Selfish reasons for not wanting a tax cut?

The Age this morning editorialises on yesterday’s survey (discussed below) showing majority support for spending the surplus on more services. They say that

The result suggests one of two things: that the Australian electorate is considerably less selfish than politicians have long assumed, or that when the time comes to choose in the secrecy of the ballot box, they will vote for the tax cut.

Those two things are certainly possibilities, but there is another one: that self-interest still rules for most, but the mechanisms of self-interest have changed. My research into the tax-spending trade-off suggests that while many factors influence any given survey result, the driving force behind the broader trends is the state of the economy. When household budgets are tight, people tend to want tax relief. When times are relatively good, they are more sympathetic to spending on services.

This is a little counter-intuitive – surely if things are tight, people need government services more? Maybe, but the household budget comes first. When things are going well, people want more of everything. Since the government has made itself the dominant supplier of various services, for many people the most practical way of getting more of them is via the tax system. If we look more carefully at the data on particular services, health is by far the area of greatest concern. This is also the government service that is most widely used, suggesting that there is a good share of self-interest as well as altruism in these polls.

Taxi!

Taking a taxi is a lottery, especially in Melbourne and Sydney. You might get a cabbie who keeps his car clean, drives carefully, knows the way, can operate the EFTPOS machine, and speaks passable English. In reality you’ll be grateful if you can get two or three of these. I suspect many taxi users have wanted to do what Mark Latham famously did to his driver back in 2001.

This is an industry long overdue for deregulation, as Jason pointed out years ago. Instead, as Miranda Devine says this morning the NSW government is placing further obstacles in the way of customers getting the service they want.

The NSW government wants people to be less reliant on their cars. But fat chance when the alternatives are the deadly, dysfunctional CityRail and a taxi industry with too many sub-standard operators and too few ways of avoiding them.

More taxing and spending

There’s another poll on the public’s preference for more spending versus their preference for less tax in the Fairfax broadsheets this morning. They don’t tell us the precise question, but the result is 75% saying they would prefer more spending on services and 22% wanting tax relief. If respondents were told the tax cut would be $10, those wanting tax relief went up another 3% to 25%.

This result is consistent with other polls, though the numbers bounce around a lot depending on how the question is asked. A Newspoll in January came up with only 9% for tax cuts. (On broad trends, John Quiggin and I are in rare agreement.)

I’ve just finished a book chapter on opinion about taxing and spending, and I think the high numbers in these polls come from the assumption that there is a surplus to be distributed somehow. The surplus seems to be viewed as a sunk cost, so spending it on services will not create any extra tax pain. When the money is still in taxpayers’ pockets there is much more tax resistance. The same Newspoll that found 9% wanting the surplus refunded also found 50% thinking that 47% tax for income above $62,500 was too high. Mathematically, rejecting a $10 tax refund or being charged an extra $10 in tax will have the same personal financial effect, but psychologically skipping the refund is much easier.

There is also evidence for the government’s view, as reported in the article, that there is more support for tax cuts than shows in the polls, as people do not want to appear selfish. Most years the Morgan Poll asks its respondents about what they think are the most important issues. When asked about national issues, there is strong support for social service issues. But when asked what the federal government could do for the respondent and his or her family, tax is the top issue by a significant margin.

Another interesting feature of these Morgan polls is that if you construct a graph of results going back to 1982 (there’s a consistent question format since then) between 1982 and 2000 tax as a national and personal issue tracked each other – if one went up, so did the other, and if one went down, so did the other. Since then tax as a national issue has trended down, while tax as a personal issue hasn’t – it was first stable (if we average two 2001 results) and then trended strongly up in the last poll in this series, in May 2003. This could be evidence of the ‘private truths, public lies’ phenomenon described in Timur Kuran’s book of the same name. Because the mood of the moment is to be concerned about social services that’s what people tell pollsters, but there are some people who would actually prefer tax cuts.

As I said, I agree about the broad trends in opinion. But some of the pro-services numbers almost certainly exaggerate their true level of support.

A chromosome test before marriage?

According to a report in this morning’s Australian the Australian Family Association argues that only men with male chromosomes and women with female chromosomes should be allowed to get married. The intent, it seems, is to stop transexual weddings. It isn’t clear from the article whether Cabinet has gone along with this, only that Phillip Ruddock is believed to have opposed it.

