them:  the list of ingredients is clearly labelled on the bottle — then our economic and cultural performance, our overall prosperity, should be better than it is.

Some ingredient is missing.  Australia is a world-beater at the creative game.  But we don't seem to be as good at translating that sort of winning creative on-field performance over inputs (our tolerance, our talent, our technology) to the off-field realm of deliverables, our "merchandising" if you will.

What's missing from our great potential in innovation is entrepreneurship.  Being creative is not enough.  We also need to improve our entrepreneurial game.  (This same point was also made, in specific reference to Australia, by the US think-tank the Kauffman Foundation.)

I produced a report last year entitled Where have all the entrepreneurs gone?.  It showed how the number of new firms created has fallen by almost 50% since 2002.  A major reason for this is the high and growing regulatory burden in Australia, which raises the costs of entrepreneurship, inhibiting entry.  This is bridling our great creative potential.

Maybe the Assistant Minister for Innovation Wyatt Roy will lead us though this with the tech-community's favourite answer:  start-up incubators and accelerators.

But a better strategy to work on our translation game is simply to increase the size of the team on the field.  This doesn't require redirecting resources, or increasing taxes, but simply giving our highly creative world-class players a bigger, freer space to run.

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Malcolm Turnbull should avoid the seductive trap of an early election

Early elections are not a good idea.

Yes, they look very democratic.  Who could object to a government seeking the approval of the voters, even if not strictly necessary?  But if there's one lesson we've learned in the last few years, it's that early elections are a seductive trap.

Julia Gillard held an early election in 2010.  She wanted voter approval for Labor's leadership change.  But by doing so she squandered any hope of exploiting her status as the incumbent prime minister, and nearly lost her first term government.

Kevin Rudd called an election well before he had to in 2013, well before he had re-established himself as the rightful leader, and well before he had rebuilt any semblance of Labor's economic credentials.  Needless to say, Rudd lost.

So one wonders why on earth people are recommending the Turnbull Government go to an election sooner rather than later.  In Monday's Australian, Phillip Hudson had an extended piece saying that Turnbull was being urged to call a poll for Valentine's Day 2016.

It's true that with an early election Turnbull could take advantage of his current popularity.  Just like Gillard and Rudd took advantage of theirs.

Over the weekend, News Limited papers revealed Treasury is actively considering a 15 per cent GST in return for significant income tax cuts.

It is widely believed that any major tax changes would have to be taken to an election first.  It's not clear to me why that is.  It seems to assume that governments these days are incapable of explaining why what they want to do needs to be done.

In fact, the so-called reform "mandate" provided by an election is ambiguous.  We cannot know why elections are won or lost.  Perhaps an election win means the public loves the policies of the winning party, or perhaps it just dislikes the leader of the losers.

Nevertheless, the idea that reform has to be taken to an election first is the received wisdom, and governments are governed by nothing but received wisdom.

This speculation of an early election illustrates one of the Turnbull Government's biggest challenges.  In the next 12 to 18 months, Malcolm Turnbull is going to have to navigate the politics of a budget, a general election, a plebiscite (same-sex marriage), and possibly a constitutional referendum (Indigenous recognition).  In each, Turnbull will be fighting the shadows of decisions left to him by Tony Abbott.

Indeed, of all these, an election is probably the easiest to navigate, given Bill Shorten's lacklustre poll performance.  As things look now, a second term for the Coalition is almost certain.

Turnbull didn't want a plebiscite on same-sex marriage.  But he has some interesting options here.  Turnbull could bring the plebiscite forward and hold it before the next election.  Surely doing so would not be breaching faith with voters who voted the Coalition into government in 2013.  After all, Turnbull would be asking for permission from those voters for the change in policy.  That's the beauty of a plebiscite.  It's hard to argue against on democratic grounds.

Tony Abbott thought he was being clever when he called for a gay marriage plebiscite.  In fact, when he did so he threw away the conservatives' strongest card:  with the current make-up of the Parliament, a conscience vote might well have been unsuccessful.  A lost parliamentary vote would have delayed the issue for at least a few more years.

Opinion polls show consistently high support for same-sex marriage.  When the plebiscite date is announced, gay and lesbian couples might as well book their wedding venues.

The Indigenous recognition referendum is much more complicated.  Turnbull is sending it off to yet another committee.

Phillip Hudson raised the possibility of a poll combining the gay marriage plebiscite, Indigenous recognition, and a half-Senate election, to be held perhaps in the second half of next year or early 2017.

But such an omnibus poll plan assumes this new committee will decide on a recognition question that is so uncontroversial it is guaranteed to be successful.  Holding a controversial recognition question at the same time as the gay marriage plebiscite will risk both failing.  Turnbull surely knows this.  So far there is no sign of a consensus question.  Don't count on there ever being one.

The final electoral complexity is the May 2016 budget.  It will be the first major test of Scott Morrison's economic skills.  It needs to symbolise a new approach to getting the budget back to surplus, while at the same time maintaining the Coalition's mantra of "lower, simpler, fairer taxes".  It needs to bear the load of the Turnbull Government's economic reform agenda.  It can't be the public relations disaster that was 2014.

