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%XPANDING ECONOMICS BEYOND ECONOMIC RATIONALISM
DUCTION OF THE '34 CAME A REDUCTION IN TAXES ON PETROL WHILE A PER CENT
TAX WAS PLACED ON THE PRICE OF PUBLIC TRANSPORT
4HE DEREGULATION OF THE ELECTRICITY MARKET RESULTED IN A SIGNIlCANT INCREASE %CONOMICS DESCRIBES ITSELF AS THE SCIENCE OF THE EFlCIENT ALLOCATION OF SCARCE
IN THE USE OF BROWN COAL lRED ELECTRICITY THE MOST GREENHOUSE GAS INTENSIVE RESOURCES )N ORDER TO JUSTIFY THEIR PREFERRED POLICY SOLUTIONS OF DEREGULA
FORM OF ELECTRICITY GENERATION IN !USTRALIA TION AND SMALL GOVERNMENT SOME ECONOMISTS AND MOST POLITICIANS FOCUS
4HE ABOLITION IN OF INDEXATION OF FUEL EXCISE RESULTED IN A STEADY ON A SMALL SELECTION OF THE AVAILABLE POLICY TOOLS DESIGNED BY ECONOMISTS
DECLINE IN THE PERCENTAGE RATE OF TAXATION OF FUEL 4HE COST OF THIS MEASURE $EPENDING ON THE NATURE OF THE PROBLEM ECONOMIC THEORY PROVIDES STRONG
WAS ESTIMATED TO BE IN EXCESS OF BILLION OVER THE PAST YEARS SUPPORT FOR A MUCH WIDER RANGE OF POLICY SOLUTIONS 4HE ISSUE THAT SHOULD
4HE RESULT HAS BEEN THAT GREENHOUSE GAS EMISSIONS HAVE RISEN EVEN FASTER BE ADDRESSED IS NOT WHICH IS THE BEST APPROACH TO POLICY OVERALL BUT WHICH
THAN 0RIME -INISTER (OWARD PREDICTED THEY WOULD GROW WITHOUT ANY ACTION POLICY IS MOST APPROPRIATE GIVEN THE SPECIlC CIRCUMSTANCES OF THE PROBLEM
ON HIS PART AT HAND
4HROUGHOUT THIS ESSAY THE TERM @ECONOMIC RATIONALISM ALSO REFERRED TO
AS ECONOMIC LIBERALISM IN OTHER PARTS OF THE WORLD IS USED TO DESCRIBE THE
VIEWPOINT OF ECONOMISTS AND POLICY MAKERS WHO CONCLUDE THAT MARKET FORCES
ARE ALMOST EXCLUSIVELY PREFERABLE TO GOVERNMENT INTERVENTION 7HILE THIS IS
ALSO AN IMPORTANT CONCLUSION OF WHAT IS OFTEN CALLED @NEOCLASSICAL ECONOM
ICS NEOCLASSICAL ECONOMICS GENERALLY ALLOWS FOR A MORE NUANCED DEBATE
ABOUT THE RELATIVE MERITS OF MARKET FORCES AND A WIDE RANGE OF GOVERNMENT
INTERVENTIONS
4HERE ARE MANY PARADIGMS WITHIN ECONOMICS INCLUDING INSTITUTIONAL
ECONOMICS POST +EYNESIAN ECONOMICS AND POLITICAL ECONOMY 7HILE ALL THESE
APPROACHES HAVE THE POTENTIAL TO ADD TO THE ANALYSIS PRESENTED IN THIS ESSAY
THE DISTINCTIONS BETWEEN THESE SCHOOLS OF THOUGHT HAVE BEEN IGNORED FOR THE
SAKE OF BREVITY OF EXPOSITION 7HEN THE TERM @ECONOMICS IS USED IT SHOULD BE
INTERPRETED TO MEAN NEOCLASSICAL ECONOMICS
7HY ECONOMIC RATIONALISTS JUST CANT COPE WITH THE ENVIRONMENT
%CONOMICS WAS MEANT TO BE EASY 2ATIONAL PEOPLE AND RATIONAL lRMS WERE
SUPPOSED TO MAKE RATIONAL DECISIONS 4HE RATIONAL ROLE FOR GOVERNMENT WAS
4/'%4(%2 !4 ,!34 3%#4)/.
SIMPLY TO GET OUT OF THE WAY AND LET EVERYONE ELSE GET ON WITH SOLVING PROB
CASE FOR GOVERNMENT INTERVENTION IN THE FAILING MARKET TO IMPROVE EFlCIENCY
LEMS AND SATISFYING THE MARKET &ROM A POLICY PERSPECTIVE IF THERE WERE PROB
AND EQUITY
LEMS IN THE DELIVERY OF A SERVICE THEN THE GOVERNMENT SHOULD EITHER PRIVATISE )T SHOULD COME AS NO SURPRISE THEREFORE THAT ECONOMIC RATIONALISM HAS
IT OR IF IT WAS ALREADY A PRIVATE MARKET THEN SIMPLY REDUCE ANY @RED TAPE AND ENORMOUS DIFlCULTIES IN DIAGNOSING AND SOLVING ENVIRONMENTAL PROBLEMS
LET THE RATIONAL PRIVATE INDIVIDUALS GET ON WITH SATISFYING THE MARKET THAT ARE LARGELY A RESULT OF MARKET FAILURE 4HE REAL SURPRISE FOR MANY IS THAT
7HILE SIMPLE TO DESCRIBE THERE ARE MAJOR LIMITATIONS TO THE EFFECTIVE
AFTER DECADES OF PUBLIC DEBATE WHICH HAS ASSUMED THAT ECONOMIC RATIONALISM
NESS OF THE ECONOMIC RATIONALIST APPROACH TO POLICY FORMULATION 0UT SIMPLY IS ECONOMICS ECONOMICS IS AND ALWAYS HAS BEEN MUCH MORE THAN ECONOMIC
IT CANNOT COPE WITH COMPLEX POLICY PROBLEMS OF @MARKET FAILURE SUCH AS RATIONALISM -ARKET FAILURES WERE RECOGNISED BY ECONOMISTS A LONG TIME AGO
WHERE THE DECISIONS OF INDIVIDUALS IMPACT ON OTHER CITIZENS ON PEOPLE OUT
AND ECONOMISTS HAVE ALWAYS PROPOSED A RANGE OF SOLUTIONS FOR MARKET FAIL
SIDE OF THE REGULATORY JURISDICTION OR ON FUTURE GENERATIONS -ARKETS ARE URES WHICH INCLUDE THE IMPOSITION OF TAXES GOVERNMENT PROVISION OF SERVICES
SAID TO BE GOOD AT ALLOCATING RESOURCES ONLY WHEN ALL OF THE FOLLOWING CONDI
AND VARYING DEGREES OF REGULATION 4HE PROBLEM IN !USTRALIA HAS BEEN THAT
TIONS EXIST THESE POLICY OPTIONS HAVE BEEN IGNORED IN RECENT DECADES
4HE WIDESPREAD ACCEPTANCE OF ECONOMIC RATIONALISM HAS CREATED A STRUC
4HERE ARE A LARGE NUMBER OF BUYERS FOR A PRODUCT TURAL BARRIER TO THE KINDS OF POLICY REFORMS REQUIRED TO ADDRESS CLIMATE
CHANGE AND A RANGE OF OTHER ENVIRONMENTAL PROBLEMS !S OUTLINED BELOW
4HERE ARE A LARGE NUMBER OF SELLERS FOR A PRODUCT IE THERE ARE NO MONOP
HOWEVER THERE IS NO ECONOMIC PRINCIPLE WHICH PREVENTS THE DEVELOPMENT OF
OLIES
CREATIVE AND EFFECTIVE SOLUTIONS TO ENVIRONMENTAL PROBLEMS )N FACT ECONO
%VERYONE HAS FREE AND COMPLETE ACCESS TO INFORMATION ABOUT ALL PRODUCTS MISTS ONCE EXPECTED THAT GOVERNMENTS WOULD IMPLEMENT EXACTLY THOSE SORTS
IE THERE IS NO NEED FOR ANY ADVERTISING OF POLICIES IF AND WHEN THE CIRCUMSTANCES DEMANDED THEM
4HE PRODUCTION OR CONSUMPTION OF A PRODUCT HAS NO EXTERNAL OR SPILLOVER
4HE TRUTH ABOUT GOVERNMENT REGULATION
COSTS THAT AFFECT OTHER CITIZENS EG NO PRODUCTS PRODUCE POLLUTION OR POS
ITIVELY OR NEGATIVELY AFFECT THE HEALTH OF OTHERS
'OVERNMENT REGULATION OF BUSINESS IS OFTEN DERIDED AS @RED TAPE AND GOVERN
4HERE ARE NO ECONOMIES OF SCALE IE MASS PRODUCTION DELIVERS NO BENE
MENT REGULATION OF CONSUMERS IS OFTEN LABELED @NANNY STATE
ISM DESPITE THE
lTS AND REALITY THAT THERE ARE NO MARKETS IN !USTRALIA THAT ARE COMPLETELY UNREGU
LATED &OR EXAMPLE
4HERE IS NOTHING PREVENTING NEW COMPETITION FROM EMERGING IE THERE
ARE NO REGULATORY RESTRICTIONS THAT PREVENT NEW lRMS ENTERING A MARKET
4HERE ARE LAWS THAT PREVENT FARMERS SPRAYING POISONS ON THEIR CROPS
SUCH AS THE MONOPOLY RIGHTS PREVIOUSLY ENJOYED BY !7" OR THE LIMIT OF
BECAUSE BEFORE THE LAWS EXISTED THAT IS EXACTLY WHAT HAPPENED
THREE COMMERCIAL 46 LICENCES
4HERE ARE LAWS THAT REQUIRE CAR MANUFACTURERS TO INSTALL SEAT BELTS AND
5NLESS ALL OF THE ABOVE CONDITIONS ARE MET MARKET FAILURE IS SAID TO EXIST OTHER LAWS THAT REQUIRE ALL PASSENGERS TO WEAR THEM BECAUSE BEFORE THOSE
AND ECONOMIC THEORY CONCLUDES THAT UNDER SUCH CIRCUMSTANCES THERE IS A LAWS SEAT BELTS WERE RARELY INSTALLED OR WORN
4/'%4(%2 !4 ,!34 3%#4)/.
