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The Forum > Article Comments > Beware bold economists > Comments

Beware bold economists : Comments

By Henry Ergas, published 11/12/2008

It is crucial to recognise the severe limitations that afflict our ability to forecast and centrally manage the economy.

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Rather than beware bold economists we would be wise to beware all economists - and especially this one proposing even lower taxes for the rich. One of the realities of our current situation is that money is more and more in the hands of the rich, and the only way everyone else can keep up is by engaging in the debt splurge that has got us into all this trouble. To compensate the Government provides welfare of some sort to pretty well everyone. Much better to pull back the difference between rich and poor, by taxation or whatever, and let the middle classes have a better standard of living with less debt and no handouts - as it used to be - and provide better welfare assistance for those in need.
Posted by Candide, Thursday, 11 December 2008 5:18:15 PM
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Ergas says :"Firms have every incentive to minimise unnecessary costs and there is little evidence that they systematically fail to do so. ..... However, it is reasonable to believe that what investment funds those households do have are allocated efficiently among competing uses, including energy efficiency."

After more than 35 years involvement in many aspects of solar energy and energy conservation, both commercial and residential, I can assure Mr Ergas that there is very little evidence that many firms or householders have the faintest idea about the costs and benefits related to this area. Rational investment is only possible if one has the appropriate information and the appropriate analytical tools. I have seen numerous cases of bad investment- both over-investment (eg single person households buying solar water heaters and energy saving globes for the toilet) and under-investment (eg mining firms that could save $1.5million/year on a 2-year payback investment,; hotels that could save $30,000 year with zero investment other than a bit of staff and management time).

What is needed in this area is a whole lot of public education- but that might be a bit too slow to save the economy -this time around.

Once again, I appeal for INFORMED opinion, not just (mere) opinion. As Grimaldi said "L’aritmetica non è un’opinione"- "arithmetic is not an opinion"
Posted by Jedimaster, Thursday, 11 December 2008 5:53:18 PM
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Fiddling with superannuation contributions is a worry. The open letter’s signatories assumption that the extra money in workers’ pay packets will be spent in the same way as business and Government have pushed for: ‘spend for Australia’, with the $10 billion hand out to some people, is just an assumption. Sensible people will be more likely to pay it off their mortgages or hang onto it for a future which is going to be pretty rough.

Despite the usual jokes about economists, I’ll accept the comments of Henry Ergas on the other matters raised in the open letter. Although I’ve probably been guilty of saying something nasty about economists, I like this one: he talks plainly and makes sense.
Posted by Mr. Right, Thursday, 11 December 2008 7:51:20 PM
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It seems to me that many economists don't stop to think how the
average punter thinks and they are not silly. People do things
for good reasons and the results affect our economy in a big way.

Australia still has one massive problem, ie our current account
deficit. Our trade deficit is not bad, it was actually positive
by 3 billion $ in September, but our current account deficit is
huge, due to all those interest payments to foreign lenders.

About half the money that our banks lend out is from local sources,
the rest is from overseas lenders. This year alone, our banks
will have to head overseas and ask for another 80 billion $ or
so. Only the Australian Govt guarantee will save their hides.
That is not a healthy situation for this country in the longer
term, yet it could be solved through taxation.

Your average punter knows that its a bit pointless saving your
money and putting it in the bank, for inflation will take half
the interest paid, marginal rates of tax will take much of the
other half.

So people prefer to borrow on housing, borrow on shares or whatever,
where they at least have a chance of coming out ahead in the
longer term. That means even more pressure on housing, even
more pressure on our current account.

Its time for fiscal honesty. If inflation is running at 4%,
interest on bank deposits should not be taxed on that amount,
for by the end of the year, that money has effectively vanished.

Give people an incentive to save and they might. That might mean
a bit less splurging on the latest plasma tv, a bit less living
it up for today and a reason and incentive to save. The affect
on our current account would be massive.

20 million Australians saving just 10$ each already adds up to
200 million !

Now why don't economists make a sensible suggestion as I am making ?

:)
Posted by Yabby, Thursday, 11 December 2008 8:39:22 PM
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its time people woke up to the simple fact that our super [laid on us as a subsitute for a wage increase ,is solely to cash up the investment/stock markets[full stop]#

howhard and cronies came up with the scam for their big buisness mates

same as having high definition tv[was to chew up spectrum so murdoch and packer wouldnt get new compition[so now we are cursed with this instead of more media][and seeing the media get boken[loss of advetising revenue]is not compensating for the evil that little man wrought

but there was more [like todays news of the GG pay out [or rather 100,000 PLUS discount on his super tax,thanks to how hards 2006 tax cut to the elites super[lest we forget paying the cash from selling telstra that got put into the public servents trust?fund for THEIR overgenerous supper to be paid up in full[lets return that to the people]

a big problem is with the states [like sydney tunnel has a built in govt guarentee [so there is a few billion going from nsw purse into big buisness who sold us a con for macqureie'investors'[mainly other companies [not all your so called mom and pop investors]

thats another con [our so called shareholders by and large own no shares[they largly are like us with super type SCEMES]i like the idea of cutting the stockmarketeering tax [gift?]in half FULLSTOP.

show me how gambeling on stock is different from gambeling on the horses or the pokies,
yet stock gambeling dont pay state taxes[its time they paid federal taxes [a day trading tax ;10%^]or a transaction tax[1%]on EVERY withdrawel.

this global carbon tax is to prop up big buisness[they will buy them up[and we pay whatever they are prepared to sell them to us[big buiness KNOWS about shortage of supply[remember the spectrum auctions, it is the same plan for carbon credits? just another tax [yet not named a tax]

[like howhards 'work choices' was about the boss chosing workers[see how their work contracts are protecting the workers now[miners are planed to be laid off by the largest miner
Posted by one under god, Thursday, 11 December 2008 9:41:10 PM
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Name ONE economist who's been consistently right, or even right more often than not.

The enitre precept of the article is false. As has been mentioned, economists never agree on anything. News bulletins consists of a procession of talking heads with their own peculiar perspective; half the time you get the impression they're being paid by the word.

We might as well bring astrologers to the table as well. They're just as accurate.
Posted by bennie, Friday, 12 December 2008 7:16:23 AM
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