With all this pressure, you can see why some in the Government would be eager to get an election out of the way before the budget was handed down.  Budgets have winners and losers.  But doing so would be a mistake.  Governments are elected to govern.  As the experiences of Kevin Rudd and Julia Gillard demonstrated, voters punish election timing cynicism.

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Hands-off approach the best way to foster innovation

For a growing and productive Australian economy, we need to embrace innovation in all forms without onerous regulatory obstacles.

Prime Minister Malcolm Turnbull has indicated, in no uncertain terms, that he is a man with a plan, and that plan is for a more innovative Australia.

In his first statement as Prime Minister, Turnbull implored Australians "to recognise that the disruption that we see driven by technology, the volatility in change, is our friend".

When he later announced his ministry the Prime Minister boldly stated:  "We must be more innovative.  We have to work more agilely, more innovatively, we have to be more nimble in the way we seize the enormous opportunities that are presented to us."

Since then, Turnbull gathered up representatives from venture start-ups, technology firms, universities, and government bureaucrats to talk at a roundtable forum about innovation issues, in preparation for a formal innovation statement later this year.

Doing his leader's bidding, Assistant Innovation Minister Wyatt Roy recently organised what has been described as a "policy hackathon", in which various interest groups were brought together over a weekend to hash out ideas for boosting innovative activity, such as business entrepreneurship.

Since theoretical developments from the 1980s identifying the likes of innovation spending and investment in human capital as bolstering the growth rate of an economy, most politicians have latched onto the notion of more subsidies and tax breaks for research and development, for schooling, and for selective industries.

For many years there have been advocates for governments to always do more to encourage innovation, pointing to statistics suggesting Australia's expenditure on research and development lags behind numerous other OECD countries.

According to a set of innovation indicators compiled by the federal Department of Industry, Australian gross R&D expenditure of 2.1 per cent in 2012 was eclipsed by the OECD average of 2.4 per cent, with R&D spending by the business sector exhibiting the same general pattern.

An obsession with international discrepancies in R&D expenditures has long animated the innovation policy discourse in this country, but is perhaps inappropriate given the vastly different industry structures and resources endowments for each OECD member.

In any case, innovation is far more than the R&D often stereotyped as learned people donning lab coats and toying with petri dishes, syringes, and machines until something miraculous happens.

Joseph Schumpeter, of "creative destruction" fame, put it well when depicting economic evolution being represented in things such as new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates.

The key message here is that innovation is conceivably every worthwhile economic activity we do to produce goods and services which please our customers.

Taking this insight even further, irrespective of whether we produce, sell, or buy a product — be it a chocolate bar to satisfy a sugar craving;  financial advice to a client about to retire;  or a hydraulic excavator for a new mine — it carries bits of economic knowledge embodying past innovative efforts.

Conceiving innovation to be embodied in everything of economic value, one might say the total value of innovation generated by the private sector of the Australian economy in 2012 was certainly substantially greater than the $18.3 billion spent by business on R&D.

It was more like the $1.5 trillion of the final value of output produced by the private sector in that year, which is taken from the national accounts and excludes the costs of public sector consumption and investment expenditures.

This figure also includes the value of purchased imports, because innovative, valuable knowledge is also embodied in the goods and services that Australians buy from suppliers located in other parts of the world.

This broad conception of innovation underlines the fact that government statutory bodies, and entities primarily funded by the public sector such as universities, are not anywhere close to being the prime drivers of innovative outcomes in an economy.

Putting it bluntly, when the writer Mariana Mazzucato argues in her book The Entrepreneurial State that government is responsible for the innovative achievements of the IT sector, she is simply mistaken.

The amazing innovations during the Industrial Revolution required no government support to bloom, whereas the academic and military originators of the internet lacked the wherewithal to commercialise it into the gloriously equalising tool for economic and social connections the world over.

And the hostile regulatory attitudes displayed by various governments in Australia, and around the world, toward the sharing economy of Uber, Airbnb and other platforms clearly demonstrate that the public sector is by no means an innovation leader.

If Prime Minister Turnbull and his eager cabinet colleagues wish for a more innovative Australia that is readily embraced by every resident, better for them not to game the market process by forcing us to accept bundles of new economic knowledge we would prefer not to produce and buy ourselves.

The best innovation policy, in other words, is one which frees up the economy in every way imaginable so that innovation is generated by entrepreneurs in the marketplace.

As part of this, to hedge against the prospect of local entrepreneurs failing to come up with good ideas we should simultaneously accept innovation values wrapped up in the form of inflowing foreign capital, goods, and people.

We shouldn't forget, either, that once existing goods and services are available then inventors and consumers should be free to tinker with them, further improving the stocks of innovative practices known to humankind.

One of the better treatments of this concept in modern times has been covered by American technologist Adam Thierer, whose principle of "permissionless innovation" states that fiscal and regulatory obstacles should be removed from anyone who is prepared to assume risk and intends to innovate.

According to Thierer, "unless a compelling case can be made that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later".

In the final analysis, we should want to encourage market-based economic activities because growth and productivity is sourced from innovation.

But when we also appreciate that innovation is embodied in everything valuable we do economically, making and selling mundane and technical products alike, it becomes clear the best strategy for the Turnbull government is a "hands-off" approach in this key policy area.

