Andrew Leigh

Just a week until Anne Summers delivers the Fraser Lecture. Details below.

Anne Summers
The Good Fight or the Wrong Fight: Directions for 21^st Century Feminism
2012 Fraser Lecture



Venue: Fred Daly Room, Belconnen Labor Club
Time: 7.30pm, Wednesday 25 July

Entry by gold coin donation

The lecture is open to the Canberra community. Please RSVP to [email protected] or 6247 4396.

About Anne Summers

Dr Anne Summers AO is a best-selling author, journalist and thought-leader with a long career in politics, the media, business and the non-government sector in Australia, Europe and the United States.  She is author of several books, including the classic Damned Whores and God’s Police, first published in 1975, Ducks on the Pond, her autobiography in 1999, The End of Equality, (2003) On Luck (2008) and her most recent book The Lost Mother published in 2009 by Melbourne University Press.



About the Fraser Lecture

Originated by former member Bob McMullan, and now continued by Andrew Leigh MP, the Fraser Lecture is a chance to hear a high-profile Australian speak about his or her vision for Australia’s future. Past speakers have included Julia Gillard, Sharan Burrow, Kevin Rudd and Clare Martin. This is the 12^th Fraser Lecture.

My Drum article today is on inequality.

Tall Poppies in the Land of the Fair Go, The Drum, 18 July 2012

Since 1980, 14 per cent of all personal income growth in Australia has gone to the richest 1 per cent.

That group - currently those individuals earning over about $200,000 - have received 14 times their share of Australia's economic growth in the past generation.

With Oxford University's Tony Atkinson, I have been compiling data on the income share of the rich in Australia over the past century. Our new estimates, which now run from 1912 to 2010, show that for most of the twentieth century, the top 1 per cent earned less than 1 per cent of all economic growth.

From the 1910s to the 1970s, the share of income earned by the super-rich steadily shrank. But the pattern over the past generation has been quite different.

The share of income earned by the top 1 per cent has doubled. The income share of the richest 0.1 per cent - the top 1/1000th of adults - has tripled. The ratio of CEO salaries to the salaries of average workers has risen dramatically.

True, we still remain relatively equal when compared with the United States. Over the past generation, the top 1 per cent share in both countries has doubled. The result has been that we have ended up about where they were in 1980.

And while median US incomes have barely budged in two decades, the typical Australian household has enjoyed steady income growth over the same period. Since 1993, more than half of US growth has gone to the top 1 per cent. For Australia, the figure is about one-eighth. Little surprise that the cries of 'We are the 99 per cent!' were heard more loudly on the other side of the Pacific Ocean.

And yet the drivers of top income inequality are quite similar in both nations. Computerisation and the internet revolution have disproportionately boosted incomes at the top: an effect that economists have termed 'skill-biased technological change'.

Under governments of all political stripes (but particularly under Hawke and Reagan), top tax rates were cut dramatically. And in 'superstar' labour markets like CEOs, lawyers, and sports stars, a global search now means that those at the top of their game earn a global wage.

Top income inequality is not without its benefits. For example, the vast rewards to making it big in America is probably one reason why the US produces so many entrepreneurs. And America's famously generous philanthropists are partly a product of a nation with extremely large fortunes at the very top.

But inequality also has its costs. At its heart, economics is about maximising wellbeing, not money. Because a dollar buys more happiness for a pauper than a millionaire, a more equal distribution of income probably raises the average level of wellbeing.

Another reason to favour equality is that human beings exhibit a strong preference for equality. I recently asked my five-year-old son whether he'd prefer that his brother got three biscuits and he got two, or both of them got one biscuit apiece. He chose the latter.

Adults share this taste for equality. In a famous experiment called the 'Ultimatum Game', the first player gets to choose how to divide a sum of money, and the second player decides whether they both get these suggested shares, or both go home with nothing.

If the second player didn't care a whit about inequality, she should accept any amount of money at all. But in a host of different contexts, players routinely reject offers of less than 20 per cent. As economist Lester Thurow once put it, a more equal income distribution is like a 'public good'.

Finally, inequality may carry costs to society. Seven-figure donations to political parties raise the risk that policy outcomes can get skewed to the very rich. In addition, more inequality probably means less social mobility. The larger the gap between rich and poor, the more the circumstances of a child's birth is likely to determine their life outcomes.

