Welcome to Dr Lincoln's blog

Welcome for visiting my blog. Hope you enjoy the visit and always welcome back again. Have a nice day!


China's new leadership and potential new strategies forward

Comments on Sheryn Lee “Taiwan–China relations under the new Chinese leadership”, 19/12/2012, http://www.eastasiaforum.org/2012/12/13/taiwan-china-relations-under-the-new-chinese-leadership/

While it is true that China now is faced with many challenges, arguably there are also positive factors that may allow it to better overcome key challenges.

Inequality in income distribution: the transition from labour surplus to shortage would mean wages are likely to rise more rapidly than in the past and that will be conducive to reducing inequality.

Corruption: the new leadership could make a new and fresh start in fighting corruptions using a new approach. They could first draw a line in time from then any new corruptions will be dealt with severely and at the same time to let the past be past. This way will mean much less resistance than the past approach and is likely to be more effective. Of course, a lot of work must be done and public relations must be managed to create an environment so such a policy can be introduced.

Dispute with other regional countries: China should realistically assess the costs and benefits of possible worsening relationships with those countries and the implications for its own interests as a whole. It is not too difficult to come to the realisation that peaceful resolutions are the way to go and compromises will have to be made from all sides including China. I would say it should use examples of land border settlements with some countries in the past couple of decades or so and use that experience to settle disputes in the seas.

Taiwan unification: China could learn from its experience in the one country and two systems that have applied to HK and possibly think more boldly along the line of a confederation. Even keeping the current status quo will be working in China's favour as the two sides will get closer in many ways, such as a gradual and more liberalised China and stronger and closer economic integration.

I think the next 10 years should be a test for China and the new leadership, but the key strategy should still be peace and development. Every effort should be made to achieve this overarching objective.

Adverse selection in choosing schools

Comments on KEVIN DONNELLY “Schools forced to dance to Canberra's centralist tune”, 19/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/schools-forced-to-dance-to-canberras-centralist-tune/story-e6frgd0x-1226539986534

Let's accept the argument that Australia's Catholic and private schools have performed well internationally and this is not the case for government schools.

Apart from differences in freedom in areas of decision making by schools mentioned in the article, another possible reason could be the so called adverse selection problem, in which wealth and family backgrounds may play a role in selecting going to government or non-government schools.

This should only need to be interpreted as on average, rather than a rule applies to all individual cases.

'New normal' for China growth?

Comments on Yiping Huang “The ‘new normal’ of Chinese growth”, 19/10/2012, http://www.businessspectator.com.au/bs.nsf/Article/Central-banks-US-England-BoE-monetary-fiscal-polic-pd20121219-34SAC?OpenDocument&src=sph&src=rot

China's high economic growth will come down to lower growth sometime in the future, although the timing may be complicated by the GFC and its continuous effects given that the world is still struggling to get out of it and the once in a decade leadership transition in China.

Yiping's assessment may be indicative for the likely growth of the Chinese in the coming two decades.

A factor needs to be considered very carefully is that the Chinese income level is still around $5000 while the income levels in the advanced countries could be 10 times of that. Even assuming a growth differential of 7.2% per annum on the per capita terms, it would still mean more than 30 years for China to catch up with the developed levels.

A growth differential of 7.2% per annum would require 9 to 10 per cent real growth on China's part.

I would interpret the current calm or "policy paralysis" by government as a practical response to the combination of the leadership transition and the deteriorating external economic environment with continued threat of euro zone meltdown and painfully slow economic recovery in the US. Setting a low growth expectation will be undoubtedly good for the coming leadership: if the growth is low, then it will have been expected, but if they can make the growth higher it will make the new leaders look better.

America and power games in Asia

Comments on Yang Razali Kassim “East Asia Summit 2012: Asia’s power game unfolds”, 12/12/2012, http://www.eastasiaforum.org/2012/12/12/east-asia-summit-2012-asias-power-game-unfolds/

It appears that the third layer game has far reaching implications for the power play in East Asia, given it is out of the desire of ASEAN for its centrality purpose. RCEP seems to suggest that it will be difficult for any power to unilaterally act to attempt to purposefully exclude any important regional players. This is particularly noteworthy given the proceedings of other economic negotiations, particularly with some exclusivity.

The regional economic links and further integration is likely to be a central feature of future development in the region that will shape the eventual regional institutions and the attitudes of individual countries towards some difficult issues, including disputes among countries.

Funding policy for education in Australia

Comments on Kevin Donnelly “Writing is on the wall as standards trend down”, 14/12/2012, http://www.theaustralian.com.au/opinion/writing-is-on-the-wall-as-standards-trend-down/story-e6frg6zo-1226536451971

There should be some distinctions between government funding for government and non-government schools, given that government schools are open to all without requiring to pay (the purpose of government schools to provide education for all).

However, a modified vouchers system may work, though.

There should be 3 types of vouchers - for government, Catholic and private schools students respectively.

Firstly, give vouchers to students who go to government schools at the average level of funding for government students, so they can choose among government schools.

Secondly, give vouchers to those who go to Catholic schools at a certain level, so they can choose which Catholic schools to go to.

Thirdly give vouchers to those who go to private schools another certain level, so they can choose to which school they go.

Such a funding system is more likely to result in better choices and better education outcomes for all students, whichever types of schools they choose to go.

If the levels of funding for the 3 types of schools are designed properly, such a system will work better than the current one.

More global coordinations in economic policy requried

Comments on Stephen Grenville “Central banks have run out of answers”, 19/12/2012, http://www.businessspectator.com.au/bs.nsf/Article/Central-banks-US-England-BoE-monetary-fiscal-polic-pd20121219-34SAC?OpenDocument&src=sph&src=rot

It is more likely for monetary policy, such as the various forms of QEs adopted now by big central banks, to work if there is only one big ones to do it and most others didn't do it.

When all central banks are doing the same QEs all at once, then the effects in one country is offset by others in terms of lowering its exchange rates and raising its international competitiveness.

While at the moment this hasn't translated into global inflation, sooner or later it will occur, along with it, a possible race by central banks to rein in monetary policies to combat inflation and generate stagnant economies that will be a repeat of the stagflation in the 1970s following the first oil shock.

In a sense, the current situation has demonstrated that monetary policies have done more than they can do to achieve meaningful objectives and more than they should do. That is more than the limit of zero interest rate or the liquidity trap when only one faced that situation.

Given the current fiscal malaises in many advanced countries and the near zero effects of monetary policy and the longer term inflationary effects, now an even taller order is required of the global leaders and economic managers, that is, they must coordinate both monetary and fiscal policies and act just as the global is the one economy and they are managing that one economy as opposed to many individual and separate economies and competing against each other.

This requires that all major countries should have work together and design both fiscal and monetary policies together. It will be extremely difficult if not impossible outright. Otherwise, the global economy will be in doldrums for a long time to come.


'Japan's decline' in world context

Comments on Gerald L. Curtis “‘Japan’s decline’: an unhelpful diversion?” 10/12/2012, http://theconversation.edu.au/face-value-where-to-look-when-you-want-to-read-someone-11219

A very interesting article.

