ABC The Drum – Page 23

The Real Reason for the Tragedy of the Titanic

Published in ABC’s The Drum as ‘Regulatory Failure of Titanic Proportions’, 11 April 2012, and in the Wall Street Journal as ‘The Real Reason for the Tragedy of the Titanic‘, 12 April 2012.

In the 1958 Titanic film “A Night to Remember,” Captain Smith is consulting with the shipbuilder Thomas Andrews. After the two realize that the Titanic will sink and that there are not enough lifeboats for even half those aboard, Smith quietly says “I don’t think the Board of Trade regulations visualized this situation, do you?”

In the run-up to the 100th anniversary of this tragedy this weekend, there’s been a lot of commentary about who and what were to blame. Left unsaid is that the Titanic’s lifeboat capacity is probably the most iconic regulatory failure of the 20th century.

The ship had carried 2,224 people on its maiden voyage but could only squeeze 1,178 people into its lifeboats. There were a host of other failures, accidents, and mishaps which led to the enormous loss of life, but this was the most crucial one: From the moment the Titanic scraped the iceberg, the casualties were going to be unprecedented.

Yet the Titanic was fully compliant with all marine laws. The British Board of Trade required all vessels above 10,000 metric tonnes (11,023 U.S. tons) to carry 16 lifeboats. The White Star Line ensured that the Titanic exceeded the requirements by four boats. But the ship was 46,328 tonnes. The Board of Trade hadn’t updated its regulations for nearly 20 years.

The lifeboat regulations were written for a different era and enforced unthinkingly. So why didn’t the regulators, shipbuilders or operators make the obvious connection between lifeboat capacity and the total complement of passengers and crew?

It had been 40 years since the last serious loss of life at sea, when 562 people died on the Atlantic in 1873. By the 20th century, all ships were much safer.

Moreover, the passage of time changed what regulators and shipowners saw as the purpose of lifeboats. Lifeboats were not designed to keep all the ship and crew afloat while the vessel sank. They were simply to ferry them to nearby rescue ships.

Recent history had confirmed this understanding. The Republic sank in 1909, fatally crippled in a collision. But it took nearly 36 hours for the Republic to submerge. All passengers and crew—except for the few who died in the actual collision—were transferred safely, in stages, to half a dozen other vessels.

Had Titanic sunk more slowly, it would have been surrounded by the Frankfurt, the Mount Temple, the Birma, the Virginian, the Olympic, the Baltic and the first on the scene, the Carpathia. The North Atlantic was a busy stretch of sea. Or, had the Californian (within visual range of the unfolding tragedy) responded to distress calls, the lifeboats would have been adequate for the purpose they were intended—to ferry passengers to safety.

There was, simply, very little reason to question the Board of Trade’s wisdom about lifeboat requirements. Shipbuilders and operators thought the government was on top of it; that experts in the public service had rationally assessed the dangers of sea travel and regulated accordingly. Otherwise why have the regulations at all?

This is not the way the story is usually told.

Recall in James Cameron’s 1997 film, “Titanic,” the fictionalized Thomas Andrews character claims to have wanted to install extra lifeboats but “it was thought by some that the deck would look too cluttered.” Mr. Cameron saw his movie as a metaphor for the end of the world, so historical accuracy was not at a premium.

Yet the historian Simon Schama appears to have received his knowledge of this issue from the Cameron film, writing in Newsweek recently that “Chillingly, the shortage of lifeboats was due to shipboard aesthetics.” (Mr. Schama also sees the Titanic as a metaphor, this time for “global capitalism” hitting the Lehman Brothers iceberg.)

This claim—that the White Star Line chose aesthetics over lives—hinges on a crucial conversation between Alexander Carlisle, the managing director of the shipyard where Titanic was built, and his customer Bruce Ismay, head of White Star Line, in 1910.

Carlisle proposed that White Star equip its ships with 48 lifeboats—in retrospect, more than enough to save all passengers and crew. Yet after a few minutes discussion, Ismay and other senior managers rejected the proposal. The Titanic historian Daniel Allen Butler (author of “Unsinkable”) says Carlisle’s idea was rejected “on the grounds of expense.”

But that’s not true. In the Board of Trade’s post-accident inquiry, Carlisle was very clear as to why White Star declined to install extra lifeboats: The firm wanted to see whether regulators required it. As Carlisle told the inquiry, “I was authorized then to go ahead and get out full plans and designs, so that if the Board of Trade did call upon us to fit anything more we would have no extra trouble or extra expense.”

So the issue was not cost, per se, or aesthetics, but whether the regulator felt it necessary to increase the lifeboat requirements for White Star’s new, larger, class of ship.

This undercuts the convenient morality tale about safety being sacrificed for commercial success that sneaks into most accounts of the Titanic disaster.

The responsibility for lifeboats came “entirely practically under the Board of Trade,” as Carlisle described the industry’s thinking at the time. Nobody seriously thought to second-guess the board’s judgment.

This is a distressingly common problem. Governments find it easy to implement regulations but tedious to maintain existing ones—politicians gain little political benefit from updating old laws, only from introducing new laws.

And regulated entities tend to comply with the specifics of the regulations, not with the goal of the regulations themselves. All too often, once government takes over, what was private risk management becomes regulatory compliance.