4HERE ARE LAWS THAT REQUIRE ALL EMPLOYERS TO PROVIDE A WORKPLACE THAT IS EFFECTIVE 4HE ANALYSIS OF THE COSTS AND BENElTS OF ALTERNATE COURSES OF ACTION
SAFE AND FREE FROM HAZARDS BECAUSE WITHOUT SUCH LAWS WORKPLACES HAVE ALLOWS ECONOMISTS TO PROVIDE A GOOD FOUNDATION FOR POLICY DECISION MAKING
BEEN AMONG THE MOST DANGEROUS PLACES IN !USTRALIA 4HE PROBLEM WITH ECONOMIC RATIONALISM IS THAT IT IS BASED ON THE ASSUMP
TION THAT A SMALL SUBSET OF POSSIBLE POLICIES IS ALWAYS THE PREFERRED SOLUTION
4HERE ARE LAWS THAT PREVENT COMPANIES FROM SELLING DANGEROUS AND DEFEC
TO ANY PROBLEM
TIVE GOODS BECAUSE BEFORE SUCH LAWS COMPANIES DID EXACTLY THAT
7HAT TRADITIONAL ECONOMICS REALLY HAS TO SAY ABOUT THE ENVIRONMENT
4HE SUGGESTION THAT THERE IS A CHOICE TO BE MADE BETWEEN @REGULATION AND
@FREE MARKETS IS AS MISLEADING AS IT IS UNHELPFUL 4HERE ARE A LARGE NUMBER OF
!S DISCUSSED ABOVE ECONOMICS IS CONCERNED WITH THE ALLOCATION OF SCARCE
WHOLLY GOVERNMENT PROVIDED SERVICES -OST GOODS AND SERVICES lT SOME
RESOURCES %CONOMISTS BELIEVE THAT WHEN A RESOURCE IS SCARCE ITS USE SHOULD
WHERE BETWEEN THE TWO EXTREMES 4HE REAL QUESTION IS @7HAT IS THE APPRO
BE RESTRICTED TO ENSURE THAT IT IS ALWAYS USED IN THE MOST SOCIALLY USEFUL MAN
PRIATE EXTENT AND FORM OF REGULATION FOR A PARTICULAR MARKET
NER 7HEN CIRCUMSTANCES CHANGE AND A RESOURCE THAT WAS ONCE ABUNDANT
)NDUSTRY DEMANDS FOR @DEREGULATION OF A MARKET MADE THROUGH THE MEDIA
BECOMES SCARCE ECONOMIC THEORY MAKES IT CLEAR THAT EITHER PRODUCER OR CON
ARE OFTEN NOTHING MORE THAN A DISTRACTION FROM PRIVATE DISCUSSIONS ABOUT
SUMER BEHAVIOUR MUST ADJUST TO SUIT THE NEW CIRCUMSTANCES %CONOMIC THE
WHICH FORMS OF REGULATION WILL MOST BENElT INDUSTRY INCUMBENTS &OR EXAM
ORY ALSO RECOGNISES THAT IN THE EVENT THAT PRODUCER OR CONSUMER BEHAVIOUR
PLE THE (OWARD 'OVERNMENTS CHANGES TO THE INDUSTRIAL RELATIONS )2 SYS
DOES NOT ALTER TO REmECT THE SCARCITY OF A RESOURCE GOVERNMENT INTERVENTION
TEM WERE DESCRIBED AS @DEREGULATION YET THEY RESULTED IN PAGES OF NEW
MAY BE APPROPRIATE !S OUTLINED IN THE FOLLOWING SECTIONS HOWEVER POLITICAL
)2 LEGISLATION 3IMILARLY THE RECENT @DEREGULATION OF THE MEDIA INDUSTRY NOW
IMPEDIMENTS TYPICALLY DOMINATE POLICY SOLUTIONS THAT ARE BOTH ECONOMICALLY
ALLOWS MORE MEDIA PROPRIETORS TO PURCHASE ADDITIONAL MEDIA ASSETS BUT STILL
AND ENVIRONMENTALLY DESIRABLE
PREVENTS NEW MEDIA COMPANIES ESTABLISHING NEW TELEVISION STATIONS OR
4HE BIGGEST ENVIRONMENTAL PROBLEMS IN !USTRALIA TODAY ARISE FROM THE
BROADCASTING NEWS
LIKE CONTENT OVER THE INTERNET THROUGH THE CONTROL OF
FACT THAT WHEN THE LAWS AND PRACTICES WHICH DOMINATE THE !USTRALIAN ECON
BROADCASTING LICENCES
OMY WERE BEING DEVELOPED WATER FORESTS lSH FRESH AIR AND THE CAPACITY OF
3IMILARLY 1ANTAS HAS USED THE THREAT OF INTERNATIONAL COMPETITION TO JUS
THE ATMOSPHERE TO ABSORB CARBON DIOXIDE WERE NOT CONSIDERED SCARCE )N FACT
TIFY REDUCTIONS IN EMPLOYMENT WAGES AND CONDITIONS WHILE SIMULTANEOUSLY
THEY WERE RARELY CONSIDERED AT ALL BECAUSE OF THEIR RELATIVE ABUNDANCE 7HEN
LOBBYING SUCCESSFULLY TO PREVENT INCREASED FOREIGN COMPETITION ON THE ROUTES
%UROPEANS lRST BEGAN TO COLONISE !USTRALIA IT WAS CLEARED LAND LABOUR AND
BETWEEN !USTRALIA AND THE 5+ AND !USTRALIA AND THE 53
INDUSTRIAL CAPITAL THAT WERE IN SHORT SUPPLY AND APPROPRIATELY IT WAS THE DIS
!USTRALIAN INDUSTRIALISTS ADOPT A PRAGMATIC APPROACH TO REGULATION AND
TRIBUTION OF THESE RESOURCES THAT ATTRACTED THE ATTENTION OF LEGISLATORS AND
GOVERNMENT ASSISTANCE THEY ARE IN FAVOUR OF GOVERNMENT POLICIES THAT ARE
POLICY MAKERS 4HIS IS NO LONGER THE CASE AS NATURAL RESOURCES SUCH AS WATER
GOOD FOR THEM AND OPPOSED TO POLICIES THAT THEY BELIEVE WILL BE BAD FOR THEM
FORESTS lSH AND FRESH AIR HAVE BECOME RELATIVELY SCARCE $ESPITE THIS SHIFT IN
3ELF INTEREST IS A MORE EFFECTIVE PREDICTIVE MODEL OF AN INDUSTRYS APPROACH TO
CIRCUMSTANCES THE PRIORITIES OF LEGISLATORS AND POLICY MAKERS HAVE RECENT
REGULATION THAN THE IDEOLOGICAL PREFERENCES OF ECONOMIC RATIONALISTS
RHETORICAL mOURISHES ASIDE FAILED TO SHIFT TO REmECT THESE CHANGES IN RELATIVE
%CONOMICS PROVIDES A USEFUL FRAMEWORK FOR ANALYSING BETTER AND WORSE
SCARCITY #ONSIDER THE FOLLOWING EXAMPLES
FORMS OF REGULATION AND THE CIRCUMSTANCES UNDER WHICH THEY WILL BE MOST
4HE PHRASE @ALL THE lSH IN THE SEA WAS ONCE MEANT TO IMPLY INlNITE
4/'%4(%2 !4 ,!34 3%#4)/.