How would such a requirement be policed? Would people require a chromosome test before marriage, or would the celebrant only have to investigate if the bride’s make-up was exceptionally thick and her voice unusually deep? And how embarrassing would it be to guess wrongly?

The same article reports that Cabinet has decided to legislate to ‘protect’ heterosexual marriage from changes by the states and to prevent gay couples marrying overseas from having their union recognised here. It says that the proposal could

spark a culture and values war between the socially conservative Prime Minister and Labor leader Mark Latham.

Actually, I doubt it. Labor is probably on safe political ground with more modest plans for more equal treatment of gay relationships, but they aren’t going to touch gay marriage in an election year. Even if there was majority support for gay marriage in the Labor caucus – and there is no evidence for that – they would not take such an electorally risky step.

Tuesday update: Nicola Roxon confirms my take on Labor’s position.

Guy Barnett offers an argument for marriage that applies as much to gay as straight marriage:

is a social institution that benefits family members and society. It provides a solidly built roof under which children are nurtured. It specifically benefits children and is designed to ensure their welfare is maximised.

What follows is a non sequitur:

There should be no doubt about its definition.

However, the commonly accepted definition – union between a man and a woman – is under threat.

The value of human capital

Last week I commented that leaving the value of human capital out of net wealth statistics, but including HECS debts, distorted the results. Looking through the print version of Measuring Australia’s Progress I found an extract from yet-to-be released ABS research on Australia’s human capital stock, which was estimated at $5,600 billion in 2001. Given that household wealth was put at only a bit over $3,000 billion in the same year, this means that human capital is the most important class of asset.

I’ll wait to see what the published ABS paper on the human capital stock says about the quality of its estimates, but the figure they have released does suggest that net wealth figures that leave out most of our wealth are very imperfect.

The cliched New Observer

Last month I predicted the early – if possibly regrettable – demise of the planned Australian version of The Atlantic Monthly. Now I will predict the less regrettable demise of The New Observer, “not so much a news magazine as a views magazine” according to its editor, the veteran right-wing journalist Tony McAdam.

The business concept behind The New Observer (the previous Australian Observer ended in 1961, so the “new” is probably redundant) is an interesting one, to combine information people are prepared to pay for – it incorporates the old New Investor – with views that may be interesting but have a lower market value. However, the danger is that neither section will be done well enough to make the two work well together.

Not knowing much about investing I cannot comment on whether that section of The New Observer is worthwhile. But the views section is very light. Only Michele Levine’s round-up of trends in Morgan Polls was interesting; a few other articles were OK but did not tell me anything I could not have read elsewhere.

Most space is given to McAdam’s puff piece on Hugh Morgan. I have a reasonably high opinion of Morgan – he is hated by all the right people, for a start – but a profile that asks no hard questions and seeks comment from no-one with contrary views is closer to propaganda than high quality journalism.

McAdam would also benefit from re-reading Orwell’s “Politics and the English Language”, and its wise advice to “never use a metaphor, simile or other figure of speech that you are used to seeing in print”. From the opening sentence (“high priest”, “culture czar”), the stale expressions distract the reader – “on that fateful day”, “world was turned upside down”, “fingers still crossed”, “assortment of hats he wears”, “the great and the good”, “golden spoon in his mouth” (OK, that one is adaptation of a stale expression), “captain of industry”, “rarely backward in coming forward”, “endured the slings and arrows”, “bee in his bonnet”.

Watching a bit of 110% Tony Squires (The Fat on 7) the other night they had a segment in which celebrity contestants tried to fit as many cliches as possible on a given topic into a set time. A new job, perhaps, for Mr McAdam when The New Observer finds its way into the cluttered graveyard of Australian opinion journalism.

RIP John Maynard Smith

Biologist John Maynard Smith has passed away. He is renowned for introducing game theoretic analysis into biology. Interestingly, he started his career as an engineer. Science blogger Carl Zimmer has written a nice obit that surveys his contributions:

Maynard Smith had the brilliant idea of apply game theory to evolution. The players in his game might be a population of elephant seals, each with its own genetically determined strategies for finding a mate. Different strategies would have different levels of success. One strategy might be to confront the biggest male on the beach, drive him away, and take his harem. That might work if a male was also big, but if he was small it was a strategy doomed to failure. So perhaps instead he might skulk at the edges of the colony and mate secretly with females from time to time, trying to avoid getting killed by the harem leader. It’s not a solution guaranteed to produce a lot of kids. But Maynard Smith showed that it’s also not necessarily a one-way ticket to extinction. Instead, it’s possible that the two strategies, one dominant and one minor, can come to a stable coexistence.