It’s easy to weave the Titanic disaster into a seductive tale of hubris, social stratification and capitalist excess. But the Titanic’s chroniclers tend to put their moral narrative ahead of their historical one.

At the accident’s core is this reality: British regulators assumed responsibility for lifeboat numbers and then botched that responsibility. With a close reading of the evidence, it is hard not to see the Titanic disaster as a tragic example of government failure.

Offence Against Free Speech

No question: in the Western world, offence is gradually trumping free speech. Consider four separate incidents, all of which occurred in the last week.

Back in 2008, News Limited’s Perthnow.com.au published a series of articles covering the deaths of four Aboriginal boys, who had stolen a car and died in an accident shortly after. The mother of three of the boys took legal action over comments published below the articles.

The Australian Federal Court found last Tuesday a number of those comments breached the Racial Discrimination Act.

Absolutely, the comments were cruel. They should not have been posted. One read “if you’re hopeless at mothering, recognise you are hopeless and don’t breed”. Another told law makers to “get out of thier [sic] ivory towers and start dealing out real punishment… instead of the 5 star treatment they get in prison”.

News Limited was ordered to pay $12,000 compensation for “offence, insult and humiliation”.

There has been one report (published in Fairfax papers) about this trial. Compare that to the outpouring of commentary about the Andrew Bolt case late last year: Factiva counts 333 separate pieces in newspapers alone.

Yet the Perthnow finding draws heavily on precedents set by the Bolt case. Sure, the Racial Discrimination Act found its current language back in 1995. But the act’s substance is only now being tested, and that substance suggests that the limitations on freedom of speech which it sets are very broad indeed. This is an evolving – and expanding – area of law.

For instance, notice that nothing in the comments quoted above makes reference to the fact that the boys were Aboriginal. The Federal Court decided, given the context of the news stories, the comments should be considered racial hatred nonetheless.

Much more attention has been given to the Kyle Sandilands episode – not least because of the extraordinary outcry when Sandilands originally aired his bizarre rant against a critic of his television show in November 2011.

Many people have suggested the Australian Communications and Media Authority’s response to Sandilands has demonstrated how weak the regulator is. But obviously a regulatory agency does not have the power to sack an employee of a private company.

And the new license condition which ACMA intends to impose on Sandiland’s station 2DayFM is actually quite significant. These new conditions provide a pretext under which ACMA could take away the station’s licence.

The conditions stipulate that 2DayFM cannot broadcast material which “demeans or is reasonably likely to demean women or girls generally and/or any woman or girl in particular”. Read that last clause carefully. For a speaker to “demean” any person who happens to be female is now forbidden – at least if they speak on 2DayFM. Sure, “Juliar” is in bad taste, but is it something that really needs to be regulated?

This is a dangerously illiberal path we are walking. And it’s a path other Western countries have travelled further along.

The conviction last Tuesday of a 21-year-old student in England for a stream of racist tweets provides no better illustration. Liam Stacey has been sentenced to 56 days jail for the sort of obscene trolling which is unhappily common on Twitter.

What Stacey wrote was foul, but his is an extraordinary punishment. Stacey was apparently drunk, and hastily deleted his tweets.

Of particular importance is the law he was prosecuted under. The UK Public Order Act 1986 prohibits “threatening, abusive or insulting words or behaviour”, which it places under the heading “fear or provocation of violence”. That this has evolved to become the criminalisation of idiocy shows how apparently modest laws can become tyrannical ones.

Even further along the path is France, where the perfumer Jean-Paul Guerlain was fined 6,000 euros for saying in a TV interview that he “set to work like a Negro”. Guerlain got off lightly. The French court could have imposed a six month prison term.

Obviously, Perthnow should not have published the seriously hurtful comments. Kyle Sandilands should not be such an oaf. One ought not get drunk on Twitter and hurl racist insults.

But if we are to remain free we must keep alive the philosophical distinction between things which are unlawful, and things which morally wrong but still lawful.

As governments expand their regulatory reach, they appear unable to conceive of the latter. Perhaps that’s no surprise. Legislators, lawyers and judges see all social issues through the prism of law.

But this legalism means we are losing confidence in society to police itself; to maintain its own standards. 2DayFM saw its sponsors drain away and its audience shrink. Liam Stacey was shouted down by others on Twitter and recanted his hateful words.

Indeed, the judge in the Stacey trial said something accidentally revealing while delivering his sentence: “I have no choice but to impose an immediate custodial sentence to reflect the public outrage at what you have done”. The power and effect of that public outrage goes unremarked here. Obviously, state regulation seems intent on supplanting society’s ability to ostracise and condemn.

And a society that drags people into the courts for nothing but offence is a deeply unhealthy society.

Tasers: The Non-Lethal Force That Kills

It’s time to stop describing Tasers as “non-lethal” weapons. They are quasi-lethal. At best.

That much should be clear from the death of 21-year-old Roberto Laudisio Curti in New South Wales last week.

The widely broadcast security camera footage shows Curti running away. One police officer in pursuit appears to pause, raise, and fire his Taser’s barbed projectiles at the Brazilian student. Curti stopped breathing shortly after.

If accurate, this incident would clearly be what the NSW Ombudsman warned about in a major report four years ago: Taser use is highly susceptible to mission creep. Nothing in the security footage suggests Curti presented an “extremely high risk” to officers or the public – the grounds for Taser use. From what we can tell, there was no threat or aggression.