RESOURCES .OW MORE lSHING VESSELS THAN EVER ARE TRAWLING WITH NETS LONGER RAPIDLY THE REGULATORY ENVIRONMENT HAS CHANGED SLOWLY IF AT ALL .EW REGU
THAN COULD HAVE BEEN IMAGINED IN THE TH #ENTURY YET THEY ARE CATCHING LATORY STRUCTURES NEED TO BE INTRODUCED TO ENSURE THAT INDIVIDUALS AND COM
LESS lSH THAN A DECADE AGO 4HE PROBLEM TODAY IS NOT A SHORTAGE OF lSHING PANIES ARE VALUING RESOURCES ACCORDING TO THEIR CURRENT SCARCITY RATHER THAN
BOATS OR lSHERMEN BUT OF lSH 4HE @LAW OF THE SEA WHICH ALLOWS FOR VESSELS TO THEIR HISTORIC ABUNDANCE )RONICALLY THE LOUDEST CALLS FOR A NEW REGULATORY
TAKE UNLIMITED QUANTITIES OF lSH IN THE DEEP OCEAN MADE SENSE WHEN WOODEN STRUCTURE ARE NOW COMING FROM THE BUSINESSES THAT ONCE SUGGESTED THAT
VESSELS WITH NO REFRIGERATION SAILED LITERALLY THE SEAS .OW THAT CIRCUM CHANGE WOULD BE CATASTROPHIC FOR THE ECONOMY
STANCES HAVE CHANGED LAWS MUST CHANGE AS WELL "UT THIS IS A POLITICAL PROB #ONSIDER THE FOLLOWING EXTRACT FROM THE RECENT 3WITKOWSKI REPORT INTO
LEM NOT AN ECONOMIC ONE AS THOSE WHO ARE USED TO CATCHING lSH AT WILL AND THE FUTURE OF NUCLEAR POWER IN !USTRALIA 4HIS REPORT WHICH WAS BOTH
PAYING NOTHING FOR THEM ARE UNWILLING TO CHANGE COMMISSIONED AND WARMLY RECEIVED BY THE 0RIME -INISTER *OHN (OWARD
)N AN ERA OF AXES AND HORSE DRAWN CARTS THE SUPPLY OF TIMBER WAS CON STATES
STRAINED BY THE NUMBER OF LOGGERS AND NOT THE NUMBER OF LOGS 4HERE WAS NO
NEED TO PREVENT THE FELLING OF THE OLDEST AND LARGEST TREES IN THE FOREST BECAUSE 4O ADDRESS CLIMATE CHANGE THERE NEEDS TO BE A LEVEL PLAYING lELD FOR ALL
THEY WERE SO BIG THAT THEY COULD NOT BE HAULED OUT OF VALLEYS REGARDLESS OF ENERGYGENERATING TECHNOLOGIES TO COMPETE ON A COMPARABLE WHOLE
HOW MUCH HORSE POWER LITERALLY COULD BE MUSTERED .OW TWO MEN DRIVING OF LIFE BASIS )N A WORLD OF GREENHOUSE GAS CONSTRAINTS GREENHOUSE
TWO BULLDOZERS CONNECTED BY A GIANT CHAIN CAN CLEAR MORE LAND IN A DAY THAN GAS PRICING USING MARKET BASED MEASURES WOULD PROVIDE THE APPRO
MEN COULD HAVE ONCE CLEARED IN A WEEK %CONOMIC THEORY SUGGESTS NEW PRIATE FRAMEWORK FOR THE MARKET AND INVESTORS TO ESTABLISH THE OPTI
CIRCUMSTANCES REQUIRE NEW POLICIES BUT THOSE WHO HAVE GROWN RICH USING MAL PORTFOLIO OF ENERGY PRODUCING PLATFORMS ,EGISLATION WOULD BE
NEW TECHNOLOGY UNDER THE OLD LEGAL FRAMEWORK ARE NOT SURPRISINGLY RELUC NECESSARY TO ESTABLISH A RELIABLE AND EFlCIENT REGULATORY FRAMEWORK
TANT TO CHANGE 3WITKOWSKI P
4HE PROBLEM OF CLIMATE CHANGE ARISES FROM A SIMPLE BUT UNDERSTANDA
BLE OVERSIGHT ON THE PART OF PREVIOUS GENERATIONS OF LEGISLATORS 7HEN THE 3WITKOWSKIS SUPPORT FOR A REGULATORY FRAMEWORK THAT WOULD PUT A PRICE
INDUSTRIAL REVOLUTION BEGAN AND COAL BEGAN TO REPLACE WOOD AS THE MAIN ON THE COSTS OF POLLUTION FROM BURNING COAL COMES AS NO SURPRISE 4HE
SOURCE OF FUEL THE REGULATORS OF THE TH CENTURY DID NOT HAVE THE FORESIGHT APPROACH HE RECOMMENDS IS ENTIRELY CONSISTENT WITH THE CENTRAL PROPOSAL OF
TO ENSURE THAT THOSE WHO BURNED FOSSIL FUELS WERE REQUIRED TO PAY FOR THE THE RECENTLY PUBLISHED 3TERN 2EPORT WHICH STATES
WASTE DISPOSAL SERVICES PROVIDED BY THE ATMOSPHERE THAT SO RAPIDLY ABSORBED
THE CARBON DIOXIDE RELEASED DURING COMBUSTION 4HE LEGISLATORS OF THE TH #LIMATE CHANGE PRESENTS A UNIQUE CHALLENGE FOR ECONOMICS IT IS
CENTURY NAIVELY ASSUMED THAT THE AMOUNT OF CARBON DIOXIDE BEING RELEASED THE GREATEST AND WIDEST RANGING MARKET FAILURE EVER SEEN 3TERN
WAS TRIVIAL AND THE CAPACITY OF THE ATMOSPHERE TO ABSORB IT WAS INlNITE P I
"ECAUSE THEY THOUGHT THAT THE ATMOSPHERE WAS NOT A SCARCE RESOURCE THEY
DID NOT SEEK TO RATION IT 4ODAYS REGULATORS HAVE NO SUCH EXCUSE BUT IT IS &URTHER
POLITICS NOT ECONOMICS THAT PREVENTS EFFECTIVE ACTION TO ADDRESS CLIMATE
CHANGE 4HE lRST ELEMENT OF POLICY IS CARBON PRICING 'REENHOUSE GASES ARE IN
4HE PRIMARY CAUSE OF THESE PROBLEMS IS THAT WHILE TECHNOLOGY HAS EVOLVED ECONOMIC TERMS AN EXTERNALITY THOSE WHO PRODUCE GREENHOUSE GAS
4/'%4(%2 !4 ,!34 3%#4)/.
EMISSIONS ARE BRINGING ABOUT CLIMATE CHANGE THEREBY IMPOSING COSTS 4HE CONSENSUS AMONG ECONOMISTS ABOUT WHAT NEEDS TO BE DONE TO TACKLE
ON THE WORLD AND ON FUTURE GENERATIONS BUT THEY DO NOT FACE THE FULL PROBLEMS OF MARKET FAILURE LIKE CLIMATE CHANGE IS AS WIDESPREAD AS THE CON
CONSEQUENCES OF THEIR ACTIONS THEMSELVES SENSUS AMONG CLIMATE SCIENTISTS OVER THE NEED FOR URGENT ACTION TO REDUCE
CARBON DIOXIDE EMISSIONS 4HE ECONOMIC COMPLEXITIES ASSOCIATED WITH
0UTTING AN APPROPRIATE PRICE ON CARBON EXPLICITLY THROUGH TAX OR ADDRESSING CLIMATE CHANGE ARE NOT ASSOCIATED WITH THE NEED OR MECHANISMS
TRADING OR IMPLICITLY THROUGH REGULATION MEANS THAT PEOPLE ARE TO REDUCE GREENHOUSE GAS EMISSIONS /N THE CONTRARY THE ECONOMIC DIFlCUL
FACED WITH THE FULL SOCIAL COST OF THEIR ACTIONS 4HIS WILL LEAD INDIVIDU TIES ASSOCIATED WITH CLIMATE CHANGE ARE CONlNED ALMOST EXCLUSIVELY TO POLI
ALS AND BUSINESSES TO SWITCH AWAY FROM HIGH CARBON GOODS AND SERV TICS AND THE IMPACTS OF THE TRANSITION FROM THE STATUS QUO TO A LOW EMISSION
ICES AND TO INVEST IN LOW CARBON ALTERNATIVES %CONOMIC EFlCIENCY ECONOMY
POINTS TO THE ADVANTAGES OF A COMMON GLOBAL CARBON PRICE EMISSIONS !NY DIFlCULTIES ASSOCIATED WITH PLANNING THE TRANSITION TO A LOW CARBON
REDUCTIONS WILL THEN TAKE PLACE WHEREVER THEY ARE CHEAPEST 3TERN ECONOMY AND THE CONSEQUENT POLITICAL DIFlCULTIES OF WHO SHOULD BEAR THE
P XVIII COSTS OF THAT TRANSITION SHOULD BE VIEWED SOLELY IN THE CONTEXT OF THE ECO
NOMIC DIFlCULTIES AND DISTRIBUTIONAL COSTS ASSOCIATED WITH THE EXPECTED LEVEL
4HE RECOMMENDATIONS OF BOTH THE 3WITKOWSKI REPORT AND THE 3TERN REPORT OF CLIMATE CHANGE 7HETHER OR NOT DEMOCRATIC DECISION MAKING IS CAPABLE OF
ARE ENTIRELY CONSISTENT WITH THE REQUIREMENT OF !RTICLE 0ART 6 OF THE +YOTO FRAMING SUCH SHORT TERM CHALLENGES IN THE CONTEXT OF SUCH A LONG TERM CON
0ROTOCOL WHICH STATES THAT SIGNATORY COUNTRIES SHALL IMPLEMENT SEQUENCE IS YET TO BE SEEN 4HIS IS EXAMINED IN FURTHER DETAIL IN 3ECTION
0ROGRESSIVE REDUCTION OR PHASING OUT OF MARKET IMPERFECTIONS lSCAL
INCENTIVES TAX AND DUTY EXEMPTIONS AND SUBSIDIES IN ALL GREENHOUSE
GAS EMITTING SECTORS THAT RUN COUNTER TO THE OBJECTIVE OF THE #ONVEN
TION AND APPLICATION OF MARKET INSTRUMENTS 5.&###
,IKEWISE THESE RECOMMENDATIONS ARE ENTIRELY CONSISTENT WITH TRADI
TIONAL ECONOMICS 7RITING SOON AFTER 7ORLD 7AR )) 0AUL 3AMUELSON IN ONE
OF THE lRST MODERN ECONOMICS TEXTBOOKS STATES
THE EQUILIBRIUM OF A CLOSED ECONOMY UNDER COMPETITION IS CORRECT
EXCEPT WHERE THERE ARE TECHNOLOGICAL EXTERNAL ECONOMIES OR DISECON
OMIES 5NDER THESE CONDITIONS SINCE EACH INDIVIDUALS ACTIONS HAVE
EFFECTS ON OTHERS WHICH HE DOES NOT TAKE INTO ACCOUNT IN MAKING HIS
DECISION THERE IS A PRIMA FACIE CASE FOR INTERVENTION 3AMUELSON
P EMPHASIS IN ORIGINAL
3%#4)/.