Given the GFC that has shown some similarity to the Japanese case in the early 1990s, the interest on the Japanese economy since the early 1990s has probably and largely shifted to the general economic concerns with the US economy in recent times.

Western economists didn't show much interest in understanding and solving the economic issues that Japan had from the early 1990s until probably the late of the first decade in the 21st century.

Those who had supported the Japanese economic model were having troubles with the new reality, while those who had argued against that model took the pride when the very model economy was in trouble. Those who had had little interests continued their indifferences.

Now part of the problem that Japan has had has been with the world largest economy, so economists have to show some interests one way or another. It is no longer ignorable anymore and become a serious challenge to many economists.


Should Australia junk Kyoto and the carbon tax?

Comments on Tim Wilson “Junk Kyoto and the carbon tax”, 10/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/junk-kyoto-and-the-carbon-tax/comments-e6frgd0x-1226533235739

This is a disappointing piece of analysis or opinion, to say the least. The following statements reflect part of the disappointment: "That leaves only a core group of countries, including Australia, the EU, Norway and Switzerland, still flying the Kyoto flag from next year to 2020. Combined, these countries represent a mere 15 per cent of global emissions and don't include any of the major growing emitters in the developing world." While some of the content is of some value, like finding alternative ways to get climate change agenda going, the overall call for Australia to abandon both the Kyoto Protocol and its carbon tax is clearly a wrong call, wrong strategy and pointing to a wrong direction. Australia should not abandon either of them. Instead Australians should abandon listening to both such a shallow opinion and such a short foresight.

Of course, Australia needs to and must take into account what is going on in the UN climate change negotiations and make necessary changes to optimise its climate change policies. For example, its carbon tax should make some border adjustment to deal with differential climate policies across different countries so Australian businesses won't be unfairly affected in their international competitiveness. Or its level of carbon tax should be reflective of the world's climate change trend and policies. But that is not to say that Australia should abandon the carbon tax that is a more efficient climate policy than most other climate policies.

What the following statements mean is that the author is scared to mention the main spoiler in international climate change negotiations, that is, the US, instead he is saying major emitters in developing countries: "That leaves only a core group of countries, including Australia, the EU, Norway and Switzerland, still flying the Kyoto flag from next year to 2020. Combined, these countries represent a mere 15 per cent of global emissions and don't include any of the major growing emitters in the developing world." It has been the US that didn't ratify the Kyoto. That also led to the few countries running away from it. The author should point that out, as opposed to blaming developing countries.


Government must have a budget constraint

Comments on David Uren "No doubt about it, taxes will have to rise", 6/12/2012, http://www.theaustralian.com.au/business/opinion/no-doubt-about-it-taxes-will-have-to-rise/story-e6frg9qo-1226530770321

I think government should establish a law similar to the California's but with a in-build flexibility, that is, to set a maximum percentage of all revenue to GDP, say 30%.

The current political landscape is unfair, with the ALP increasing spending and the size of government with no limit, while when the opposite political party is in government they reduce spending reduce debts.

It will be a fair game for political parties to have a hard budget constraint and it should be the same for both political sides.

If any party wants to go over that limit, it needs a referendum. If any party break the rules, the ministers and the caucus must pay from their own income and assets.

Only in that way, will political parties focus on creativity and innovation in policy to generate the maximum benefit to the nation for the given constraint.

Working families have to live within their means. Government should also live within its means. AND its means should only be a proportion of the size of the economy.


Key to global deal for limate change - a fair deal on per capita basis

Comments on Pep Canadell "The widening gap between present emissions and the two-degree target", 4/12/2012, https://theconversation.edu.au/the-widening-gap-between-present-emissions-and-the-two-degree-target-11101

The author states "Perhaps the most immediate critical challenge to meet the 2°C target is the need to curb global fossil fuel emissions within the next ten years. This would require annual emission mitigation rates to around 3%. Some integrated assessment models show that this is possible globally without causing economic damage."

I would argue that those so called integarted assessment models are clearly unrealistic, given the annual growth in emissions over the past decade is 3% and to turn that into a reduction of 3% is a clearly acdemic excercise!

What it means is it is unrealistic and impossible to achieve the 2 degree limit (assuming the modellings for that 2 degree limits are correct) and the world has to learn to adapt to a warmer world more than 2 degree.

The first realistic step is to reduce the growth in emission to 0 for normal world economic conditions. After achieving that target, then the next step is to reduce emmissions.

The current difficulties in reaching an international binding agreement can only be overcome if a deal is fair and effective that requires per capita emissions have to be used as the basis for a deal. Failing to do that is unlikely to advance the cause very far.

A per capita deal is not aimed at achieving equal per capita consumption or emissions, it is to use per capita emissions as a key variable in determining which countries should pay to the international community and by how much for each and which countries should be paid and by how much for each.

This approach will focus on the current consumptions/emissions and will not look back at histories of emissions.

It should be based on the user pay concept on a global scale.

Theories and practices of economics with innovation in between

Comments on Shaun Vahey "Academics v practitioners: split views within the Shadow Board", 4/12/2012, https://theconversation.edu.au/academics-v-practitioners-split-views-within-the-shadow-board-11110

The views of both practioning and academic economists are "should be", though they may have different perspectives in their thinking.

The academic economists there may have a too theoretic focused and may be a little too rigid and inflexible. In their mind, it is all theories that matter. If it is not in accordance to the theories, they cannot be. But the Fed has operated on a non conventional basis for quite sometime and that points out the potential shortcomings with the academic macroeconomists (their thinking).

Practitioning economists may be too affected by the markets.


Australia should never become an America in population or military

Comments on Cassanddra Wilkinson "Less welfare, more immigrants and an Australian century", 3/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/less-welfare-more-immigrants-and-an-australian-century/

While the idea to reform the welfare state and encourage citizens to work should be done as an urgency, there are few signs that the politicians are willing to take real steps and there are influential interest groups that will oppose to reforms in that regard. Secondly, the American historical example will not and should not be followed by Australia because there are fast differences between the two countries and the timing cannot be any more different too. Australia has struggled to cope with its won natural environment, mainly the dry climate and the lack of rain water. As a dry continent, its soil is poor. The struggle with the Murray Darling Basin water plan is an example of water scarcity in Australia. It is an indication that Australia will struggle more to sustain a large population. In timingwise, now there is no need to become a populous nation to enjoy wealth and freedom. In terms of military and defence, Australia seldom has been under threat of invasions by other nations. Of course interest groups will argue that Australia needs a stronger and larger military force to defend itself. But the question is to defend from who? Its all imaginary.
So forget steretypes and old style thinking, folks. The world is increasingly becoming one. There will not be serious threat to Australia's security in the next hundred years. And, don't ever think that Australia needs a larger population to survive!

Kyoto is both a success and a failure

Comments on Tim Wilson "Failure to extend Kyoto agenda will mean pain at home", 3/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/failure-to-extend-kyoto-agenda-will-mean-pain-at-home/comments-e6frgd0x-1226528457765

The Kyoto Protocol is both a failure and success. That it is a failre is not because 'The journal, Nature, recently argued: "In practice, the 1997 treaty did little to curb emissions of greenhouse gases". The failure came mainly because of the US did not keep its government bargained for and did not do its part. Without the US to demonstrate its committment as the largest emitter at the time, it would always doomed to be a failure. How can the US ask other countries to commit given its per capita emissions is still among the highest and is much higher than those in developing countries including large developing countries such as China and India. That it is a success is because many industrialised countries participated and made a real committment. Rich and high per capita emission countries must demonstrate any deal must be fair on per capita basis.