But let’s put the specifics of this case aside. There are inquiries by the New South Wales Coroner and NSW Ombudsman which will be looking closely at those.

There is a more basic problem with the use of Tasers.

In the United States, 12,000 law enforcement agencies now carry the weapon. Assessing the evidence collected in that country, the National Institute for Justice (the research wing of the Department of Justice) found in 2011 there is “no conclusive medical evidence” indicating “a high risk of serious injury or death” from Tasers.

That sounds all well and good until you read the NIJ’s caveat: “… in healthy, normal, nonstressed, nonintoxicated persons.”

This is a particularly crucial caveat, as it is dealing with unhealthy, abnormal, highly stressed and blindingly intoxicated persons where Tasers are most useful.

One anonymous police officer wrote in the Punch after last week’s fatality he had “wrestled a lot of drug-affected people and they don’t give up easily. Often a lot of force needs to be used in order to bring them under control.”

More than half of those tasered in NSW between 2002 and 2007 were identified as having drug or alcohol problems, or having been intoxicated at the time of the incident.

A Taser is effective in such situations because it does not rely on pain, or the threat of pain, to compel compliance. The shock delivered through the darts completely incapacitates its target – the electric current overrides the brain’s control of the body and causes the muscles to spasm involuntarily.

So as a policing tool, it is most useful against drug-affected people who display “superhuman” strength.

And that is also exactly the circumstances where the research suggests Tasers are going to be at their most lethal.

This analytical disconnect allows supporters to claim Tasers are much safer than they actually are in practice.

Yet announcing the rollout of Tasers to general duties police in 2008, the Police Commissioner Andrew Scipione said “if this is but one option that gives the police officers in the streets of NSW some alternative rather than to use deadly force, rather than to shoot somebody and killing them, then this is a good option.”

Even our limited experience in Australia shows Tasers don’t replace firearms. The Western Australian Corruption and Crime Commission found they are a substitute for other tools like pepper spray.

Taser use has increased substantially over the last few years in WA, but firearm use has increased as well. This is a phenomenon overseas jurisdictions have discovered too, and it makes some sense. Depending on the environment and the officers’ training, attempts at tasering someone fail 10-20 per cent of the time. If a situation is truly dangerous, police officers use much more reliable guns.

It has been suggested the use of a Taser could have saved the life of the carjacker who was shot in a Parramatta shopping complex on Sunday.

Perhaps. But if the officers in question believed anybody was seriously at risk, a Taser would not have been their response. There is a reason officers still carry firearms.

Tasers don’t always attach to their target properly. The model in use in NSW can only fire once – if the darts miss, the officer has to reload. And in only 35 of 48 incidents studied by the NSW Ombudsman in 2008 were Tasers described as “effective”.

So yes: Tasers are less lethal than firearms, and in some circumstances would be preferable. But that is not how they are actually used. They are now, according to the WA CCC, the “force option of ‘choice'”. And, given the usual profile of individuals which they are used against, Tasers are a more potentially lethal replacement for other non-lethal methods.

Some reports have said Roberto Laudisio Curti was on drugs when he died.

The problem for Taser advocates is to devise a standard of use which recognises first, that Tasers are most useful when for dealing with highly intoxicated individuals and second, they are at their most deadly when doing so.

Newspapers Tangled In Politics… That’s Yesterday’s News

Every generation thinks the world they are presented with is unique.

Reflecting on the 1819 parliamentary session, the British conservative Henry Bankes regretted that the government had not done more to “restrain and correct the licentiousness and abuse of the press”. Newspapers are “a tremendous engine in the hands of mischievous men,” Bankes wrote.

Bankes’ complaint was old hat even then. There’s not much new in media criticism. When Ray Finkelstein argued the press fosters “inequality, abuse of power, intellectual squalor, avid interest in scandal, an insatiable appetite for entertainment and other debasements and distortions”, he may not have realised how tired a note he was striking.

The great champion of press freedom, Thomas Jefferson, lamented that nothing in a newspaper could be believed. With obvious disappointment, Jefferson wrote “the man who never looks into a newspaper is better informed than he who reads them”. Journalists had welcomed “prostitution to falsehood”.

John Stuart Mill described the London press as “the vilest and most degrading of all trades”. Edmund Burke considered newspapers as a “grand instrument of the subversion of order, of morals, of religion and… of human society itself”.

We could go on. For as long as there has been media there have been complaints that it is biased, unbalanced, unfair, immoral, reckless, unethical, excessively powerful, and untrustworthy. An unhappy Samuel Johnson said too many journalists of his day were political partisans “without a wish for truth or thought of decency”.

So – for instance – it is hard to understand Robert Manne’s claim that in recent years The Australian has “transcended the traditional newspaper role” and become an “active player in both federal and state politics”. Newspapers have always been tangled up in politics. There is no traditional, non-political role for them to transcend.

Manne wrote in his Quarterly Essay that The Australian is a “remorselessly campaigning paper”. Is this description supposed to be damning?

One of the world’s greatest media moguls, William Randolph Hearst, claimed his newspapers “control the nation”. His New York Journal didn’t just report, it participated. It distributed welfare and disaster relief. It launched public interest lawsuits. It even broke someone out of a Cuban prison – “the greatest journalistic coup of this age,” according to the Journal.

