Cost Benefits nonsense and the NBN

The Great NBN Cost Benefit Analysis furphy

The trendy demand for a cost-benefit analysis on Everything and the NBN is really getting beyond the pale.   Cost-benefit analysis on large-scale government projects projected for operation decades ahead is about as useful as trying to crochet a fishing net to catch whales:  it’s simply not up to it as a tool.  It’s a tool for business enterprise that might work in the short term for some people.  It’s just not appropriate for large-scale, long term government projects and policies.

Ask yourself why you would want to ask a collection of economists who:

  • can’t see a GFC coming;
  • can’t predict the interest rates for the next year or 2 years hence; or
  • can’t tell us the cost of fuel or minerals over the next decade;

to give us a sensible projection of what might happen in 10 or 20 years in the development of communications and the internet, with all of the national and international implications taken account of ?

Government projects of this kind needn’t be a complete stab in the dark, but politicians are kidding you and maybe themselves if they think cost benefit analysis is the glowing Answer from on High.

And if you’re not sure about that, just have a look at some of the remarks which Access Economics made about the prospects for cost benefit analysis of the NBN in the area of tele-health:

“There does not appear to be sufficient data to estimate the benefits of online training for rural / remote medical professionals. “
….

“There have been well over a thousand studies conducted of telehealth.  Unfortunately, very few have been conducted from an economic perspective, with quantitative data on costs and benefits.    Fewer still  contain  health  related  quality of  life  results  that would  enable  the  cost effectiveness of telehealth to be compared to standard interventions. ”

“…..there  are  no  uniform  methodologies  or  guidelines  to conduct standardised economic evaluations in tele-medicine. “
….
“Absence of quality data and appropriate measures undermines the quality and reliability of economic evaluation.”

—- “Financial and externality impacts of high-speed broadband for telehealth” — Report by Access Economics Pty Limited for Department of Broadband, Communications and the Digital Economy, June 2010

Postscript (2015)

Go a step further, and simply put yourself back in say, 1995.  Then tell me confidently you would have predicted the use of the internet by billions of people using pocket and now, watch-sized mobile phones with computing capacity 10 to 100 times the biggest PCs in existence in 1995.      Tell me what the benefits of that would prove to be, based on what was known in 1995.  Tell me the volumes of data required for it to operate.  Tell me the implications for international trade and intellectual exchange.  That’s what you’ll put in your Cost Benefit Analysis, of course.

Then tell me why you aren’t in control of the biggest company in the world, because if you knew all the answers, you’d be the only person on the planet to know them.

Except of course, for Malcolm Turnbull.    Malcolm presumably knew we wouldn’t need all that stuff because no one was actually asking for it at the time.   That’s the central thesis of his grand NBN Cost Benefit Analysis.  He says no-one’s asking for stuff. Just movies.   Funny thing is, the mobile phones came, anyway, even though people didn’t ask for billions of them in 1995.

Vale NBN.

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Myths, Mandates and Broken Promises

The current whinge that the Gillard government has broken its election promises (e.g. on considering/not considering a carbon tax) overlooks one Big Fact about the election: the Labor Party didn’t win a mandate, as the Opposition Leader keeps saying.

And if the electorate doesn’t give one party or the other a mandate, no party can actually be expected to implement all its promises.

No-one expects Tony Abbott to keep his promises, and this is partly because his coalition didn’t get a mandate. [We all know what the other reason is: he had his fingers crossed when he made his promises anyway, so those promises don’t count — although how he keeps signing agreements with crossed fingers is a mystery.]

Obviously, if a government can only be formed by cobbling different interests together, the result to be expected is that policies will vary according to the compromises reached by those who form government.

This is Political Science 101 stuff. If you want a government to keep to its promises, you have to elect it.  If you choose to elect a motley combination of representatives, you get a motley collection of policies.

In a hung Parliament where, in order to form a government, there need to be allegiances formed with smaller parties or independents, the suggestion or expectation that somehow promises can be expected to be strictly adhered to, flies in the face of the Facts of Life.

And dreaming up surrealist “Brandisian” interpretations of the Constitution “proleptically“, as it were, as an “excuse” for breaking a signed agreement is no way to behave for someone who wants to hold others to their promises. Stones and glass houses…..

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When is not voting a vote?