Net creditor is not a cause of alarm for lower trade GDP ratio

Comments on Yu Yongding "China’s rebalancing act: between exports and domestic demand", 25/10/2012, http://www.eastasiaforum.org/2012/10/24/chinas-rebalancing-act-between-exports-and-domestic-demand/

I don’t have a problem with a fall, a rise or no change in the ratio of trade to GDP in China. However, I cannot see why it is necessarily that being a large net creditor means being in the worst position in today’s global economy when faced with ‘infinite quantitative easing’.

The question is how to use that credit. It does not necessarily have to be used in holding US government bonds. The US stock market has boomed following the QEs. The US housing market is still low and there are values there. A move from government bonds to equities would not only keep the value of credits, but also increase its value.

And it is not necessary for all those reserves to be held in government hands. Why not transfer some to private holders?

It is not the credits but only the limitations of fixed thinking that is the problem for China.


Alternatives provide room for competition and betterness

Comment onJohm Keane “How Not to Think about China”, 24/08/2012, https://theconversation.edu.au/how-not-to-think-about-china-8933

While many in the West may be concerned about the appearance of a different style from the West democracy, I think it may be beneficial to the world and all human beings if there are some alternatives and competition available.

China is still reforming and evolving and its current form may or may not necessarily be an eventual alternative style of democracy, but it has the potential to become one.

One may speculate that some sort of authoritarian social capitalism might be emerging from China that would differ from the current West style democracy. Main differences might include

that it may be a combination of western democracy with eastern stronger states (with a stronger emphasis on more effective collective governing through government, and a market system that would rely more on redistribution for equality purpose to balance the main focus of the current capitalism on capitalists' profits.

Just as competition by market forces is generally good for efficient resources allocation, competition in social and democratic systems can be expected to be constructive and have a positive effect to human beings.

But there is no guarantee that China will develop into a real alternative.

Let’s hope China’s current experience or attempt of an alternate will be positive and constructive to all human beings.


Relativity in creating fictions

Comments on John Lee "Knock down this great wall of lies" 14/08/2012, http://www.theaustralian.com.au/national-affairs/opinion/knock-down-this-great-wall-of-lies/comments-e6frgd0x-1226449575760
Though John has a point, he has unfortunately stretched the facts, argument and logic too far.

While it is true that there were many wars throughout China's history, is there any country in the world with a very long history that has not seen/experienced many wars?
If leaving ideologies, human rights and other things aside for the moment, in terms of China's strengths and weaknesses in the past 200 years or so, the period China under CCP has been arguably the strongest. Does John disagree with that?
In terms expansionism or not, has China conquered any other country even under the CCP rule? Or has it invaded and occupied any other countries for a long period over the past 200 years or so, including under the CCP rule?
Further, again leaving the ideologies aside, does what the CCP say in terms of China's history over the last 200 years or so facts or fiction?
On the other hand, John seems to create his own fictions here. He seems very good at practicing what Mao's saying - oppose whatever the enemies support and support whatever the enemies oppose, even though he criticise Mao a lot.
As a result, his view is too much distorted and has become fictions itself in terms of China.
In that he is misleading his readers.


Understand why and how productivity has slowed in recent years

Comments on John Freebairn "Evolution of the productivity pariahs", 2/08/2012 https://theconversation.edu.au/australias-productivity-problem-why-it-matters-8584 and

I think governments, businesses and economists probably need to have more realistic expectations and understand where the most important constraints to productivity improvements are and how to go about them to help raise productivity.

It probably means quite a number of new points or more creative thinking.

For example, the improvement in the terms of trade, as a luck gift to many Australians including Australian businesses, may mean they don't want to work that hard to raise productivity in the comparative sense, so they are happy to enjoy the life with better living standards. Alternatively, they need to be given greater incentives to work as hard as they did in the of no improvements in the terms of trade to produce the same improvement in productivity.

So this kind of work/leisure choice must be taken into account in analysing our productivity to really understand the true underlying factors on productivity in Australia.

However, I do share Professor Freebairn's view that government has important roles in raising productivity. Freebairn mentioned two of them: government policies such as taxation and government supply of services, like education, law and order.

Another important area the government has an important role is to ensure consumers get the maximum benefits from adequate competition, including from competition from overseas through trade policy.

It has been reported that Australians are charges much higher prices for many products or services than their overseas counterparts. This is not only detrimental to the welfare of Australians, but also is unconducive to competition and productivity.

The government must examine why that has been the case and develop the most appropriate policies to change it.

It is a mystery why the government hasn't done such work for so long.

A better alternative to the NDIS

Comments on Gary Johns "Middle-class welfare must be squeezed to help the disabled" 2/08/2012 http://www.theaustralian.com.au/news/opinion/middle-class-welfare-must-be-squeezed-to-help-the-disabled/story-fn8v83qk-1226440702411

While the NDIS has its merits, I think it would be even better to introduce a national, voluntary and tiered scheme similar in spirit to the proposed NDIS.

Such a scheme should have a standard contribution rates similar to a levy, but whether a person pays or not is voluntary. Besides the standard rates, one can also be allowed to choose a lower rate for a lower level insurance. If a person pays, then he/she and his/her family are covered by such an insurance.

With this voluntary scheme, there is a national register which shows the records of people's "insurance" that will be used for "claims". Low/no income people are also covered, as their taxation records can be matched with to show whether they have paid their voluntary premier or not.

Such a scheme should be better than the current proposed NDIS. It would be a real insurance as opposed to a general taxation/levy, which blurs incentives and responsibilities at may levels including politicians and bureaucrats.


New application of comparative advantage trade theories

Comments on Christopher Findlay and Dean Parham "
Blurred borders: ‘offshoring’ Australian business", 31/07/2012  http://www.eastasiaforum.org/2012/07/31/blurred-borders/

It seems the new model is a development of the comparative advantage trade theories albeit at the production/value chain as compared to the whole production process.

It also implies that new comparative advantages may have a strong focus on fast innovation and rapid response, as compared to the past simple capital/labor type.

It is a more complex model with fine distinction of elements of sources of comparative advantage.

Economists must also be innovative and creative in theorising new practice and economic reality.

Businesses must also be highly adaptive to globalisation trends and regional and global economic integration.


Alternative ways for CO2 capturing?

Comments on Fron Jackson-Webb "Clue to carbon storage in the Southern Ocean" 30/07/2012 https://theconversation.edu.au/clue-to-carbon-storage-in-the-southern-ocean-8490

If ocean can absorb CO2 in that way, then instead of the current research on much more costly CO2 capturing and storing underground technologies, perhaps studies should be undertaken to explore how make the CO2 (from power generations or large concentrations of some other CO2 producing processes) pass through water to be captured and and stored in water to be either put into the ocean or used in irrigation.

Would that be a feasible project or idea to deal with CO2 emissions?