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Turnbull has golden opportunity

The question now facing Malcolm Turnbull is what to do with his 58 per cent satisfaction rating.  Being the preferred Prime Minister by 63 per cent of Australians is nice for the time being, but both Kevin Rudd and Julia Gillard were once pretty popular too.

Turnbull still has time to decide his agenda, but maybe not as much time as he thinks.  MPs get impatient with party leaders quicker than the public.  The reality is that a PM or opposition leader is more likely to be struck down by their colleagues than by the electorate.  Since 1983 the Liberal and Labor parties have each changed their federal parliamentary leader 10 times.  Only three of the changes each party made was the direct outcome of a federal election.  As traumatic as it was, the manner of Tony Abbott's removal as Liberal leader, albeit that he was the prime minister, is not unusual.

There's one thing Turnbull shouldn't spend his political capital on — and that's raising taxes.

For two reasons.  The first reason is that he shouldn't even be contemplating raising taxes.  Australia is already a high-tax country.  As the Productivity Commission pointed out a few weeks ago in its report Tax and Transfer Incidence in Australia if taxes across countries were compared on a like-for-like basis "taxation revenue as a share of GDP from all other sources would be higher in Australia than the OECD average".

The commission's finding, which confirmed my own research, received no media coverage.

The second reason Turnbull shouldn't spend his political capital on raising taxes is that raising taxes is easy.  One of the few budget measures Tony Abbott got through the Senate was increasing the top rate of income tax.  Political capital should be spent on hard stuff, not the easy pickings.

There's one thing that's even harder to do in Australia than cutting government spending, or restoring freedom of speech although it's not as hard as Turnbull seems to think it is.  Does anyone honestly believe that in a free country it should be against the law to insult someone?

What's harder than any of these things is changing the industrial relations system to make sure it is about one thing and one thing only — getting people into work.  Hopefully Turnbull will turn out to be not quite as "progressive" as his left-wing boosters in the media would like him to be.

But, if Turnbull as a Liberal prime minister is going to spend his time giving exclusive interviews to The Guardian the least he can do is use the left's own language to make the left understand industrial relations reform is a question of social justice.

Nothing could be fairer than ensuring an individual has a job.  There's nothing fair about an unemployment rate for 15 to 19 year-olds of 20 per cent.  It is unfair that an adult Australian is forbidden from choosing to work for a wage of $17.28 per hour, because a government committee has decided the minimum wage should be $17.29 per hour.

Turnbull could point out to Guardian readers that Denmark, the country they want Australia to be like, doesn't have a statutory minimum wage, and neither do Norway or Sweden.

The Prime Minister's current preferred formulation for his vision of Australia as "a high wage, generous social welfare net, first-world society" is the jargon of economists.  As Goethe said:  "Dream no small dreams for they have no power to move the hearts of men."

If Turnbull wanted to blow his political capital well and truly he could banish the terminology that dominates the "reform" debate.  He could not talk about "productivity" or "GDP per capita" and he could even abandon the three-word-Holy Grail of the Coalition — "industrial relations reform".  All of these things are merely abstract concepts.  They say nothing about human flourishing.

In their place Turnbull could say something more important and meaningful.  He could for example say something like his government will be judged on how many people who want a job have a job.  Or how fewer families live in poverty.

The Prime Minister has the chance to reset what passes for the national conversation.  He should take it.

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Lego can avoid Ai Weiwei, but it can't avoid politics

On Friday the Chinese dissident artist Ai Weiwei revealed that Lego had refused a bulk order of bricks from his studio.  The bricks were to be used for a piece that he was going to show at the National Gallery of Victoria.

Lego says it has a long-standing policy to not knowingly supply its bricks for political uses.  Yet there might be something else going on here.  In an Instagram post, Ai drew a connection between Lego's action and the recent announcement of a new Legoland to be opened in Shanghai.  He later described Lego's actions as "an act of censorship and discrimination".

On the one hand, this ban means nothing in practice.  The company may not approve of using its product for political works but Ai does not need Lego's approval.  There's nothing stopping him from buying new Lego kits from retailers, rather than from Lego directly, then doing whatever he likes.  If that fails, there's a thriving global second-hand market for individual Lego pieces.  And the artist has apparently been "swamped" by offers of donations of Lego since Friday.

When Lego declined his order the firm was no more engaged in censorship than was the Brisbane bookstore that refused to stock Campbell Newman's biography as retaliation for cancelling the Queensland Premier's Literary Awards.

On the other hand, what we're seeing here is a toy company struggling with the political implications of its own enormous cultural profile.  Lego is a very particular toy company.

The global toy industry is dominated by a few big players.  Mattel and Hasbro are two of the largest umbrella firms.  Almost every toy brand and product you can think of — Fisher-Price, Barbie, Power Wheels, GI Joe, Mr. Potato Head, Transformers, Jenga, Monopoly, Battleship, Cluedo — falls under one of those two, giant publicly listed companies.

But last year the privately held Lego trumped Mattel and Hasbro to became the biggest toy company in the world.

Unlike its rivals, Lego is based around a single, iconic product:  the Lego brick.  And unlike its rivals, it professes a peculiarly utopian ethic about the nature of play and creativity that very much reflects the era and place in which it was founded:  1950s Denmark.  The firm is still based in the small Danish town of Billund.  It is still very much animated by its founding myths.

