Please, no more superannuation

Here’s something that should be in the budget but won’t be: an end to the outrageous assault on our wallets that is ever-increasing compulsory superannuation.

I am hearing that it nearly was in next week’s budget, until the government chickened out.

I’ve never been able to see what most people see in boosting compulsory superannuation, although I certainly have been able to see what those who stand to benefit see in it. They are people who work in the finance industry and the trade union movement and the employer organisations that would get an extra $10 billion a year of our wages to play with, if, as scheduled, compulsory contributions climb from 9.5 per cent of our salaries to 12 per cent in the space of a few years.

They would be doing more than playing with our wages. They’d be collecting hundreds of millions of dollars more in fees for doing it, for making essentially the same investment decisions as they are making at the moment.

But think what it would mean for the rest of us, for the vast bulk of the population who (after a five-year phase in period) would have an extra 2.5 per cent of each year’s salary taken from us and put somewhere else. If we were told we were about to get a tax increase of that size (and in essence it would be a tax increase) we would be enraged. All the more so because the phase-in will be brutal.

For more than a decade the compulsory super was stuck at 9 per cent. The Henry Tax Review examined whether that was enough and found that it was. It recommended that compulsory contributions “remain at 9 per cent”.

It was an unwelcome recommendation for a Labor government that had already decided to lift the rate beyond 9 per cent, so it ignored it. Deceitfully, it announced the lift to 12 per cent on the day it released the Henry Review, giving the impression it had endorsed it. Given everything else that was announced that day, including the mining super-profits tax, Henry’s explicit recommendation not to do what the government was determined to do slipped under the radar.

Henry’s thinking was that while locking away an extra 3 per cent of wages would probably increase retirement incomes, it would do it mainly by further impoverishing people who were already hard up.

Well-off Australians already save much more than their compulsory super contributions. Indeed, even excluding housing, most of their assets are held outside super. They’ve no problem cutting back on other savings in order to negate the effect of an increase in compulsory super, just as they have done when it’s been increased in the past.

Less well-off Australians are trapped. Saving little outside super because of more immediate demands, such as rent or mortgages or raising families or putting themselves through university, they are forced to accept less take-home pay than they would have got at the times in their lives when they need it most in return for the promise of more when they were retired and mightn’t need it as much.

And don’t for a moment think those compulsory contributions don’t come from pay. All manner of people tell me they don’t, but they are not the people who know. Bill Shorten put it this way when spruiking the planned increase from 9 to 12 per cent: “What will happen is that superannuation, the increases to superannuation, will be absorbed as part of people's pay rises.” Employers forced to pay more of their employment bill in superannuation will necessarily pay less of it in wage rises.

Which didn’t matter much for the first two increases. The first, from 9 to 9.25 per cent, was small and seems to have cut wage rises from about 3 per cent to 2.75. The second, a year later, was the same size. It seems to have cut wage rises from about 2.4 per cent to 2.2.

But the next increases were to be gargantuan. Labor’s plan doubled them after the first two, lifting the annual jump from 0.25 to 0.5 percentage points, and it was set to do it at a time when wage rises were sliding to an all-time low. Had that next increase of 0.5 points happened it would have cut wage growth from about 2 per cent to an impossibly low 1.5 per cent, sending buying power backwards.

In its first budget the Abbott government baulked and froze the rate at 9.5, later extending the freeze until 2021. It’s that 2021 increase from 9.5 to 10 per cent which will appear in the four years of estimates to be published in Tuesday week’s budget. (It appears in the budget because increases in compulsory super cost the budget money, taking income out of highly taxed wages and putting it into more lightly taxed super funds.)

It’s why Tuesday week was going to be the perfect time to abandon the schedule of increases for good, an opportunity I’m told the budget cabinet has passed up. It might have taken the view that it shouldn’t fix up Labor’s mess for it. If Labor wins the next election, it will have to either wind back its schedule itself or risk sending living standards backwards.

If compulsory super stayed at 9.5 per cent, anyone who wanted to would still be able to put away extra and anyone who couldn’t wouldn’t have to. We could hang onto our money.

In The Age and Sydney Morning Herald

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It's time for sweetest tax of them all

Never before has a tax been such an instant success. I am talking about what happened in Britain last Friday. That’s when new so-called sugar tax sprung into life, with much of its work already done.

The whole idea was to cut the consumption of sugar, something we have just as much need to do here, given that our rates of obesity are on a par with those in Britain - an outrage that will prevent many of us living long lives.

Up to one third of us are obese, another third are overweight. Thirty years ago it was 10 per cent. If you don’t think that’s shortening lives, ask my colleague, Peter FitzSimons. He says everyone he sees aged over 75 is thin. Their heavier contemporaries are dead.

Announcing the sugar tax in the 2016 budget, Britain’s (Conservative) Treasurer George Osborne said five-year-olds were consuming their entire body weight in sugar every year.

A single can of cola has nine teaspoons of sugar in it. Other drinks have 13 teaspoons - more than double the recommended daily intake.

“I am not prepared to look back at my time here in this parliament doing this job, and say to my children’s generation: 'I’m sorry, we knew there was a problem with sugary drinks, we knew it caused disease, but we ducked,'” he said.

His tax was clever. It was to apply only to soft drinks, and it wouldn’t apply for two years, until 2018. It would be set at three different rates.

The rate would be zero for drinks with 5 grams or less of sugar per 100 millilitres, meaning some would stay tax-free, including Schweppes Lemonade, Tesco Lemonade and Lucozade Sport. It’d be heavier for drinks with between 5 and 8 grams of sugar. Among them were Fanta, Sprite and Dr Pepper. And it would be high for drinks with more than 8 grams, such as Coke, Pepsi and Red Bull.

His hope was that the drinks above each threshold would cut their sugar until they were below it. It’d cut their tax from 24 pence per litre to 18 pence, or from 18 pence to nothing. They had two years in which to do it.

Within months, Tesco said it would reformulate its entire range to escape the levy. Lucozade Ribena followed, also for its entire range. It meant halving the high sugar contents of Lucozade and Ribena.

Then Sprite halved its sugar content, Fanta fell from grams 7 to 4.5, and 7 Up from a scary 11 grams to 7 grams.

By the time the tax arrived last week, Britain had more than halved its initial estimate of what the tax would raise, cutting its estimate for takings in the first year from £520 million to £240 million ($439.6 million to $952.5 million).

The government-owned Behavioural Insights Team reckons around 750 million litres of drink has been reformatted, which would save a welcome 30,000 tonnes of sugar per year, all before day one.

There’ll be more change now the tax is in place. Retailers will more prominently display the cheaper drinks that are lower-taxed, producers will shift their marketing to products they are able to sell for less, and customers comparing prices will be more likely to pick the cheap ones. More manufacturers will cut their sugar content as a result, and even those that don’t will sell increasing amounts of their zero-sugar products and less of those with sugar.

After a while, the sugar tax might raise very little. Which was the idea. The universal truth about tax is that people don’t like paying it. It can be put to good use.

Australia did it with petrol. From 1994 we more heavily taxed leaded petrol, pushing up the price by 2 cents per litre to encourage drivers to switch to unleaded. We do it with tobacco, and, imperfectly, with alcohol.

What’s great about so-called sin taxes (or "Pigovian taxes") is the double pay-off. Taxing more the things we want less of, including things that kill people, allows us to tax less the things we want more of, such as jobs, income and savings.

Julia Gillard did it big-time in 2012. Her carbon tax raised $14 billion. She used it to pay out$14 million in income tax cuts, grants to industries and increases in pensions and benefits. By taxing "bads", she was able to cut taxes on "goods".

Electricity emissions slid during those two years, then climbed again after the tax was axed.

Prime Minister Malcolm Turnbull gets the idea, at least in theory. He said so during the last election.