Moral hazard must be avoided in euro

Comments on Karen Maley "First shots in the battle for Spain?" 30/07/2012, http://www.businessspectator.com.au/bs.nsf/Article/European-crisis-ECB-Mario-Draghi-Spain-bailout-pd20120730-WNUMH?OpenDocument&src=sph&src=rot
It will not work as long as there are diverse interests and responsibilities that have been running so deep and wide between the Germans and the others.

It will be irresponsible to bail out some the troubled euro economies without them paying a real price for their troubles.

A middle way is to bail them out on the condition that they pay a higher than the ECB rate or possible potential euro bond rates to other more better shaped euro member economies.

But no one is saying that yet so far.

Until that is clear, then the euro is doomed to see some of its weak members to exit it.

Alternatively, a possible dual euro currency system may also work that would afford the flexibility of currency adjustment to their fallen international competitiveness.

US monetary policy has lost its power

Comments on Robyn Harding "Bernanke is running out of magic bullets" 30/07/2012 http://www.businessspectator.com.au/bs.nsf/Article/US-Fed-Reserve-Bernanke-stimulus-eurozone-pd20120730-WNSLX?OpenDocument&src=sph&src=rot

Conventional monetary policies have done its appropriate jobs in managing the US economy and it is highly unlikely for it to be capable of doing more as long as the US economy is concerned.

Any further QE or lower the 0.75% rate will not produce any measurable effects on the economy, apart from benefits the banks and those financial institutions to make money by pushing the stock market higher.

It is now for fiscal policy to take its responsibility to put the US economy in a long term path to health.

Besides, the US and EU all have to adjust to the challenges out of the rise of large emerging economies and that means their relative living standard will not be as higher than the emerging economies as in the past.

That also means the real wage in those countries have to fall further to be internationally more competitive vs the emerging economies.


Abbott's foreign adventure

Comments on Craig Mark "Abbott’s stance on China needs to evolve with the times" 27/07/2012  https://theconversation.edu.au/abbotts-stance-on-china-needs-to-evolve-with-the-times-7975#comments
Abbott is unlikely to be as successful in dealing with China as he has so effectively opposed to the ALP government since he became the opposition leader. 

China is no Gillard nor Rudd.
If Abbott hopes his hardlining tactics may work, the US would have China measured long ago, given that the US has been and is still much much more powerful than Australia and there have been many harks there who are at least as good as Abbott in global leadership and skills.
So yes, his stance on China has to evolve with time.
Just see how American presidents changed their attitudes towards China from their campaigns once they came to the White House and began to deal with China.
Rhetoric is one thing and reality is another totally different one all together.


Academic scholars in Australia shouldn't be Chinese-scholars bashing on climate change

Comments on Justin Norrie "Rich nations should do more on climate, say Chinese" 26/07/2012,  https://theconversation.edu.au/rich-nations-should-do-more-on-climate-say-chinese-8417#comments
It seems the tone of this article appears a little biased against China and Chinese scholars.
For example, the article states "It (China) produced 8.3 billion tonnes of carbon dioxide in 2010 – an increase of 15.5% on the previous year".

Readers with a rational mind would naturally be surprised how an increase of that magnitude could occur in China at the current economic environment and at the current high level of emissions.

Then you have the more obvious first and second paragraphs:
"Greenhouse gas cuts pledged by developed countries will not be enough to stop temperatures rising by 2 degrees by 2100, according to Chinese researchers who argue wealthy nations should bear greater responsibility for tackling climate change.
The controversial assertion is contained in a paper published today in the US Proceedings of the National Academy of Sciences. The paper, produced by 37 Chinese climate scientists and statisticians, says that two types of modelling show developed nations were responsible for 60% to 80% of the global temperature rise, upper ocean warming and sea-ice reduction until 2005."

Why is that argument or viewpoint a controversial assertion? Is that because it was made by Chinese scholars?

Why in academic fields like the Conversation should people bash China and Chinese scholars?


A dual Euro currency is likely to work to save the Euro in the long run

Comments on Michael Pettis "Breaking up (the euro) is hard to do", 21/07/2012, http://www.businessspectator.com.au/bs.nsf/Article/European-debt-crisis-market-reaction-policymakers--pd20120718-WB9E7?OpenDocument&src=sph&src=rot
I personally believe in neither the conviction of a single currency Europe nor the complete break up of the Euro - something in the between is likely to emerge sometime in the next couple of years and to last.
Some problematic and weak Euro members may exit the Euro, but the majority may stay.
It is possible that instead of a single euro currency in the euro zone there might be 2 currencies, that is, a dual currency system to provide some flexibility.
At the same time, they may establish some mechanism that allows a common euro bond, but allow limited internal risk sharing and fiscal transfer, but each country will still be responsible for their own actions.


Role of expectations and market forces in causing economic "imbalances"

Comments on James Laurenceson “Four vital things Australian commentators don’t understand about China’s economy” 17/07/2012 https://theconversation.edu.au/four-vital-things-australian-commentators-dont-understand-about-chinas-economy-8262
While all the factors that James mentioned matter, also important is the way people's expectations change over time that influence both culture and history.
I am surprised that it wasn't mentioned that adaptive expectations could also explain many of what have been the imbalance issues with the Chinese economy.
When a developing economy changes very rapidly with considerable uncertainties, many consumers, particularly historically poor ones that are the cases with developing economies, are adaptive to the rapid change in the economy and the rise in income, so their expectations are somewhat influenced by their past low income and won't spend as much as people in rich and economically relative stable developed countries.
Another factor is the role of surplus labor has played in depressing the real wages, at least until now. While many economists, including some in China, take the market as sacred on the one hand, they leave the market force aside in analysing the imbalance in the Chinese economy. They say it was the Chinese government policy that was pro investment and pro exports.
How cynical and illogical can they be?
People need to use their creativity in research, not simply and wholly rely on existing theories or what conventional line of views.


No cause for pessimism for the Australian economy

Comments on Henry Ergas “Policies standing in the way of management can do great damage”, 16/07/2012, http://www.theaustralian.com.au/news/opinion/policies-standing-in-the-way-of-management-can-do-great-damage/story-fn7078da-1226426636726
Ergas has made an important contribution to the current debates on the multi-speed economy associated with the mining boom and on productivity.
The latter first. I have made a comment on the shortcomings of the viewpoint by Gruen et al that poor manager performance was the main reasons for the latest productivity slow down, by referring the charts consisting of one cross section international data with a time seires of Australia's productivity. That mix is problematic, because it says little how the international comparison has changed over time. Further, it is doubtful that international productivity would have performed better in recent years over the pre-GFC period.
For Henry's viewpoint on the Dutch Disease in the Australian economy, although it is correct to say that adjustments are inevitable when mining booms as a result of increases in international demand for mineral and a consequential rise of the Australian dollar, the view that no policies can offset or lessen the adverse impact of the mining boom on other trade exposed sectors is likely to be false.
For one thing, his mining tax design was one of policies that could just do that if the policy was designed and implemented properly.
Further, monetary policies could be designed in such a way that lowers both the demand of Australia for international capitals and the Australian dollar.
A fine combination of fiscal and monetary policies together would make the adjustments much less painful than they have been.