For instance, Lego avoids making realistic military kits or weapons because its founder, Ole Kirk Christiansen, didn't want to make war seem like child's play.  Star Wars branded Lego has been central to the firm's recent success.  But as David C Robertson points out in Brick by Brick:  How Lego Rewrote the Rules of Innovation and Conquered the Global Toy Industry, Lego nearly passed on the Star Wars license because "the very name ... was anathema to the Lego concept".

Robertson's book leaves you with the impression of a company struggling to come to terms with the way Lego has been repurposed and reimagined by its own consumers.

In 2010 the firm reported that about 5 per cent of its sales come from adult consumers buying for themselves.  This is certainly an understatement, given Lego's growth since, the Lego Movie, and the fact that some parents are choosing Lego for their children partly for self-interested reasons.

Large scale Lego sculptures are a minor pop culture genre.  Lego profits from this:  the Architecture line, marketed to adults, taps into the ways consumers have been using the pieces unintended by Lego's marketing team.  That Ai Weiwei wants to use Lego for art is a reflection of its cultural symbolism.  Ai is not a pioneer here.  There are artists who work exclusively in Lego.  Hobbyists make elaborate creations.  There's a rather incredible Battle of Waterloo.

Yet Lego is not a company well-geared for political controversy.  At first glance their policy on controversial uses of their product is sound and clear.  No politics, no religion, no military.  Chinese democracy activists won't get Lego's approval, but then nor will Klu Klux Klan members.  Lego wants to remain above the grubby material concerns of politics.

Such anti-political neutrality is obviously impossible.  Whether they like it or not, Lego is a player in the cultural life of the human species, and in a way that any of Mattel and Hasbro's competing brands are not.  Lego profits handsomely from that status.  Perhaps a truer form of political neutrality would mean paying no attention to the ultimate use of bulk Lego sales.

I suspect the refusal to fill Ai's order is more a case of mindless adherence to their no-politics policy rather than a sop to the Chinese state.  But if it is the latter, with this controversy they've found themselves in the invidious position shared by firms around the world who want to service markets in unfree countries like China.

Such relationships throw up serious ethical questions.  Refuse to abide by the state's rules and deny their oppressed citizens a product you believe will better their lives?  Or obey and hope the benefits outweigh the harm of cooperation?  You can imagine the tense meetings going on right now in Billund, as news of the Ai decision snakes around the world.  They're just a toy company after all.

Milton Friedman was correct when he said that the social responsibility of business is simply to increase its profits.  But ours is a fallen world.  Businesses are also participants in our political systems as much as our economies.

Sometimes that means toy companies have to take a stand on democracy in China.  They have to choose between the Chinese state and its dissidents.  Implicitly, inadvertently, perhaps even with the best of intentions, they already have.

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Film Thor promises an Australian jobs bonanza, but don't believe the hype

Flanked by a smiling telecast of actor Chris "Thor" Hemsworth and director Ridley Scott, foreign minister Julie Bishop and arts minister Mitch Fifield last week announced some blockbuster news for the Australian film industry.

Production of upcoming films Thor III, Thor:  Ragnarok, and Prometheus 2 from the Aliens franchise would all take place in Australia, they said.

True, Australian taxpayers will be partially footing the bill, with the Australian government chipping in A$47 million to 20th Century Fox and Disney's Marvel Studios to entice them onto Australian shores.

But the benefits will far outweigh the cost, we are told.  According to Fifield:

Every job created in the film and television industry supports 3.57 jobs in other industries.  Every dollar of turnover creates turnover of $3.52 in other industries.  And an amount equal to 13-20% of spend comes back to the Australian Government in taxation, and a further 3% goes to state governments in the form of taxation.

There's only one problem:  those figures are simply conclusions drawn from economic models (called input-output models) that assume very generous multiplier effects from initial government investment.

The magic of economic models

To be fair, Fifield is quoting industry figures and a 2013 report titled Valuing Australia's Creative Industries, prepared for the Creative Industries Innovation Centre by consultants at SGS Economics and Planning.

These sorts of consultants' economic impact studies drive economists crazy because of the way they are used to imply that a change in spending will multiply through creating all sorts of new jobs.  But that's not what these models mean.

I would argue that governments do not and cannot create jobs — only markets and entrepreneurs do.  Why?  Because creating jobs is hard and requires discovering new sources of value that others had not seen.

If the figures in Fifield's assertion were correct, then surely private investors (in the form of the financing industry) would have already spotted those opportunities.

And where does this blockbuster enticement money come from?  From tax, obviously.

And when you tax an existing business, you are imposing additional costs upon it.  That destroys incentives and jobs.  So for the extra jobs and spending created by giving money to one group, you have to subtract away the jobs and spending lost from the ones you took the money from.  Usually those will be similar, so there will be zero net effect.  But the figure could even be less than zero, because of the distortion created by the political interference.

And then there are rent seeking effects, where the beneficiaries of the subsidies (the film studios) spend resources lobbying for these tax breaks.  This is unproductive spending, further compounding the waste.

So when you hear about the wonderful flow-on benefits of hosting these film productions in Australia, don't simply wonder if the numbers are inaccurate.  It's not as though it is really 2.07 rather than 3.57 broader Australian jobs that every job in the film and television industry here supports.

