by Brian Easton

Is public spending stuck in the vicelike grip of our quasi-Austerian economic policy?

Are we at a turning point in our politics? I don’t mean whether we have a new government. That is a matter for the voters; the polls say that either they are very volatile or that the polls are very unreliable – probably both. What I am interested in is whether we will have a new approach to the economy.

The last column described the philosophy of economist James Buchanan as it applied to the United States. What is its relevance to New Zealand?

When I looked at James Buchanan’s theory of public choice, I was struck by how it reflected an American institutional setting; Our political system is different. Even so, our colonial mentality meant his economics and social philosophy was influential on ‘Rogernomics/Ruthanasia’ in the 1980s and 1990s generating patterns of thinking which persist to this day.

A new biography of James Buchanan, a founder of economist’s public choice theory, suggests he was not only anti-democratic but was working with others to revoke democracy in America.

The work of economist and social philosopher James Buchanan (1919-2013) came to prominence in the mid-1980s when he was awarded the Economics Prize in honour of Alfred Nobel and when his thinking was impacting on Rogernomics (more of that next week).

The just published PREFU, Treasury’s assessment of the economy, raises more important questions about our fiscal stance than what the election is talking about. Have we the right borrowing strategy?

 

It was amusing how the Minister of Finance, Stephen Joyce, had to present the PREFU (Pre-election Economic and Fiscal Update) as both an optimistic account of how well the economy was doing, and yet caution that it was not doing so well that the opposition parties could spend or cut taxes big.

The policy dimension of the election appears to be about the concerns with past restraints on government spending and the consequential social failures. But whatever the rhetoric, implementation of campaign promises is going to be much harder.

Last Saturday, the Minister for Social Housing, Amy Adams, admitted her government had a poor record on social housing but promised to do better. On the same day, the Prime Minister said the government would (might?) spend $1.2billion on the Dunedin Hospital which was a similar admission of poor past performance on capital funding for DHBs.

Equivocation and dissembling have been integral parts of political life. How should we judge them?

Among the sinners the drunk porter in Macbeth welcomes into hell is the ‘equivocator, that could swear in both the scales against either scale’. Equivocation is a theme of the play; Shakespeare is thought to have been influenced by the recently written A Treatise of Equivocation by Jesuit priest Henry Garnet.

With most parties having announced their lists for the next election, we need to think about how the system works.

  • As some day it may happen that an MP must be found
  • They’re put upon the list - I've got a little list
  • Of political offenders who are always safe and sound
  • And who never would be missed - so I put them on the list.
  • There's opinionated graduates who always are around
  • Who’ve done absolutely nothing but are legislature bound
  • Who know absolutely n

The acheivements of two outstanding economists who died recently illustrate just how diverse the profession is.

I first came across William Baumol when, as a student, I valued greatly his two text books: Economic Dynamics and Economic Theory and Operations Analysis, both lucid, intellectually challenging and with a gentle humour.

Effective markets are underpinned by the government. The interventions may be sophisticated and well-thought through or they may be clumsy and ineffective. The neoliberal rhetoric of ‘free markets’ leads to the latter.

In a recent Metro article, Matthew Hooton wrote ‘globalisation combined with free markets has been the most successful economic and social system of the world’. I do not propose to discuss whether we can describe as successful a social system which is riven with mental health and addiction problems or whether we can attribute them to globalisation and free markets.

The growth of farm output may be slowing. Specialty cheeses show an alternative strategy of further post-farmgate processing.

Land for farming ran out in the 1950s. Farm production intensified. We shifted from more dollars of farm output by using more land to getting more dollars per unit of land. Among the challenges we had was to replace the nutrients we were depleting from the soil – notably phosphates. Fortunately the world’s reserves of cheap phosphates have not yet all gone.