Dutch Disease can be managed to minimise ill effects

Comments on Ken Henry "
Ken Henry: why Australia’snon-mining sector will continue to struggle", 12/07/2012,  https://theconversation.edu.au/ken-henry-why-australias-non-mining-sector-will-continue-to-struggle-8224 

This is where many economists and government officials have been lacking in creativity and in bringing a whole practical package together to deal with challenges, although the current challenges from mining boom is a good one.
Dr Henry should realise that the Henry Taxation Review's recommendation on the mining tax is a good economic theory but is not very applicable in practice and it was this combination together with bungles by politicians and bureaucrats that have resulted the current poor state of the MRRT.
Undoubtedly, the initial design of a mining tax by the Henry Review was very ambitious and elegant in theory. But the problem was it is too theoretical but not practical. An alternative one could be as simple as a pure addition to the company tax with an link to either terms of trade using mineral exports and all imports or the relative prices of mineral exports.
Of course, that additional tax should be mostly given to the states where the additional profits are generated, with some left the to the commonwealth for national adjustment to the mining boom.
States, of course, would be part of the adjustment process using that additional profit tax revenue from mining companies.
This can limit the rise of the Australian dollar and a lower dollar is conducive to lessen the impact of the mining boom, that is, the Dutch Disease.
The so called Dutch Disease can be managed with a good national policy.
Only purely relying on the market that gives to the rise of Dutch Disease.
The main viewpoint and argument in this article belongs to the latter.

Meaning and meaningful in measuring producivity

Comments on Tim Mazzarol "

Poor management performance and the implications for Australia’s economic outlook", 15/07/2012, https://theconversation.edu.au/poor-management-performance-and-the-implications-for-australias-economic-outlook-8254

While Dr Gruen and Dr Dolman's paper fingers out at what they view as poor management, particularly amongst our nation’s manufacturing firms based on some interesting research recently completed by the World Management Survey, chart 1 and chart 2 alone are not necessarily helpful in supporting their viewpoint.
Chart 1 is a time series while chart 2 is a cross-sectional. Although chart 2 indicates what is argued in this article, that is, the difference in management between Australian manufacturing firms and world best such as the US, Japan and Germany, is does not say how that difference changed over the same time period shown in chart 1.
Besides, chart 1 show the multifactor productivity had declined since 2003 not just from 2008-09. Was that coincident with the mining boom from 2003?
Further, I doubt the meaning of multiproductivity shown by chart one would really mean much to firm and industry management, because such measurement, while having its merits, may have some weaknesses in terms of significant relative price changes. We all know that the mining boom was associated with significant rises in mineral prices. From profit maximisation point of view, if the out price rises, then even the multifactor productivity stays constant or goes backward the firm may still be more profitable.
That is the difference between academic style studies and real world operators.
So the question is how to be most meaningful in measuring productivity in the real world. That would require a bit of creativity, not simply adopt what is available. Creativity may be controversial when it first appears, so it needs courage too.
If I were to redo a study on productivity similar to show the case shown chart 1, I would take the changes in relative prices into account and come up with a new concept or new measurement for it.

PS: The same logic applies to the situation when an industry or the economy is experiencing recessions when capital is sticky in the short term and cannot be adjusted as freely and quickly as desirably. So from microeconomic point of view, firms maximising profits would take the most effort to do it and that does not necessarily mean an improvement in multifactor productivity.


An Australian political reform?

Comments on Greg Craven "Parliament needs the voice of reason to raise the tone of politicians", 12/07/2012,  http://www.theaustralian.com.au/national-affairs/opinion/parliament-needs-the-voice-of-reason-to-raise-the-tone-of-politicians/story-e6frgd0x-1226423839617
It is an interesting idea to have eminent Australians participate in parliament debates. Equally, the same effects could be achieved with an effective forum for eminent Australians to voice their opinions and inform the parliament. The only reform needed is for the parliament to note and debate recommended opinions by the forum. Such a forum could also include creative opinions of other Australians.

Structural changes in world economy

Comments on Greg Sheridan "Seven reasons not to write off the US", 12/072012, http://www.theaustralian.com.au/news/opinion/seven-reasons-not-to-write-off-the-us/
Greg, I am an economist and would use some economic jargon to comment on your article and viewpoints.

Your analysis is reasonable in terms of adaptive expectations, based on past experiences. The likely problem with that is if there are structural changes occurring, then adaptive expectations may lose their explanatory power. In contrast, rational expectations may be handy to use to explain things.

Over the last 20 years or so, the world has undergone an enormous and powerful structural change, typified by the rise of very large developing economies, such as China and India. This kind of structural change in the world economy means the relative decline of the developed economies and the increase in the relative weight of the developing economies. Along with this structural shift towards the developing economies, technologies are also moving to the developing world.

While China, the most dynamic example of the rising developing economies, has its many problems, it also has its strengths to formulate and stick with a long term plan. The Chinese and Indians can be as innovative as the Americans, as long their talents are allowed to do so. You and the readers can draw conclusions.


What is the criterion for economic balance or not?

Comments on Ligang Song and Huw McKay "Rebalancing the Chinese economy to sustain long-term growth", July 3rd, 2012, http://www.eastasiaforum.org/2012/07/03/rebalancing-the-chinese-economy-to-sustain-long-term-growth/

While it popular to say that the Chinese economy is unbalanced, it seems not convincing and rational basis has been presented to put it beyond dispute or doubt, except to use the facts of China has surplus in trade and its investment/consumption shares are high/low.

What economic models would demonstrate that balanced trade is always optimal and that a lower/higher investment/consumption are always optimal over the course of economic development and when people and nations clearly can have different preferences?

Further, investment is absolutely necessary for economic growth, especially for developing countries which have relatively low physical capitals and inadequate infrastructure and low urbanisation. Besides, better technologies are embedded in investment

Let’s look at some of the arguments in this article. It argues “Although the non-state sector accounted for the majority of industrial output in 2007, the SOEs accounted for more than 53 per cent of non-agricultural fixed investment while employing only 13 per cent of the total workforce. These discrepancies reflect the fact that SOEs operate in capital-intensive heavy industries. But they also suggest an inefficient allocation of capital across sectors and underline that there are still large distortions in China’s factor markets.”

Even though it is acknowledged the influences of capital intensity on investment needs, it simply states that they also suggest inefficiencies in capital allocation without supporting materials/facts. Further it does not mention the role of the grey or underground banking and finance sector in providing capitals to non SOEs and its relative importance. Without those facts how the reader can be sure the argument is correct?

The article also argues the potential effect of a reform to the Hu Kou system on consumption. Although it mentions urbanisation will require investment but it does not present the fact of which effect is greater. Without those facts the reader is left wondering whether the argument is sound or not. Besides, urbanisation has different models and it does not necessarily mean that all people will need to move to mega-cities.

It is also puzzling that it has been argued that the Hu Kou system has resulted in lower wages for migration workers while no mention of the effects of excess supply of rural migration workers.
On this particular point, whether the low wages of rural migration workers were the effects of the labor market with relatively unlimited labor supply or whether it was due to the Hu Kou system, most economists would likely to argue it was the former rather than the latter.