“All of us know that if you want to have less of something, you increase the tax on it,” he said, complaining about Labor’s plan to boost the capital gains tax. “That is how health organisations justify and urge governments, as we are doing, to increase the tax on tobacco. Labor clearly wants to have less investment.”

What about less obesity? If we designed our sugar tax like Britain’s, we could cut consumption from the day it came in. And we could use what we raised to fight obesity in other ways, or to help cut income tax.

We would be joining 30 or so countries already doing it. The Grattan Institute says our sugar industry would barely suffer. It exports most of what it makes, and it would export more if it sold less here, without much further depressing the global price.

It’d be popular too, if you believe the opinion polls. And it might actually do some good.

In The Age and Sydney Morning Herald

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Why your chocolate tastes better

That chocolate you’re opening, it’s better than it used to be.

To most of us, there are only two types of chocolate: that glorious melt-in-your-mouth confection made with cocoa butter, and the lesser, waxy, so-called "compound" chocolate made with vegetable oil, about which I would rather not think. And please, don’t get me started on carob.

What most of us probably don’t know is that the main ingredient grows on trees, and generally only on small collections of them.

Ninety eight per cent of the cocoa pods used to make chocolate are grown on small farms where they are also harvested and fermented in a process that can’t be easily mechanised.

“They grow from the trunks and the branches, they don't grow from twigs,” says Fuzz Kitto, a co-ordinator with the anti slavery campaign Stop the Traffik. “You’ve got to cut the pods off very carefully, so as not to damage the nodes where they join the trees, otherwise they won’t grow again.”

The pods look like small footballs. Inside each is white pith and then a sack, or "placenta", which holds the seeds in a special fluid.

At the farm the seeds and fluid are smeared on banana leaves on tables that slope downwards so the fluid can drain off. Then banana leaves are placed on top. The leaves and the fluid provide the enzymes that are needed for fermentation, a process that takes three to five days. Afterwards, the seeds are taken to racks in a central point in a village where they are dried.

Most of it happens in Côte d’Ivoire (formerly known as the Ivory Coast) and neighbouring Ghana in west Africa. Between them they account for two thirds of the pods harvested worldwide.

From then on, things get big. There are only three big processors, and they sell to only six big manufacturers: Mars, Mondelez (which we know as Cadbury), Nestle, Ferrero, Meiji of Japan, and Hershey.

The processors crush and roast the beans to create liquor, out of which comes cocoa butter and cocoa powder. The more of the butter that’s included in the final product, the better it tastes. But there’s a lot of demand from other users of cocoa butter, including the cosmetics industry which likes it because it is so hydrating.

It’s a world away from the dirt poor farms that need boys, ideally aged 10 to 16, who can climb and have nimble fingers. Many buy their boys from labour agents who truck them in from nearby Burkina Faso and Mali. They are lured with promises of a better life, then locked up, not paid and made to pick and ferment pods with no way out, often not even knowing which country they are in.

How do Cadbury, Nestle, Mars and Ferrero feel about it? Awful. But it’s only in the past few years they’ve been doing a lot about it. Stop the Traffik’s first Australian breakthrough was with the Adelaide family-owned manufacturer Haigh’s.

Campaigner Carolyn Kitto says Haig’s was at first suspicious. Then, as it learnt more and discovered it was possible to work out where its beans came from, it became excited, and then proud. “Every time we turned up, the executives wanted to tell us more about what they had done,” she says. “It’s become about their values.”

After complaints and the threat of legislation in Europe, which is the world’s biggest chocolate consumer, all of the big manufacturers got together with governments, campaigners and farmers at the world cocoa conference in 2012 and drew up plans of action.

Nestle is aiming for 100 per cent slave and child-free labour. It is already up to 37 per cent. It is also funding child schooling, clean water and sanitation programs and has commissioned the international Fair Labor Association to audit farms at random.

When an early visit found slavery, fearful Nestle executives invited Kitto in to ask how she would react. She told them she would congratulate them because it meant their systems were working. “If you are not finding some slavery, you are not looking,” she said.

Mondelez is up to 35 per cent slave-free beans. It is funding community development plans in five communities. Mars might be up to 80 per cent, although it is only claiming 50 per cent, Ferrero believes it is up to 75 per cent, and Lindt operates independently of the big processors and tracks 90 per cent of the beans it buys directly from farmers and roasts.

The only Australian holdout is Darrell Lea, which has been in receivership and has just changed hands again. It hasn’t yet said where its beans come from.

Even better, Australia is about to get a Modern Slavery Act, recommended unanimously by a parliamentary committee. Every business above a certain size will be required to know and report where its raw materials come from. It'll leave a better taste.

In The Age and Sydney Morning Herald

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Australia. It depends on where you live

Woody Allen was right when he said 80 per cent of success was showing up. But only for some of us.

If you are born in Blacktown in Sydney or Broadmeadows in Melbourne, showing up probably won’t do. But showing up is about all you’ll need if you are born in Pennant Hills or Glen Iris.

It’s a shocking thought, and until now there’s been no evidence for it. It is well-known that people who are born in poor suburbs do more poorly later in life, but until now it has been thought that it's because of who they are rather than where they are.

It’s been hard to disentangle the two. Families with low aspirations and little education tend to congregate in the same suburbs. That their children do poorly could well be because of them, rather than the families and conditions that surround them.

Now Australian National University researcher Nathan Deutscher come up with an ingenious way to seperate the them. He got the Tax Office to match taxpayers born between 1978 and 1991 to their parents using the home addresses they first quoted when they applied for their tax file numbers. He compared their incomes at age 24 to those of their parents and also to the parents of their peers in the same postcodes.

Then he got clever. Some of those parents moved home while their children were growing up, to suburbs more than 15 kilometres away.

He examined what happened to the eventual incomes of the children who moved compared to the eventual incomes of the children with similarly well off parents who stayed put.

Moving out of a poor suburb helped them even when their parents’ incomes didn’t change. Unsurprisingly, it helped them more the earlier they left. But here’s what is surprising. When they moved didn’t matter much before the age of 11. Nor did it matter much after the age of 20. It mattered an awful lot in the teenage years. Every year that a teenager delayed moving to a higher income suburb cost them 4 per cent of the eventual boost to their income.

It’s as if it’s our teenage years most determine who we are, rather than the earlier ones or the later ones. That’s certainly how it is for our taste in music, and also for our ability to learn languages when we move between countries. Every teenage year delayed matters a lot more than each early childhood year delayed.

Deutscher is quick to point out this doesn’t mean our early childhood years aren’t critical. It’s just that there’s less variation in them suburb by suburb, after taking into account income. Parents that move don’t deliver particularly different early childhood experiences.

What is it about location that matters so much during our teenage years? Roughly half of it is because it’s where we live in those years that will most likely determine where we look for a job and try to settle down. It's where our friends are. It’s also where we are likely to develop the connections that will help us look for that job. It’s why Adelaide turns out to have been a less than good place for many to have spent teenage years. It’s also why during the mining boom Western Australia and Queensland turned out to be good places, although less so afterwards.

Much of the rest of it is to do with our peers – our friends in our teenage years. Deutscher gets at this by comparing the income of their parents (actually the income of all parents of children born in the same year in that postcode) to eventual personal incomes. The poorer our friends' parents, the poorer we will be ourselves. Naturally, the income of our parents matters more. But the income of our friends' parents matters quite a bit. It has about a quarter the weight of the income of our own parents.

Added to that would be the impact of our teachers, what’s available in the community and what seems possible in the community. All of this might be something many parents already know, which might be why so many of them spend so long obsessing about bringing up children in the right suburb. And it might be what pushes up prices in those suburbs and makes the distinction between high priced and low priced suburbs more extreme.

