03 March 2006

a question of balance

Those of you looking to read about the Moody Blues, stop now, you will only be disappointed..

No, this is about economics and the difficulty I continually experience in figuring out where I stand on the spectrum. I get utterly riled about outrageous CEO salaries,
industry special pleading, privatisation as the sine qua non of economic management and the marketisation of absolutely everything. I think arguments about markets always delivering the best outcomes because they allocate to the "highest and best use" fall way short of comprehensive analysis. I get awfully annoyed about the unholy alliance of Treasuries, market/securities analysts, ratings agencies and sympathetic journalists who all support Washington Consensus economic policies. This alliance is dangerous for democracy and public well being. I particularly oppose policies that treat people as inputs.

On the other hand, I understand that governments cannot throw money at very 'deserving' cause, that the price mechanism is an effective allocator of resources and, in general, intense competition works very well in ensuring consumer choice.

But I loathe excessive choice for choices' sake - insurance, health, phone plans etc are good examples - where governments intervene to bolster choice while the companies go to extraordinary lengths to ensure that you can't easily compare offerings.

When I do on-line quizzes I generally end up labelled as fairly pro-market, for want of a better term and my approach to my work more or less reflects such a preference.

As with all things, I suppose, the answer lies in the middle and maybe what really upsets me is that there seems to be an acceptance that because the economic reforms over the last two decades have delivered generally good outcomes, we simply need to keep going. But, in contrast to a bloke I once worked for, I believe that all such gains are not cost free. Holding back progress is one thing: inadequately recognising and compensating those adversely affected is another, and often gets lost in the euphoria about the supposed benefits. Which leads in turn to inflated claims: recall the billions that the Uruguay Round was going to deliver, and then the same types of claims were made for the USFTA. And it's all crap - the answer depends on the inputs (and in these two cases the inputs reflected the wishlist, not the actual outcome).

All of which is bad for democracy. Which assumes we still live in one. Have a good weekend, folks.


Anonymous said...


close your eyes... you are in that happy place with fluffy bunnies and cars made of chocolate... and exhale.


phil said...

...cars made of chocolate...hmmm..must be a Lada....

thanks Chris - I'd been thinking of this post for a while but it's harder than it looks to get your ideas down and get the right tone...what I need is someone with a blue pen to set me right, do the essential revision, rewriting, revision, rewriting, revision

Anonymous said...


the old blue pen... how i miss thee so.

heres to days gone by...


Anonymous said...

Drawing a long bow of an analogy, Subway is a classic case of having too much choice. It's almost an ordeal having so much choice - particularly if you just want to grab something quick to eat.

Sometimes it's good just to point and say "that one"!.

Anonymous said...

Disagree with regard to Subway (and other similar reasonably-fast food places - Ali Baba is another). While people might be bewildered at first they very quickly develop their "the usual", and they stick to it.

Whether they stick to it out of laziness or not is another matter. I know when I wanted to open another bank account recently I thought about looking at other banks than the one I was already using... Then I used CBA's facility that lets you open one in about 30 seconds if you already use their Netbank facility. Very possibly not the optimal choice in terms of fees, interest earned, blahblah, but certainly the path of least resistance.

Overall I tend to believe that if the general populace was not outrageously lazy and/or stupid they wouldn't be nearly as susceptible to stupid advertising on telly. They'd probably have a longer average attention span, too.

Jennifer said...

The thing that pro-choice arguers ignore is the real cost of exercising that choice - at the very least in the time taken to research the choices, and often in great dissatisfaction with the choice. The book The Paradox of Choice, by Barry Schwartz, develops this argument very well.

phil said...

Thanks Jennifer - you're right. To me, this is a straight transfer of costs from supplier to purchaser: the time we spend on trying to figure out the 'best' choice is all opportunity cost to us.

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