Calls for more “evidence-based policy” in Australia are routine. For former Prime Minister Kevin Rudd, under whose watch very little reform occurred, it was “at the heart of being a reformist government”.

All this excess bureaucratic weight ain't satisfactioning me. Pic: Supplied

But more “ideology-based policy” is what this country needs. Evidence is useless without underlying principles to guide what to do with it. Statistics are often crafted from poor data and reported tendentiously.

As the government mulls over a successor to Gary Banks, the outgoing chairman of the Productivity Commission, it would be wise to select a man or woman with a hardnosed attachment to a few key economic and political principles.

Sharing David Hume’s assumption, for instance, that “every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest” when designing public policy, would foster a healthy scepticism of bureaucrats’ incentives to provide objective advice and act ‘in the public good’.

Understanding what Frederic Hayek called “the pretence of knowledge” - the widespread but mistaken idea that governments can aggregate sufficiently accurate and timely information - would limit policy makers’ desire to disrupt the most efficient method yet found for allocating resources and sustaining prosperity: a free market.

Together with Adam Smith’s timeless observation that “the whole or almost the whole public revenue is in most countries employed in maintaining unproductive hands [and] little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice”, Australian policy makers have a ready-made reform agenda without any need for ‘evidence’.

How can we improve productivity in Australia? Shrink government and thereby expand the fraction of the labour force producing goods and services people are actually willing to pay for.

At the federal level, abolish patently absurd departments and their attendant expenditures - such as ‘innovation’, ‘climate change’, ‘agriculture’, and ‘families’. At the state level, contract out the management and operation of hospitals and schools and deliver subsidies direct to the people consuming these services.

Health and education have no more right to be nationalised than the production and sale of food, which in private hands has proved a marvel of efficiency, diversity and customer satisfaction. Health and education are `important’; but so is food. 

At the local level, sack diversity officers and community outreach programs in favour of fixing potholes and approving new developments.

One might be sceptical principled policy ever existed. It did, with the accompanying economic miracle to boot.

John Cowperthwaite, the British finance secretary in colonial Hong Kong in the 1960s, was largely responsible for Hong Kong’s spectacular ascent from colonial backwater to gleaming, dynamic economic powerhouse. He kept the state to an absolute minimum and refused to collect official statistics; in a decade real wages grew 50 per cent and poverty collapsed by two thirds.

There wasn’t an evidence-based policy’ in sight. Cowperthwaite knew from first principles that “in the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster.”

Not only does evidence-based policy’ thwart sensible reform with a barrage of data, the very process of producing statistics and ‘evidence’ encourages governments to meddle with the economy.

No-one would pay to know Australia’s gross domestic product or supposed aggregate productivity, for instance. Australia would be far freer and more prosperous if government produced fewer statistics.

Australian businesses do not even measure their productivity in the way the Australian Bureau of Statistics does. They are more interested in profit, a far more reliable indicator of success.
To the extent any principle guides modern economic policy it is a crude utilitarianism that mandates fleecing the many to curry political favour with the few.

New government spending proposals think the $6.5 billion a year earmarked for Gonski review or the $8 billion National Disability Insurance Scheme give no consideration whatsoever of the economic costs, let alone the moral justification, of increasing the massive burden on Australia’s dwindling group of taxpayers.

Perhaps macroeconomic policy is even worse. Governments’ attempts to `stimulate’ their economies with borrowed money rob future generations of their income without asking, justified only by the flimsy and highly disputed theory that such action helps `growth’ in the present.

Equally, monetary policies that artificially create money increase the risk of inflation without seeking permission from hapless savers.

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    • hawker says:

      05:40am | 09/11/12

      Yes, more ideology. As long as it’s my kind of ideology of course.

      But then, what else would you expect a blinkered ideologue to say?

    • Mahhrat says:

      06:43am | 09/11/12

      Thanks, hawker.  Said it better than I can.

    • Nathan says:

      07:45am | 09/11/12

      could not agree more, i think that was the approach Greece took

    • subotic says:

      07:59am | 09/11/12

      A little less government, a little more freedom to do whatever I… please

    • Rose says:

      01:29pm | 09/11/12

      Too true!!

    • Steve says:

      06:02am | 09/11/12

      Wow! Just wow. When the evidence doesn’t agree with your pre-conceived view of the world, then let’s dismiss it.