As would intermarriage. The Productivity Commission reported a few years back that two thirds of Australia’s high earners were married to other high earners. A decade earlier it was half.

We are increasingly less likely to move out of the circumstances in which we are born, unless our parents up stumps and move, which is itself increasingly difficult.

Australia is a far less equal place than it was in the 1980s. But that’s not all. There’s also less equality of opportunity. Just showing up is just about good enough for some, nowhere near good enough for others.

In The Age and Sydney Morning Herald

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There's a case for immigration, and it's not about us

It’s great that we are talking about immigration. But could we talk about immigrants as well?

I’ve never met one who wasn’t delighted to have made it here.

To conduct the debate as the ABC did on both Four Corners and Q&A on Monday night, as if it was only about us, leaves out half the picture.

People come here to get a better life, and they generally do. Those who don’t, leave.

If we can lift the living standard of people who would like to come here, without much harming (or even while enriching) our own, why shouldn’t we?

Here’s a quick run-through of some of the things that have been said about the harm immigration is supposed to have done to our prosperous country.

Tony Abbott says it has held down wages. Indeed, “It is a basic law of economics that increasing the supply of labour depresses wages.”

It would have held down wages, had it not lifted the demand for labour at the same time, which is what happens when the population grows.

To see that this is true, imagine an Australia with only half its present population. Would wages be much different? Or imagine an Australia with the population it has now, but cut in two along a line separating Victoria, South Australia, Western Australia and Tasmania from NSW, Queensland and the Northern Territory. Each half would have roughly half Australia’s present population, but would its wages change much?

The Productivity Commission examined every piece of international evidence it could and found only “small (either positive or negative) effects”. Its own Australian modelling found only a “negligible” impact overall, but allowed for the possibility that immigration would make some workers worse off and some better off.

In the United States, leading immigration economist George Borjas has found persuasive evidence that it’s the least skilled who have been made the worst off and the most skilled the best off. But when Australian National University economists Robert Breunig, Nathan Deutscher and Hang Thi To set out to replicate his work in Australia they found no such thing. Which isn’t surprising. The US immigration program is skewed towards low-skilled arrivals, while the Australian program is skewed towards the high end.

They examined 40 different skill groups and found “no evidence” that immigration damaged the labour market outcomes of pre-existing Australians.

“If anything, there is some evidence for small positive associations,” they wrote.

It shouldn’t be surprising. Migrants bring with them, or make, money, which they use to buy houses, start businesses and educate their children. They employ people.

What if we don’t want all that activity? What if we want a more peaceful life with fewer traffic jams and shorter commutes?

It’s a future we would be denying would-be migrants, who often come from places far more crowded than Australia. That there are places worse than Australia suggests that Australia isn’t yet populated enough compared with the rest of the world. Anyone who gets out of our cities and looks at our coastline will have to agree.

The "problem" is that immigrants want to settle in cities, and who could blame them? (Although it must be acknowledged that many settled in Western Australia during the mining boom at a time when existing Australians would not). They make our existing cities bigger rather than help us create new ones.

Building a new city is hard. Australia has only successfully done it once, in Canberra. But the second-best options aren’t bad.

This month’s Grattan Institute report says it wouldn't be that hard to build all of the extra homes we will need within our existing cities, so long as we get used to the idea of living closer together. It would bring us benefits. Berlin, Rome and Toronto are each more densely populated than Sydney and Melbourne, and easier to get around. Dense populations can make proper public transport worthwhile.

Sydney is leading the way, creating dense corridors along major roads, while leaving the suburbs surrounded by those corridors untouched. Canberra is doing it by stealth. Each ACT suburb has within it randomly distributed "Mr Fluffy" houses, contaminated by loose asbestos. The ACT government has bought each one, demolished it and resold the site on the condition that it can be used for multiple dwellings, whatever the zoning. Every suburb, leafy or not, will get used to denser living. When the existing residents sell, they too will want the right to have their blocks divided.

We’ve a right not to choose this future - one where, with good planning, there’s a chance our cities will work. We’ve a right not to be confident enough in our governments to do it. But only up to a point. The rest of the world has granted us a licence to use this continent on the implicit understanding that we populate it.

Most of the people we are populating it with are like us. They are us. One in every four of us is a migrant. Almost one in every two lives in a migrant family. We already allow New Zealanders free access. The biggest gyrations in our population result not from the actions of others but from locals either changing how they return home or leave. There’s no longer an us and them.

In The Age and Sydney Morning Herald

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Meet the MP who actually wants to know what works

A house in the Canberra suburb of Narrabundah had suffered multiple burglaries. For the sixth time someone had broken in through a window and taken things from the bedroom of a nine-year-old boy.

This time the offender was caught red-handed, with a pillowslip full of the Lego – he was the nine-year-old boy from next door.

When police officer Rudi Lammers arrived, he decided not to follow the usual procedure. Instead, he sat down with the two nine-year-olds and asked the victim, “What do you think we should do?”

The reply surprised him. The victim tipped out half the Lego, and gave the rest to the thief. Then he said, “Any time you want to play Lego, come over. But can you come through the front door? Because Dad gets really cranky when you come through the window.”

Decades later, Lammers was approached by a man in a Canberra club who whispered in his ear, “Do you know who I am? I am the Lego boy. That experience changed my life.” He had stopped stealing and gone on to run a construction company.

Without realising it, Lammers had been practising what’s known as ''restorative justice''. We know that it works better than the other kind, not just because of that incident (''data'' is not the plural of ''anecdote'', Labor politician Andrew Leigh reminds us in the new book that recounts the story) but because restorative justice has been trialled repeatedly in random experiments.

Whenever offenders have been randomly assigned either to arrest or meeting the victims, those assigned to meeting the victims have been significantly less likely to commit further crimes, even violent crimes.

Except in the family.

In the Minneapolis domestic violence experiment, police were given a special pad of report forms which listed three kinds of responses: arrest, send the perpetrator away from the home for eight hours, or provide advice. The three responses appeared in random order throughout the report pad. Where the injury wasn’t serious, the police had to do what the pad said.

The results were crystal clear. Households where the perpetrator had been arrested experienced half as much violence in the following six months as those in which the perpetrator had been temporarily removed or given advice. Arrest became the standard response.

Originally an economics professor, Leigh might well have the least number of preconceptions of anyone who has ever sat in parliament. On teenage sex, he reports that virginity pledges don’t work. On smoking, he reports that paying people to stop does work. Vitamin tablets and fish oil are of no use to healthy people, so Leigh has given them up. None of these findings was obvious, and none would have become apparent were it not for random trials, which Leigh wants to use when in government.

Rather than introduce co-payments for bulk-billed visits to the doctor, as Tony Abbott wanted to do, we could introduce them in one state, or postcode, and see how over-servicing and under-servicing or visits to emergency departments in that location change. Or we could make use of the giant Rand health experiment, in which Americans were randomly assigned to free visits, cheap visits and expensive visits. It found that co-payments cut visits, but that they do it indiscriminately, keeping away genuinely ill people just as much as the not so ill.

Advertisers do it all the time, running test campaigns in small states before going national. Pharmaceutical companies do it. By experimenting with different colourings in random trials they know that yellow tablets work best at fighting depression, white ones at reducing pain, green ones at fighting anxiety and blue ones at sedation.

Surgeons do it. But to ensure the experiments make sense, they have to actually perform surgery - sham surgery - on knees and sometimes brains, where people get put under anesthetic, cut open, not operated on, and stitched back together again. Three-quarters of the time those who get sham surgery improve just as well as those who get the real thing.

There are ethical problems, to be sure. But they are often overstated. My economics lecturer told me of an early researcher who reported the results of a study in which he had withheld treatment from randomly chosen patients. He displayed a graph that showed those who missed out died sooner. Amid uproar and suggestions he had blood on his hands, he apologised to the conference and turned the graph the right way around. By withholding treatment he had prolonged their lives.