Andrew Leigh is the Federal Member for Fraser. This is an edited version of his Young Economist Award keynote address to the 2012 Australian Conference of Economists. View his full profile here.

I'm speaking at the Centre for Independent Studies in Sydney on 7 Aug, on the topic 'Politics and the Media: A New Spin?'. Details below.

Politics and the Media: A new Spin? - Dr Andrew Leigh & Thomas Tudehope

Where: The Centre for Independent Studies

Level 4, 38 Oxley St, St Leonards, Sydney 2065

Date: 07 August 2012

Time: 6:00 pm - 7:30 pm

Register here.

With the rise of social media, the chattering classes have become the twittering classes, and we are seeing its increasing impact on politics. Social media has been embraced by US politicians, particularly in the lead-up to the November election, but less keenly – and more awkwardly – by their Australian counterparts. Why is this? Will Twitter, Facebook and the like change the political landscape in Australia – and to what extent? Is social media making us more educated about policy matters or simply more prone to knee-jerk reactions? And how is the speed and scale of this style of communication affecting policy and party decisions?

Dr Andrew Leigh Before his election in 2010 as the federal Member for Fraser, Dr Andrew Leigh was a professor of economics at the Australian National University. Andrew has written extensively on a range of subjects, including education, taxation and social policy. He also writes regularly for the Australian press. Andrew holds a PhD in public policy from Harvard and graduated from the University of Sydney with first class honours in law and arts. He has worked as a lawyer (including a stint as associate to former High Court Justice Michael Kirby) and principal adviser to the Australian Treasury. Andrew is a Fellow of the Australian Academy of Social Sciences; in 2011, he received the 'Young Economist Award', a prize given every two years by the Economics Society of Australia to the best Australian economist under 40. Andrew has been a member of the Australian Labor Party since 1991.

Thomas Tudehope is one of Australia's most recognised social media experts. Thomas pioneered the use of social media and online activism in Australian politics through his work with Malcolm Turnbull, Member for Wentworth. Turnbull's online presence during his time as cabinet minister and leader of the opposition was regarded as best practice and officially recognised by the Australian Internet Industry Association. Thomas has also worked in America with Republicans and Democrats on digital outreach and online activism. Before joining SR7, Thomas was a Digital Producer at Sky News specialising in current affairs, business and technology. He has extensive experience managing small and large social media campaigns that seek to raise awareness, drive sales, and increase exposure. Thomas also conducts social media workshops to educate stakeholders on social media best practice, handling dissent, and the benefits of monitoring social media. Thomas regularly appears as a commentator across all TV networks on issues such as social networking, politics and media. He also regularly contributes to The Drum and The Punch.

I'm giving a Blackfriars Lecture at the Australian Catholic University on inequality next Monday night. Details here (and flyer below).

I'm speaking at the University of Canberra on 1 August, on the topic 'The Naked Truth? Media and Politics in the Digital Age'. Details below.

'Challenge Your Mind' University of Canberra Public Lecture Series:

'The Naked Truth? Media and Politics in the Digital Age'

Event details:

Date: Wednesday, 1 August 2012

Time: 11:30 AM - 12:30 PM

UC Location: Ann Harding Centre, Building 24, University of Canberra

URL: http://challengeyourmind.eventbrite.com.au

About the Talk: Has the media cycle become a cyclone? Are dead-tree publications being crowded out by Twitter? How should politicians and journalists who want a serious conversation about ideas respond to the technological changes of our age? Dr Leigh will speak about these challenges, and discuss with the audience how we can work together to forge a healthier civic conversation.

About the Speaker:  Dr Leigh was elected as the Federal Member for Fraser in 2010. Prior to this, he was a professor of economics at the Australian National University. Dr Leigh has written extensively on a range of subjects including eduation, taxation and social policy. He also writes regularly for the Australian press. Dr Leigh holds a PhD in public policy from Harvard, having graduated from the University of Sydney with first class honours in Law and Arts. He has previously worked as a lawyer (including a stint as associate to former High Court Justice Michael Kirby), and as a principal adviser to the Australian Treasury. Dr Leigh is a Fellow of the Australian Academy of Social Sciences, and in 2011 received the 'Young Economist Award', a prize given every two years by the Economics Society of Australia to the best Australian economist under 40.