      I’m sick of this completely untested Ayn Rand ideological BS. It’s like a religion to these mathematically illiterate economists.

    • Al B says:

      08:16am | 09/11/12

      Evidence? Mathematically illiterate? Steve you’re misunderstanding the Austrian perspective perhaps. Mises and the like would argue the very idea of ‘govt economics’ is flawed to begin with…no matter how much keynesian ideology u want to pile on, it doesn’t negate the position that govt is overstepping its role to begin with.

      So to suggest they are speaking against “evidence” misses the point. And you’re also missing the other “evidence” in Europe and the US of where rampant growth of govt can lead to. QE infinity won’t save u…

      The very idea of ‘monetary policy’ is absurd…it should be left to the market to set rates, while a commodities backed currency would eliminate the whole idea of central bank currency debasement.

    • Hume? says:

      09:38am | 09/11/12

      I agree, but find it particularly interesting that the article begins with:

      “Sharing David Hume’s assumption, for instance, that “every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest””

      Which was David Hume’s way of arguing that everyone is vicious and selfish unless you impose a government ‘Leviathan’ which prevents people’s more base activities from destroying society.

      But, of course, putting it to the free market means that all of this selfishness would not result in more selfishness but magically achieve altruism for such sectors as health and education.

    • Steve says:

      11:05am | 09/11/12

      Al B, yes Austrian economics does not place much emphasis on mathematical models.

      Of course QE infinity can’t go on forever. You need to cut back where you can, and raise taxes where you can to reduce deficits.

      Somehow that’s unacceptable for the ideologues, that both sides have to give a bit.

      And there are many theories to explain the US and European recessions. Some say too much government, some say too much private debt and risk taking by deregulated banks, forcing the government to step in so half the population doesn’t become insolvent.

      Almost certainly it’s a combination of both. But ideologues claim that the other side caused it and only they can fix it - just like religious fanatics. Which is why we don’t really need them more involved in policy, rather people who listen to both sides, look at the evidence and formulate appropriate policies.

    • acotrel says:

      06:06am | 09/11/12

      ‘But more “ideology-based policy” is what this country needs.’

      More ambition and a better appreciation of the ‘big picture’ is what this country needs.  The paradigm shifted with globalism and the GFC, so the rules have changed.  It is time to loook forward and imagineer our future, instead of driving the car looking into the rear vision mirror. We should look at the risks, and manage our way towards our national goals, and forget ideology !

    • Bill says:

      06:40am | 09/11/12

      Spoken like the worst ideologue haunting this website.

    • marley says:

      07:37am | 09/11/12

      You can’t “manage” your way towards national goals without having a vision of what those goals should be - an ideology, even.

    • Nathan says:

      07:50am | 09/11/12

      “It is time to loook forward and imagineer our future, instead of driving the car looking into the rear vision mirror.”
      This i fundamentally disagree with this, you need to understand the past to better identify future problems and opportunities. If you do take this approach how do you make a decision about what projects get of the ground and which one won’t? There is not a bottomless pit of money

    • Philosopher says:

      08:13am | 09/11/12

      Alice: Would you tell me, please, which way I ought to go from here?
      The Cat: That depends a good deal on where you want to get to.
      Alice: I don’t much care where.
      The Cat: Then it doesn’t much matter which way you go.
      Alice: …so long as I get somewhere.
      The Cat: Oh, you’re sure to do that, if only you walk long enough.

    • acotrel says:

      09:02am | 09/11/12

      I suggest there is a very big difference between an ideology and a vision. George Pell and Tony Abbott have plenty of ideology, but a vision ? Where is the evidence of that ?

    • acotrel says:

      09:06am | 09/11/12

      ‘There is not a bottomless pit of money ‘

      Is there more money in the global economy now,  than there was in the time of Jesus ? Where do you believe wealth comes from ?  ‘Spend a dollar to make a dollar’.

    • acotrel says:

      06:13am | 09/11/12

      ‘Australian businesses do not even measure their productivity in the way the Australian Bureau of Statistics does. ‘

      And how might that be ?  The ABS has stated that the ratio of profit to wages bill is a poor measure of productivity because it does not take into account investment in company infrastructure.  Yet we still have toe-cutters getting around sacking people and selling the idea that they have achieved a productivity gain.  Changing processes to improve value adding is beyond them, they don’t teach that at university !
      ‘The system runs on bullshit’ ! A deskilled company is a non-existent one !