Politicians are forever promising programs they say are ''evidence-based'', but they are usually less than keen on conducting the experiments needed to obtain that evidence. Leigh is different, which means that in government he’ll probably be different. He used randomly-generated advertisements to pick the title of the book. Randomistas: How Radical Researchers Changed our World got the most clicks.

In The Age and Sydney Morning Herald

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Welcome to university, the university of life

Never have I been more excited than on my first day at university.

Orientation week, which is about to begin throughout the nation, opened a door to an entire world of courses, clubs, concerts, films, friends and beautiful facilities in which to have endless fun and be treated like an adult without ever having to act like one.

Ditching the idea of science, my original first choice, I chose drama, because I fancied myself as a producer of radio plays, politics, because I was obsessed with it, and economics because there was so much about it in the papers, and it was really, really, interesting; all the more so because no-one seemed to know the answers.

At university I was allowed to grow up slowly and learn stuff I wanted to learn, for its own sake. Never, for a second, until the final few months did I think about whether it would get me a job.

I don’t know what’s changed in more recent years, perhaps the economy, but it doesn’t seem to be like that these days. Students often work part-time, they choose courses on the basis of job prospects and they limit the time they spend on campus.

If I had my way, I would recommend the full university experience to everyone, but I’d be wrong.

Financially, there’s an advantage, one I didn’t know much about at the time.

Over their lifetimes university graduates earn 40 to 75 per cent more than workers who go to work straight from school. One estimate puts the lifetime earnings of male graduates at $2.3 million compared to $1.7 million for those who go straight to work. The earnings of female graduates are put at $1.8 million compared to $1.4 million.

You might have noticed those figures say nothing about whether or not university education is the cause of those extra earnings. Those people might have done well anyway. It is my unfortunate duty to tell you most would not have. University education brings about extra earnings, rather than being merely associated with them. An ingenious Australian study of identical twins (“by definition, the same innate ability and family background”) found that it’s the twin that does the extra study that gets the extra earnings.

Research conducted by Dr Andrew Leigh, now a member of parliament, found that each extra year of education beyond Year 10 added an extra 10 per cent to lifetime earnings.

But it didn’t answer the more important question: what is it about those extra years that makes the students so much more valuable? If you think the answer is "learning more stuff" you’ll have to answer to Bryan Caplan.

A university professor himself, he has just published a book titled The Case Against Education. Its implications are enormous. He is in no doubt that graduates earn more, and that graduation is the reason.

But he thinks it has little to do with what they learnt. Consider two students who had each learnt as much. One had a family tragedy and couldn’t sit the final exam, the other could. US statistics show that the one who got the final piece of paper earns roughly 10 per cent more than other people for each extra year of education, whereas the one who learnt the stuff but missed out on the certificate gets only 4.2 per cent more.

Or ask someone whether they would have rather have learnt stuff without getting a degree or got a degree without learning stuff.

And what could they possibly have learnt at university that would be of use to an employer anyway? Calculus? Literature? Most jobs don’t even require algebra, and literature doesn’t help people write, which is what’s required in jobs. There are exceptions: economics might be one, engineering another. But most courses teach things that aren’t useful for employers.

So why do employers pay so much for people who’ve done them, or at least have got the certificates to show they once did them?

Caplan reckons it’s profiling, a bit like racial profiling, where police use the way someone looks as a rule of thumb to work out whether they are likely to commit a crime, or the profiling by insurance companies who use postcodes to tell them what to charge. It mightn’t be fair, but it's quick.

Seen that way, university is a sorting tool for employers, one they don’t pay for. It helps them identify characteristics that will be needed on the job but have nothing to do with what was learnt. One is intelligence. You need a certain amount to get enough marks to pass, whatever the subject. Another is consciousness. You need to apply yourself. And the third is conformity. Sane free-thinkers realise quickly there’s not a lot of point to what they are learning and drop out. Degrees certify IQ, the ability to knuckle down and a worker who won’t make trouble.

So they are great for employers and great for graduates, albeit at the cost of enormous wasted resources. Employers could get the same outcomes if the courses lasted for two years instead of four, or even one. Or if they administered tests themselves.

If Caplan’s right, we should be pushing politicians for less education rather than more, especially as the ageing of the population makes workers more scarce. My own company, Fairfax, is doing just that. It has taken on several truly excellent journalists precisely for the reason that they left university rather than see it through. They wanted to do the job rather than study it.

In The Age and Sydney Morning Herald

See also: The Economists, Is education a waste of time and money?

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Gaming. Why young men are walking away from work?

A team of researchers in the United States might have just cracked one of the biggest mysteries in economics. It's why young men are vanishing, in Australia as well as overseas.

A decade or so back we had a good idea of where they were. Of the Australian men aged 15 to 24 who weren't in school or higher education, an impressive 85 per cent were working.

That was back in May 2007. By May this year it had fallen to 78.6 per cent. That's one in every five young men not in education now not working, up from one in every seven a few years back. An extra 51,000 young men have "gone dark", slipped under the statistical radar.

And hardly any women. Young women not in education are about as likely to work as they used to be.

No-one's too sure what the young men are doing. Tragically, our Bureau of Statistics hasn't run a time-use survey since 2006. We don't know who supports them - is it girlfriends, is it parents? And we don't know why they are not working or if they'll start. Might they have suddenly found work hard to get? It's possible. These days there are fewer (traditionally male) manufacturing jobs and far more (traditionally female) healthcare and social services jobs. Might the minimum wage have priced them out of work? It's unlikely, because young men are also falling out of work in the United States.

etween 2000 and 2015, the hours worked by American men in their 20s slid 12 per cent. The slice of those not in education who'd been out of work for at least a year jumped from 8 to 15 per cent.

It isn't showing up in the unemployment rate. America's unemployment rate is very low, lower than Australia's. That's because most of these men aren't looking for work. They're doing something else. And, in America at least, we've a good idea of what it is.

In the US, they still conduct a time-use survey. Every year they ask thousands of Americans where they were at each moment of the day, who they were with, and what they were doing.

Young men cut back on work by an average of 2.5 hours per week between 2004 and 2015. All of it became extra leisure time, an astonishing 1.9 hours of it extra "recreational computer time", and 1.4 hours of it "gaming" – using computers to play video games.

Before 2004 gaming was small time. Massive multiplayer online games hadn't been invented. There was no World of Warcraft, the graphics weren't lifelike. Gaming has swiftly become very, very attractive. But mainly to young men, not women. That couldn't be why they are deserting work, could it?

Mark Aguiar, Mark Bils, Kerwin Kofi and Charles Erik believe it is. Economists at Princeton University, the University of Rochester and the University of Chicago, they believe the increasing quality of video games explains half of the retreat from work of young men since 2004.

Their study, published on the 4th of July, is entitled Leisure Luxuries and the Labour Supply of Young Men.

Their statistical analysis suggests that gaming is like any other luxury. The greater your ability to buy it (in this case with time), the more of it you want. They find that television (even Netflix) isn't a luxury. When people get more time, they don't spend an ever greater proportion of it watching TV.

As gaming becomes better and better, it's rational for people to sacrifice more and more of other things to do more of it, especially if they can get by financially. They find an astonishing 67 per cent of non-employed men in their 20s live with their families, up from 46 per cent in 2000. And they don't mind it much, either. Men in their 20s are happier than they were in the year 2000. Older men, who aren't into gaming, are more miserable.

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What if the nerds are reading Trump right?

The January meeting of the American Economic Association is to economics nerds what Star Wars conventions are to George Lucas fanatics. It's an opportunity for more than 13,000 of them to cram into hotels to swap ideas, make new friends and catch up on research.