Popular mythology reflects Hearst’s self-aggrandisement by crediting his papers with amazing political power as well. But the reality does not reflect the legend. It suits everyone to talk up the power of the media. Proprietors trade on the illusion of clout, and politicians want excuses for their own impotence. Hearst later made a series of failed political runs. Clearly he thought public office a desirable promotion.

Across the Atlantic, the mid-century press baron Lord Beaverbrook famously said he ran the Daily Express “merely for the purposes of making propaganda and with no other motive”.

Beaverbrook was being playful. The occasion for those words was his interrogation by the 1947 Royal Commission on the Press. That Commission had an eerily similar origin to our recent Independent Inquiry. The post-war Labour party was frustrated with press hostility. Labour had won the 1945 election by a landslide. But most papers in that election had editorialised in favour of the Tories. For Labour politicians egged on by the journalists’ union, this was proof the papers and their owners were dangerously out of touch.

Any semblance of historical awareness should lead us to focus our attention not on the repetitive, unchanging complaints about how venal the press is, but on what is genuinely new.
And that is the extraordinary wealth of new information, new sources, and new outlets available to media consumers in 2012; our access to the global press online, social media and ‘citizen’ journalism, the opening up of the journalistic processes, and, even, the democratisation of media criticism.

While the complaints about journalism made today are virtually indistinguishable from those made by Henry Bankes in 1819, the environment in which the media operates is totally different.
The Finkelstein Inquiry was given two tasks. The first was to look how the internet challenges newspaper business models. The second was to look at press standards and quality. One of Finkelstein’s biggest failures was not coherently joining the two tasks together – what the second task meant in light of the first.

Finkelstein’s proposed News Media Council is strikingly similar to the 1947 Royal Commission’s recommendation that British newspapers be governed by a General Council of the Press. (The Royal Commission’s threat of statutory regulation led the industry to form the UK Press Council.)

It’s as if nothing has changed in the meantime.

The Duke of Wellington defeated Napoleon and made it to the office of prime minister – few were more respected and influential than Wellington – but he privately complained to his family that Britain’s real rulers were “the Gentlemen of the Press”.

It is a professional pastime of politicians to complain about newspaper influence and the grubbiness of journalism. We do not have to treat their whining as novel. And we must not believe it is anything more than the traditional antagonism between government and press.

Foreign Investment And The Whims Of Politicians

In September 2009, economics officials from the US embassy sat down with the then-head of Australia’s Foreign Investment Review Board (FIRB), Patrick Colmer.

The record of this meeting is one of the gems in the WikiLeaks diplomatic cables. Colmer confirmed to the embassy that the Government had changed the foreign investment guidelines in order to address “growing concerns” about Chinese investment in Australia.

New guidelines introduced in the second half of 2009 relaxed the mandatory review threshold to make small private investments easier. But, the US embassy reported back to the State Department, by excluding state-owned businesses from the relaxation, the policy was specifically designed to “pose new disincentives for larger-scale Chinese Investments”.

This, of course, was contrary to everything the Government was saying at the time.

The Trade Minister, Treasurer, and Foreign Minister had lined up to claim the changes had nothing to do with China (perhaps they could have let the FIRB know).

So we shouldn’t take on face value the comments made by Craig Emerson in the Australian on Monday, arguing that his Government is eager to attract more Chinese investment.

After the post-Rudd reshuffle, Emerson is now Minister for Trade and Competitiveness. But the FIRB reports to the Treasurer, not the Competitiveness Minister (whatever the hell that is). Furthermore, the Treasurer has a veto over the FIRB’s decisions: he can, and does, ban investments even when the FIRB has recommended they be approved.

In other words, if Emerson wants to open Australia up to Chinese investment he won’t have to convince readers of The Australian, but Wayne Swan, who sets the rules.

Well, ‘rules’ is a generous word. The foreign investment guidelines are infamously inscrutable: Stephen Kirchner of the Centre for Independent Studies had to submit an FOI just to obtain a copy of a speech that merely suggested how the FIRB would treat investments. As Kirchner wrote in February 2010, “Foreign investors cannot be expected to understand a policy that the government itself cannot properly articulate.”

The foreign investment mess is a deliberate creation of government. If Emerson is able to elbow his way into the FIRB, convince his colleagues that investment – from China or anywhere else – is to be greeted not resisted, and then clean up the mess, that would be a great thing.

But don’t hold your breath. Emerson told ABC radio on Monday he was “not so much in the camp of easing” foreign investment regulations.

So while talking about how you want foreigners to put their money in Australia is lovely, allowing them to do so would be better.

There is no reason to believe that foreign investment is a threat to Australia’s food or resource security, our sovereignty, or contrary to our national interest. Even when that investment is made by firms which are state owned.

Investors in Australia have to obey Australian law. And we have a great deal of law, covering everything from competition to environmental standards, all which treats investors equally, regardless of their nationality. That really should be all there is to it.

Every other part of this debate quickly descends into absurd hypotheticals about World War III, outright xenophobia, or trite meaninglessness. People who talk about ‘protecting food security’ should be forced to explain how limiting access to foreign capital would do anything but harm the agriculture sector.

Yes, foreigners may not prioritise Australia’s ‘national interest’ when making business decisions. But so what? Neither will Australians. The great thing about market capitalism is that they don’t have to. As Adam Smith said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. The pressures of competition will make sure resources are put to their most productive use.