    • I hate pies says:

      07:32am | 09/11/12

      Unless, of course, they maintain output. Then they have achieved a productivity gain.

    • acotrel says:

      09:09am | 09/11/12

      Productivity also involves the quality of product or service. You don’t make a sustained profit by producing substandard output.

    • I hate pies says:

      09:37am | 09/11/12

      No, but if you can cut people and still produce the same product you have a productivity gain. Most products are made on machines nowdays; the quality of the product has everything to do with the quality of the raw material, not the number of people on the process line.

    • Big Jay says:

      10:38am | 09/11/12

      Unfortunately, Pies is right. Same output (product/service/quality) with less people is a productivity gain.

      “Changing processes to improve value adding is beyond them, they don’t teach that at university” Um yeah they do. I studied it in 2nd year Commerce, then again in post-grad.

      I hate these “toe-cutters” as well, that sack people willy-nilly but investing in machinery and systems that reduce the number of people required is fair enough. You know, like buying a plane that doesn’t need to as much maintenance therefore you have surplus engineers that are redundant is exactly what you’re talking about.

    • acotrel says:

      06:17am | 09/11/12

      ‘Perhaps macroeconomic policy is even worse. Governments’ attempts to `stimulate’ their economies with borrowed money rob future generations of their income without asking, justified only by the flimsy and highly disputed theory that such action helps `growth’ in the present.’

      You are obviously referring to Rudd’s stimulus package.  I’d point out that it occurred post GFC - the paradigm has shifted .

    • Esteban says:

      11:52am | 09/11/12

      I too recall Rudd saying he was in charge of an evidence based Government.

      The only attempt to avert a recession with stimulas was Japan and 20 years later they are in debt and still languishing.

      So the only available evidence was that it is futile to avert a recession with stimulas.

      Evidence based indeed.

      How annoying that the evidence says that the economy must reach the bottom of the cycle before a recovery can start.

    • Fiddler says:

      06:22am | 09/11/12

      Agree with most of it, except for the health and education should still be publicly held.

      You are dead right on stopping collecting stats. I work for an organistation where about 30% of the staff are solely employed in analysing statistics that in no way help the other 70%. Oh and the other 70% spend most of their time reporting statistics to the 30%.

      That 30% constantly come up with new ways to get more statistics making the 70% do more paperwork and less actual work.

    • Economist says:

      07:17am | 09/11/12

      Yep stats are worthless. Pundits at Fox who focus on ideology over substance got the election result right didn’t they? A Statistician didn’t get the Presidency correct , nor every Senate, House Reps race but one?

      You might not look at stats produced by the 30%, but clearly your management do.

    • Markus says:

      07:43am | 09/11/12

      I spend about as much of my day logging, reporting on and accounting for the work I/we have done as I do actually doing said work.

      When the question was raised at that time of the year again of how to raise productivity/efficiency, I suggested that output would increase by x% if those employed fulltime to report on output had their services redirected to actually contributing to said output.
      That didn’t go down too well.

      I understand the need for accountability in a society, but it has gotten to the point where more time is spent ensuring nobody is held liable for a bad outcome that nothing actually gets done.

    • acotrel says:

      09:15am | 09/11/12

      How do you measure improvement in process if you don’t measure input and output ?  The joke is that the consultants with the MBAs are incapable of process improvement, as are the managers who employ them, so why evaluate the process ?  In the end we just finish up looking up at the backsides of the Chinese and Indians who have claimed the high ground..

    • acotrel says:

      09:32am | 09/11/12

      As a famous misogynist once said : ‘Shit happens’ ! Get a better job.

    • Fiddler says:

      09:34am | 09/11/12

      Economist, the problem is my profession has far too many chiefs and not enough Indians. The statistics are constantly told to us being used to make our work more efficient and yet for every efficiency introduced from them five inefficiencies are brought in to capture the information.

      Plus the 30% spend their time networking/playing emporers new clothes and using words like paradigm and proactive.

    • Big Jay says:

      10:48am | 09/11/12

      @Economist - “You might not look at stats produced by the 30%, but clearly your management do.” Haha way to give managers too much credit. Suppose you think every page of every govt report gets read by the people in charge? smile

      @Markus - “I understand the need for accountability in a society, but it has gotten to the point where more time is spent ensuring nobody is held liable for a bad outcome that nothing actually gets done.” Dead right.