It's that these are not checkable facts in the first place.  They are political promises that are never subsequently verified for their accuracy as a prediction.

And this is not just true of film and television.  It's true of every sector that seeks to promote its economic impact to public spending, such as big sporting events like the Olympics or the Formula 1 Grand Prix in Melbourne, which routinely promise thousands of jobs created and enormous multiplier effects.

As always, it's worth taking such political assurances with a very large grain of salt.

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Don't blame voters for a lack of competition reform

Malcolm Turnbull should count himself lucky.  Tony Abbott has handed his successor a remarkably fleshed out agenda for economic reform.

Shortly after the 2013 election, Abbott and Joe Hockey commissioned a series of reviews and inquiries.  There was one on the financial sector, which reported in December last year.  A federation inquiry and a tax inquiry are both working their way through the system.

And then there was the inquiry into competition policy, headed by the economist Ian Harper, which released its final report in March 2015.

The last major competition policy inquiry was the Hilmer Report under the Keating government in 1993.  That report laid the groundwork for half a decade of competition policy reform.  Hockey to his credit knew what he was doing when he commissioned a sequel to Hilmer.

It's easy to forget all these reviews.  The Abbott government was so policy shy in its last 12 months.  The Harper review sunk like a stone almost as soon as it was released.

Only one of the Harper recommendations was seriously considered by the Abbott government — the so-called "effects test", which would have made it easier to penalise firms for "lessening" competition.

The effects test divided the Abbott cabinet.  It is the only major recommendation from the Harper review that would constitute an increase in regulatory interventionism.  The free market right hated it.  Small business minister Bruce Billson was the effects test's biggest advocate.  He was dropped from the ministry when Turnbull took over.  We can speculate that this was not a total coincidence.

So when Scott Morrison announced on Friday that the Turnbull Government was going to look again at the Harper review, he was wading into a deep pool.

Morrison did not commit to the effects test either way.  He did, however, specifically note the much more ambitious proposals in the Harper review:  reforms to urban planning and zoning to open up the housing market, and subjecting social services to competition.

All good stuff.  But it will be a hell of a challenge to implement any of these proposals.  It's true that the Coalition now has a minister for cities.  But all functional power in planning and urban policy lies with state governments, who created the disastrous land supply restrictions that caused the housing mess in the first place.

Likewise, the Commonwealth can cajole and bully all it likes but the ultimate responsibility for most service delivery is in the hands of the states.  Very little marketisation of social services is going to go ahead unless state governments buy in.

Last week we had an even more glaring illustration of the institutional barriers to competition reform.  The Harper Review put particular emphasis on taxi deregulation and removing barriers to the ride-sharing firm Uber.  But on Monday the Commonwealth's independent competition regulator the ACCC provisionally denied the taxi industry authorisation to launch a smartphone app, iHail.

The iHail app would have allowed users to book the closest taxi from participating taxi networks.  The ACCC thought that this would reduce competition in the taxi sector because it was a joint venture between a number of taxi networks.  You can read their draft determination.

The ACCC's arguments don't even pass the laugh test.  There is virtually no competition between taxi providers right now.  Indeed, we've had a century of regulation with the express purpose of eliminating competition between taxis.  The only real competition that is exists is between taxis and ride-sharing services like Uber.

But the ACCC has decided that, because the legality of Uber is still unclear, for the purposes of competition law taxis do not compete with Uber.  (You can see this rather astonishing claim on page 21 of the draft determination.)

Therefore the ACCC believes that taxi companies collaborating on an app endangers the taxi market — rather than being an example of how competition from Uber is encouraging taxis to offer a better service.

Malcolm Turnbull and Scott Morrison should be looking at this draft decision closely.  Not because its specifics are particularly important.  The ACCC might well change its mind on the scope of taxi competition before it releases a final determination.  And as the Harper review noted, even a completely deregulated taxi market reform would do little to boost total Australian productivity.

But Harper thought taxi deregulation was important because failure to do so symbolised a lack of seriousness in competition policy.  The ACCC draft determination is important.  It's a warning.  We now have a legal framework where firms have to request permission from the government to innovate.

In an influential short book, the American technology scholar Adam Thierer argued for "permissionless innovation".  Thierer argues that if we want take advantage of technological progress, we must remove the approvals, authorisations and clearances that innovators and entrepreneurs need from government before they bring ideas to market.

For years commentators have complained that the era of economic reform is over.  In the most common version of this story, any attempt to restructure the Australian economy will be scuttled by a hostile Australian public.  This is really just blaming voters for the failures of the political class.

In fact, what is more likely to hold back economic reform is government itself:  the network of interests and institutions that believe their job is to supervise the innovation economy.

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Globally, extreme poverty closer to becoming history: World Bank

Don't believe the hype:  the poor are not getting poorer, either in Australia or globally.

There has long been a sense of gloom regarding living conditions experienced by those in outright destitution, and others struggling to make ends meet on a regular basis.

Arguably the most forceful voice in the world today concerning these issues is that raised by the head of the Catholic Church, Pope Francis, who has gone on a mission to focus upon the plight of the impoverished.