3%#4)/. PROCESS IN !USTRALIA AND IN TURN FOR THOSE INTERESTED IN SOLVING A RANGE OF
ENVIRONMENTAL PROBLEMS IS NOT WHETHER GOVERNMENTS ARE ABLE TO ADJUST TO
4HE POLITICS OF ECONOMICS CHANGING CIRCUMSTANCES BUT WHY GOVERNMENTS REACT TO SOME CHANGES IN CIR
CUMSTANCES AND NOT TO OTHERS
&URTHER WHY DO GOVERNMENTS THAT PROFESS A HIGH LEVEL OF FAITH IN THE EFl
4HE SECTION ABOVE HIGHLIGHTS THE FACT THAT ENVIRONMENTAL DEGRADATION IS CIENCY OF MARKET PRICES TO SOLVE PROBLEMS IN AREAS SUCH AS HEALTH EDUCA
CAUSED BY THE FAILURE OF POLICY MAKERS TO IMPLEMENT NEW REGULATORY REGIMES TION AND EVEN THE INCARCERATION OF PRISONERS AND REFUGEES REFUSE TO RELY ON
AS NEW PROBLEMS EMERGE AND RESOURCES THAT WERE ONCE ABUNDANT BECOME MARKET PRICING MECHANISMS TO INCREASE THE EFlCIENCY OF THE USE OF WATER
INCREASINGLY SCARCE 4HIS SECTION ILLUSTRATES IN WHAT WAY THE FAILURE OF THE ENERGY TRANSPORT AND TIMBER )F POLLUTERS WERE FORCED TO PAY FOR THE DAMAGE
REGULATORY STRUCTURES TO RESPOND TO ENVIRONMENTAL PROBLEMS IS CAUSED BY A THEY CAUSE TO OTHERS THEN THEIR COSTS WOULD RISE THE PRICES OF THEIR PRODUCTS
LACK OF POLITICAL WILLINGNESS RATHER THAN BY ANY SHORTFALL IN ECONOMIC OR WOULD RISE AND CONSUMERS WOULD SWITCH TO LESS HARMFUL PRODUCTS %CO
POLICY KNOW HOW NOMIC THEORY SUGGESTS THAT THIS IS THE BEST WAY TO DEAL WITH POLLUTANTS BUT
2EGULATORY STRUCTURES IN !USTRALIA AND IN OTHER DEVELOPED COUNTRIES CAN ECONOMIC RATIONALISTS RESIST SUCH POLICIES IN !USTRALIA
AND DO CHANGE RAPIDLY 2ECENT EXAMPLES OF RAPID REGULATORY RESPONSES TO #ONSIDER THE INCONSISTENT APPROACH OF THE .ATIONAL &ARMERS &EDERATION
EMERGING PROBLEMS INCLUDE .&& TO THE BENElTS OF A MARKET BASED APPROACH TO POLICY PROBLEMS /NE THE
ONE HAND
s 4HE DECISION TO ALLOW EMBRYONIC STEM CELL RESEARCH IN RESPONSE TO PRES
SURE FROM THE MEDICAL COMMUNITY &REE 4RADE HAS BEEN A HARD SELL BUT ITS THE ONLY WAY FORWARD n ESPE
CIALLY FOR .37 AND 1UEENSLAND FARMERS WHO ARE PROVIDING THE BULK OF
s 4HE PROVISION OF REGULATORY PROTECTION TO NEW FORMS OF {PROPERTY SUCH AS
!USTRALIAS HIGH VALUE AGRICULTURAL EXPORTS 4HERE IS SIMPLY NO WORK
WEB ADDRESSEES IN RESPONSE TO BUSINESSES WHO WANTED TO USE THE INTERNET
ABLE OR SUSTAINABLE ALTERNATIVE TO A MARKET ORIENTED ENVIRONMENT
FOR COMMERCE
.&& 0RESIDENT 0ETER #ORISH
s 4HE DECISION TO EXCISE !USTRALIAN TERRITORY FROM IMMIGRATION LAWS IN
RESPONSE TO INCREASED NUMBERS OF APPLICATIONS FOR ASYLUM "UT ON THE OTHER
s 4HE RECENT DECISION TO REVERSE !USTRALIAS POSITION ON THE USE OF NUCLEAR
.&& DOES NOT SUPPORT THE INCLUSION OF ENVIRONMENTAL IMPACT AS PART
ENERGY AND TO ALLOW THE EXPORTATION OF URANIUM TO COUNTRIES WHICH ARE
OF BEST PRACTICE PRICING 7ATER PRICING MUST NOT BE USED AS A POLICY
NOT SIGNATORIES TO THE .UCLEAR .ON
0ROLIFERATION 4REATY IN RESPONSE TO
INSTRUMENT FOR DELIVERING ENVIRONMENTAL OUTCOMES OR MODIFYING THE
CLIMATE CHANGE AND
BEHAVIOUR OF WATER USERS 0ETER #ORISH
s 4HE DECISION TO BAN HANDGUNS AND HEAVILY RESTRICT THE OWNERSHIP OF OTHER
lREARMS FOLLOWING THE MASSACRE AT 0ORT !RTHUR 4HE &EDERAL 'OVERNMENTS VIEWS ON THE ROLE OF GOVERNMENT INTERVENTION
EXHIBITS A SIMILAR DEGREE OF INCONSISTENCY IN RELATION TO THE ABILITY OF PARENTS
4HE INTERESTING QUESTION FOR THOSE INTERESTED IN UNDERSTANDING THE POLICY TO MAKE DECISIONS ABOUT WHAT IS IN THE BEST INTEREST OF THEIR CHILDREN
4/'%4(%2 !4 ,!34 3%#4)/.
7EVE RECOGNISED THAT THERE IS A CONCERN FOR YOUNG PARENTS WHO GET A EFFECTIVE AS BANNING CIGARETTE ADVERTISING HAS BEEN !LTERNATIVELY WHILE
VERY LARGE SUM OF MONEY AND THAT IT MAY BE MISUSED )N SOME INSTANCES THERE IS A PERCEIVED POLITICAL BENElT IN SUGGESTING THAT SINGLE MOTHERS CANNOT
THERE HAVE BEEN CONCERNS THAT THE PARENT HAS IN FACT HAD OTHERS USE MAKE GOOD DECISIONS ON BEHALF OF THEIR CHILDREN THERE IS NO INDUSTRY GROUP
THAT MONEY ON THEIR BEHALF NOT TO THE BENElT OF THE CHILD 4HIS IS ERR
THAT WOULD BENElT FROM ARGUING AGAINST SUCH AN INSULT
ING ON THE SIDE OF BEING MORE RESPONSIBLE AND ENSURING IN THOSE CASES 7HILE ECONOMIC RATIONALISTS ARGUE THAT SELF INTEREST IS WHAT DRIVES A MOD
WHERE WE HAVE YOUNGER MOTHERS THERE ARE SAFEGUARDS IN PLACE TO PRO
ERN ECONOMY THEY ARE TYPICALLY SILENT ON COMMUNITY IMPACT OF SELF INTER
TECT THE MOTHER AND TO PROTECT THE CHILD -AL "ROUGH -INISTER FOR ESTED LOBBYING FROM LARGE INDUSTRIES WHICH SEEK TO INmUENCE THE REGULATORY
&AMILIES ENVIRONMENT IN ORDER TO MAXIMIZE THEIR PROlT
4HERE HAS BEEN LITTLE REAL SCRUTINY APPLIED TO !USTRALIAN GOVERNMENTS
(OWEVER (EALTH -INISTER 4ONY !BBOTT TAKES A DIFFERENT APPROACH WHEN INCONSISTENT APPROACH TO THE BENElTS OF GOVERNMENT INTERVENTION 4HIS STEMS
EXPLAINING WHY REGULATION TO PREVENT JUNK FOOD ADVERTISING AIMED AT CHIL
LARGELY FROM THE FAILURE OF ECONOMISTS AND OTHER ANALYSTS TO INCORPORATE
DREN IS NOT REQUIRED POLITICAL FACTORS INTO THEIR ANALYSIS OF GOVERNMENT POLICY &OR EXAMPLE THE
COAL INDUSTRY HAS OPPOSED THE INTRODUCTION OF A CARBON TAX WHILE THE RENEW
4HE ONLY PERSON RESPONSIBLE FOR WHAT GOES INTO MY MOUTH IS ME AND ABLE ENERGY INDUSTRY HAS SUPPORTED ONE TO DATE THE COAL INDUSTRY HAS PRE
THE ONLY PEOPLE WHO ARE RESPONSIBLE FOR WHAT GOES INTO KIDS MOUTHS VAILED !N ANALYSIS OF RELATIVE POLITICAL INmUENCE PROVIDES A MUCH SIMPLER
ARE THE PARENTS 7HAT WE REALLY NEED IS MORE RESPONSIBLE DIETARY EXPLANATION FOR SUCH AN OUTCOME THAN ANY PURELY ECONOMIC ANALYSIS COULD
BEHAVIOUR FROM PARENTS FROM INDIVIDUALS AND SCHOOL CANTEENS ) 4HE OTHER REASON THAT THE INCONSISTENT APPROACH TO THE ROLE OF REGULATION
WONT AT THIS POINT IN TIME OR ) SUSPECT DOWN THE TRACK BE DEMANDING IN !USTRALIA HAS ESCAPED EFFECTIVE SCRUTINY IS THE ABUSE OF LANGUAGE INHERENT
THAT THEY BAN ADS 4ONY !BBOTT IN THE APPLICATION OF ECONOMIC RATIONALISM &OR EXAMPLE WE ARE TOLD THAT THE
!USTRALIAN CAR INDUSTRY NEEDS SUBSIDIES TO MAKE IT INTERNATIONALLY COMPETI
4HE &EDERAL 'OVERNMENT IS WILLING TO BE PRESCRIPTIVE AND INTERVENE IN TIVE 7E ARE ALSO TOLD BY THE SAME GOVERNMENT THAT SUBSIDIES IN THE TEXTILE
RESPONSE TO SOME CONSUMER BEHAVIOUR YET IT CITES A PREFERENCE FOR @FREE MAR
INDUSTRY MUST BE REMOVED TO MAKE IT INTERNATIONALLY COMPETITIVE
KETS AND @INDIVIDUAL RESPONSIBILITY WHEN IT CHOOSES NOT TO ACT /VER PER 7E ARE TOLD THAT WE SHOULD NOT BAN OLD GROWTH LOGGING BECAUSE SOME
CENT OF !USTRALIANS AGREE THAT THERE IS TOO MUCH ADVERTISING AIMED AT CHIL
PEOPLE WILL LOSE THEIR JOBS BUT WE ARE TOLD BY THE SAME GOVERNMENTS THAT
DREN BUT THE &EDERAL 'OVERNMENT INSISTS THAT SUCH CONCERNS ARE MISGUIDED UNFAIR DISMISSAL LAWS MUST BE SCRAPPED BECAUSE OTHERWISE IT IS TOO DIFlCULT TO
7HILE A PREMISE OF ECONOMIC RATIONALISM IS THAT INDIVIDUALS KNOW BETTER SACK WORKERS
THAN GOVERNMENTS WHEN INDIVIDUALS EXPRESS A PREFERENCE THAT IS UNPALATA
7E ARE TOLD THAT IN ORDER TO GROW THE ECONOMY !USTRALIA MUST ALLOW
BLE TO THE 'OVERNMENT THE 'OVERNMENT FEELS FREE TO SAY THAT IT KNOWS BETTER MINING THAT DESTROYS !BORIGINAL HERITAGE YET THE SAME GOVERNMENTS CRITICISE
THAN INDIVIDUALS 0APUA .EW 'UINEA FOR WANTING TO MINE NEAR THE +AKODA 4RAIL AS SUCH ACTIV
! SIMPLE WAY TO EXPLAIN THE APPARENTLY CONTRADICTORY APPROACH TO THE ITY WOULD DESTROY !USTRALIAN HERITAGE
DESIRABILITY OF REGULATION IS TO CONSIDER WHICH GROUPS BENElT FROM REGULATION 4HE REAL POWER OF ECONOMIC RATIONALISM HAS BEEN IN THE SKILFUL USE OF
AND WHICH GROUPS LOSE OUT 4HERE IS STRONG INDUSTRY OPPOSITION TO BANNING LANGUAGE 7HEN THE CIRCUMSTANCES SUIT ECONOMIC ARGUMENTS ARE USED TO
JUNK FOOD ADVERTISING PRESUMABLY BECAUSE SUCH A BAN WOULD LIKELY TO BE AS DElNE THE SCOPE OF PROBLEMS AND WHEN THE CIRCUMSTANCES DO NOT SUIT THE
4/'%4(%2 !4 ,!34
ALLEGED @ECONOMIC RATIONALISTS RELY INSTEAD ON NATIONALISM PROTECTIONISM OR 3%#4)/.