The vote you have when you’re not having a vote

The silly season started early — as soon as the election was over.

Latest contributor of an amazing non-sequitur is Senator George Brandis — often a bloke who seems to have his head screwed on, compared with many in politics.

This week he needed to have the screw threads checked, with his opinion that the granting of a pair to the Speaker (whoever that may be) is a breach of Section 40 of the Australian constitution.

Let’s get this clear. Section 40 reads:

Questions arising in the House of Representatives shall be determined by a majority of votes other than that of the Speaker. The Speaker shall not vote unless the numbers are equal, and then he shall have a casting vote.”

Meanwhile, back at the Parliamentary ranch, the arrangement of pairs (not specifically covered by the Constitution) is a semi-formal (read “conventional”) system under which agreements are made on different sides of the House as to who will not vote when someone else is not voting. (It’s assumed to be an act involving consenting adults. )

Did you get that bit about not voting?

Apparently George and a few others have come up with this fascinating idea straight out of Lewis Carroll that if the Speaker is paired, and neither he nor his pair will cast a vote, this is a breach of the Constitutional provision which says “The Speaker shall not vote….

So if the Speaker doesn’t vote, he breaks the provision which says he shall not vote ?

“To extend pairing arrangements to the speaker would, in effect, be to treat the speaker’s casting vote, proleptically, as if it were a deliberative vote, which is a plain violation of the prohibition in [Section] 40.”

Whaaattt ??!! Come again, George?

What happened to common sense ?   Yes, we know you’re a lawyer, but that isn’t an excuse, even if you have invented a new version of the English language. No, not the “proleptically”* bit — the bit that says agreeing not to do something is inconsistent with not doing something!

*In case you needed to know, “proleptical” is a reference to something happening in anticipation of the events that would bring it about (as in, “Vote the wrong way, and you’re dead”). The only trouble for George is that the events involved imply consensual agreement not to vote. So if the Speaker agrees not to vote, he’s — well, not voting. And if he’s paired, someone else isn’t voting.  So ?  Where’s the breach? (Voting isn’t compulsory in the Parliament. You’re allowed to abstain.)

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Pink Batts and Tony Abbott’s Failure

Pink Batts and Tony Abbott’s Failure

Peter Garrett suffered from two main drawbacks when he gained both a seat in Parliament and a Ministerial post in the Rudd government: he was a prominent achiever as singer for the “Oils”, in an industry which had seldom been involved directly in politics, and he had extensive public commitments to evironmental issues.

In the former case, he was an immediate target for those who see politics as a field in which — despite all the theories of democracy — only certain “types” may play a role (presumably lawyers, small business persons, property holders, union officials, former Ministerial staffers and even the occasional journalist). How dare a “mere” singer aspire to political office ? And what’s a tall poppy like him doing in a place like this?

In the latter case, he was someone who could not be allowed to do what all the others do in politics: compromise with reality and a balance of conflicting interests.

So the stage was set for a crucifixion of some kind, and the housing insulation scheme was to become the cue for it.

Eventually, even his leaders were to deny him and abandon him.

When the Opposition hysteria began, Kevin Rudd seemed to stay locked in his Prime Ministerial citadel until forced belatedly to offer a pitiful defence when in fact a strong case could have been made in his Minister’s defence. Rudd then gave up the ghost on Garrett’s behalf, sacked him from that portfolio, and abandoned the cause by having the scheme shut down. The words “mea culpa” may have been heard ringing down the Parliamentary corridors, but to no avail and little benefit.

Julia Gillard, in turn, having inherited the retreat position, stayed with the “safe” course during an election campaign with a series of admissions that the scheme had been a failure.
This was the “easy” strategic position, presumably, when her predecessor had shown no gumption for the battle. And by then, presumably, that was what the focus groups were saying.

And the focus groups, the advisors and all but some of the more percipient and cool-headed of the press were all wrong.

The insulation scheme was in fact a moderate success in several ways, and the main problem relevant to Peter Garrett was that the key government leaders and their advisers couldn’t get around to mounting an effective support and defence, and possibly even turning it into an attack, if they bothered to stop and think about their position.

Guilt by Association?

We have now seen what seems to have been the first of the prosecutions arising from the insulation scheme.