Hope for a reduction in rates by RBA on 3 July 2012

Comments on Shaun Vahey ", Keep rates on hold, says CAMA shadow board", 2/07/2012, https://theconversation.edu.au/keep-rates-on-hold-says-cama-shadow-board-8031

From aggregate GDP point of view and the housing market, rates should be held unchanged.
However, there will not be too large risks should rates go down a bit, given that mining investments are unlikely to be affected by RBA overnight rates and a lower rate should provide a boost to the other sluggish sectors and states that have struggled.
The difficulty is asset markets, especially housing market which is clearly still high as compared to other advanced countries. Stock market in Australia is probably undervalued as opposed to overvalued, and should not be a problem.
But it is difficult for the RBA to influence the housing market without significantly hurting the real economy.
Australia's interest rates are relatively high as compared to other advanced economies and we are having a multi-speed economy.
I'd hope there will be a 25 base points reduction on Tuesday.


Rio+20 can it achieve anything?

Comments on Ruben Zondervan "

Rio+20: Take science seriously and change the process", 21/06/2012, https://theconversation.edu.au/rio-20-take-science-seriously-and-change-the-process-7804

While Rio+20 may have a much wider agenda in terms of sustainable development, the inability of the international community to reach an agreement of actions and policy framework on emissions, arguably the most pressing and important environment issue facing all human beings, suggests the large gathering is unlikely to achieve meaningful outcomes for the environment.
For emission and climate change issues, it is the rich and powerful countries that have been the obstacles to progress, out of their self interests because they have far greater per capita emissions than most other countries.
Until the international community can achieve a fair and workable agreement on emissions control there is no reason and justice for rich countries to press poorer countries to be responsible to the environment in their development and make sacrifices in getting a better world environment.

A new framework for La Trobe?

Comments on Stephen Matchett "

If La Trobe was a car …", 21/06/2012, http://blogs.theaustralian.news.com.au/thecommonroom/index.php/theaustralian/comments/if_la_trobe_was_a_car/

I think Australian universities and La Trobe included should establish a model that values both research and teaching quality and reward excellence in both fields. The model clearly needs a set of clear criteria and explicit assessment framework.
It seems that the pay conditions and reward system needs some innovation and creative thinking is required. Maybe a pay system  should be established that has a minimum pay for each level and them a large part of loading and reward payment that is linked to teaching and research loading and outcomes.
Such a system would provide both stability for academia and reward for excellence.
Should a person perform poorly for a period of 3-5 years or more, then that person should consider whether academia is a suitable profession or not.

Living and working longer for happiness

Comments on Hiroshi Yoshikawa "

Japan’s aging population and public deficits", http://www.eastasiaforum.org/2012/06/21/japans-aging-population-and-public-deficits/

Given that the VAT in Japan is only 5%, there is plenty room to raise revenue from an increase in VAT.
While raising tax may improve government budgetary positions, it does not necessarily increase output of the economy.
So other ways should be considered to increase the economy at little or no costs to the budget.
Maybe a scheme of volunteers should be established for older people who are able and willing to be involved in voluntary work with government agencies or private firms and organisations.
People are now living longer and healthier, as a result, many older people may still be able to work to contribute to the economy or society.
By getting involved in some sort of productive activities, many older people may be even living happier.
Of course, such a scheme should and must be voluntary.


An income loan for younger people?

Comments on Tony Makin "Beware politics of envy when considering ways to equalise incomes", 19/06/2012, http://www.theaustralian.com.au/national-affairs/opinion/beware-politics-of-envy-when-considering-ways-to-equalise-incomes/story-e6frgd0x-1226399149922
Assume Makin's argument that income redistribution to younger people is inter-generational unfair, maybe there should be income loans that can be repaid in the future when their income exceeds a set level, similar to the HECS in nature, to younger people in need.

My comments on The Economist

My comments on articles in The Economist website may be accessible via the following link:

张维迎 - 真味迎

评“张维迎:通胀不可避免 人民币升值躲过初一躲不了十五”,fnsr 27/02/2010, http://www.pinggu.org/bbs/thread-722143-1-1.html


张讲:“如果人民币升值之后,我想中国的企业家就会更多地来注意开发国内市场。 我反复强调国内市场的开发不是一个宏观问题,是一个微观问题,如果我们把开发国内市场的希望寄托在货币政策上那是有问题的,但是我们必须承认宏观的政策,特别是汇率政策对于企业家开拓国内市场我觉得是非常非常重要的”。这不自相矛盾?那到底是还是不是宏观问题呢?


Do we really need a new climate change paradigm?

Comments on Mutsuyoshi Nishimura "In search of a new climate change paradigm" June 15th, 2012, http://www.eastasiaforum.org/2012/06/15/in-search-of-a-new-climate-change-paradigm-2/
Nishimura asks the following question: “what kind of carbon market is needed?”
The answer is quite simple, yet the world at large seems unable to get it.
If it is true that “there is a strong consensus that imposing a price on CO2 emissions is the most cost-effective way to motivate all players to use less fossil fuels and move to low-carbon or non-carbon economic systems”, as Nishimura states, then isn’t a global price for carbon emissions and an equal per capita distribution of the revenue from pricing revenue simply enough to do the job?
Isn’t what is taught in economics to deal with pollution issues?
Most economists in the developed world including many of its national leaders and politicians should understand this, but few of them advocate this simple, efficient and effective method/policy. Why?
The answer is also simple, but I leave that to the readers.
Comments on Hironori Fushita "Putin, Russia’s eastward pivot and prospects for Japan", http://www.eastasiaforum.org/2012/06/15/26925/
I think regional cooperation should be the right approach to best developing Siberia and Far East.
New and creative thinking is needed.
Maybe some special economic development zones could be established where foreign firms and nationals be allowed to reside, work and do business there, but subject a special land tax in addition to other Russian taxes (excluding their other normal land taxes).
Those regions are vast in land size with scarce population.
A win-win situation/outcome could be created for Russia and other regional countries.

My blog is back again - lessons of the GFC for economics

It's been a while that I have not included my comments in my blog due to certain inconvenience at work. And  it is time to resume doing it.

Comments on Kemal Derviş and Homi Kharas "New challenges for the global economy, new uncertainties for the G20", 17/06/2012, http://www.eastasiaforum.org/2012/06/17/new-challenges-for-the-global-economy-new-uncertainties-for-the-g20/
The GFC and possibly a potential second GFC seems to indicate more fundamental causes at play, that is, the tendency of markets particularly assets markets fails to work properly and to reflect correct values in the face of the surge of developing economies and its effects on world financial especially money markets.
The rapid growth in average productivity in fast growing developing economies generates excess savings/credits. This causes some sorts of bubbles in the asset markets by having more fund and credits to push up stock market and housing market.
People with apparently increased values in their assets may consume more than their life time real income level.
Bubbles mis-allocate national resources to bubbling sectors cause them to boom to meet the demand.
So, it seems that the GFC is caused by the fundamental failures of markets working along when governments fail to realise national and international regulation and cooperation are needed to correct those market failures.
This may be a lesson in economics when something is new and significant appears that the market is unable to cope.