COMMON SENSE 2ATHER THAN ACKNOWLEDGING THAT SUCH SELECTIVE APPLICATION
OF ECONOMIC RATIONALISM IS INCONSISTENT THESE DOUBLE STANDARDS ARE USED AS
7HERE TO FROM HERE
EVIDENCE THAT THE ADVOCATES OF ECONOMIC RATIONALISM ARE ANYTHING BUT IDEO
LOGUES
4HE LANGUAGE OF ECONOMICS IS AN IMPORTANT POLITICAL TOOL 4HE ABILITY TO ,ANGUAGE IS THE ARMORY OF THE HUMAN MIND AND AT ONCE CONTAINS THE TROPHIES OF ITS
CONTROL THE DElNITION OF WORDS SUCH AS @EFlCIENCY @PRODUCTIVITY @COMPETI PAST AND THE WEAPONS OF ITS FUTURE CONQUESTS H6BJ:A I6NADG 8DA:G>9<:
TIVENESS @GROWTH AND EVEN @PROSPERITY PROVIDES A SUBSTANTIAL RHETORICAL
ADVANTAGE TO INCUMBENT GOVERNMENTS )F NAMES ARE NOT CORRECT LANGUAGE WILL NOT BE IN ACCORDANCE WITH THE TRUTH OF THINGS
4HOSE WHO OPPOSE THE POLICY PRESCRIPTIONS OF THE ECONOMIC RATIONALISTS 8DC;J8>JH
ARE BY DElNITION OPPOSED TO EFlCIENCY GROWTH AND PROSPERITY 2HETORICALLY
BUT NOT LOGICALLY THOSE WHO OPPOSE ECONOMIC RATIONALISM ARE BY DElNITION 7ASTING NATURAL RESOURCES IS NOT EFlCIENT 0EOPLE AND PRODUCTS STUCK ON
ECONOMICALLY IRRATIONAL CONGESTED ROADS ARE SIGNS OF AN UNPRODUCTIVE TRANSPORT SYSTEM 3UBSIDIS
ING POLLUTING INDUSTRIES DOES NOT MAKE !USTRALIA COMPETITIVE 3PENDING
BILLIONS OF DOLLARS ON AIR CONDITIONERS TO PROTECT OURSELVES FROM CLIMATE
CHANGE DOES NOT CONSTITUTE GROWTH !ND A SOCIETY THAT CANNOT AFFORD TO
LEAVE THE PLANET IN BETTER CONDITION THAN IT INHERITED CANNOT BE CONSIDERED
PROSPEROUS
4HE MEANING OF WORDS SUCH AS GROWTH AND EFlCIENCY HAS BEEN NARROWED
ALMOST BEYOND RECOGNITION BUT THESE WORDS RETAIN THEIR PERSUASIVE POWER
!USTRALIANS WANT TO LIVE IN A SOCIETY THAT IS IMPROVING 4HEY WANT GOVERN
MENTS THAT WILL ENHANCE THEIR QUALITY OF LIFE 4HEY WANT PERSONAL GROWTH AND
THEY WANT MORE VIBRANT SOCIETIES AND ECONOMIES 4HEY TAKE PRIDE IN BEING
EFlCIENT PRODUCTIVE AND INTERNATIONALLY COMPETITIVE 7HY WOULD THEY SUP
PORT POLICIES THAT DELIVER DECLINE AND INEFlCIENCY 7HY WOULD THEY WANT TO
BE UNCOMPETITIVE ON THE WORLD STAGE
4O ECONOMISTS PRODUCING THE SAME LEVEL OF OUTPUT WITH FEWER HOURS OF
WORK IS A TRUE SIGN OF EFlCIENCY 3O IS USING LESS ENERGY AND WATER TO MAKE A
PRODUCT AND HAVING A TRANSPORT SYSTEM THAT ALLOWS COMMUTERS TO GET TO WORK
QUICKLY WHILE GOODS CAN BE MOVED QUICKLY ACROSS AND BETWEEN CITIES 4HERE
IS NOTHING INEFlCIENT ABOUT MINIMIZING THE USE OF NATURAL RESOURCES AND
THERE IS NOTHING UNCOMPETITIVE ABOUT MAKING POLLUTERS PAY FOR THE DAMAGE
THEY DO TO THE ENVIRONMENT
4/'%4(%2 !4 ,!34 3%#4)/.
4HE BROAD CONCLUSIONS OF ECONOMICS ARE IN HARMONY WITH THE PERSONAL )DENTIFYING THE OBSTACLES
REmECTION OF NON
ECONOMISTS WHO EXPRESS DOUBT BUT STRUGGLE TO ARTICULATE
CRITICISM OF THE POLICY PRESCRIPTIONS OF ECONOMIC RATIONALISM !NY SUCCESS
2ECLAIMING THE LANGUAGE OF ECONOMIC DEBATE IS A NECESSARY CONDITION FOR
FUL ATTEMPT TO REFORMULATE ENVIRONMENTAL POLICY IN !USTRALIA MUST INCLUDE A ACHIEVING REAL POLICY CHANGE BUT IT IS NOT SUFlCIENT TO ENSURE THAT SUCH
COHERENT STRATEGY TO TAKE BACK CONTROL OF THE LANGUAGE OF HOPE 3OME EXAM
CHANGE WILL OCCUR %NVIRONMENTALISTS WON THE DEBATE OVER THE LANGUAGE OF
PLES FOLLOW SUSTAINABILITY WITH FEW GOVERNMENTS OR BUSINESSES NOW WILLING TO OPPOSE
)T IS TIME TO REFRAME THE DO
GOODING DESIRE TO INCREASE ENERGY EFlCIENCY THE NEED TO BECOME @MORE SUSTAINABLE BUT THIS VICTORY OVER LANGUAGE HAS
AS THE SERIOUS TASK OF IMPROVING ENERGY PRODUCTIVITY 7E MUST ENSURE THAT BEEN ACCOMPANIED BY POLICY DEFEAT -INING COMPANIES NOW PUBLISH REPORTS
BUSINESSES BECOME MORE PRODUCTIVE BY INCREASING THEIR OUTPUT WHILE REDUC
ON THEIR GROWING SUSTAINABILITY TO ACCOMPANY REPORTS ON THEIR RECORD EXTRAC
ING THEIR ENERGY USE )T IS TAKEN FOR GRANTED THAT GOVERNMENTS HAVE A ROLE TO TION OF FOSSIL FUELS AND URANIUM
PLAY IN INCREASING LABOUR PRODUCTIVITY IT IS TIME THAT GOVERNMENTS WERE 2ECLAIMING LANGUAGE CAN HELP BUILD PUBLIC SUPPORT FOR CHANGE #LEARER
MADE ACCOUNTABLE FOR THEIR FAILURES TO DRIVE ENERGY PRODUCTIVITY LANGUAGE CAN ALSO HELP CLARIFY POLICY OBJECTIVES "UT SUCCESSFUL OUTCOMES
7E MUST ENSURE THAT PROTECTING THE ENVIRONMENT IS SEEN AS IMPROVING REQUIRE NOT JUST NEW POLICY GOALS BUT MECHANISMS FOR ACHIEVING THEM
OUR NATIONAL COMPETITIVENESS RATHER THAN ALLOWING GOOD ENVIRONMENTAL POL
!USTRALIA LACKS THE POLITICAL AND BUREAUCRATIC STRUCTURE FOR DRIVING ENVI
ICY TO BE FRAMED AS SIMPLY AN ADDITIONAL COST TO OUR EXPORT INDUSTRIES !US
RONMENTAL POLICY REFORM 3TATE AND FEDERAL GOVERNMENTS HAVE LEGISLATION
TRALIA IS A RICH COUNTRY BUT IT USES AS MUCH ENERGY TO PRODUCE EACH DOLLARS AND DEPARTMENTS DEDICATED TO PROTECTING @THE ENVIRONMENT BUT SUCH DEPART
WORTH OF '$0 AS DEVELOPING COUNTRIES SUCH AS #HINA )F !USTRALIA COULD MENTS DEDICATE LITTLE OR NO RESOURCES TO ENFORCEMENT !S A SOCIETY WE DO NOT
INCREASE ITS ENERGY PRODUCTIVITY TO THE LEVEL OF *APAN OR 'ERMANY THIS WOULD RELY ON LEGISLATION AND CIVIC MINDEDNESS TO PROTECT OURSELVES FROM DRINK DRIV
DELIVER A SUBSTANTIAL COST SAVING TO EXPORTERS AND !USTRALIAN CONSUMERS )N ERS WE SPEND HUNDREDS OF MILLIONS OF DOLLARS PAYING POLICE TO DETECT SUCH
ADDITION TO LOWERING lNANCIAL COSTS AND GREENHOUSE GASSES THE PURSUIT OF BEHAVIOUR 3IMILARLY TAX LAW ALONE IS NOT EXPECTED TO ENSURE COMPLIANCE
SUCH ENERGY PRODUCTIVITY WOULD SIGNIlCANTLY REDUCE !USTRALIAS RELIANCE ON RATHER THE THREAT AND CONDUCT OF TAX AUDITS ENSURES MOST PEOPLE TAKE TAX LAW
IMPORTED SOURCES OF ENERGY SERIOUSLY
4HE CREATION AND DESTRUCTION OF JOBS IS INEVITABLE IN A MARKET ECONOMY 7HEN IT COMES TO THE ENVIRONMENT HOWEVER WE SIMPLY HOPE THAT CIVIC
7HEN GOVERNMENTS PRIVATISE BUSINESSES OR REDUCE TARIFFS WE ARE TOLD THAT MINDEDNESS WILL PREVAIL
JOB LOSSES WHILE UNFORTUNATE ARE AN UNAVOIDABLE CONSEQUENCE OF POLICIES %NFORCEMENT OF EXISTING LAWS WOULD BE AN IMPROVEMENT ON THE STATUS
THAT WILL IMPROVE THE OVERALL WELLBEING OF ALL !USTRALIANS (OWEVER CALLS TO QUO BUT IT ALSO WOULD NOT BE SUFlCIENT IN ITSELF 4HE BIGGEST ENVIRONMENTAL
END OLD GROWTH LOGGING OR RICE FARMING IN DESERTS ARE MOCKED FOR SUGGEST
PROBLEMS ARE NOT CAUSED BY THE LACK OF INVESTIGATIVE RESOURCES DEDICATED TO
ING SUCH @JOB DESTRUCTION )T SHOULD NEVER BE FORGOTTEN THAT THE ECONOMIC PREVENTING ILLEGAL LAND CLEARING ILLEGAL lSHING ILLEGAL WASTE DUMPS AND THE
RATIONALISTS WHO ARE SO CONCERNED ABOUT JOBS IN LOGGING AND MINING ARE ILLEGAL WATER HARVESTING 4HE REAL PROBLEM COMES FROM THE STRUCTURE OF THE
THE SAME GROUP WHO SUPPORTED THE WHOLESALE LOSS OF JOBS VIA THE INTRODUC
POLITICAL DECISION MAKING PROCESS THAT PLACES THE ENVIRONMENT AT THE PERIPH
TION OF .ATIONAL #OMPETITION 0OLICY IN THE EARLY S ERY OF DECISIONS CONCERNING ENERGY TRANSPORT TRADE DEVELOPMENT AND INDUS
TRY ASSISTANCE
-INISTERS FOR THE %NVIRONMENT HAVE A ROLE TO PLAY IN ENVIRONMENTAL
4/'%4(%2 !4 ,!34 3%#4)/.