Peter Garrett was not one of those charged. No government official was charged. And nor is there any suggestion that they should or could they be charged.

Why not? For basic and simple reasons:

1. The Government did not install one single pink batt.

2. There was not even some large government contract handed out to a specified private contractor. The choice of installer was not one made by Peter Garrett or his department, but by each of the private householders who sought to take advantage of the scheme — a point some aggrieved householders in distress have tended to ignore.

3. The government provided funds to benefit householders — initially by providing rebates — and then by paying small business operators a contribution to insulation installation costs. The insulation, including all the faulty stuff, was provided by small business operators. Amongst these operators were those who sent untrained people into dangerous areas, and who accepted government money for shoddy and dangerous work. Normally, these would be the very same people who the Coalition parties claim should be freed from the “shackles” of government regulation….

But suddenly it’s the Minister’s fault for trusting these people to comply with the law and avoid incompetent work and threats to lives of their customers. So why didn’t that apply to some of his predecessors in Ministerial office?

Funding assistance of this kind has been common in a number of areas in the past. Both sides of the Parliament for example, have had responsibility for housing schemes which provide first home buyer assistance. There, the government puts up the funds, the home buyer chooses the property to buy from a range of private suppliers of homes. And if the buyer chooses a property badly, well, “tough titties” as the saying goes (aka caveat emptor).

Much the same thing can be said about the insulation scheme. This was no “nanny state” scheme: it really was up to the householder to choose an installer, and to the installer to do the job properly and safely.

If there was one basic mistake Peter Garrett and his department made, it was one which many have been guilty of: he ran a scheme in an area of relatively high risk, where no-one had previously been able to do much about the risk level involved, and he trusted good old Aussie businessmen to do the right thing.

It turned out, according to the Hawke report on the scheme, that the risk areas were reduced, and that the biggest problem with the scheme was that it was open to too many small business crooks to exploit it.

The claims about the scheme are that 4 people died and there were 100 or more household fires caused by installations it funded.

It’s actually to Garrett’s credit that the level of risk per installed household has been calculated to be about one tenth of what it had been with installations before the scheme began.

Leaving aside the household fire rate, and how you distinguish fires started by insulation installed poorly before the scheme and those installed under it, let’s look at an area of fatalities and human injury — an area that Tony Abbott knows about, and has had responsibility for.

Sauce for the Garrett is Sauce for the Abbott

To draw a simple comparison relevant to Tony Abbott, the Garrett scheme was a kind of Insulation Medicare: private citizens chose their installer of choice, just as patients choose their doctor of choice under our Health Scheme. Funds were available from the government initially by rebates, then directly to the installer to offset the price of installation to the householder, just as bulk billing and other Medicare subsidies were and still are, paid either as rebates or as direct payments to medical practitioners at all levels.

So what are the comparable national figures for problems and disasters ?

In Tony Abbott’s term as Health Minister, (07.10.03 to 3.12.07) approximately 1700 patients sued doctors for medical malpractice of some form or another. And that’s just known and litigated cases. It is not recorded how many of the treatments by the practitioners involved were directly funded by the Health Department, but we can assume all of them benefitted from subsidies of one kind or another. Are there any that don’t?

Around the same time, it is reported that in one year alone, for example, (2004-2005) there were 130 “sentinel events” leading to patients dying or being harmed by treatments administered by doctors funded by the Health Department. In Western Australia alone, there were more than 150 such events during the Opposition leader’s term of office as Health Minister.

Tony Abbott did not resign as Minister because of these deaths and “sentinel events” in hospitals, despite the fact that on several occasions, he and the Federal Government were warned by numerous individuals and bodies that the failure to maintain adequate funding to our hospitals would inevitably give rise to events of this kind.

Is talk of “industrial manslaughter” justified here for the former Health Minister, in the manner in which it was bandied around in the Parliament about Garrett ? Of course not!

What is justified is a charge of gross hypocrisy on the part of the former Health Minister, who is so fond of declaring a need to avoid government “interference” in business practices.

And given that his colleague Joe Hockey as Human Services Minister was able to claim (9 March 2006 and later) that a new ID card was needed to save “hundreds of millions of dollars” in Medicare fraud, there may be justification for extending the hypocrisy tag to cover problems of fraud risk in Mr Abbott’s area of Ministerial responsibility.

