Jardine K. Jardine,

You are fast becoming my favorite poster.

First you banish the Wicked Witch from the West (name withheld to protect the guilty)

And now you're vanquishing Alan the Gaul.

And every post a poem of pure logic.

If you think I am talking through my hat, spend 1/2 an hour and watch
this talk on Energy Return on Energy Invested.

http://www.youtube.com/watch%3Fv%3DM9YRNqewGIY

All this playing with money to try to achieve business as usual is very
clearly a mirage. The mathematics says so.

JKJ,

>by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth?<

I know your question is addressed to Alan Austin, but I venture that the answer is obvious: constructive development contributes positively to future amenity, prosperity, resilience and growth; whereas reconstruction of purposeful de-construction can only at best restore the former status quo, but only after wasting finite resources, including energy - resources which have to be taken into account in any assessment of overall prosperity and potential - including the waste of human potential which could otherwise have been utilised in more constructive occupation.
Everything has to be paid for, one way or another, whether constructive or not, but only occupation which produces a net gain can be considered constructive.

One factor not considered in your questioning of empirical data is the value of positive motivation to overcome adversity or attain positive reconstruction. The effectiveness of the Marshall Plan was in part due to the development of optimism, and of faith that economies would rebound - leading to investment and risk-taking based on an optimistic outlook on the future.

Hence, constructive investment to avert undue hardship, and to give people hope for a positive future, produces multiple gains, more than compensating for the initial stimulus outlay. The only question may be on the actual 'constructiveness' of the projects which are the subject of that stimulus outlay. In our case, some of the stimulus projects have been imperfectly conceived and/or delivered, but we are nonetheless better off for those efforts.
We are rightly No. 1 on so many bases of comparison, and it is impossible to demonstrate that the stimulus has not contributed positively to this reality.

BTW: Why so down on democratic governance, when it is this which facilitates our stability and the assured future quality of life for the whole of the populace?

Greetings.

@JKJ: Re: “Therefore the empirical evidence, of itself, is not capable of concluding the issue …”

Evidence leads to many important conclusions, if not all.

Re: “we would have to examine all the different statutes, regulations and policies of the countries you compare on all the headings you mention ...”

Correct. Painstaking, but important.

Re: “Secondly we would need to account for the unknown contingent variables that might affect the result ...”

Correct also. They do that too.

Re: “Obviously many of these data are unknown or unknowable and it is false to pretend otherwise.”

No, not many. Some. Most important data is knowable. No-one is pretending it is less tricky than it is.

Re: “You need to be able to say what empirical evidence would prove it wrong at the same time as take into account the unknown contingent variables which, correct me if I’m wrong, you can’t do.”

Yes, we need to say that. We can and we do.

Re: “If percentage of GDP spent is the criterion, why not 100%?”

Because the empirical evidence suggests 3.3% was optimum. This is based on the observed outcomes in Australia of growth, low debt, low taxes, low unemployment, low interest rates, positive savings, adequate welfare and superannuation.

Re: “you’re using theory to interpret the data.”

No. The other way around. We are using data to validate the theory. I think this is where we differ, JK. You have asserted this before. It has been rejected before.

Re: “To show which theory best explains the evidence, you have to eliminate the obvious logical possibility that the stimulus policy was a mere wealth redistribution ...”

Correct. We did.

Re: “Looks like you’ve abandoned the central tenet of Keynesian theory that aggregate demand is the criterion …”

Yes. Abandoned long ago.

Re: “by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth?”

Simply by measuring the nation’s wealth. The ABS does this routinely. Catalogues 1370, 1383, 6523 and 6554.

Requires some effort. But that’s okay.

Cheers, AA

Alan

You are kidding, right?

Who's "we"?

Your argument has again degenerated into mere appeal to absent authority. You can’t just expect me and everyone else to accept your assertions, for no other reason than that you say that "we" (unspecified) have checked "the data" (unspecified) and validated a "theory" (unspecified) thus knowing, for the subjective evaluations of 23 million people, what they would have preferred the money to be spent on!

Sorry, not good enough. You need to show your workings: both data and reasons. You need to bring them into the debate, not just refer off to them somewhere else on the basis that you already know everything in issue, you’re right without having to prove it, and the unspecified facts speak for themselves.

It's just another fallacy. All I would need to disprove it, is adopt exactly the same standard as you’re using, and allege that “we” too had crunched the numbers and proved you're definitely wrong. You accept that of course?

Saltpetre
Interesting. I regard net nick-names to be irrelevant, only I have often found that when people can’t defend their arguments, they degenerate into trying to make mileage out of my nic.

It’s not me who’s ignoring the importance of subjective values in dealing with the empirical data: it’s Alan and you.

With respect, you don’t appear to understand the issue, and I can't answer your question on democratic governance until you do. The question is whether there’s a net benefit to society as a whole, not just whether there’s a benefit to one group at cost to another.

You have to prove it. You can’t just assume it. Why? Because we already know that the stimulus programs were funded by political takings from A and giving to B.

For example, suppose the state were to build a railway through the middle of the Great Stony Desert. That would satisfy your criterion, because it would be constructive development that contributes to future amenity. But you can see the problem for your position, can’t you?

SPQR
Thanks for your kind remarks.

Hi again JK,

Re: “Who's ‘we’?”

Those of us who subscribe to the view articulated above which started this discussion:

“After five years of Labor and the worst economic downturn since the Great Depression Australia is first in the world - by a long margin. All the evidence shows that the economic settings Australia's Government has chosen have been the right ones for the times.”

Re: “Your argument has again degenerated into mere appeal to absent authority.”

Not at all, JK. Twelve authorities were named. You can’t expect us to present all their findings here in 350 words. Easily googled, however.

Here, for starters is Scott Haslem, Chief Economist at UBS:

"I’m definitely not in the camp that says the government should aggressively wind back the fiscal stimulus. On that basis I’d give the government a big tick in managing the economy through the economic downturn — what’s most important is that they commit immediately to banking all of the gross dividend in the fiscal accounts. It’s not necessarily about radically altering the settings — we’re desperately short of infrastructure — but the government must bank the dividend and return the budget to surplus. It’s tough to calibrate the balance between monetary and fiscal stimulus but the government has done a reasonable job."

Re: “You need to show your workings: both data and reasons.”

Of course. No problem.

This chapter from the OECD’s Economic Outlook Interim Report titled The Effectiveness and Scope of Fiscal Stimulus is a good starting point. Lots of data and reasons:

http://www.oecd.org/economy/outlook/42421337.pdf

More here from the IMF:

http://www.imf.org/external/np/pp/eng/2009/020109.pdf

Re: “The question is whether there’s a net benefit to society as a whole, not just whether there’s a benefit to one group at cost to another.”

Correct. ABS papers 6523 and 6554 deal with income and wealth distribution.

Re: “Because we already know that the stimulus programs were funded by political takings from A and giving to B.”

Correct. That is why being Treasurer is difficult. And why Australia’s current Treasurer has earned immense respect and admiration around the world.

As shown here Thursday:

http://www.guardian.co.uk/commentisfree/2013/mar/21/australians-julia-gillard

Cheers, AA