    • Economist says:

      11:43am | 09/11/12

      Sure Key Performance Measures and statistical models on their own are worthless without interpretation. KPMs have a history of being manipulated. The only true KPM is money, but without a doubt statistical modelling of behaviour is worth big bikkies.

      Good managers know how to interpret data and see the big picture, to provide a context.

    • acotrel says:

      06:41am | 09/11/12

      ‘How can we improve productivity in Australia? Shrink government and thereby expand the fraction of the labour force producing goods and services people are actually willing to pay for.’

      So you are saying that logistics systems which support soldiers on a battlefield are unecessary, and we don’t even need to count the dead ?
      We can improve productivity by establishing common goals and motivating trained people to work towards them while managing the risks, and concentrating on ‘continual improvement’ . Perhaps you need to read the biography ‘Monash - the outsider who won a war’ ?

    • Fiddler says:

      07:01am | 09/11/12

      I think you just knocked over your hyperbowl acotrel.

      Reducing government is not the same as getting rid of all support services

    • acotrel says:

      09:23am | 09/11/12

      Making government effective with a different mindset might be a better option ? You saw Kevin Rudd get the boot up the bum.  He was a second division public servant, brilliant guy but with no idea of delegating effectively or motivating the people around him - and that is right throughout the public service and many large companies. The way to buck the syst m if you are a public servant is to conscientiously achieve all objectives.  If you do that you become a target, but it is really good for a laugh.

    • Tubesteak says:

      06:56am | 09/11/12

      A million times yes.

      Nothing works when you hand administration over to the hand-wringers, bedsitters and bleeding-hearts. You just end up with a lot of money wasted on people trying to feather their own nest while they invent boogeymen to jump at.

      Humans were once tribes of hunters and gatherers. Then we became towns and cities of workers and producers. We need to get back to this fundamental way of being. Individual rationale for individual gain. Let each man rise and fall of his own choosing and his own endeavour.

    • Shane From Melbourne says:

      07:30am | 09/11/12

      “You just end up with a lot of money wasted on people trying to feather their own nest while they invent boogeymen to jump at.”

      That’s not a nice way to describe The Department of Homeland Security…

    • Cheeso1 says:

      07:41am | 09/11/12

      That’d be great. No bloodsucking lawyers when we were hunter/gatherers!

    • fml says:

      07:48am | 09/11/12

      But for that to happen you need regulation to prevent big business from over taking the little guy.

      In essence it won’t work without big government, all that will happen is that the strong will over take the little businesses and we will see less diversity in the market.

      If we removed regulation, do you think the little mom and pop stores would flourish? nope, coles and woolies will just run them out of town. Deregulation only favors big business with its detractors claiming the trickle down effect will allow us all to flourish. I have not seen any examples of that? The mining boom? WA employs about 33,000 miners. The cost of living has increased dramatically for everyone else, if anything the only trickle down we get is cost of living increases.

    • Tubesteak says:

      09:06am | 09/11/12

      Since when have I been nice?

      No laws = no lawyers

      What’s wrong with big business taking over the little guy. Consumers will support whoever gives them what they want. Whenever there is a gap in the market not being served someone will appear to fill that gap. With more regulation the more cost we get. With more cost the less people can compete in the market. This is typically the little guy because the big guy can absorb those costs. Therefore, the regulation you ask for is counter-productive to your stated goal.
      If you’re going to argue against the trickle down effect then mining is about the worst example you can use. I know miners with no qualifications who earn more than me (who is qualified in two different professions: law and accounting). The trickle down effect does work for those that position themselves near the streams. The trickle-down effect was never meant to be an equal distribution of wealth.

    • acotrel says:

      09:29am | 09/11/12

      ‘Let each man rise and fall of his own choosing and his own endeavour. ‘

      ‘The poor should have managed their affairs better ‘?- ( ( Straight out of Dickens !)

    • Philosopher says:

      08:04am | 09/11/12

      Impressive! Mr Creighton attempts to bolster his polemic through selective, non-contextual quotes from Hume and Smith, whilst disregarding competing ideas of the role of the state (polis?) from Plato, Locke, Hobbes, Mill and others, which deal with ideas of justice, freedom, universal rights and welfare. Amusing how homo ecomomicus perennially complains about the inefficient meddling of government that supposedly hampers the markets, when the very idea of a free market (invisible hand) is in fact a theory, a model. Laughable also that the author describes our retail food duopoly (Coles and Woolworths) as ‘a marvel of efficiency, diversity and customer satisfaction.’ Was this a nod-nod wink-wink joke? Ha ha! This is why most public intellectuals in this country get short thrift in Europe and the US.