Scientists have found lots of these so-called evolutionarily stable stategies. Some male salmons who take the sneaky route actually commit their whole bodies to the strategy. Instead of bulking up their bodies and developing big sexual displays such as long jaws, they become small and invest their energies into growing massive testes that give them a large enough supply of sperm to make the most of their few tristes. Some evolutionarily stable stragies cycle from prominence to rareness and back over time, in a sort of rock-scissors-paper game …Genes have a role in personality, intelligence, and behavior, and there’s obviously a lot of variation in all these factors. It’s possible that these genes have, over millions of years, reached an evolutionarily stable state with one another.

Plagiarism – does it matter?

The government is having some fun today with the accusation that Mark Latham plagiarised a Bill Clinton speech.

“This really illustrates …, as I said earlier, that the Latham ideas are essentially generated by internet search engines” Peter Costello told the media.

But if you can find good ideas on the internet, should it matter where they come from? It’s not as if Bill Clinton’s speech was intellectual property that he wanted to protect. To the contrary, he would want its ideas spread as widely as possible – even, perhaps, to Australia.

When periodic plagiarism scandals hit newspapers, after a journalist has lifted copy from elsewhere, exposure on Media Watch and the sack are likely consequences. Yet from the reader’s point of view, which matters more – originality and sourcing or accuracy? I’ll forget most by-lines before I finish reading the article, but will be very annoyed by a factual error. Yet the error will result in a ‘we were wrong’ at most.

This leaves personal integrity issues, especially as Latham has humiliated someone else for plagiarism in the past. But was he using anything from the Clinton speech to make himself look smart, original or witty? From the extracts from the two speeches in the newspapers, the ideas and language are what you would expect of any education-oriented social democrat since the mid-1990s.

Yes, sure, it is better to be original, and if you can’t to acknowledge your sources. But Latham’s offence is at most very trivial.

Are things getting better?

The latest edition of the Australian Bureau of Statistics’ Measuring Australia’s Progress was released yesterday. From what I have read and heard about it (at 71 megabytes I decided to wait for the print version rather than download it) it is better than previous efforts, criticised by Peter Saunders here.

Such reports are, however, likely to have only modest effects on public opinion. Poll respondents are always more pessimistic about trends for other people than they are about trends for themselves, and more negative about the present versus the past than the present versus the future. I try to explain why here (html, but click on the pdf version to see the figure and tables clearly). It is an interesting case study in how biases and heuristics distort the answers people give pollsters.

The value of HECS

The Australian this morning is reporting on research by HECS architect Bruce Chapman that the new $35,000 repayment threshold (up from $25,348) will help low-paid women. Certainly it helps the cash flow of anyone earning between the old and new thresholds. But what Chapman is getting at, though the article does not state it quite so bluntly, is that there may be a group of women who never earn more than $35,000, or earn so little over it that they end up never paying back all their HECS debt (the debt is extinguished on death). Since the major cost of going to university is still the opportunity cost of being out of the full-time labour force, the bigger story here is probably that these women get little or no financial return on their higher education (and nor do the taxpayers who subsidised them).

Data I have from the ABS suggests that female graduates do have weak full-time labour force commitment: 57% in the 25-34 age group, 39% in the 35-44 age group, and 43% in the 45-64 age group. It’s impossible to tell from these figures about the career paths of individual women, who may move in and out of full-time work. But these figures do have major implications for the economics of human capital investment, especially now that a large majority of university students are women.

The highly variable value of a university education is why it is not included in measures of wealth, such as this interesting research (pdf file) published by the Reserve Bank last week. However, the absence of any calculation for human capital wealth does distort the figures, particularly when comparing older and younger age groups. HECS liabilities are included in debt figures, but there is no corresponding educational asset recorded. This makes younger people look poorer than they are, in relative terms. 2002 estimates put the average lifetime monetary gain (pdf file) of a graduate over a Year 12 school leaver at $381,000, so the distortions caused by leaving out the value of human capital, though probably unavoidable, are large.