And (it seems strange to have to write this) limiting foreign investment means the Australian economy gets less money. Australian businesses that have to sell up will have fewer potential buyers, lowering the final sale price.

But to be fair, the Government’s doublethink on foreign investment is miles better than the outright hostility of the Coalition.

The Opposition wants agriculture to be considered as “sensitive” a sector as defence and the media – and face even greater investment restrictions as a result. This has been an over-riding obsession of the Nationals, and they seem to have been given carte blanche to write the Coalition’s agricultural policy.

For all the contradictions of the Government on foreign investment, the Opposition’s policy would be far, far worse – seriously shutting Australian agriculture off from Asian capital.

Few other areas of public policy are as governed by the whims of politicians as foreign investment approvals. If Craig Emerson would personally like to liberalise it: brilliant. But he’ll have to look at the obstacles within his own Government to do so.

Regulating From A Distance: Finkelstein, Politics, Power

The structure of the News Media Council proposed by Ray Finkelstein is complicated.

The council would consist of a chair and 20 other members. Half of those members are to be drawn from the public. The other half would come from the industry, but they cannot be managers or shareholders. The chair should (of course) be a judge or an “eminent” lawyer.

The council would be appointed, not by parliament, but by a separate, independent body comprised of three senior academics, the Commonwealth Ombudsman, and the Commonwealth Solicitor-General. The three academics would be chosen by a board of university vice-chancellors from across the country.

So that’s one independent body, appointed by another independent body, most of whom will be appointed by a third independent body.

This elaborate composition is supposed to demonstrate maximum impartiality and objectivity.

After all, it would not do to have any whiff of politics near something as sensitive media regulation. The risk of impropriety – or just the impression of impropriety – would be too great.

This allows Finkelstein to write in his report that, beyond its funding and powers, “government should have no role”. It’s a curious claim.

Do not imagine, as his language implies and some have since suggested, that his proposals are just industry self-regulation with a little bite. Finkelstein describes his scheme “enforced self-regulation” – a term drawn from the regulatory theory literature but one which is virtually meaningless.

An independent regulatory agency is the Government. Sure, the News Media Council wouldn’t directly answer to Julia Gillard. It wouldn’t be democratic. But it would have coercive powers, would be funded by compulsory taxation, and its journalistic codes of conduct would be mandatory. This is the very definition of ‘government’. Any limit on free speech it imposed would be a limit on free speech imposed by the state.

The idea behind independent regulatory agencies is simple, and superficially attractive: to get the politics out of policy and compliance. Rather than having politicians oversee the decisions made by regulators – with all the risks of corruption and political manipulation that would create – the agencies are separated from the rest of the government. They are delegated their powers by parliament, but they are not responsible to parliament.

Independent regulatory agencies are relatively new to Australia and Europe. There were virtually no such bodies in the 1960s. Governments of the early and mid-20th century were vast public utilities, owning industries and enforcing cartels.

The untold story of the “neo-liberal” reforms of the last few decades is how privatisation and trade deregulation was matched by an extraordinary explosion of new regulation. And to enforce this huge corpus of new law and regulation, state power was spun off into dozens of independent bodies. The responsibility for regulation was moved out of ministries and into agencies.

Along every measure government has grown. Government has expanded its reach and ambition and brought more activities into its web.

At the same time government has become less democratic. That is a feature, not a bug. Those who call for regulatory independence worry parliamentary representatives could interfere in technocratic decision-making.

It’s a reasonable concern. Politicians are driven by politics. They have political motives, political aims, and use political tactics. They are the last people you’d want in charge of regulation.

Yet we seem reluctant to over think the implications of this change. Certainly, there are other undemocratic parts of government – the courts and the police are the most obvious. But regulatory agencies are one of the fastest growing areas of government power.

And these agencies make government policy. Parliament provides the general legislative framework within which those agencies operate, but leaves them to refine their goals. The regulators are free to pursue their own agendas and set their own direction. In a very real sense, they shape (within the limits of parliament’s legislation) the law of the land.

Outside the democratic spotlight, the independent agencies are highly susceptible to regulatory capture – that phenomenon where special interests manipulate the regulatory process to favour their own interests, rather than the interests of the public.

In Finkelstein’s proposal, the News Media Council itself would write the code by which the media is governed. This would avoid the taint of partisan politics, which is good, but would at the same time have the limits of democratic debate circumscribed by a committee appointed by university vice-chancellors.

It is well to imagine regulations which might, if perfectly and uniformly enforced, change things for the better.

But the choice which modern advocates of greater regulation offer is unappealing: give power to politicians, and risk the corruption and politicisation of public policy, or give power to independent regulators, and allow unelected and unaccountable bureaucrats to govern economy and society.

The Greeks have been rightly upset that their government has been replaced, virtually wholesale, with European technocrats.

As independent regulatory agencies blossom, we might start thinking about what it means for democratic control to be eroded as government expands.

The Decriminalisation (Or Even Legalisation) Of Drugs

It doesn’t take more than a moment of thought to recognise that the rulings on which drugs are legal or illegal are governed by no particular logic.

No theory from medicine or philosophy or psychology demands alcohol, tobacco and caffeine must be legal while marijuana, cocaine, and heroin must be prohibited.