    • Thank you Thank you very much says:

      08:20am | 09/11/12

      Abbott your the Devil in disguise

    • Philosopher says:

      09:26am | 09/11/12

      he’s a vicious psychopath who once tried to stab his own family to death. His public facade is the classic ‘mask of sanity’ that Cleckley wrote about.

    • AdamC says:

      08:44am | 09/11/12

      To start with, I totally disagree on the statistics point. The author’s argument that the government should stop collecting statistics lest it be tempted to try to plan the economy on the basis of those statistics is utterly underwhelming. In the absence of statistics, governments would simply make policy on the basis of the conventional wisdom. At least, with decent statistics available, it is possible to challenge some of this conventional wisdom. For example, that we are working longer hours. (False) That the world population is growing at an ‘out-of-control’ rate. (Wrong.) Or that Australians’ living standards are falling. (Utter BS).

      I agree with your other points. Sadly, the public mood tends to demand government ‘do something’ in response to just about every perceived social evil. Indeed, we now live in an age where even private evils, like smoking, drinking and being overweight, are regarded as legitimate targets for state intervention. That is certainly an area where the ‘evidence’ in support of government action is usually laughably unbalanced and misleadingly presented.

      Ultimately, the public in Australia is only ever prepared to put up with very incremental economic reform. For example, despite its obvious benefits, the public rejected Work Choices on the basis of a seemingly religious conviction that it went ‘too far’. (Whatever that means.) Likewise, despite an overwhelming consensus in the policy community, neither side of politics seems prepared to even countenance raising the GST.

      The fundamental question is how can we create some sort of public constituency for small government and economic rationalism in Australia, as seems to exist in emerging (or, in truth ‘emerged’) Asia?

    • Economist says:

      09:16am | 09/11/12

      While I agree on the importance of statistics and reviewing government intervention. I do get a little fed up with comparisons with Asia. Hong Kong, and Singapore who we love to focus on reside in a space less than the ACT, compared with delivery of government services on over 7 million square kilometres. That’s roads, healthcare and education. We do it on a total tax take of around 30%, personally that’s pretty low for what you get.

    • AdamC says:

      10:56am | 09/11/12

      Economist, I do not accept that argument. Australia’s scale may present some challenges, but our embarrassment of natural riches makes up for that in spades. The success of Singapore and HK is built on government policies that include sustained lower taxes, less regulation of industry and employment and openness to international trade.

      They obviously also have a less extensive welfare state, and more of a culture of self-reliance and family support.

    • fml says:

      08:52am | 09/11/12

      A little less government, a little more deregulation please
      All this regulation is constipating me
      A little more profits and a little less tax
      A little less talk and a little more spark
      Close your heart and open up your mouth and government satisfy me
      Satisfy me government

    • Fiddler says:

      09:36am | 09/11/12

      nice haha. The point being however the government shouldn’t satisfy us, it should stop stopping us from satisfying ourselves wink

    • acotrel says:

      10:07am | 09/11/12

      How is life in the queue at the soup kitchen ?

    • fml says:

      10:49am | 09/11/12


      rewarding when you are the one that hands out the soup…

    • sunny says:

      09:00am | 09/11/12

      “the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government”

      The individual judgement of a mortgage lender would tend not to lend money to a person who probably can’t pay the money back. But when the regulatory shackles are off those individual businessmen are going to get their heads together and get a little bit creative. Like Hey, let’s on-sell the risk element of a loan as if it’s some kind of product, removing the risk from us the lender, but we still collect our cut. Multiply this type of dodgy transaction by several million and hey presto the ground falls out from under the economy.

    • Economist says:

      09:05am | 09/11/12

      There’s nothing wrong with having a wish list I just wish people would be a little more pragmatic.

      Without a doubt government’s can be a pain in the arse, but why not start small. Government’s expect small to medium businesses to be our tax collectors, to manage monies into our retirement funds, to be psychologists in dealing with their workers problems, they’re expected to aid in family management by providing flexibility, they even assist in the management of welfare by providing Centrelink their payroll records for those partly on welfare and then their is compliance with a raft of other legislation depending on the service they offer. While technological development has aided in providing this information they’re expected to employ a raft of expert accountants, managers etc. Let’s focus on making this easier for business.