POLICY BUT UNTIL CENTRAL AGENCIES SUCH AS 0RIME -INISTER AND #ABINET AND POLITICAL ARGUMENT OVER LAND USE THAN CITY RESIDENTS ARE IN REGARD TO
4REASURY ARE AS CONCERNED WITH THE DEVELOPMENT OF A COHERENT GOVERNMENT WATER
WIDE APPROACH TO THE SOLUTION OF ENVIRONMENTAL PROBLEMS AS THEY CURRENTLY
ARE IN RELATION TO ECONOMIC PROBLEMS THERE IS UNLIKELY TO BE SIGNIlCANT POLICY #REATING NEW STRUCTURES
PROGRESS
)N ORDER TO ACHIEVE GREATER INTEGRATION OF ENVIRONMENTAL PROBLEMS INTO 0OLICY CHANGE WILL NOT OCCUR IN !USTRALIA UNTIL THE POLITICAL BARRIERS TO
THE POLICY PROCESS IT IS NECESSARY TO IDENTIFY THE MAJOR OBSTACLES TO SUCH INTE
CHANGE HAVE BEEN OVERCOME 7E SHOULD NOT BE SURPRISED THAT POWER COMPA
GRATION $ESPITE DECADES OF DEBATE !USTRALIA IS YET TO IMPLEMENT EFFECTIVE NIES ARE RELUCTANT TO PAY MORE FOR THEIR COAL THAT FARMERS ARE RELUCTANT TO
REFORMS TO THE USE OF OUR ENERGY WATER AGRICULTURE OR TRANSPORT INDUSTRIES PAY MORE FOR THEIR WATER OR THAT lSHERMAN AND LOGGERS ARE RELUCTANT TO PAY
4HIS FAILURE CAN BE BEST UNDERSTOOD BY ANALYZING THE POLITICAL OBSTACLES TO MORE FOR THE lSH AND LOGS THEY HARVEST "UT WE SHOULD ALSO NOT LET SUCH SHORT
CHANGE RATHER THAN BY REDOUBLING EFFORTS TO COLLECT MORE DATA ON THE BENE
TERM SELF
INTEREST DETERMINE THE LONG RUN POLICY SETTINGS FOR !USTRALIA
lTS OF REFORM !DDRESSING CLIMATE CHANGE AND OTHER ENVIRONMENTAL PROBLEMS WILL
.UMEROUS GOVERNMENT INQUIRIES AT ALL LEVELS OF GOVERNMENT HAVE REC
REQUIRE SUBSTANTIAL CHANGES IN !USTRALIAN SOCIETY BUSINESS AND GOVERN
OMMENDED THAT TRUCKS SHOULD BE CHARGED FOR THE DAMAGE THEY DO TO ROADS MENT 4HE BARRIER TO SUCH CHANGES IS NOT OUR WIT BUT OUR POLITICAL WILL 4HE
THAT RAIL IS A MORE EFlCIENT MEANS FOR INTER
CITY FREIGHT TRANSPORT THAT FARM
INTRODUCTION OF THE '34 HAD A SUBSTANTIAL AND DIRECT IMPACT ON EVERY BUSI
ERS NEED TO PAY FOR THE FULL COST OF THE WATER THEY USE AND THAT COAL lRED POWER NESS AND EVERY CONSUMER IN !USTRALIA 4HE REMOVAL OF LEAD FROM PETROL
STATIONS NEED TO PAY FOR THE DAMAGE THEY CAUSE TO THE ENVIRONMENT $ESPITE REQUIRED THE CREATION OF A SEPARATE RElNING TRANSPORTATION AND STORAGE
THESE POLICIES lTTING NEATLY WITHIN THE ECONOMIC RATIONALIST WORLD VIEW OF INFRASTRUCTURE FOR THE NEW FORM OF FUEL AS WELL AS THE REDESIGN OF EVERY PAS
{USER PAYS THEY HAVE YET TO BE IMPLEMENTED SENGER VEHICLE SOLD IN !USTRALIA !USTRALIAN GOVERNMENTS KNOW HOW TO
4HE TRUCKING INDUSTRY IS OPPOSED TO DAMAGE BASED ROAD PRICING 4HIS CHANGE !USTRALIA
ENSURES THAT THE COSTS OF ROADS AND ROAD REPAIRS ARE COVERED BY TAXPAYERS IN 0ERHAPS THE BEST EXAMPLE OF SUCH GOVERNMENT LED CHANGE WAS THE INTRO
GENERAL 4HE PUBLIC PROVISION OF HIGH QUALITY FREEWAYS BETWEEN CITIES ENSURES DUCTION OF .ATIONAL #OMPETITION 0OLICY BASED ON THE RECOMMENDATIONS OF THE
THAT ROAD FREIGHT IS RELATIVELY CHEAP AND QUICK COMPARED TO RAIL FREIGHT (ILMER 2EPORT 4HE (ILMER 2EPORT PROVIDES A UNIQUE MODEL FOR POLICY CHANGE
WHEREAS THE COST OF BUILDING NEW FREIGHT LINES IS EXPECTED TO BE BORNE EXCLU
IN !USTRALIA 2EGARDLESS OF VIEWS ABOUT THE DESIRABILITY OF THE POLICY CHANGES
SIVELY BY THE FREIGHT USERS THAT RESULTED FROM IT THERE SHOULD BE NO DOUBT ABOUT THE EFFECTIVENESS OF THE
&ARMERS HAVE FOUGHT HARD TO ENSURE THAT THEY DO NOT HAVE TO PAY FOR STRUCTURES THAT THE (ILMER 2EPORT RECOMMENDED IN DRIVING SUCH CHANGES
THE FULL OPPORTUNITY COST OF THE WATER THAT THEY USE 7HEN FARM LAND ON 4HE (ILMER 2EPORT IS OFTEN WRONGLY CONSIDERED BY ITS CRITICS TO BE THE
CITY FRINGES IS LOST TO RESIDENTIAL DEVELOPMENT IT IS JUSTIFIED ON THE BASIS SOURCE OF ECONOMIC RATIONALISM /N THE CONTRARY THE IDEAS BEHIND THE REPORT
THAT LAND IS MUCH MORE VALUABLE TO HOUSEHOLDS THAN IT IS TO FARMERS "UT HAD BEEN CIRCULATING FOR NEARLY TWO DECADES 4HE GENIUS OF &RED (ILMER AND
WHEN THE SUGGESTION IS MADE THAT SOME FARMERS SHOULD STOP USING SCARCE HIS #OMMISSION WAS TO DEVISE A PLAN TO OPERATIONALISE THOSE IDEAS
WATER BECAUSE IT IS OF HIGHER VALUE TO OTHER FARMERS OR TO CITY RESIDENTS THE )T MUST BE REMEMBERED THAT IN THE S THE IDEA THAT PATIENTS SHOULD BE
TERMS OF THE DEBATE ARE SHIFTED TOWARDS EQUITY HISTORY AND CULTURE 4HE SEEN AS CUSTOMERS THAT CHARITIES SHOULD BE SEEN AS WELFARE PROVIDERS AND
ONLY DIFFERENCE IS THAT PROPERTY DEVELOPERS ARE BETTER PLACED TO WIN THE THAT SERVICES SUCH AS PRISONS COULD BE RUN IN ORDER TO MAKE A PROlT WERE
4/'%4(%2 !4 ,!34 3%#4)/.