In his much debated encyclical letter, Laudato si:  On care for our common home, he urges people to be "particularly indignant at the enormous inequalities in our midst" because, in some respects, "we fail to see that some are mired in desperate and degrading poverty, with no way out".

Although Francis is particularly concerned about the relationships between poverty and environmental degradation, which is partly affected by what he sees as immodest consumption in rich countries, his key writings do tap into a chord of greater worry expressed in recent years.

Of course, there is a certain intersection between material poverty and the observation that inequalities within income and wealth distributions have been widening lately, with the words of Francis and others, such as Thomas Piketty and Joseph Stiglitz, tapping into the veins of concern in this regard.

I would humbly submit it is obvious there is poverty in this world, which needs to be countered, but by the same token let us not harbour fears out of all proportion that the poor, as a whole, are necessarily getting poorer.

The key point here is the rich are getting richer and the poor are getting richer, too, or at least certainly less discomforting.

Just last week the World Bank released a report examining global trends in extreme poverty rates, and came up with a stunning finding that countries around the world are getting closer to the threshold of making extreme poverty history.

According to the report, the number of people living in extreme poverty (defined at an international poverty line of $US1.90 a day, or $US668.80 per annum) is likely to fall at below 10 per cent of the global population by the end of this year.

The World Bank has projected that the extent of global poverty has fallen from 1.96 billion people, or 37.1 per cent of the global population, to 702 million people (9.6 per cent of global population) this year.

It should be obvious even to the casual observer of global trends that a precipitous decline in poverty in East Asia and the Pacific region, including China, is helping to make the worldwide anti-poverty drive a reality, reducing the numbers of extremely impoverished people from 999 million people to 83 million from 1990 to 2015.

Now, it is true that not every region has experienced an absolute decline in poverty, with 63 million more people in sub-Saharan Africa earning below $US1.90 a day since 1990, but the declining representation of poverty in population shares is a general global and regional observation.

Turning now to Australia, there is virtually nobody in this country earning below the international standard poverty line set by the World Bank, certainly if 2011 research by the American Pew Research Centre is of any guidance.

Australia is a developed country by international standards, by and large, thanks to its market-based economy, even if fettered by taxes and regulations and, also in part, because of large-scale public sector redistribution running over the top.

But even in these circumstances, one is also prone to hear the argument there is still widespread poverty in Australia, even if what we conceive of as being poverty is nothing like what is experienced in many other locations around the world.

Importantly, the claims of an extensive Australian poverty remains the key rationale for ever more demands for fiscal, and to a lesser extent regulatory, measures to shift resources from the rich to the poor.

Regardless of whether we believe extra redistribution is prone to help or hinder (and I find myself in the latter category), the truth is that across several dimensions those disadvantaged Australians are sharing in the improved living standards most of the rest of us enjoy.

My research shows average income by the bottom 20 per cent have risen, average life expectancies for people living in disadvantaged areas is increasing whilst mortality rates are falling, and educational attainment is also on the improve in low socioeconomic locations.

Comparing the affordability of goods, proxied by the amount of time it takes for a labourer on a low income to buy a good outright, also bears the hallmarks of dramatic improvement we often overlook in the poverty debates.

That those in poverty are being lifted up along with the rest of us is even more starkly illustrated when comparing the conditions of life between now and a century ago.

As an example, diseases that wreaked havoc in poorer communities in places such as Sydney and Melbourne 100 years ago, such as diphtheria, polio, tetanus and tuberculosis, are thankfully pretty much long forgotten today, even in less advantaged communities.

The general lot of people has improved, even for those at the lower rungs of the distribution of financial resources, but we still want to ensure that poverty, indeed, becomes history.

The most effective formula for anti-poverty success here in Australia is fairly much the same as it is anywhere else in the world, and that is forging and maintaining good institutions giving everyone a shot at prospering.

It is no coincidence that as poverty has abated, economic freedom has increased in degree, both here and abroad, during the past 20-odd years.

As a number of empirical studies about the relationship between economic freedom and poverty reduction have shown, more freedom has added in new rungs on the economic ladder of opportunities for all to climb up, once some of the worst forms of central planning and political interference have collapsed.

We shouldn't fall for the hype that the poor are strictly getting poorer, and future discussion during Anti Poverty Week could be greatly enhanced if we can start talking about how economic freedom helps dissolve poverty out of sight.

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The ACCC is ripe for disruption

Monday's decision by the Australian Competition and Consumer Commission to ban the use of iHail, a smartphone application to book taxis, is yet more proof its attitude to competition and innovation is outdated and old-fashioned.  The ACCC of 2015 would have been right at home in the Australia of Gough Whitlam in 1975.  There is no role for it in the age of digital disruption.  If anyone at the ACCC had ever come across the term "creative destruction" their first reaction would probably have been to ask "how do we stop it?"

On these pages in 2004, I wrote that unless the ACCC's powers were restricted it should be abolished.  In the 11 years since the ACCC has got from both Coalition and Labor governments more money and more power.  Just on Tuesday the Turnbull government announced it was giving the ACCC an extra $1.4 million to enforce new rules against "unfair" contracts for small business.  In 2014 the government gave the ACCC $179 million.  The year before it got $150 million.  With this money it makes stickers for people to put on their letterbox to warn off door-to-door salespeople.  In its so-called "horror" first budget the Abbott government cut welfare by $3 billion but it didn't dare touch the ACCC.  Its budget was merely kept at it was.  Meanwhile, the ACCC boss Rod Sims complains of his "constrained financial environment" and his "significantly fewer resources".  If he really wants to know what a "constrained financial environment" looks like he could go to work in the private sector with the people who pay the taxes that pay his salary.