Justin Wolfers prowled the halls. An Australian expatriate who's professor of economics at the University of Michigan, he told the Australian forecasting conference in Sydney this week: "There are more handsome people blessed with amazing social skills in that one building than you'll ever see anywhere else."

He asked them what was going on.

"Over the course of four days I literally did not meet a single North American economist who thought that anything good for the US was going to come out of the Trump administration," he said. "Not one."

Not a single nerd. But outside of the Chicago Hyatt Regency, in the world of actual business ...

Each month, the US National Federation of Independent Business asks 10,000 small business owners whether they think conditions will improve or get worse in the six months ahead.

The month before the election, 7 per cent more thought things would get worse than get better. Two months later, 50 per cent more thought things would improve. "That's an extraordinary turnaround of 57 per cent in two months," Wolfers said. "Small business people are just beside themselves with joy."

There has, he said, never been a more pure test of what matters most: the views of experts, or of real business people putting up real money who can make things happen because they believe things will happen.

"And it's not obvious who's right," he said. "Do we trust the guys who study this stuff for a living, or the guys who bet millions of dollars?"

These are the reasons to trust the experts.

• Trump has signalled interest in a war in the Middle East. The first Gulf war knocked off trillions (15 per cent) from the US stock market.
• Impeachment and all it entails is a real possibility – Trump has already lost a National Security Advisor.
• There's an increased risk of a new financial crisis, with Trump preparing to unwind the Wall Street Reform Act.
• And an increased risk of the US defaulting on its debt. Trump has already said he would consider "renegotiating" it.
• And the possibility of a trade war, and the collapse of a stable financial system.

Too extreme? Perhaps. But his point is we have to put some probability on these events, "just as a couple of years ago we had to put some probability on a reality TV host becoming president".

But how big a probability? Wolfers says before the election, smart people thought we should take Trump seriously, but not literally. They were wrong. Trump's biggest surprise has been his fidelity. "He really has begun to do the things he said he would do." The awful truth is we're going to have to take him literally and work through what that means.

In The Age and Sydney Morning Herald

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NAPLAN prepares us for neither the real world nor Trump

Google NAPLAN and you'll get an advertisement taking you to a website that will help you cram for it.

Of course that's not the idea. The standardised National Assessment Program for Literacy and Numeracy introduced by Julia Gillard as education minister is meant to be impossible to prepare for.

But teachers do. The next one is in May, two weeks into term two. The reputation of their students, the reputation of the school and their own reputations depend on it. Time that would have been spent encouraging year 3, 5, 7 and 9 students to ask questions and gain knowledge will instead be spent drilling them in how to pass the test.

That the two aren't the same ought to be apparent from the writing test. It's a hangover from an earlier era, before Donald Trump stood for president.

The persuasive writing test requires the student to introduce a topic, seek to persuade the reader by "for example, listing and describing parts, comparing and contrasting and showing cause and effect" and then to "synthesise" the ideas in order to draw a conclusion".

It might have been an effective technique in the 1960s, but since then decades of research have established what Trump instinctively knew – that clearly set-out arguments don't persuade. If they did, his greatest successes wouldn't have been in town hall rallies and on Twitter.

Fact checkers say 70 per cent of his campaign claims were false, but the method of argument required for students to succeed at NAPLAN couldn't defeat them. It's as if Clinton had on her team Australians who'd aced NAPLAN, and Trump had Americans who knew about people.

They key to convincing people appears to be repetition, something frowned on by those who mark NAPLAN. Study after study has found that the more often something is said the more likely it is to be regarded as true, all the more so if it is said by your side of politics.

In one, voters who were told about a policy assessed it in accordance with its merits and their ideological leanings. Another identically matched group, given the same information but also told that their side of politics supported it, backed it overwhelmingly. The political party effect "overwhelmed the impact of both the policy's objective content and participants' ideological beliefs".

In another, voters were given false information, given a "correction" telling them that it was false and in large numbers continued believed it. It happens because we are lazy. Processing a correction takes effort. Continually evaluating things to determine whether they are false takes effort. Using whatever our party thinks as a rough guide saves time.

And corrections can backfire. By repeating the original claim (as a correction or a fact check has to) they cement it in memory.

We're going to need new techniques of telling the truth from here on. They needn't be manipulative, but they'll have to move beyond the straightforward, beyond what's taught by time-stressed teachers teaching for the test.

In The Age and Sydney Morning Herald

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Not born to run. Why Springsteen was lucky

People don't see Bruce Springsteen for the music. He says so himself.

Here he is on the New Yorker radio hour in November: "I don't get paid necessarily to play this song or that song. I get paid to be as present as I can conceivably be on that particular night, because if I'm there, and I'm alive, I know you're feeling it too."

That's what we will be paying for over the next few weeks: communion, the opportunity to hang out with Springsteen and have him hang out with us, fully present.

We want to be close to him because we know he is one of us. Although talented and driven as a musician, he almost dropped out of high school, he drove busses. He mightn't have made it at all were it not for an extraordinary stroke of luck, which he details in his autobiography.

Asked what he would have done if it hadn't worked out, he says he would have gone back to New Jersey and played in bars.

I've been privileged to see Peter Allen perform twice. As for Springsteen, I didn't go for the music. I went to see him perform, to have him take me into his life. He was the boy who could have been any of us. Try to listen to Cassie McCullagh's Life Matters documentary about her family's memories of him as a boy in Armidale without crying.

Allen was certain he had what it took to get to the top, but he couldn't get close until, balding, with a failing voice and an act that was getting laughed out of gay bars, he was picked up by a manager who thought he could pull something off.

We want to get close to Allen, Springsteen and the rest in part because what happened to them is so unlikely.

If you need to be convinced, check out the Academy Award-winning documentary 20 Feet from Stardom broadcast on the ABC last month. It's an account of truly excellent singers - all of them as good as or better than the stars - who didn't make it.

As with Allen, back-up singer Merry Clayton felt that "if I just gave my heart to what I was doing, I would automatically be a star". She was wrong. Record companies told her she sang gospel and said: "there can only be one Aretha".

In a legendary paper entitled The Economics of Superstars, economist Sherwin Rosen argues that these days the world only needs a few musical superstars, whereas before modern communications it needed one per village.

In Success and Luck: Good Fortune and the Myth of Meritocracy, economist Robert Frank uses maths to point out that even if most of success is due to talent, the final decisions about who makes it to the top will inevitably be the result of luck.

The implications extend from ministerial entitlements to Centrelink to tax to pay scales. They're worth remembering whenever we are told someone got there by themselves.

In The Age and Sydney Morning Herald

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How Centrelink unleashed a weapon of math destruction

The most frightening thing about the Centrelink malware debacle is the verve with which the government embraced it.

Malware is software designed to do damage under the cover of providing a service.

Unveiling the automated Centrelink debt recovery system mid-year treasurer Scott Morrison and social services minister Christian Porter promised more "accurate and appropriate income testing". They were going to work with the prime minister's Digital Transformation Office to "cut red tape and ensure that mistakes are minimised".

It's theoretically possible for machines to do complex things better than humans. These days chess-playing programs do it (at least they do it to me) but those programs are exquisitely designed and have goals that are properly specified.

What Morrison and Porter promised was an automated system that would issue Centrelink debt notices "better" than human beings.

Humans did the job extremely well. A former Centrelink worker with 30 years experience says they would "look at start dates for employment that customers had declared, see if it was the same for the employer [using Tax Office records] and roughly work out if it lined up."

"If it looked as if a person had possibly been overpaid they would write to the customer and ask them to call and tease out where the discrepancy was, and ask for proof, if it was still available, in the form of things such as payslips. If the customer didn't have them and it looked like there was a possibility of an overpayment, they would write to the employer to ask for the information. If evidence was collected that the customer had not declared the income correctly and a debt existed, then the debt calculator would raise the debt in accordance with the legislation and the customer would be written to."