ANATHEMA TO !USTRALIAN SOCIETY 4HERE WAS STRONG OPPOSITION BY THE PUBLIC 7HILE THE POLITICAL WILL FOR SUCH A PROJECT WOULD NEED TO BE BUILT FROM
BY THE UNIONS AND EVEN FROM STATE AND LOCAL GOVERNMENTS TO THE (AWKE SCRATCH MUCH OF THE BUREAUCRATIC INFRASTRUCTURE IS ALREADY IN PLACE 4HE
+EATING REFORM AGENDA OF PRIVATIZATION AND DEREGULATION 4HE (ILMER REPORT #OUNCIL OF !USTRALIAN 'OVERNMENT #/!' FOR EXAMPLE ALREADY PROVIDES A
PROVIDED A BLUEPRINT FOR A NEW SET OF GOVERNMENT STRUCTURES TO ENSURE THAT FRAMEWORK FOR DISCUSSION AND DECISION MAKING BY THE 0RIME -INISTER THE
AN UNPOPULAR REFORM AGENDA WAS IMPLEMENTED DESPITE THE WISHES OF POWER
0REMIERS AND THE 0RESIDENT OF THE ,OCAL 'OVERNMENT !SSOCIATION 3IMILARLY
FUL VESTED INTERESTS IF THE BATTLE TO RECLAIM THE LANGUAGE OF PRODUCTIVITY AND EFlCIENCY CAN BE
)N BRIEF THE (ILMER REPORT IDENTIlED THE MAJOR OBSTACLES TO CHANGE AND WON THEN EXISTING BODIES SUCH AS THE .ATIONAL #OMPETITION #OUNCIL ALONG
PROPOSED MECHANISMS FOR OVERCOMING THEM 3OME CHANGES WERE LEGISLATIVE WITH STATE AND FEDERAL TREASURIES CAN BE CHARGED WITH THE TASK OF ENSURING
BUT THE MOST EFFECTIVE MECHANISMS WERE STRUCTURAL AND lNANCIAL 3TATE AND THAT THE EFlCIENT USE OF SCARCE NATURAL RESOURCES IS RELENTLESSLY PURSUED 3UCH
LOCAL GOVERNMENTS WERE BRIBED INTO PARTICIPATING WITH LARGE GRANTS BEING A TRANSFORMATION MAY SEEM OPTIMISTIC BUT IT IS IMPORTANT TO REMEMBER THAT
MADE BY THE #OMMONWEALTH TO JURISDICTIONS WHICH MET SPECIlC TARGETS 4HE THE 0RODUCTIVITY #OMMISSION GREW OUT OF THE ASHES OF THE )NDUSTRIES !SSIST
.ATIONAL #OMPETITION #OUNCIL WAS ESTABLISHED TO BOTH DRIVE THE REFORM ANCE #OMMISSION
AGENDA AND TO SANCTION STATES WHICH WERE NOT MEETING THEIR TARGETS 3TATES &INALLY IT IS IMPORTANT TO NOTE THAT WHILE NEW MACHINERY OF GOVERNMENT
STILL RECEIVE @COMPETITION PAYMENTS FROM THE #OMMONWEALTH EACH YEAR IN IS NEEDED IT MUST BE ACCOMPANIED BY A NEW POLITICAL CONSCIOUSNESS 4HROUGH
EXCHANGE FOR THEIR ONGOING COMMITMENT TO THE REFORM PROCESS OUTLINED IN OUT THE S AND S !USTRALIA SAW THE PROMINENCE OF ECONOMIC ISSUES IN
THE (ILMER 2EPORT 3TATE 4REASURERS HAVE BECOME ACCUSTOMED TO RECEIVING MEDIA AND POLITICAL DEBATE RISE EXPONENTIALLY 4HE NIGHTLY NEWS NOW INFORMS
THESE PAYMENTS FROM THE #OMMONWEALTH AND ARE RELUCTANT TO RISK LOSING A ALL GOOD CITIZENS OF THE PERFORMANCE OF THE $OW *ONES THE !LL /RDS AND .IKKEI
SIGNIlCANT SOURCE OF REVENUE IN ORDER TO ACCOMMODATE THE POLITICAL CONSID
STOCK INDEXES DESPITE THE FACT THAT FEW PEOPLE HAVE ANY IDEA WHAT THEY ARE
ERATIONS OF OTHER STATE MINISTERS WHO MAY PREFER TO DRAG THEIR FEET "UT WHAT EVERYONE NOW UNDERSTANDS FROM ALL THIS EXPOSURE TO STOCK INDEXES
4HE (ILMER 2EPORT SUCCEEDED IN BRINGING AN IDEOLOGICAL PREFERENCE FOR IS THAT THE ECONOMY IS IMPORTANT 4HERE IS NO REASON THAT DAILY WATER USE
THE PRIVATE PROVISION OF SERVICES INTO THE HEART OF DECISION MAKING AT ALL ENERGY USE AND PUBLIC TRANSPORT USE COULD NOT BE PROVIDED TO BOTH POLITICIANS
LEVELS OF GOVERNMENT 7HILE PASSAGE OF LEGISLATION REQUIRING COMPETITIVE AND THE PUBLIC TO INFORM THEIR DAILY DECISION MAKING 4HE NATURAL ENVIRON
TENDERING FOR GOVERNMENT SERVICE CONTRACTS WAS AN IMPORTANT PART OF THIS MENT WILL ONLY BE TRULY SAFE WHEN IT HAS BEEN FULLY INTEGRATED INTO THE PUBLIC
ACHIEVEMENT THE PROVISION OF LARGE UP FRONT BRIBES TO PARTICIPANTS COM
AND POLITICAL CONSCIOUSNESS
BINED WITH ONGOING lNANCIAL SANCTIONS FOR RECALCITRANT STATE GOVERNMENTS 7ITH THAT IN MIND IT IS IMPORTANT TO RECOGNIZE THAT IN !USTRALIA THERE IS
ENSURED THAT THE SPIRIT OF THE REFORM AGENDA REMAINS CENTRAL TO GOVERNMENT NO -INISTER FOR THE %CONOMY 4HERE IS A 4REASURER WHO IS PRIMARILY RESPON
DECISION MAKING PRACTICES SIBLE FOR TAXING AND A &INANCE -INISTER WHO IS RESPONSIBLE FOR SPENDING
7HAT !USTRALIA NEEDS NOW IS THE ENVIRONMENTAL EQUIVALENT OF THE (ILMER 4HERE ARE )NDUSTRY -INISTERS %MPLOYMENT -INISTERS 4RADE -INISTERS AND
2EPORT 4HERE ARE ALREADY MANY REPORTS DESCRIBING THE NATURE OF THE ENVI
!GRICULTURE -INISTERS WHO WOULD ALL CLAIM TO BE CENTRALLY CONCERNED WITH
RONMENTAL POLICY REFORMS THAT ARE NEEDED BUT THEY NEED TO BE SYNTHESIZED DELIVERING GOOD ECONOMIC OUTCOMES )N TURN THE 0RIME -INISTER WOULD SEE
INTO A REPORT THAT GOES ON TO IDENTIFY THE BARRIERS TO CHANGE PROPOSE THE MOST HIMSELF AS HAVING A CENTRAL ROLE IN DELIVERING A STRONG ECONOMY 4HE POINT IS
EFFECTIVE MECHANISMS FOR OVERCOMING EACH OBSTACLE AND SET OUT THE NEW THAT THERE IS NO ONE -INISTER WHO SPEAKS FOR THE ECONOMY BECAUSE ALL
MACHINERY OF GOVERNMENT NEEDED TO INITIATE AND DRIVE SUCH CHANGE -INISTERS INCLUDING THE %NVIRONMENT -INISTER SEE THEIR ROLE AS FOCUSED ON
4/'%4(%2 !4 ,!34 3%#4)/.