We cannot rely on distinctions about relative harm. Many experts have pointed out that marijuana is on balance less dangerous than alcohol. But this legal discord isn’t unusual. One British police chief controversially stated a few years ago that ecstasy is safer than aspirin.

Nor is the distinction between recreational or medicinal use any help. There are legal and illegal drugs that fall on both sides of that artificial line.

The generally accepted definition of the word “drug” offers no guide to legality either: “any substance other than food which by its chemical nature affects the structure or function of the living organism”.

Whether a drug is illegal is nothing more than an accident of history. Drug laws were not written dispassionately by a panel of the best medical and ethical minds in the world. The laws bear no relation to the damage those drugs could cause or their danger to society – they were not written to minimise harm or protect health.

Quite the opposite: the current schedule of drugs in the Western world has been driven by politics, expediency, prejudice, and sometimes outright racism.

Take, for instance, the prohibition that kicked it all off – the prohibition on opium.

In 19th century Britain, opium was so common as to be part of everyday life. It was an essential ingredient in tonics and pick-me-ups. One writer claimed in the 1870s that opium use “may indeed be said to have reached the height of Fashion”.

Few British conceived of a drug “problem”. Certainly, there were dramatic, gothic tales of addiction and vice. Thomas de Quincey’s novel Confessions of an English Opium-Eater is the most well-known. And there were some distressing, but not representative stories of overdose. But, culturally, moderate drug use was normal.

And the medical establishment largely accepted this. When reporting on the Royal Commission on Opium in 1893, the iconic journal Lancet described it as a “crushing blow to the anti-opium faddists”.

There was however, an “opium problem” in Australia and the United States. The difference was race. In both countries there was a significant Chinese minority who had brought their country’s opium smoking habit with them. The first war on drugs was a proxy for racial politics, not public health.

“Who has not seen the slave of opium?,” the Victorian minister of health asked parliament at the end of the 19th century: “a creature tottering down the street, with sunken yellow eyes, closely contracted pupils, and his skin hanging over his bones like dirty yellow paper.”

The issue here, clearly, was not opium but the Chinese.

Unsurprisingly this attitude towards opium was hard to separate from the belief Chinese migrants were undercutting Australians in the employment market. The visceral hatred of opium-smoking was the manifestation of resentment about labour competition.

It was the same in the United States. As the British writer Christopher Snowdon points out in his excellent new book The Art of Suppression, “if the government could not get rid of opium-smoking, it would get rid of opium-smokers”.

The 1862 Californian law Protect Free White Labor Against Competition with Chinese Coolie Labor and Discourage the Immigration of the Chinese into California Act is self-explanatory.

One of the most prominent American anti-opium campaigners, Dr Harry Hubbell Kane, openly argued that those concerned about job competition should focus their animosity on Chinese drug use.

It is easy to tell a parallel history of marijuana prohibition, which was overwhelmingly used by Hispanics and African-Americans.

And in his book, Snowdon details the tabloid hysteria of recent times which has led to laws against “designer” drugs – synthetic concoctions which are better described as second-rate substitutes for safer, purer, and already prohibited drugs.

Do the political origins of drug laws matter? Absolutely.

The first international treaty on drug control was signed in January 1912. The war on drugs is 100 years old this year.

This century-long war has definitively and undeniably failed. There is widespread belief in expert circles that the world needs to move towards decriminalisation (or even legalisation) if we want to minimise the harm of drug abuse.

But the biggest cultural barrier to such reform is the current status illegal drugs have. In the sort of circular reasoning that only popular discourse can manage, the prohibition of drugs is mostly justified by their pre-existing legal status. Why are certain drugs prohibited? Because they are illicit drugs.

But that status has been set by politics and moral panics, not dispassionate evidence-based risk assessments. Drug prohibition carries the legacy of the ugly politics of the past. Once we realise that, we may start to rethink the justice of a war that is, in truth, not against drugs, but against drug users.

O’Farrell’s Campaign Finance Reforms Are Abominable

As a general rule, any government that changes the rules of elections and political campaigns should be looked upon sceptically.

It’s too easy to dress up a base attack on your opponents in democratic frills.

But even with those cynical expectations, the changes to campaign finance laws in New South Wales are abominable.

The Election Funding, Expenditure and Disclosures Amendment Bill 2011, which passed the NSW parliament last week, is transparently designed to defang the union movement and defund the Labor Party. The bill bans donations to political parties from any organisation, allowing only those from individuals, and maintains the cap on donations from any individual at $5,000 a year.

In one fell swoop, there goes the Labor Party’s reliance on union affiliations.

The Government might argue that if Labor is hurt by this reform, so is the Coalition. Corporations are no longer able to donate either. In Premier Barry O’Farrell’s words, the reform will create an “equal and level playing field for all”.

But the key dynamic threatened is not between Labor and the unions, or between the Coalition and the corporate sector, but that between opposition and government.

Restrictions on donations hurt the party out of power. It is expensive to compete with the soapbox of incumbency. Stemming the flow of money favours the government.

Compounding this, donors like to back winners. And Labor, reeling after a historic loss, is bound to be a loser for the foreseeable future.

Yet that sort of crude political calculation is par for the course when it comes to donations reform. The truly obnoxious part of the NSW Government’s bill is how it restricts third party organisations from conducting political campaigns.