What's important in this description is the humans charged with applying the law didn't issue debt notices unless they had evidence that a debt existed. To do so without evidence would be to break the law.

But a wrongly-programmed computer need have no such scruples. Even better, its decisions can be presented as objective, hard to overturn. Data scientist Cathy O'Neil outlines scores of examples in her new book Weapons of Math Destruction, from the systems used by credit rating agencies in the lead up to the global financial crisis, to systems that automatically select teachers for the sack on the basis of secret algorithms that grade performance, to systems that deny people job interviews on the basis of proxies for mental health, even though that's illegal.

They are used because they are quick rather than accurate. As an expert told O'Neil, the primary purpose of a workplace hiring system is "not to find the best employee, but to exclude as many people as possible as cheaply as possible".

By necessity, they do it unfairly. People who are wise to the systems will mention the right words in job applications to get to the top of the pile. As she says, they are usually not from racial and ethnic minorities. Here, it's the persistent and well-resourced people who get the better of Centrelink. They are unlikely to be the hardest up.

Many of the automated systems are malicious, created to do harm in the guise of providing a service. The formula used by Centrelink produces consistently false estimates of debts by dividing by 26 the annual wages employers report paying in order to overestimate income received during the smaller number of fortnights claimants get benefits.

The formulas used by for-profit colleges in the US to target internet advertising zero in on single mothers of colour who are poor enough to earn the colleges' valuable subsidies and ill-informed enough not to twig to debt. The formulas O'Neil herself worked on in financial markets presented securities as safe that weren't.

O'Neil says that to be a "weapon of math destruction" a formula has to be used en masse (as the Centrelink formula will be), it has to be difficult to question (as the Centrelink formula will be for many people) and it has to cause damage (as the Centrelink formula is doing).

That isn't to say that credit risk and Centrelink and other software can't be designed to do the job better than humans. It's a worthy aim, one Morrison and Porter apparently thought they had achieved.

The man Turnbull hired to prevent such stuff-ups describes what happened as as "cataclysmic". Paul Shetler left the prime minister's Digital Transformation Office in November as the Centrelink debt collection program gathered pace. 

In The Age and Sydney Morning Herald

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Ditching sugar is a new year diet that might actually work

This year you're going to lose weight. Really. Not like last year, when you tried to eat less and exercise more and ended up no lighter, but by approaching the problem differently. Because calories in and calories out is probably the worst way to think about it.

Here's another one.

Excluding waste and sweating, it's true that the calories we take in have to be turned into either energy or weight. So it ought to be true that taking in less will cut weight. But what usually happens first is that we get hungry (and add back the calories, leaving our weight unchanged) or lethargic (expending less energy so that more of what we take in is directed to maintaining our weight).

It's almost as if our weight wants to be maintained; as if it has a will of its own and manipulates the rest of us to get what it wants.

Which is probably what happens.

Tumours act as if they have minds of their own. They press-gang whatever they can find into making themselves grow. Children do it. During growth spurts their growth hormones direct whatever's coming in to building bones and muscles, leaving the rest of the body bereft or hungry.

Only in a trivial sense is it true to say that children grow because they eat more. They eat more because they are growing. And that growth is regulated by hormones.

In 1977 Rosalyn Yalow won the Nobel Prize for tracking the hormone insulin. When it's released, fat cells start packing in fatty acids. And they also close the exits so the fatty acids can't escape while the insulin is there. It's why, oddly, we often feel weak or hungry after having sugar. The energy we thought we'd get isn't accessible. So we want to eat more, which also gets tucked into fat cells if there's insulin around; which there will be if what we've eaten is rich in sugar or other carbohydrates.

Veteran science journalist Gary Taubes has just set out his findings in a book entitled The Case Against Sugar, which follows Why We Get Fat, and Good Calories, Bad Calories. He is more of a forensic examiner of evidence than he is a purveyor of diets, and his main finding is that much of the evidence has been buried.

He says in the 1960s it was fairly widely accepted that carbohydrates (especially sugar) boosted the production of fat and increased appetites. It's one of the reasons we use bread as a starter at meals; it prepares us to eat.

Fat, by contrast, doesn't bring on the production of insulin at all. It may eventually be stored in fat cells, but it doesn't make those cells pack fat in and prevent them letting fat out. It's one of the reasons it rarely makes us hungry. Try eating half a slab of butter and see whether it boosts your appetite.

But in the 1970s, in the United States and in Australia, where our dietary guidelines follow the US, a new more plausible theory took hold. It was that fat causes fat. Nutritionist Ancel Keys laid it out in the massive Seven Countries Study which compared nations including the US, Finland and Japan and concluded that the nations that ate the most fat suffered the most heart disease.

Later research concluded that the results derived were particular to the seven countries chosen. Had Keys chosen other countries, such as France and Switzerland with high rates of fat consumption and low rates of heart disease, the correlation would have disappeared. But by then an abhorrence of fat had been written into the guidelines.

Consuming less fat meant consuming more carbohydrates, especially sugar which improves the taste of low-fat foods. So obesity climbed. The University of Sydney's Charles Perkins Centre is one of the few that disputes the connection. It produced a paper defending sugar that later had to be corrected after economist Rory Robertson ripped into it for misuse of statistics. Columnist Peter Fitzsimons details links between sugar and those dietitians promoting sugar in his book The Great Aussie Bloke Slimdown.

Just last month an industry-funded paper purporting to defend sugar fell apart when one of the funders, Mars Inc, disassociated itself saying it made all industry-funded research look bad.

Naturally, I am unable to guarantee that giving up sugar will make you lose weight. But I can guarantee that if you are anything like me it'll make you less hungry. I ditched sugar several new year's days ago, lost weight, and never got it back.

In The Age and Sydney Morning Herald

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Giving is like sex, it makes us human

Want to make someone incredibly happy? Give them $5, or $20. But you can't stop there.

A few years back researchers Elizabeth Dunn, Lara Aknin and Michael Norton approached students at the University of British Columbia Vancouver in the morning and administered a happiness questionnaire, after which they gave them either $5 or $20. They told half to spend it on themselves as soon as possible, and the other half to spend it on someone else.

The first thing they discovered when they readministered the happiness questionnaire at 5pm was that the amount of money made no difference. Five dollars did just as much as $20. And for those who had spent it on themselves (on magazines, at Starbucks and the like) that was nothing. They were no happier than they had been before.

But the half that spent the money on someone else (on toys for children, donations to the homeless and so on) were a good deal happier.

Without fully realising it, Dunn, Aknin and Norton had helped crack what's known as "happiness paradox" or "Easterlin paradox", named after the economist who came up with it. Based on inadequate measurements and broadly accepted until about a decade ago, it seemed to show that, when measured over time or between countries, more money didn't create more happiness.

It's now widely accepted that it does, at least for big changes in income. And it should. There's a lot you can do with more income, including giving it away. To the extent that more income does not create more happiness, that could be because people aren't doing the right things with it. As Dunn, Aknin and Norton put it, "how people spend their money may be as important for their happiness as how much money they earn".

So they surveyed workers at a large Boston firm one month before and two months after they received their annual bonuses, which averaged $US5000 ($6800). The more of their bonuses they had spent on buying things for someone else or donating to charity, the more their happiness had increased.

Even toddlers seem to delight in giving. Aknin videotaped children between the ages of 22 and 24 months who had been introduced to a puppet (a monkey) they had been told "liked treats". The researcher then gave them some treats (goldfish crackers) and asked them to share some with the monkey. Then the researcher "found" an extra one and asked them to pass it to the monkey.

Coding of the facial expressions by two assistants showed the children were happier passing the treats to the monkey than they were receiving them themselves. But they were the happiest of all when they gave up treats they already had to share with the monkey.