Realistic and optimistic on Asia

Comments on Koh "

Three challenges to Asia’s global ascent", 9/03/2012, http://www.eastasiaforum.org/2012/03/08/three-challenges-to-asia-s-global-ascent/

The three areas Koh listed are all very important issues that many Asian countries face, and should and must be dealt with sooner or later.
I somehow am confident and optimistic that those issues will be able to be dealt with and resolved in the due course.
Although I have been aware that Gini is high and has been on the rise in China and many people have used that as a big problem in the rapid growing Chinese economy, I didn't realise that Gini is 0.48 in Singapore. I think that China will pay more attention to inclusive growth and achieve better equity in terms of income distribution as its income level rises and as its labour force turns from surplus to relatively scarce especially in the context of rapid growth of the economy and of physical capital investment.
In terms of environment sustainability, it is likely that we will see gradual and significant improvement in some fast growing economies, especially China, as it's economy enters into a stage of extensive physical quantity growth to intensive quality and value growth phase. I think China, leaving aside urbanisation that will still be dominated by extensive physical growth, is very close to this critical transition. Besides, as income level rises, the relative value people place on environmental goods will rise so naturally from now on we are likely to see more "demand" for environmental goods relative to other goods.
Corruptions in many Asian countries are reported to be serious. However, I do believe that it is likely to decline and possibly significantly so in major large fast growing Asian countries, especially in China.
If China is one of the best representatives of Asian fast growing countries, especially when its size and share in those fast growing economies are concerned, my confidence and optimism in them to resolve those three issues seems to be justifiable.

Need more creative thinking to deal with floods in Australia

Comments on GRAHAM RICHARDSO "Water, water everywhere, none is saved", 9/03/2012, http://www.theaustralian.com.au/national-affairs/opinion/water-water-everywhere-none-is-saved/story-e6frgd0x-1226294045473

I agree with RICHARDSON on this important issue facing Australia and many Australians.
It is high time that we Australians should have bold, strategic and creative thinking and ideas.
Floods and bushfires are two very frequent natural disasters in Australia and they can occur almost every year and cause so much damages to properties and people's lives, as well as economic losses.
I remember last year or the year before that the Association of Insurance Australia had a competition for proposals to alleviate the impacts of natural disasters in Australia and I submitted an idea to build a system of dams and canals in eastern Australia especially Queensland and NSW to deal with floods as well as drinking water. But unfortunately that idea was not taken up.
We need to conduct costs and benefits analyses on a fairly large scale projects, because floods and bushfires can cause billions of damages and economic losses.
It is not a matter that individuals can do and must be considered by government.
RICHARDSON's suggestion is timely and we owe ourselves so much that we must be more creative and much more constructive in the face of frequent natural disasters in Australia.


School funding - Gonski Review

Comments on Judith Sloan "It would be fairer and cheaper for some rich schools to lose funds", 28/02/2012, http://www.theaustralian.com.au/news/opinion/it-would-be-fairer-and-cheaper-for-some-rich-schools-to-lose-funds/story-fnbkvnk7-1226283265715

I think the second last paragraph is the key for this review to work and be adopted in 2014 finding.

The reconciliation of the government proposition of no loss of $1 per student and the percentage funding of non-government schools can only be done by transitional arrangements.

Further, total $ amount per student recommended in the review report should and must be state specific, given the huge differences in costs of education between the states.

Lastly, the percentage funding should be different for catholic and independent schools in general and should be adjusted by the relative resources of schools accordingly. Maybe a floor per student percentage should be considered.


Both US and China need to consider win-win mentally

Comments on Nick Bisley “An assertive China rattles the region”, 24/02/2012, http://www.eastasiaforum.org/2012/02/24/an-assertive-china-rattles-the-region/
Apart from agreeing to Professor Bisley's analysis, I would add that an economic terminology here to describe the situations that I think they fundamentally reflect a behaviour of adaptive expectations as opposed to rational expectations.
By that I meant that those reactions by some of the East Asian regional players as well as the US appear to me a backward looking as opposed to forward looking in their fundamental nature.
The US behaviour is not too different from many earlier powers behaviour before they exited their past colonies.
Some regional players are reluctant to accept the rise of China as a world power with its regional implications and hope the US influence will continue. But that is hardly unsustainable, as China will replace the US as the world's largest economy with the power necessary to protect its economic interests.
Nothing has been more contrast in the fact that China has been experiencing a rapid growth in both its economy and a largely proportional increase in its military budget and the fact that the US has been struggling with both its economy and the cuts of military budget as part of its reactions to reducing its huge government debts.
Besides, the US has a wide spread in its military interests and China of course is much more focused on its surrounding areas as opposed to global reach.
So in terms of regional power strengths and weaknesses, the real differences between the US and China undoubtedly lie in the ultimate deterrence of nuclear power while the gaps between the US superiority the rise of China in Asia in conventional military is rapidly closing.
In terms of nuclear power, it is hardly imaginable that either is willing to risk, even though there is a huge gap in their strengths.
What implications of all these changes and ongoing changes between the US and China have, while with considerable uncertainties, are likely to be in favour of China's continued rise in both economic, political and military strengths relative to that of the US.
If the US continues to put obstacles on the path of China's rise, how it and China will resolve the unavoidable clashes and skirmishes is unclear.
Will that have to come to a military confrontation, or a conflict to set a score to see the changed comparison? I hope not.
There is no need to have another Korea war style battle to show they would have a draw and both have to settle for a truce.
Both the US and China will need to recognise that neither of them can resort to nuclear conflict and it is also unlikely that in any conventional conflicts that either side will have a clear victory.
But the US seems to be forcing China into a position of put up or shut up with its recent behaviours.
For China, it must take the current international order into account in shaping one for the future. For the US, it must recognise that the rise of China means it cannot defeat China in militarily and has to give some ground in accommodating China's and other world power aspirants' legitimate demands.
Only in that way, everyone can have a win-win outcome.


A point of logic on a Lardy analysis

Comments on Nicholas Lardy “China’s rebalancing will not be automatic”, 22/02/2012, http://www.eastasiaforum.org/2012/02/22/china-s-rebalancing-will-not-be-automatic/
While I am highly likely to be in no position to analyse the various data and/or studies to support different and often opposing argument, I wish to make a point on perhaps one small aspect explicit or probably more implicitly in Lardy's post, on a logic or reasoning basis.
It seems to me that Lardy's implicit underlying logic foundation is on "equilibrium level" or "purity" in terms of balance and imbalance. In another word, if it is not in the balance at the equilibrium level, it poses a problem. Fundamentally, it relies on equilibrium and statics.
That kind of logic can be contrasted with a change concept, that is, a gradual improvement or moving towards something, say equilibrium.
In physics or mechanics terms, he emphasises much more on the level of "speed", and much less so on the change in speed or "acceleration".
There is no need for me to say too much more on this, given that most readers would be familiar with these concepts and the relationship between speed and acceleration.
So in my view he is both correct and incorrect, depending how one looks at the issue.
Having said that, I seem to remember that Lardy is an accomplished US scholar on the Chinese economy and my comments is by no means to discount his contributions in this area.


Why Australian have to pay higher interest rates and higher retail prices?