MORE CONVENIENT WAY

In simple terms, the ACCC ruled against iHail because it is the product of a joint venture between a number of large taxi companies and the ACCC had the opinion that it would be impossible to say whether any future success of iHail would be because of its inherent advantages or because it was going to be used in lots of taxis.  If it was the latter, then iHail would be against the law because the "market power" of the large taxi companies would be being used to have an impact on competition from other taxi booking applications.  It took the six ACCC commissioners 19,000 words to make this single point.  The best part of this whole sorry story is that the ACCC admitted iHail would be a "more convenient way for consumers to book taxi services" but it would come at "too big a cost to competition".

This is one of the most starkly absurd decisions the ACCC has made, probably in its entire history.  In the midst of a furious contest between taxis and Uber, the ACCC has decided to cripple the taxi companies' ability to innovate in response to competition.

READ AND WEEP

If anyone has ever wondered what government regulators do all day, they can go to the ACCC website and read the correspondence between the ACCC and iHail's lawyers.  They can read — and weep — about how in making its decision the ACCC wanted to know from iHail its "view about the extent to which the iHail app may provide an incentive, or disincentive" to compete on things like price and service levels.  This is a completely hypothetical and speculative question and in any case the answer is "who cares?"  The idea that if iHail is better than the alternative people will use it and if it isn't they won't seems to be beyond the comprehension of the ACCC.

Any entrepreneur giving an honest answer to such a ridiculous question would say "I hope my product is so amazing that everyone buys it, all my competitors go out of business, and then I IPO the company and become a billionaire".

A month ago, at his press conference held minutes after becoming Liberal leader, Malcolm Turnbull said:  "The Australia of the future has to be a nation that is agile, that is innovative, that is creative."  Turnbull is right, of course.  Unfortunately that future won't eventuate if the Australian Competition and Consumer Commission has anything to do with it.

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Alcohol and the nanny state inquiry: This isn't just about money

It's one of the most cited numbers in Australian politics:  alcohol costs Australia $36 billion every year in preventable death, illness, inquiry and lost productivity.

Unsurprisingly it has become a centrepiece of the Senate inquiry into personal choice and community impacts — you might know it as the "nanny state" inquiry — which began its hearings last month.

In their submissions to the inquiry, the Australian Medical Association, the Alcohol Policy Coalition, the Foundation for Alcohol Research and Education, the Public Health Association of Australia, the Royal Australasian College of Physicians, and the Australasian College for Emergency Medicine all cite the $36 billion figure to variously justify higher taxes on alcohol, or more controls over alcohol supply, marketing and licensed venues.

The media loves this number, mainly because they love big numbers.

Public health activists and academics love this number too, because they hate being called nanny staters and wowsers.  The $36 billion figure is useful because it purports to take the question of whether government should regulate people's personal choices out of the domain of morality and philosophy and into the domain of economics and rationality.

But it is absolutely meaningless in any policy-relevant way.

And it ironically reveals how philosophical questions cannot be separated from the debate over paternalistic restrictions on alcohol.

The figure comes from a 2010 study conducted by the Alcohol Education and Rehabilitation Foundation.

The 13 authors of the paper came to $36 billion by piling on as many "costs" of alcohol as they could imagine.  They took the full kitchen sink approach.  They included everything from the lost productivity of workers affected by alcohol, to the cost of hospitalisation of children who have been abused by adults believed to be affected by alcohol.

Even where the connection to alcohol is tenuous — the fact that some crimes are committed by people who have alcohol in their system does not mean that alcohol causes those crimes — they derived costs and added them into the big headline number.

It is a credit to their creativity that the authors managed to add a further $20 billion to the $15 billion social cost of alcohol found by a study published by the Commonwealth government in 2008.

But the policy question is not whether alcohol consumption has costs.  All choices have costs.  The question is whether those costs outweigh the benefits from alcohol consumption.  Costs are meaningless if they are not paired against benefits.

And as the economists Eric Crampton, Matt Burgess and Brad Taylor point out in an important paper, these sorts of social cost studies dismiss the benefits of alcohol by leaning heavily on an assumption that drinkers are uninformed or irrational, and therefore do not really "benefit" from drinking.

It's a revealing move, because it shows how even this most rationalistic and economistic argument for alcohol regulation ultimately comes down to an assertion that people just don't know what's good for them — and that others do.

In fact, as the 2008 study found, the direct costs to the public healthcare system of alcohol consumption are much more modest:  about $2 billion a year.  This might still seem like a lot.  But the government received more than twice that from the excise on alcohol sales:  $5.2 billion.

You often hear in debates about paternalism that the government wouldn't care about what we ate or drank if it weren't for the fact that taxpayers pay for the consequences of those choices through the public health system.  Hence we need to regulate alcohol and reduce alcohol consumption for the budget's sake.

Even if the excise on alcohol didn't more than recover the direct healthcare costs of alcohol, this would still be one of the most counterproductive arguments in politics.