At the US National Institutes of Health neuroscientist Jordan Grafman conducted the same sort of experiment on adults, with their heads in a brain scanner. After money had been placed in their "accounts", they were presented with a list of charities and told they could pick some to donate to, or decide not to and take some of the money home.

Whenever they decided to donate, parts of their middle brain lit up, the same parts that control cravings for food and sex, and also the same parts that were activated when the money went into their accounts.

He concluded there was nothing particularly sophisticated about the decision to give. It was as basic as the need for sex, and food.

And sex comes into it. There was another bit of the brain that lit up: a small part of the frontal lobe that's full of receptors for oxytocin, the so-called "love hormone" that's released during sex, childbirth and breastfeeding.

Whereas adrenalin gives us "fight or flight", oxytocin gives us lust and trust. It makes us both more loving and more loyal, bonding us to each other. It's what most of us want.

Many of us are unhappy at Christmas. The Paul Kelly song How to Make Gravy is about someone who can't be with the ones he loves. He isn't feeling miserable because of what he won't get, he is feeling miserable because, this year, he won't be able to give; because this year he won't be flooded with oxytocin.

That makes it sound selfish, but it isn't. Giving is a human duty. It's what we do because we're part of the species. That's why it makes us feel better.

In The Age and Sydney Morning Herald

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Cheap wine is better, but hide the bottle

I get anxious going into bottle shops. That's partly because I was brought up Methodist, and partly because I never pick the right thing. If I spend too much, I'll be wasting my money; if I spend too little, my guests will think I'm serving rubbish. And to me, it's all the same.

The reassuring if depressing news from the American Association of Wine Economists is that I'm not alone. (Yes, there is such a group.) One of the most widely cited papers in its Journal of Wine Economics is "Nothing Good Ever Came from New Jersey: Expectations and the Sensory Perception of Wines".

In the first test they gave "experienced wine professionals" reds from New Jersey and California and asked them to tell the difference. They had been told nothing about where the reds came from and couldn't. But in the second they told the tasters that some (but not which) of the wines came from New Jersey. The professionals became dogmatic, saying that the wine they thought was from New Jersey was plainly inferior, even if it was really from California. They still couldn't pick which was which.

In Predictably Irrational, economist Dan Ariely describes how he gave students two small samples of beer and asked which they would like in a larger glass. One of the samples had vinegar added. The students rated each pretty well. Then he ran the experiment again, this time telling the students one of the samples contained vinegar. They picked the one they thought it was, and hated it.

Back to price. Ariely gave students electrical shocks, asked them how much they hurt, then handed out tablets to "relieve the pain" (which actually were vitamin C tablets). They worked, but what really worked was the price. If the students were told they were expensive, they worked extremely well. If they were told they were cheap, they were less effective.

Which is where wine comes in. Study after study finds that more expensive wines taste better, when people know they are more expensive. When they don't, the shocking finding from an analysis of 6000 tastings entitled "Do More Expensive Wines Taste Better?" is that, "on average, individuals who are unaware of the price do not derive more enjoyment from more expensive wine. In fact, they enjoy more expensive wines slightly less".

It bears repeating: on average, people unaware of the price enjoy expensive wines slightly less. If price is a guide, it's a guide for what not to buy.

Curiously, there was one small group which enjoyed what turned out to be the most expensive wines slightly more. They were wine experts; which is only half reassuring. They are experts at something, but it's not predicting what you and I will like.

My best advice (and I'm the worst person to give this sort of advice) is to race in, get something cheap, get out, and pour it into better looking bottles. Your guests will be doubly grateful.

In The Age and Sydney Morning Herald

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We need an inquiry into the entire Northern Territory

Anyone who doubts that the Northern Territory is different should look at the number of police per 100,000 residents. The Territory has 700. The next highest state, South Australia, has 312. The rest of the nation makes do with 267.

The Territory has 10 judicial officers per 100,000 residents. The rest of us have four.

In graph after graph, statistic after statistic, the Territory sticks out. It spends $1150 per head on police and courts, more than twice the $430 the rest of the nation spends. And it doesn't spend it to the satisfaction of its residents. Territorians are far less satisfied with their police than the rest of us. They are also the most likely to believe they don't "perform their job professionally" and don't "treat people fairly and equally".

 

 

And the Territory's super-expensive rehabilitation system is extraordinarily bad at rehabilitating. Sixty per cent of the prisoners released from the Territory's jails are back within two years, compared to half in the rest of Australia. The latest Productivity Commission report shows that one-third of the Territorians who've completed community service orders are back on new ones within two years, compared to one-fifth in the rest of the nation.

The commission is incredibly careful not to draw conclusions from the data it lays out each January in its report on government services. It needs the cooperation of the states in order to get the otherwise unpublished information.

If it was less guarded, it would probably say the jailers in Territory are particularly unproductive. There's one for each nine prisoners, compared to one for each 16 elsewhere. Yet for the most part they simply keep their prisoners locked in cells, for an average for 17 hours each day, compared to 10 hours in the rest of the country. And they are far less concerned about improving prisoner's lives. Only 14 per cent of Territory prisoners attend training courses, compared to 32 per cent in the rest of the nation.

If the jailers live a featherbedded life compared to the largely Indigenous population they are responsible for, it's symptomatic of the Territory as a whole. It employs 12 per cent of its population as public servants, compared to 7 per cent in other states. And it pays them better, an average of $83,000 compared to $75,000 per annum, according to my calculations. It is able to do it because it gets five times its per capita share of the GST distribution. The next most looked after state, Tasmania, gets only 1.8 times what it puts in.

Tragically, the Territory gets the largesse because the formula awards it extra points for Aboriginal disadvantage. But there's no requirement under the Grants Commission rules for it to actually spend that money on Indigenous disadvantage, meaning there's a financial incentive for it not to.

 

 

As Australia's foremost expert on state taxation, Neil Warren, puts it, "the Northern Territory likes to have a disadvantaged population – it has no interest in removing disadvantage".

The Prime Minister is right to limit his royal commission into the shocking treatment of youth in detention to the Northern Territory. It'll enable it to zero in on the problem and provide lessons for the rest of Australia.

But his next step should be a proper inquiry into the Grants Commission formula and to the Northern Territory itself.

If it was a state, it'd be a failed state, propped up by creaming off aid intended for its most disadvantaged citizens. It's nearer to us than the other failed states. We are able to fix it.

In The Age and Sydney Morning Herald

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So you think you voted wisely

So you think you voted wisely. Up until 1984 the candidates' names on the House of Representatives ballot paper were arranged alphabetically. So much did this advantage candidates whose names were near the beginning of the alphabet that half of those elected had names starting between the letters A and H.

Andrew Leigh, who with Amy King researched ballot paper order for his book The Luck of Politics, says the candidate at the top gets an extra 1 per cent of the vote. He says that since 1996 there have been nine such candidates who won by less than 1 per cent – one of whom was former Labor leader Kim Beazley.

Gender is also a matter of luck. Leigh says being a woman costs you one-third of a percentage point and makes it much less likely that you will be preselected at all. Of the 13 vacant yet safe seats up for election this time, 12 went to men.

Having a Muslim-sounding name sets you back as well. Leigh and King reckon it equates to 2.3 percentage points. An Asian name costs 1.5 percentage points and a continental European name 0.7 percentage points.

Their findings echo those of Queensland economists Redzo Mujcic and Paul Frijters who asked volunteers to get on buses, claim that their travel cards didn't work and ask to stay. They ran the experiment 1500 times. The success rate of the whiter-looking volunteers was 72 per cent, the success rate of those with darker skin was 36 per cent.