Comments on David Uren "Politicians make lousy bankers" 7/02/2012, http://www.theaustralian.com.au/business/opinion/politicians-make-lousy-bankers/story-e6frg9qo-1226264125617
I've lost the copy of my comments but will get it when it is available from the Australian.

Reward practical solutions to significant issues

Comments on Dick Smith's population award, 7/02/2012, see http://dicksmithpopulation.com/2010/08/11/wilberforce-award-announced/

This is my second time to visit this page about this award and my urge has become stronger that the age restriction would not be helpful to finding real and the best solution to the population sustainability issue.
While it is clearly good to encourage young people to think about it, the smaller feasibility area does constraint the optimal results, unless the best result in the unrestricted optimisation coincides with this smaller feasible area optimisation.
If Mr Dick Smith is not only interested in encouraging young talent but also in finding the best solutions, then the award should not be restricted to young persons aged 30 or below.
Having said that I would have to say that Mr Smith's setting up a award for such a social and policy issue is outstanding thinking and should be highly commended.
Australia will definitely be a better place if more awards for solutions to important social and policy issues, such as mitigation of floods and bush fire damages in Australia, practical and optimal taxation and social welfare, Indigenous education, health and economic participation, optimal monetary and fiscal policies (i.e. why Australians have to pay so high interest rates), why Australians have to pay so much higher prices for virtually many things (i.e. the price differences between here and that in the US)?
It would be nice to award practical solutions and people who make outstanding contributions to practical solutions to important social and policy issues.
Both the public sector (government) and the private sector including private citizens should join such effort to improve Australians' welfare and well beings.
The public services and bureaucrats have their roles, but experience shows that many real constraints (such as political, operational and organisational constraints) have put a significant limit to their roles.


Temporary dual currency will save euro zone

Comments on Bill Evens “WEEKEND ECONOMIST: Full-scale fiscal union”, 29/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/European-currency-fiscal-union-Germany-pd20120127-QW9YA?OpenDocument&src=rot
Quantitative easing means effectively fiscal transfer between good managed countries and poorly managed ones, so unless the former are comfortable with that kind of sacrifice, it is difficult to do in the euro zone where member countries are sovereign and independent.
It may be fair to make this kind of fiscal transfer explicit and let the recipient countries to shoulder some of the costs. It could be in terms of long terms loans from those better managed countries' governments.
Fiscal union is not absolutely necessary, if the euro zone allows a second currency when necessary such as the current situation with a fixed exchange rate with the current euro, so those countries badly in need of a competitive devaluation can adopt that second currency temporarily to boost their international competitiveness.
A dual currency monetary union when necessary is a solution to the currency economic and fiscal difficulties in the euro zone.
This alternative will be better than fiscal union where some nations will oppose it if there are better alternatives that are available.
This dual currency zone will not only retain all the advantages that the current euro have, but also have the necessary flexibility for some countries to adjust through an effective devaluation without the need to have politically and socially difficult nominal wage cuts.
New problems call for new thinking and innovation.
This kind of innovative thinking will save the euro without fiscal union.


RBA can further improve Australian welfare

Thus reflects an anomaly with the Australian money markets or at least in the effectiveness of RBA monetary policy.
The RBA should do what the Fed has been doing recently, that is, to allow at least the four major banks to borrow from it with their high quality mortgage backed securities to make the RBA interest rate a really market rate that banks can borrow.
This may include a revised definition of deposits of banking institutions with the RBA, that is, the reserve ratio to facilitate this, but still retain effective control and effectiveness of monetary policy. So how high quality mortgage backed security is accounted in such new definition may need some thinking.
RBA officials need to consider this move to improve the Australian money market in terms of effectiveness. Arguably, Australian real effective interest rates can be lowered and hence welfare can be enhanced. This can be reasoned from the borrowing costs (the interest paid for borrowing at the international markets be our banks for example) that could be paid to the RBA so would be part of gain by Australians!
RBA should reflect why it has not done this earlier.

The US has been the main obstacle in climate change

Comments on Judith Sloan “Doha is dead and there's no case for reviving it”, 27/01/2011, http://www.theaustralian.com.au/news/opinion/doha-is-dead-and-theres-no-case-for-reviving-it/story-fnbkvnk7-1226254691086
The US has been the worst international culprit in terms of international climate change responsibility and agreement, typified by its refusal to join the Kyoto agreement. So there is no credibility in any of its arguments in this area and there is no persuasion for citing that against demand and arguments of the developing countries.
The US stance and the fact that no other countries could do anything about it was the main reason why Canada, Japan and Russia have taken their recent stances.
It is only fair and legitimate that developing countries argue for what they have been argued for.
The fundamental issue of the difficulties in reaching an binding international agreement on this issue has been that the developed countries, especially the US, have all failed to adopt the simplest and fairest approach, that is, equal per capita right of emissions and the user pay principle.
Had that been adopted, developing countries with low emissions are entitled for payments for below average emissions.
Sloan should be able to acknowledge this without too much difficulty, given her strong economic background.


Spectrum of capitalism - something between pure market to pure state

comments on "Davos elite confront capitalism crisis", 26/01/2012, see http://www.businessspectator.com.au/bs.nsf/Article/Davos-elite-confronts-capitalism-crisis-QUL3N?OpenDocument&src=hp9

The debate really is no brain. It is like the kind of debate between new-classical economists and new Keynesian economists, the truth is always some where in between.
Keynesian realise that market can have problems from time to time in getting full employment not soon enough and that is true, so government has to do something to aim at achieving full employment.
Even that theory works, then there is politics that endangers the theoretical fiscal policies that will be needed to ensure full employment.
Then, there are further problems with markets, it is not just aggregate demand or supply that are the only issues, there are structural and inter-temporary issues that are not too dissimilar to the aggregate issues. Those kind of structural and inter-temporary issues also need policies to manage and government is needed to play that role to address those issues.
Then of course income allocation has been recognised as an issue so government constantly work on taxation and welfare policies.
All those issues added together, you have a much bigger role for government to play in the economy: that is essentially some kind of capitalism and state work together, or some kind of state capitalism.
Of course, countries may differ in the kind of issues and their severity that requires different kind of combination of market and state, akin to the kind of Samuelson’s synthesis of classical and Keynesian economics.


High time for ACCC to use plan B

It was an interesting case by the ACCC bordered on bizarre, considering the Wesfarmers acquisition of Coles was done, while the ACCC had objected the Metcash' Franklin case.
For a market regulator to rely on theoretical argument without putting into a proper practical and commercial environment reflects how out of touch government organisations can be.
The ACCC should adopt a similar approach to the Productivity Commission in using applied model in testing and determining its decisions. The PC, from its predecessor, the Industry Commission, has been using models, including CGE models to study complex economic cases for policies.
The sort of models the ACCC would need to use may be different from those used by the PC, but modern contemporary merger and acquisition cases can only properly understood by informed studies from using practical models.
ACCC must have a clear overall goal to ensure market competition, efficiency and consumer welfare and use the best applied models available to measure it. Otherwise it will fail in its regulation of the market to enhance Australian welfare.
I would argue that many of ACCC decisions did not have a clear measure how much gain/loss should that case be or not be allowed.
In that context, it is high time for the plan B to be used!