ECONOMIC PERFORMANCE )F AS IS PLAIN THE ENVIRONMENT NEEDS PROTECTING %CONOMIC THEORY PROVIDES NO JUSTIlCATION FOR THE PURSUIT OF '$0 GROWTH
THEN POLICY OR POLITICS IS FAILING 3HOULD THE ENVIRONMENT BECOME AS CENTRAL OVER THE PURSUIT OF INCREASED LEISURE )NDEED WHILE THE TH CENTURY
TO DECISION
MAKING IN THE NEXT YEARS AS THE ECONOMY BECAME IN THE LAST BEGAN WITH MOST WORKERS HAVING NO HOLIDAYS NO SICK PAY AND NO FORMAL
YEARS THEN IT WILL NO LONGER NEED LONE VOICES TO @SPEAK ON ITS BEHALF WEEKENDS THE lRST YEARS OF THAT CENTURY WAS A STEADY MARCH TOWARDS
MORE LEISURE )N !USTRALIA THAT MARCH ENDED WHILE THE 7ESTERN %UROPE
3ETTING THE RIGHT GOALS ANS HAVING STUCK TO THEIR GOAL ARE NOW AVERAGING OVER WEEKS PAID LEAVE
PER YEAR !USTRALIANS HAVE BEEN TOLD THAT THE PURSUIT OF LEISURE WAS UNPRO
%CONOMICS CAN DELIVER THE SOLUTIONS TO CLIMATE CHANGE AS WELL AS A WIDE DUCTIVE INEFlCIENT AND MAKE US UNCOMPETITIVE 3UCH CLAIMS ARE BASED ON
RANGE OF OTHER ENVIRONMENTAL PROBLEMS 7HAT IS LACKING IS NOT THE KNOW
THE PREFERENCES OF ECONOMIC RATIONALISTS NOT THE CONCLUSIONS OF ECONOMIC
HOW BUT THE POLITICAL WILL TO INITIATE CHANGE AND THE MACHINERY OF GOVERN
THEORY
MENT TO DELIVER ON THAT WILL 4HIS ESSAY HAS ARGUED THAT IF THE BROAD %CONOMIC THEORY VIEWS INDIVIDUAL PREFERENCES AS SACROSANCT ! FOUNDA
CONCLUSIONS OF ECONOMIC THEORY ARE COMBINED WITH POLITICAL DESIRE TO OVER
TIONAL PREMISE OF ECONOMIC RATIONALISM IS THAT INDIVIDUALS KNOW BETTER THAN
COME OBSTACLES TO CHANGE THEN EFFECTIVE SOLUTIONS FOR ENVIRONMENTAL PROB
GOVERNMENTS WHAT THEY WANT FROM THEIR LIVES 9ET WHEN !USTRALIANS REPEAT
LEMS CAN BE RAPIDLY IMPLEMENTED EDLY STATE THAT THEY WANT TO PAY MORE TAXES TO FUND BETTER HEALTH AND EDUCA
(OWEVER WHILE THERE IS NO DOUBT THAT ECONOMICS SHOULD PLAY A BROADER TION AND TO IMPROVE THE ENVIRONMENT THEY ARE TOLD THAT TO PURSUE SUCH
ROLE IN THE POLICY FORMULATION PROCESS THERE IS ALSO NO DOUBT THAT ECONOMICS PREFERENCES WOULD DESTROY THE ECONOMY !CCORDING TO THE ECONOMIC RATION
SHOULD PLAY A MUCH LESS SIGNIlCANT ROLE IN THE SETTING OF NATIONAL GOALS 4HAT ALISTS 'OVERNMENT KNOWS BEST AFTER ALL
IS ECONOMICS SHOULD PLAY A BIGGER ROLE IN HELPING US ACHIEVE OUR NATIONAL )T IS IRONIC THAT ECONOMIC RATIONALISTS CITE THE NEED FOR !USTRALIANS TO
OBJECTIVES BUT IT SHOULD PLAY A MUCH SMALLER ROLE IN INmUENCING WHAT THOSE SUBJUGATE THEIR PERSONAL PREFERENCES IN PURSUIT OF THE COLLECTIVE GOAL OF
OBJECTIVES SHOULD BE GREATER ECONOMIC GROWTH "UT IN POLITICS THE PRESENCE OF IRONY IS NO BARRIER
-ANY !USTRALIANS WOULD RELY ON ADVICE FROM THEIR ACCOUNTANTS ABOUT TO BAD POLICY )F !USTRALIA IS TO PLAY ITS PART IN REDUCING GLOBAL WARMING AS
HOW TO ORGANIZE THEIR lNANCIAL AFFAIRS BUT THERE ARE UNLIKELY TO BE MANY WELL AS SOLVING A WIDE RANGE OF ENVIRONMENTAL AND SOCIAL PROBLEMS THEN IT
WHO WOULD CONSULT THEIR ACCOUNTANTS ON HOW MUCH THEY SHOULD SPEND ON MUST EMBRACE THE FULL TOOLBOX OF ECONOMISTS )N EMPLOYING THOSE TOOLS
#HRISTMAS PRESENTS OR WHICH FAMILY MEMBERS SHOULD RECEIVE THE BIGGEST HOWEVER IT IS ESSENTIAL TO WORK AROUND OR THROUGH THE POLITICAL OBSTACLES TO
GIFTS CHANGE THAT HAVE HALTED THE WORK OF REFORM TO DATE "UT THE GREATER RELIANCE
4HE ROLE OF ECONOMISTS IN A DEVELOPED DEMOCRACY SHOULD BE THAT OF FUNC
ON ECONOMICS TO SOLVE PROBLEMS MUST BE SEPARATED FROM THE PROCESS OF IDEN
TIONARY NOT THAT OF VISIONARY )T IS FOR THE !USTRALIAN PEOPLE THROUGH THE TIFYING WHICH PROBLEMS NEED TO BE SOLVED )N THAT REGARD ALL CITIZENS VIEWS
!USTRALIAN 0ARLIAMENT TO SAY WHAT IT IS THEY WANT TO ACHIEVE AND IT IS FOR ARE EQUAL
ECONOMISTS TO PROPOSE OPTIONS AND TO COMPARE THE ALTERNATIVES FOR ACHIEV
ING SUCH OBJECTIVES
%UROPEANS WORK SHORTER HOURS AND HAVE LONGER HOLIDAYS THAN !US
TRALIANS AND !MERICANS !S A RESULT THEY HAVE LOWER ANNUAL INCOMES
%CONOMIC THEORY PROVIDES NO FOUNDATION FOR JUDGING SUCH PREFERENCES
4/'%4(%2 !4 ,!34 3%#4)/.
! NEW LANGUAGE OF ECONOMICS n THE PRINCIPLES OF %CONOMIC .EO 2ATIONALISM INEQUALITY CAN BE JUSTIlED IF IT IS ACCOMPANIED BY FASTER GROWTH IS A MORAL
QUESTION BEST ANSWERED DEMOCRATICALLY RATHER THAN AN ECONOMIC QUES
7E NOW NEED A NEW LANGUAGE OF ECONOMICS WHICH MIGHT BE CALLED %CONOMIC TION TO BE ANSWERED BY ECONOMISTS
.EO RATIONALISM )TS PRINCIPLES SHOULD BE
3OCIAL CULTURAL AND ENVIRONMENTAL OBJECTIVES ARE AS IMPORTANT AS THE
PURSUIT OF ECONOMIC GROWTH 7EALTHY COUNTRIES CAN AFFORD TO PURSUE A
-ARKETS ARE A POWERFUL FORCE AND HAVE THE CAPACITY TO DRIVE EFlCIENCY
WIDE RANGE OF ENDEAVOURS AND THE ROLE OF ECONOMISTS IS TO ASSIST SOCIETY
AND INNOVATION
IN ACHIEVING THEIR DEMOCRATICALLY DETERMINED GOALS
-ARKET FAILURE IS COMMON AND CAN ARISE FROM THE EXISTENCE OF EXTERNALI
TIES DIFFERENCES IN BARGAINING POWER ASYMMETRIES IN INFORMATION AND
THE FAILURE OF DECISION MAKERS TO CONSIDER FUTURE GENERATIONS
7HEN SIGNIlCANT MARKET FAILURE EXISTS THERE IS AN IMPORTANT ROLE FOR GOV
ERNMENT INTERVENTION
7HILE GOVERNMENT INTERVENTION CAN TAKE MANY FORMS IT IS THE SPECIlC
CIRCUMSTANCES OF THE SPECIlC MARKET NOT THE GENERAL PREFERENCES OF ANY
GROUP OF ECONOMISTS THAT SHOULD DETERMINE THE BEST FORM OF POLICY
RESPONSE
)NDIVIDUAL PREFERENCES SHOULD PLAY AN IMPORTANT ROLE IN THE ALLOCATION OF
RESOURCES BUT THE CAPACITY OF GOVERNMENT POLICY ADVERTISING AND MAR
KETING TO EFFECT THESE PREFERENCES SHOULD NOT BE IGNORED BY POLICY MAK
ERS
)NDIVIDUALS ARE BEST PLACED TO MAKE VALUE DECISIONS ABOUT WHAT IS BEST FOR
THEM BUT THE CAPACITY OF SOME PEOPLE TO DECEIVE OTHERS INTO MAKING DECI
SIONS THAT ARE DEMONSTRABLY BAD FOR THEM SHOULD NOT BE IGNORED BY POLICY
MAKERS
)NDIVIDUALS HAVE THE CAPACITY TO THINK LONG TERM "UT POLICY DECISIONS
THAT IMPROVE THE WELLBEING OF TODAYS CITIZENS BY IMPOSING COSTS ON FUTURE
GENERATIONS HOWEVER POPULAR SHOULD BE AVOIDED WHEREVER POSSIBLE
%QUITY IS AN IMPORTANT GOAL IN AND OF ITSELF 7HILE INDIVIDUAL REWARD IS
AN IMPORTANT DRIVER OF INNOVATION AND EFFORT THE NOTION THAT GREATER
2EFERENCES ¥ #OPYRIGHT 2ICHARD $ENNISS
!LL RIGHTS RESERVED
!BBOTT 4 CITED IN @*UNK FOOD BAN RUN OFF ROAD HTTPWWWPARENT
0UBLISHED BY
SJURYORGAUTPJ?BROWSEASP #ONTAINER)$ JUNK?FOOD?BAN?RUN?OFF?ROAD 4HE !USTRALIAN #OLLABORATION
"ROUGH - CITED IN @"ABY BONUS CHANGES TO STOP MISUSE BY TEEN 3T 6INCENT 0LACE !LBERT 0ARK 6ICTORIA
MUMS HTTPWWWNEWSCOMAUSTORY HTML 7EBSITE WWWAUSTRALIANCOLLABORATIONCOMAU
#ORISH 0 @&REE TRADE THE WAY FORWARD -ARCH HTTPWWWNFF
ORGAUPAGESPOLICIES?PRINTlLES/P%D?4RADE-ARCHPDF
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#ORISH 0 @.ATIONAL 7ATER REFORMS 7ESTERN !USTRALIAN 2URAL 7ATER
5SERS 3UMMIT .ANNUP 7! 7EDNESDAY $ECEMBER HTTPNFF
4HE VIEWS EXPRESSED IN THIS ESSAY THE ARE THOSE OF THE AUTHOR AND DO NOT NECESSARILY
ORGAUPAGESSPEECHES.ANNUP3PEECH?0ETER#ORISHPDF REmECT THE VIEWS OF THE !USTRALIAN #OLLABORATION OR ITS MEMBER ORGANISATIONS
(OWARD * @3AFEGUARDING THE FUTURE !USTRALIAS RESPONSE TO CLIMATE
CHANGE 3TATEMENT BY THE 0RIME -INISTER OF !USTRALIA .OVEMBER
HTTPWWWPMGOVAUNEWSMEDIA RELEASES'2%%.HTML
3AMUELSON 0 &OUNDATIONS OF %CONOMIC !NALYSIS (ARVARD 5NIVERSITY
0RESS %NLARGED ED
3AMUELSON 0 %CONOMICS !N )NTRODUCTORY !NALYSIS -C'RAW (ILL
3TERN . @3TERN 2EVIEW ON THE ECONOMICS OF CLIMATE CHANGE (-
4REASURY HTTPWWWLUNTREASURV OVUKINDE ENDENT REVIEWSSTER I EVIE
ECONOMICS CLIMATE?C HANEESTERN REVIEW REPORTCFH I
3WITKOWSKI : @5RANIUM -INING 0ROCESSING AND .UCLEAR %NERGY
/PPORTUNITIES FOR !USTRALIA HTTPWWWDPMCGOVAUUMPNERREPORTSCFM
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