Meanwhile, what is also justified is a criticism of the government leadership of both Kevin Rudd and Julia Gillard that they permitted this gross hypocrisy to be rewarded by lack of robust defence of their colleague… a matter that the government might need to consider as it reviews its recent electoral performance.

The Rudd “mea culpa” was a late and empty gesture which ended up punishing a Minister for not running a nanny state. Rudd didn’t resign after taking “responsibility” for the issue. Perhaps it’s not so surprising that he was later pushed.

As an afterword, it is important to note that of all the unthinking press hysteria that surrounded this area, several journalists provided full details of just how unjustified the hysteria about the scheme was. Geoff Winestock, of the Australian Financial Review, John Watson, of The Age, Ross Gittins of the SMH, and “Possum Comitatus” of Crikey.dot.com all wrote salutory pieces which critically examined some of the sillier arguments that others had promulgated with unquestioning servitude. Two examples are at:

http://blogs.crikey.com.au/pollytics/2010/02/24/did-the-insulation-program-actually-reduce-fire-risk/comment-page-1/

http://www.theage.com.au/opinion/politics/insulation-fire-risk-was-worse-before-rebate-20100303-pivv.html

Footnote: In the year when 1.2 million homes had insulation installed under the scheme, and 4 people died, another 34 or more others died while working on building and construction sites, mostly on 40,000 or so homes.    Where is the grand indignation about that death rate (1 in  about 1200 compared with 1 in 300,000?)

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Big and Everything?

BP’s oil spill and the “Big Tax on Everything”

Sometimes it takes a slight shift in perspective to reveal the implications of some of the sillier claims made in politics. This is very much the case when you analyse the Opposition Leader’s specious arguments on the subject of carbon pricing.

The story goes: if you “tax” or price carbon emissions at industry source, the dominant energy providers will simply increase prices so they can pass the cost on to consumers. This means the price on “everything” will go up.

Yep. That has a big measure of truth to it.

But long-term problems with this argument are easier to see if you simply understand that excessive carbon emissions must now be regarded as pollution, in pretty much the same way as say, the dumping of PCBs or cyanide.

Sure, carbon dioxide is part of the cycle of life on this planet, is necessary for the survival of life, and is even responsible for setting temperatures that made life as we know it possible in the first place. But as is the case with many things that are useful or necessary for modern life (another example is salt, and even water), there comes a point where a “spike” of unbalanced generation of excess quantities can amount to pollution, and deadly pollution at that.   Perhaps the recent Pakistan floods serve to remind us of just how deadly?

Climate research now indicates that we have passed the point where carbon emissions from human sources are “balanced”, and are heading hell-for-leather into the production of CO2 as life-threatening pollution.

Oils = Fuel = Pollution

To use a different example, we know that oil is naturally present in our environment, and has been found to be useful as a source of energy. But if oil is let loose in excessive quantities, as it obviously was in the recent Gulf of Mexico disaster, the threat to life and industry of many kinds is apparent, and steps need to be taken to clean it up and compensate the victims for the spill consequences.

To this end, President Obama was quick to impose on BP to cough up and set aside large sums to cover the costs of oil pollution, estimated to run to $20 billion dollars and more.

That’s a big slug. But in fact, of course, it’s the equivalent of a “Big Tax on Everything”.

Is there anyone out there that has any doubt as to whether BP, having forked out this kind of money, will be hefting the price it charges for oil ? And isn’t that increase then bound to be passed on to the consumer, affecting transports costs and the price of, well, …. Everything?

So logically, Opposition policy would preclude a Coalition government from doing anything like what Obama did ? It would preclude any action to get compensation from an oil company which is responsible for the pollution of say, the north-west coast of Western Australia?

Why do I doubt that that stance is what we can expect as official policy from the Coalition — although that’s what it appears to be, judging from its attitude to CO2 emissions?

Is the grand opposition to any “Big Tax on Everything” really a matter of principle, or is it rather a stance of convenience and contrariness that would disappear immediately in the face of a need to take real action?

Maybe we should have it spelt out that the Liberal Party is totally opposed to imposing penalties on polluters who cause a national disaster. Now there’s a brave policy to take to the polls!

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The whys and wherefores….

Why “View from the Headland” ?

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