Any third party involved in “promoting or opposing, directly or indirectly, a party or the election of a candidate or candidates, or for the purpose of influencing, directly or indirectly, the voting at an election” falls under the restrictions and can now only be funded by individuals.

In a way you can understand why the bill does this. Donations reform in the United States has demonstrated when you cut off funding to political parties, money will flow into other campaigning bodies to compensate.

But the NSW Government’s solution to this problem is to restrict the ability for organisations to participate in public debate (of course, this would really hurt the unions).

The Premier has repeatedly said these laws will not affect “genuine issues based campaigns” and “genuinely independent” third parties. That’s not very comforting. People are free to advocate policy as long as they do not hint at support for a political party to implement that policy?

And the distinction between genuine and political is not very clear. Indeed, as Andrew Norton of the Grattan Institute pointed out in his submission to a parliamentary inquiry into the bill, NSW election law now draws some awfully fine and complicated distinctions between what political expression is free, and what is regulated.

The reforms intend to restrict participation in political activism solely to individuals, rather than corporations, unions, and peak bodies. Is our right to freedom of speech and participation rescinded when we form groups? Surely not. But that is the basic assumption behind the NSW reforms.

Yet there is a deeper philosophical disagreement here, and it concerns how we understand “democratic” political debate. Broadly, there are two models.

The first imagines democratic debate as a free-for-all. People and organisations should be allowed to say and advocate whatever they want, support whoever they want through words or donations, and argue their case as publically as they can. The rough and tumble of such a debate is natural – the sign of a healthy liberal democracy sustained by a broad freedom of speech.

The second model argues that governments should “manage” the debate. The parliamentary inquiry said the reforms sought to “promote fairness and equality”. As Kristina Keneally said back in 2010, “those with the most money have the loudest voice and can simply drown out the voices of all others”. In the name of democracy, loud voices need to be quietened.

But this second model is puzzling. Free debate informs the decisions made by voters to elect representatives and change governments. Free debate is at the heart of democracy. So what right does a government have to manipulate that debate? How can it legitimately suppress and restrain participants that it has determined are excessively loud, or decide what constitutes a “genuine” – rather than political – campaign?

A government’s legitimacy requires voters to make a free choice about their vote. That choice is not free if the government is managing how those decisions are made – preventing some third parties from endorsing and supporting candidates. Andrew Norton has noted that the losers from these reforms are community non-profits. Corporations don’t rely on donations to run political campaigns.

It’s an appealing idea to “get money out of politics”. But legislative attempts to do so have invariably punished oppositions, entrenched incumbents, and limited political participation. The O’Farrell Government’s reforms are just an egregiously bad example.

Behavioural Economics: An Excuse To Tax And Regulate

Few areas of study are as fashionable as behavioural economics – the integration of psychological factors into economic analysis.

No wonder. Behavioural economics seems tailor-made for public policy. If people do not act rationally and do not pursue their own best interests, then perhaps markets aren’t that good. From there, the case for government intervention seems pretty obvious.

Two of Australia’s left-wing think tanks, the Centre for Policy Development and Per Capita, have released reports specifically on the implications of behavioural economics. And it is a rare paper from the Australia Institute which doesn’t discuss how market actors are riddled with biases, psychological flaws, and irrationalities. Therefore, they all conclude, governments need more power. There’s hardly a regulation or tax that hasn’t been justified by reference to the behavioural economics literature.

But the public policy implications of behavioural economics are more interesting than that.

The study of behavioural economics has largely focused on the irrationality of participants in the market. Yet there are two sides to policymaking. Regulators, bureaucrats, and politicians are just as affected by psychological ticks as consumers and businesses.

A newly published paper in the Journal of Regulatory Studies, “Behavioural economics: implications for regulatory behaviour” makes the obvious point: if the claims made by this field are right, then it should make us think just as sceptically about government action as consumer action.

After all, it would be no good to destroy the myth of Homo Economicus just to replace it with an equally pernicious myth of Homo Bureaucratus – a clearheaded and efficient policy designer.

There is no reason to believe that someone moving from the private sector to the public sector suddenly becomes more rational and unbiased. The dispassionate, rational economic actor might be a convenient fiction dreamt up by modellers and theoreticians, but then so is the dispassionate, rational, unbiased policymaker.

The paper’s authors, James C Cooper and William E Kovacic, look specifically at anti-trust law, where behavioural economics is commonly used to study business decisions to enter or exit markets, to merge with other firms, or split. Cooper and Kovacic argue that the bureaucrats who regulate those decisions are likely to have biases that undermine the effectiveness of government intervention.

Regulators are like the rest of us. They are over-confident, thinking they can understand complex behaviour. Hindsight bias leads them to believe events are more predictable than they are. And, unsurprisingly, they are driven by action bias – a tendency to favour interventionist solutions when faced with a problem.

In fact, regulatory biases could be worse than market ones. Behavioural economics tells us that irrationality is everywhere. But the marketplace provides firms and consumers with instant or near-instant feedback. In a competitive market, psychological bias can lead to failure or loss of market-share. With such feedback, market participants will change their actions. Make a mistake, lose money… do better next time.

By contrast, regulators receive little feedback at all. They operate in a political world, not an economic one. Regulatory or bureaucratic error is hard to pin down. It’s harder to allocate blame for errors. It’s even harder to quantify the costs of those errors.