      Yes even in healthcare and education there are ways of improving administration, but you can’t ignore evidence based policy, you can’t ignore the fact that many government interventions save lives, protect consumers.

      Despite the fact that my pseudonym is Economist I fundamentally believe that the private sector is far from efficient, that left to it’s own devices it costs society more than it saves. That’s not to say there aren’t practices that the private sector employs that are efficient and effective, but there is a lack of accountability. For example the GFC wiped out people retirement savings/ compensation payments, but we can’t expect them to live on nothing so now they access government safety nets of old age and disability pensions. That the private sector can hide behind price increases when they make mistakes, that there is no perfect competition.

      Without a doubt some deregulation has improved our standards of living as has government intervention. It’s a constant swings and round abouts.

    • Esteban says:

      02:13pm | 09/11/12

      He is not arguing for no Government economist.

      He is arguing for small or smaller government which is not the same as no government.

    • AdamC says:

      03:19pm | 09/11/12

      I disagree. There is no mechanism more effective at allocating resources and providing goods and services than the private sector. Indeed, I am not even sure that there is another, alternative mechanism. Consumer societies have always relied, at least primarily, on the private sector to provide goods and services.

      Government regulation should focus on resolving information assymetries and discouraging misconduct.

    • Richard says:

      09:21am | 09/11/12

      I would appreciate a little less government in my life and less layers of Government would be appreciated. Which layer do we remove in order to achieve this ?.

    • Stephen Scott says:

      09:38am | 09/11/12

      Political ideology is killing democracy. It divides us, when we need unity more than at any other time. This vacuous, mythological class-based divide of political agendas is flawed, false and fatal to our future.

      We are one country. We don’t need ideology. We need ideas.

    • I hate pies says:

      09:39am | 09/11/12

      So we should base public policy on the “vibe” should we? Yeah right.

    • Big Jay says:

      09:46am | 09/11/12

      Interesting article. But every good point he makes tends to countered by some tripe, which is a shame.

      More than a few points;

      The author didn’t propose to measure productivity either. People always seem to screw this up, but the way I see it, it is just output divided man-hour of input. That’s it. So sacking public servants (or cutting penalty rates) doesn’t increase this output/person, it just changes what is produced or who shares the profits.

      Hong Kong is a tax haven. That’s why its an economic powerhouse. They don’t necessarily produce anything amazing there (feel free to correct me if I’m wrong) it’s just a big regional corporate admin centre.

      “increasing the massive burden on Australia’s dwindling group of taxpayers.” This is complete BS. Most Australian “FAMILIES” aren’t heavily taxed, 40% pay no net tax. (Skilled) Immigration is at historical highs, so that is a growing base of taxpayers.

      “Health and education have no more right to be nationalised than the production and sale of food…” I’ll agree the Green revolution after WWII (say 1950-1990) was amazing and all private, however, I’ve never seen private health and education produce good outcomes. I can see what happens in the private health market in USA and can also see whats the manipulation (and screwing over) on global food markets.

      “At the local level, sack diversity officers and community outreach programs in favour of fixing potholes and approving new developments.” Hahaha fair enough, till you start complaining about how many people work in the bureaucracy doing approvals, and why it takes as long as it does.

      “even if often mistaken, is less likely to do harm than the centralised decisions of a government, and CERTRAINLY THE HARM IS LIKELY TO BE COUNTERACTED FASTER.” That last bit is a good point, totally agree.

      For me, I agree govt should produce less stats. Govt should move people from office based work on to the tools fixing potholes, painting train stations and building infrastructure (like canals). So agree with the author there.

      In terms of productivy improvement, I hate the “govt need to get out of the way” slogan, its simplistic rubbish for the Ayn Rand faithful. To increase output per person Australia should;

      * encourage productive investment (maybe better depreciation allowances) rather than speculation ie. building houses and factories rather than buying existing houses and shares on the ASX.

      * Get an education to those that aren’t getting it.

      * Infrastructure - drought proofing, road/rail/ports.

    • Damian says:

      10:17am | 09/11/12

      More ideology?  The great problems of our democracy at the moment are that we have too much ideology, and not enough thinking.  This is why politics here (and worse in the US) is framed as a contest between good and evil, and not as a discussion of ideas. 

