The May 2008 IPA Review is now available, to subscribers and newsagencies in the next day or two, if it hasn’t arrived yet.

My editorial asks why it takes just four conservative columnists for the federal government to change its foreign diplomacy strategy. Other topics covered within this issue: the 2020 summit, sport and the culture wars, the republic, the Liberal Party, Cuba and Castro, social capital, caravan parks, and more. A selection of articles are available on the IPA website.

I’m in The Age today, disliking the Beijing Olympics: “The patriot Games“

Wasn’t it better during the Howard government, when we weren’t able to quantify how dim Australia’s best and brightest actually were? Or how few ideas they had?

Putting aside completely the merits of the individual proposals, some of the ‘new ideas’ that have been aired include: a republic, an aboriginal treaty, bill of rights, subsidies for energy saving devices, taxes on junk food, etc etc etc.

About the only idea in the list on the SMH website that does not appear every single day in the national media and on talk back radio is the idea that the tax code should be made even more progressive - when most media commentators criticise Australia’s tax system, their criticism isn’t that it is too flat.

When the ideas are not entirely banal they are entirely predictable. The cultural stream wants a national cultural policy, and a culture minister to manage it. Anybody who has ever been to one of the dozens of similar conferences that are held each year around the country will be familiar with the inevitable proposal to have a federal ‘minister for the future’ or something equally as daft.

And yet, the ideas aren’t the point - even the ones that haven’t been rehearsed over and over already in the public sphere.

2020 is a grand spectacle, an elaborate theatrical show complete with movie stars and comedians and passion and energy and geniuses and journalists, all of which is supposed to symbolise the federal government’s break with the dark Howard past. All levels of government and all sectors of the economy are present under the guiding hand of Canberra to work together for a progressive Australian future.

2020 is like a successful version of Brendan Nelson’s listening tour - a publicity stunt designed specifically to fill the Rudd government up with enough political capital to pursue a second and third term. After all, is it really too cynical to believe that this major government conference has a political agenda? (That is, apparently, too much for even the federal opposition to believe)

This weekend just goes to show how utterly credulous Australia’s public intellectuals actually are.

(I wrote about the summit when it was first announced: “Rudd summit puts con into consensus“. I think it holds up.)

Crossposted at ALSBlog

I have a letter in today’s Australian Financial Review with Sinclair Davidson following up from the post below:

Government failure not market failure

Nicholas Gruen follows Friedrich von Hayek in arguing that markets are best able to aggregate information and allocate resources (’Information key to efficiency’, AFR, April 16).

He errs, however, when he extends the argument to suggest that markets do not make the best possible use of information. This is particularly highlighted by his examples of where markets might fail - education and health care. Both these industries are heavily regulated by government and often do not rely on the price mechanism, something Gruen completely ignores.

But the importance of the price system is fundamental to Hayek’s argument. In fact, the greatest impediments to full disclosure in these industries are trade unions and state governments.

Gruen has highlighted, perhaps unintentionally, government failure, not market failure.

In the April edition of The Monthly, Gideon Haigh is not impressed by There Will Be Blood as an adaptation of Upton Sinclair’s Oil!. (Online here, but subscribers only.)

That this bloviating wimp of a film has been so uniformly lauded tells us something about how we like our politics nowadays. Where Sinclair’s anti-capitalism was stern, strident and wrong-headed, Anderson’s is diffuse, evasive and feel-good; where Sinclair made noisy common cause with communism, Anderson offers not a single left-leaning character.

But There Will Be Blood isn’t weak and uninspiring anti-capitalism. It isn’t really anti-capitalist at all. The protagonist, Daniel Plainview, may be hardheaded, (sometimes) deceitful, and (unquestionably) anti-social. But he is not the halfhearted caricature of a capitalist described by Haigh. His personality doesn’t fit the mold: he is concerned for the safety of his workers, and he clearly and repeatedly demonstrates emotional and familial bonds. He is an entrepeneur, and builds his oil business within the limits of the law. Indeed, one of the biggest surprises about There Will Be Blood is how strangely sympathetic the Plainview character is. A psychopath, sure, but a kind psychopath.