In the Northern Territory, where photos are allowed on the ballot paper, Leigh and Tirta Susilo analysed the results of the 2005 election and found that in predominantly white electorates those candidates with lighter skin did better. In the electorates with a high indigenous population, dark-skinned candidates did better.

And beauty itself is important. Leigh and King collected the photographs displayed on how-to-vote cards in the 2004 federal election and asked an independent panel to rate them. They found the best lookers (in the top 15 per cent) got an extra 1 to 2 percentage points. Oddly, beauty mattered more for male than female candidates.

Leigh is now himself a Labor politician, re-elected on Saturday. He is male, Anglo and symmetrically faced. But he is self-aware enough to acknowledge that his success is due as much to luck as competence. Most of us aren't.

In his new book Success and Luck: Good Fortune and the Myth of Meritocracy Cornell University's Robert Frank writes that we are incredibly keen to believe the good things that happen to us are the result of our own actions. He says it's not such a bad strategy (it helps to take responsibility) so long as we realise that it isn't true.

Songs become hits if the first one or two web reviews are good, regardless of the others; unknown actors become megastars when they are chosen because the big names aren't available; VHS beat the Beta because it was adopted first by the porn industry.

Frank describes an experiment in which volunteers were sent into rooms and given a problem to solve. One member of each group was arbitrarily made the leader. After half an hour a tray of biscuits was brought in, with four for the three volunteers. In every case the randomly-appointed 'leader' grabbed the fourth biscuit.

It would be nice if those we elected on Saturday showed humility. It'd be nice too if they remembered that the richest among us might not deserve their tax cuts. It would be best if all of us acknowledged that, but for a few rolls of the dice, we would be somewhere completely different.

In The Age and Sydney Morning Herald

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Live exports, offshore detention: the lie that diminishes us all

Who are we? We tell ourselves we are compassionate. We've rules for determining how long anyone can be in prison, rules prohibiting cruelty to animals. We even begin parliamentary sittings with the Lord's Prayer: "Forgive us our trespasses ... deliver us from evil".

Yet we send people and animals to torture and death overseas with scarcely a second thought.

On Thursday the ABC's 7.30 showed shocking footage of Australian cattle being bludgeoned to death with sledgehammers. Animals Australia says the lucky ones die immediately. The unlucky remain conscious, in pain and terror, bellowing as they are hit again and again.

It's one of the ways cattle are killed in Vietnam, and we've known about it for years.

Just last year, after earlier secretly recorded vision emerged, our live exporters said their talks with the Vietnamese had given them "a sense that changes would be made".

In 2011, truly shocking footage of Australian animals being tortured forced Labor to ban the export of live cattle to Indonesia. So big had been the public outcry that Centrelink staffed the department's phones.

"I truly do wonder how you sleep at night," said one letter to the minister. "I grew up on sheep and cattle stations and was killing my own meat the age of 14, but I have no stomach for the collection of various tortures I have witnessed inflicted upon the species bred by us, to sustain us."

A few months later "tough new regulations" were put in place and the ban lifted. A year later it happened again, this time in Pakistan, then a year later in Egypt, then Israel. Each time it was never going to happen again, and each time we only knew about it because of a leak to an outlet like Four Corners.

There's talk of making it an offence to film the treatment of Australian animals overseas, just as it is now an offence for health workers to report what they've witnessed happening to human beings on Manus Island and Nauru.

The link is that if these things are happening offshore (even to those for whom we have responsibility) we can kid ourselves we are true to our values at home, all the more so if the details are kept from us.

It's why the United States tortures its captives offshore, in secret locations.

Except that it doesn't work. Cognitive dissonance is a technical term for the mental stress we experience when we know that we are doing something wrong.

Showing around Australia right now is Chasing Asylum, a movie made using hidden cameras in our offshore detention centres. For me the most chilling part is the interview with the former prison officer who says the people he locked up in Australia weren't that badly off. They knew when they would be released.

Neither of our main political parties wants to stop shipping people and animals overseas. But the Greens and others do. We are able to make choices in the fortnight ahead, or we are able to turn our backs and tell ourselves it isn't happening here.

In The Age and Sydney Morning Herald

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The real drug problem that could cause a catastrophe

Count yourself lucky if you are laid low this winter. You probably won't die.

But not long ago you could have. Back in the 1930s before the widespread introduction of penicillin, infectious diseases were responsible for 5600 of Australia's 62,000 annual deaths. These days they bring about just 2600 of 148,000 deaths.

Nothing has improved health and brought down the cost of staying alive as much as antibiotics. But they are losing their power. A decade ago only 1800 Australians died of infectious diseases, but the death rate is climbing and is back to where it was in the late 1960s. Last month the United States was presented with its first patient carrying a bacteria resistant to the drug of last resort, Colistin.

There are literally no backups left, and for financial reasons, there is nothing on the horizon.

Australia has had several cases of Carbapenem-resistant Enterobacteriaceae, some brought in from overseas, and some transferred from patient to patient in hospital. It kills up to 50 per cent of the people it touches. If it gets a bigger foothold and becomes commonplace, we'll enter what the experts call the "post-antibiotic era".

 

 

It's true that to a large extent we've done it to ourselves. Right at the beginning of the modern era, accepting the Nobel Prize for his work on penicillin, Alexander Fleming forecast "the time may come when penicillin can be bought by anyone in the shops".

"Then there is the danger that the ignorant man may easily underdose himself, and by exposing his microbes to non-lethal quantities of the drug make them resistant," he went on.

"Here is a hypothetical illustration. Mr X has a sore throat. He buys some penicillin and gives himself not enough to kill the streptococci, but enough to educate them to resist penicillin. He then infects his wife. Mrs X gets pneumonia and is treated with penicillin. As the streptococci are now resistant to penicillin the treatment fails. Mrs X dies. Who is primarily responsible for Mrs X's death? Why, Mr X whose negligent use of penicillin changed the nature of the microbe. Moral: If you use penicillin, use enough."

We haven't. We've often taken antibiotics only until we felt well. Then we've infected other people with the bugs that survived and no longer feared the antibiotic. And we've handed them out where they are not needed and dosed up pigs and chickens on overstocked farms in conditions that breed resistance. Carbapenem-resistant Enterobacteriaceae developed first in pigs before jumping to humans through raw pork.

As a business model, guaranteed obsolescence has worked well for the pharmaceutical industry. It has had to keep coming up with replacement drugs, each time getting new patents.

But what hasn't worked for it is the more important need to come up with a genuine antibiotic of last resort; something that is held in reserve and hardly ever used, because there's no incentive to make such a thing.

Patents typically last only 20 years. Even at an appropriately high price per unit sold, the manufacturer and developer of such a drug would be unlikely to get their money back. Tripling or quadrupling the patent term wouldn't much help.

Antibiotics aren't like other products, or other drugs. The less they are used, the bigger the pay-off. But our system of incentives encourages the reverse. It's in large measure an economic problem, with an economic solution.

The most promising is called "delinkage​". One its most influential proponents is Boston University law professor Kevin Outterson.

Under delinkage companies will no longer be paid according to sales. Instead they would be paid handsomely for developing drugs that weren't to be used. Promotion and free samples (usually the drug company's lifeblood) would be banned. Where the drugs were used, the drug companies would receive nothing other than the actual cost of producing them. Doctors might be given special payments ("bribes") tied to how little they prescribed them.

As an attempt to re-engineer a market it's on a par with carbon pricing, and about as important. Outterson says the long lead times involved mean we've got to act a decade before the need becomes urgent.

The UK government's review into antibiotic resistance has reached a similar conclusion. It believes that unless we act quickly, drug-resistant superbugs could kill as many as 10 million people per year by 2050, more than cancer kills now. Britain's prime minister David Cameron is talking to the group of seven leading industrial nations and to the G20 later this year. I'd like to hope we got on board.

In The Age and Sydney Morning Herald

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