Market participants learn from their mistakes. But regulators are completely isolated from the consequences of their decisions, so it’s much harder for them to learn.

Compounding that, confirmation bias – where the introduction of new, ambiguous information leads to the unjustified hardening of previous conclusions – may steer regulators and their political masters to believing a policy has been a triumph when it has not.

Indeed, even what constitutes success or failure in the public sector is debatable. Few policies have defined criteria whereby we can determine if they have succeeded or not.

In the Centre for Policy Development’s 2008 paper, You Can See a Lot by Just Looking: Understanding human judgement in financial decision-making, Ian McAuley rightly points out that humans are susceptible to the fallacy of sunk costs.

“We find it very difficult,” McAuley writes, “to make decisions solely on the basis of future costs and benefits, particularly if it means implicitly admitting that we have made poor decisions in the past”.

This is true for private actors, but is especially true for governments. Old bureaucracies never die – they just get renamed. Subsidies survive long past their use-by date. And taxes are stubborn things.

So far, the policy debate around behavioural economics has led with ideological conclusions – apparently offering those who believe governments should tax and regulate more a cutting-edge reason for doing so.

But if we want to fully understand the implications of behavioural economics, we’ll have to recognise that the field offers an even harsher critique of government than it does of markets. And the safe money says policy makers and bureaucrats will not enjoy the spotlight on them.

Farmers Feeling The Squeeze Of Marketplace Realities

We are a pessimistic bunch. Apparently no-one will win out of the supermarket price wars.

The farmers will lose: Nick Xenophon claimed that “short-term gain will be followed by long-term pain for farmers – and, ultimately, consumers.” Bob Katter said the price of cheap food will be “the broken backs of our farmers.”

Consumers will lose: Supermarkets are “businesses, not benevolent institutions,” warned the self-styled consumer group Choice last week, “we may see longer-term impacts that work against consumers’ interests.” A writer in the Courier Mail claimed that “we should not be delighting in the promise of lower prices”, in a column titled “We’ll pay for this price war”.

Even the supermarkets will lose: market analysts were sternly telling the business pages that “‘persistent acute food deflation posed a risk to this financial year’s margins.”

One news story even initially reported “supermarket giants have been given the green light to continue with aggressive discounting, with worse to come”. Yes, that’s right: “worse to come”.

If you ever needed a demonstration that producers have a lock on the public debate, look no further.

Declining prices and aggressive competition is an absolute, unbridled, unvarnished good for consumers, yet we only seem to hear how much discounting could hurt.

Sure, supermarkets should be able to defend themselves.

But our apparent sympathy for producer interests over consumer interests has – and has had – some terribly unfortunate consequences.

One analyst described to RN’s PM program what he imagined was the consequences of price competition:

The very consumers that they’re selling their products at lower prices to are employees of the companies that are going broke because they’re not making enough money selling to Coles and Woolies.

In other words, a vicious cycle of cheap goods where we all end in poverty.

That is a complete fantasy. If buying more for less led to economic collapse, we’d have no economy to speak of anymore.

An alternative theory is that consumers are bringing enormous competitive pressure on supermarkets to reduce the price of grocery staples, which the supermarkets respond to by trimming administrative fat, reducing margins, and getting better deals out of suppliers.

You know, a competitive market working in exactly the way a competitive market should.

It’s exactly the sort of aggressive pricing dynamism that we want from the marketplace.

But producers don’t like that sort of dynamism and competition. Satisfying consumers is stressful – it’s a never-ending process of innovation, refinement and creative destruction. Markets are uncomfortable and uncertain. And competition is destabilising for established firms.

No wonder farmers don’t like the pressure being applied from the retail end.

But why should we give their complaints such credence?

Adam Smith wrote in his Wealth of Nations,

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

We work so we can eat. We labour so we can relax. We don’t consume in order to produce, we produce in order to consume.

Smith continued to say that this “maxim is so perfectly self-evident, that it would be absurd to attempt to prove it.” Apparently it is not.

Protectionism is based on the belief that producer interests are more important than consumer interests. Australia was the richest country in the world at Federation. Ninety years of protectionism later, we had dropped to 15th.

When Australia embarked on economic liberalisation, it was a reorientation of the economy towards consumption.

But we did not similarly reorientate our political culture. The howling of rent-seekers after such an unambiguously pro-consumer price cut has been deafening, and reported uncritically.

There’s an important reason why producer interests dominate the public and legislative debate. Only producers have enough incentive to lobby in their interests.

The benefits of producer-favouring regulations are concentrated. Producers who believe they can get a commercial advantage out of regulatory protection have an enormous incentive to lobby for new laws. Farmers feeling squeezed by the demands of the supermarkets email their local MP and call sympathetic journalists.

There is no equivalent dynamic on the consumer end. Who would spend days, or weeks, or months, of their life defending ever-so-slightly lower prices? The benefits of cheap goods are dispersed across all consumers.

When Adam Smith was writing in the 1770s, his targets were the mercantilist states of his day. In the 18th century, governments had created cartels and monopolies in order to dampen “troublesome competition” and deliver political favours.

But troublesome competition is what has made us in the 21st century wealthier than at any other time in history.

Yes, consumers always demand that producers make things better and cheaper. And not all firms can meet those demands. This is exactly how the system should work.