But nevertheless, Haigh chides the film maker for not going far enough in denouncing capitalism. Anderson should have worked in the trade unions and Bolshevism that feature prominently in the Sinclair novel. Haigh even contends that the film should have squeezed in a trendy criticism of energy dependence. He writes disappointingly: “What’s left is a bunch of garbled message of … well, what exactly? That hydrocarbons make people do bad things? That capitalism is a means by which psychopaths get to live in big houses?”

But Haigh is wrong to even attribute those messages to There Will Be Blood. It is not a message film. Haigh’s mistake is to try to read it as one. Rather than being a spineless adaptation of Oil!, There Will Be Blood is a totally new beast. When writing the film, Paul Anderson entirely stripped Upton Sinclair’s heavy handed socialism out of his source material, leaving a simple and extraordinarily powerful character study.

(Would the film have been better if it had been as deeply infused with Sinclair’s politics as Haigh would have liked? I doubt it - just look at the dreary sanctimony of Ken Loach’s The Wind That Shakes the Barley to see what happens when filmmakers try to revitalise the ideological spirit of early twentieth century radicalism.)

Nicholas Gruen had an interesting piece in The Australian on Thursday which argued that Hayek’s theory of the distribution of knowledge in society could provide a guide to better regulation. (A longer version is at Club Troppo)

Gruen tries to resolve the assymetries of knowledge between the regulator and the regulated firm by reference to Hayek’s criticism of central planning. The biggest problem facing effective regulation is managing the flow of information from firm to regulator, and Gruen sees parallels here with the failure of socialist central planners to take account of local knowledge. His solution is deeper engagement with firms to draw out some of their specialised knowledge, as well as implementing extensive trials of new regulation to see how they perform.

It is hard to how these proposals differ in practice from extending mandatory disclosure regimes, as regulators burrow further and further into the internal operations of the firm. Of course, from a regulator’s perspective, this is an appealing suggestion. But regulation is antagonistic - regulators and firms rarely pursue the same goal. Gruen’s proposals would do little to reduce the cat and mouse games which characterise contemporary regulatory negotiation.

But in coming to this argument, Gruen has misread Hayek. As he rightly points out, Hayek was concerned with local knowledge being insufficiently distributed in a planned economy. But Hayek’s resolution wasn’t simply to develop a mechanism to distribute that knowledge better – his resolution was the price system. And the price system doesn’t inform a central body about how best to manage the economy, it informs an infinitely diverse array of producers and consumers, so that the economy manages itself.

Without reference to price, Hayek’s criticism of central planning would be just a lament about the Politburo being insufficiently informed about recent rainfall in Omsk.

Gruen’s proposals may have something to recommend them from the perspective of policy implementation – although some of them would, in my view, dramatically increase the power regulators have over firms. It is not always the case that businesses and regulators work together harmoniously, and not likely that increasing the amount of consultation would change that, except to add to the risk of regulatory capture or regulatory rent seeking.

But, nevertheless, Gruen’s proposals cannot be justified by reference to Hayekian theories of information. It wasn’t just local information that Hayek was concerned with, it was, very specifically, local knowledge embedded in prices. And it is not prices that define the relationship between firm and regulator, it is legal power.

My otherwise reliable webhost neglected to inform me that it was changing the DNS name servers for this site. As a result, this website has been down for about two weeks until I was able to discover the problem.

In the mean time, I had a piece in The Age last Sunday on the ABC’s drifting purpose, “Come on, Aunty, time to work out where you’re at“, which has so far received the bevy of hate mail I am getting used to with these columns.

Michael Duffy was also kind enough to cover my book in a Sydney Morning Herald column: “Small government goes large on red tape to create an industry giant” and I appeared on Radio National’s Counterpoint discussing it shortly after. Interviews which cover my book are of course a right and proper task for the ABC and central to its charter.

But more importantly, the May IPA Review is at the printers now.