      I agree that we need to more economic thinking, but it needs to be sound thinking, not more ideological economics.  Ideological economics like the idea that borrowing to stimulate demand is always bad, rather than thinking through the point that it is a choice between borrowing, and letting aggregate demand collapse leading to less government revenue and therefore borrowing - possibly more than would be required to take the Kaynesian approach, and being left at the same time with increased joblessness and increased welfare dependancy.

      when Hayek argued in Law, Legislation and Liberty for free markets on the the basis of informational constraints he was (aside from perpetrating a false dichotomy that one either has a command economy or laissez-faire) making an ideological point as well as a practical one; and the practical argument was based on an idealised concept that does not actually exist in the real world.  The informational constraint argument is very persuasive and it is one reason among others that I agree that free markets are a good thing; all other things being equal; but very frequently they are not, and economics is a tool, not a holy book.

      I always find it interesting that the one part of economics that actually looks closely at the world (as opposed to glancing at the world and claiming that the world is wrong if it doesn’t fit the models), behavioural economics, is considered somewhere between a joke and heresy by the broader economics community.

    • Economist says:

      11:45am | 09/11/12

      Far more eloquently put than myself.  +1

    • Economist says:

      11:45am | 09/11/12

      Far more eloquently put than myself.  +1

    • Esteban says:

      01:31pm | 09/11/12

      The problem with the use of the word “ideology” is that it has diverted attention from the general thrust of the article which is smaller Government.

      It would have been good to have an eloquent view of smaller government.

      There must be a recognition that there are cyles in economies that are as just like cycles in nature.

      Left alone the market will go along happily with the cycles but it can be brutal. Peaks too high and troughs too low. However there should be an ideology that the economy will and can repair itself without any help from Government.

      Having said that I think there is a role for Governments and central banks to trim the peaks and troughs and extend the economic cycles.

      By default Governments have gone into debt because usually the crash catches everyone by surprise and by the time they consider cutting expenditure to reflect falling tax revenue they find themselves in deficit.

      There is good evidence over the years that deficit spending can accelerate an economy away from the bottom of the cycle.

      There is no evidence that the bottom ofthe cycle can be averted by deficit spending.

      We are now faced with a slowing economy that is insisting on finding the bottom of the cycle with no capacity left to stimulate away from the bottom. (Just this morning the RBA downgraded growth forecasts for next year by 0.5%)

      You are right not all debt/deficit is bad but I think this last lot has been bad.

      On small government well I will never be convinced that taxing productive businesses to support unproductive government can be better than leaving the money in the business to invest and employ more people.

    • the apologist says:

      10:23am | 09/11/12

      Great article. Excellent. Great use of the Hong Kong case study too. Two thumbs up.

    • Esteban says:

      12:12pm | 09/11/12

      Adam Creighton it is time to cut to the chase and join the Liberal party.

      If you can rise to the top and implement your ideas the country will be saved after all.

      Stop wasting your time agitating the left on punch your country needs you.

      In politics you must cater for the masses so please be careful about using words like “ideology” which carry negative connotations.

      Describing the idea of smaller government as an ideology simply puts people offside before even contemplating the idea.

      In modern politics it is good if you have policies but as the ALP have demonstrated you can have crap policies and good spin and you can still win the election.

    • Rose says:

      01:40pm | 09/11/12

      This is one of the largest pieces of rubbish I have attempted to read in a long time. I got just a little way in and had to check your bio and discovered you were formerly a senior economic adviser to Abbott. Is that the same Abbott that was referred to be Peter Costello as an ‘economic illiterate’?
      Ideology gets in the way, we have used ideology to guide us for centuries and it usually ends up failing us. We have never, ever attempted to follow evidence based policy that has not been bastardized by ideology.
      John Howard took the Little Children are Sacred report and completely ignored every single recommendation, bar one,  and instead we end up with an Intervention which is a big failure, Gillard an Rudd didn’t have the guts to recognize that it was failing and extended it, too scared to override ideology with evidence. We have this blind commitment to a surplus, when we should be ensuring that whether there is a surplus or not that the effort should go into strengthening our economic systems.
      Ideology is the cause of most of our political problems, it cannot save us, only true evidence based policy can!!

    • Michael says:

      04:06pm | 09/11/12

      I have a feeling that the author would have an issue with ideology over pragmatism had the ideology in question not been his own.


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