First, the argument suggests that a public health system is incapable of handling the freely-made health choices of its customers.  Second, it suggests that the corollary of public health provision is state control over our bodies and what we choose to put in our bodies.  And third, it suggests that there is no "right" to public health care — rather that access to health care is contingent on making the correct health decisions.

Far from being a defence of the nanny state, this argument looks like a rather powerful attack on the notion of a publicly funded and universal health care system.  I'm guessing this is not the intention.

Helping launch the nanny state inquiry last month Sam Dastyari told the ABC that "ideology has just been dead in Australia for too long.  Let's actually have some big debates, let's have some different views".

Like it or not, the debate about restricting what we drink, eat and otherwise consume cannot avoid ultimately considering deeper philosophical questions about the relationship between individual and government.

Why the Reserve Bank isn't the right regulator for our payments system

Sometimes boring debates are important.  Mind numbing detail gets in the way of good policy.  So it is with an obscure feature of credit cards known as "interchange fees".

At the moment these fees are both highly regulated, and inappropriately regulated by the Reserve Bank of Australia (RBA) and not the Australian Consumer and Competition Commission (ACCC).

People tend to overlook the complexity of the market economy.  It seems all so easy.  People trade goods and services all the time.  The Payments System is how we actually pay for things.  It isn't simply a matter of handing over cash — the Payments System is a complex technological infrastructure, a web of interconnections and protocols between consumers, merchants, and banks.  Cash makes up a part of that system but most of it runs on payments technologies that include debit cards, eftpos, and credit cards.

Here is where things get wonky — how many people actually understand how their credit card works?  Most people simply swipe their cards and all the "backroom stuff" that actually facilitates the transaction happens.  Card payments are very convenient for everyone.

But there is no such thing as a free lunch or a costless transaction.  All the technology and organisation that underpins the credit card system has to be paid for.  The costs can either be paid by consumers, or merchants, or some combination of the two.  That is where the so-called interchange fee comes in — historically merchants have paid the costs of operating the credit card system.

All that started changing in 2003, however, when the RBA began regulating interchange fees.  The rationale being that interchange fees were somehow monopolistic and the costs of operating the Payments System too high.  We have argued that this policy was a mistake.

Here we want to address a more general question:  Why is the RBA regulating interchange fees at all?

At first glance this seems a bit trivial.  After all the RBA is responsible for the conduct of monetary policy and it sets the overnight interest rate.  Credit cards are about money too, so it's obvious that the RBA should be involved in regulating them too.

Actually, no.

The main argument for why the regulation of the payments system remains with the RBA can be summarised, in essence, as "because it has been with the RBA since 1959".  There is no strong or explicit case for positioning the oversight and regulation of the payments system within the RBA.  There are a number of implicit arguments that can be approximated as follows:

• That the payments system has some connection with the monetary system — payments are made in money, and because the RBA controls money, it should also control payments.
• Interchange fees are connected to credit cards and credit cards involve interest rates — monetary policy involves interest rates, ergo the RBA should regulate interchange fees.  (This is a variant of 1 above).
• The payments system is a utility, (albeit run by the banks) or public good.  Therefore the central bank should regulate this.
• The RBA has acquired historical experience in oversight and regulation of the payments system, and so it should continue in this role.
• The RBA should regulate the payments system because it can regulate the payments system.

It does not require a great deal of logical skill to disassemble these arguments:  (1) and (2) are fallacies of composition;  (3) is an empirical claim;  (4) is the induction problem, and (5) is the naturalist fallacy.  The point is that none of these are solid economic arguments, each can be picked apart logically and empirically, and all carry a large amount of expediency.

The Payments System is not a public good and not a utility.  Rather it is a suite of technologies and organisations, that is, an industry.  It is useful to think of the payments system as a network infrastructure that has cumulatively emerged from entrepreneurial actions, as the economy has grown and developed, in order to facilitate the transaction needs of a market economy.

By contrast monetary policy is a utility, and monetary stability is a perfect example of a public good.  It is both non-rivalrous and non-excludable.

While there is no good economic argument for the RBA to regulate interchange fees, there are good arguments why it shouldn't.  In short — it is likely to be a distraction from the RBA's main function.

Monetary policy is a specialisation based on the theory of both monetary economics and macroeconomics.  It is built around the analysis of interest rates and various indices (inflation, asset prices, aggregate demand, GDP, unemployment, industrial production) and involves an understanding of emergent aggregates, transmission mechanisms, and macro-econometric models of economic systems.

Regulatory economics is, in essence, the study of the social control of business and is a very different branch of economic theory and practice to monetary economics.  It is entirely based in microeconomic theory (not macroeconomics) and is focused on private market behaviour under different degrees of competition (from perfect competition to monopoly).

So the RBA has no comparative advantage or good reason to regulate the Payments System.  Australia already has a specialist agency to regulate industry — the ACCC.  So in the first instance we argue the RBA should be stripped of its regulatory powers and focus its entire attention on monetary policy.

Of course once we recognise that the Payments System is an industry rather than a utility, the question arises why government would fix prices in that industry.  So whether the ACCC should fix prices is an open question of competition policy.  Our argument here is that the RBA has no business in regulating industry.

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