Register by Monday 30th July at http://challengeyourmind.eventbrite.com.au

Julie Doyle hosted me and Liberal Senator Mitch Fifield on ABC 24’s Capital Hill program yesterday. Topics discussed include Tony Abbott’s ambiguous position on penalty rates and protection for workers, the efficiency of pricing carbon to improve environmental protection, and the transition to the carbon price.http://www.youtube.com/embed/3aC5jVp2RpM

I addressed graduating ANU students today, speaking about doubt and uncertainty, scepticism and risk-taking, experimenting and being prepared to make a mistake.

‘The Spirit Which is Not Too Sure It’s Right’
ANU Graduation Address
12 July 2012

In 1931, the British air ministry decided to experiment by commissioning a new fighter aircraft.[1] The bureaucrats wanted aviation engineers to abandon past orthodoxies and create something entirely new.

The initial prototypes were disappointing. But then a company called Supermarine approached the ministry with a radical new design. A public servant by the name of Henry Cave-Brown-Cave decided to bypass the regular process and order it. The new plane was the Supermarine Spitfire.

The Spitfire was one of the greatest technological breakthroughs in aviation history. One British pilot called it ‘a perfect flying machine’. It fundamentally changed aviation wisdom, which had been that countries should focus on bomber fleets.

It’s no exaggeration to say that without the Spitfire, Britain may not have been able to fight off the Luftwaffe to win the Battle of Britain. Asked what he needed to beat the British, a German ace told Hermann Göring, ‘I should like an outfit of Spitfires’.

As economist Tim Harford points out, without the Spitfire, Germany might have occupied Britain. The course of world history was changed because a public servant decided to experiment with something new.

Today I want to speak with you about the virtues of experimenting and taking risk, and their flipsides: making mistakes and being wrong. I want to argue that having doubt is a good thing; that a little modesty is a smart way to live. As US judge Learned Hand famously said, ‘The spirit of liberty is the spirit which is not too sure that it is right’.

* * * * *

In 1984, a young psychologist called Philip Tetlock had the job of summing up expert opinion on how the Soviet Union might react to Ronald Reagan’s Cold War policies. He was struck by how often the leading US experts flat-out contradicted one another, so he designed an experiment.

Tetlock asked 300 expert commentators to make specific forecasts about the future.[2] Then he waited to see their results. Across nearly 30,000 predictions, he found that the experts were about as accurate as dart-throwing monkeys.[3]

Among these professional pundits, the least accurate were those who viewed the world through the lens of a single idea – what philosopher Isaiah Berlin once called ‘hedgehogs’. As new facts came in, these pundits stuck inflexibly to their initial views. Those who did a better job were the group that Berlin called ‘foxes’, who based their analysis on observing as much as possible. They were much more willing to change their analysis as the world shifted.

It’s fun to laugh at the inaccuracy of professional pundits, but Tetlock’s findings have lessons for us too. You should remember what you said in the past, but you shouldn’t be slavishly bound to it. If it helps, remember that there are virtually no atoms in your body that were there seven years ago.

It’s ok to change your mind. And when you do, you might as well admit it. As Keynes once put it when asked why he had changed his position on monetary policy during the Great Depression: ‘When the facts change, I change my mind. What do you do, sir?’

Investor Nassim Taleb argues that when it comes to adjusting to a changing world, some people are better than others.[4] Entrepreneurs are very good at it. Senior businesspeople are often too reluctant to admit a mistake. Politicians, Taleb argues, are the worst of all.

In her splendid book On Doubt, ABC journalist Leigh Sales writes that ‘Politics is littered with the carcases of the indecisive.’[5] In 2004, US President George W Bush used the ‘flip-flopper’ tag to devastating effect on rival John Kerry. Yet it’s hardly radical to imagine that the world would be a better place if Bush had been a little more self-reflective.

A good way of achieving this is to surround yourself with people who disagree with one another. Abraham Lincoln is one of the greatest leaders in history partly because he chose a cabinet who argued among one another – what historian Doris Kearns-Goodwin called ‘a team of rivals’.[6]

And yet it is too easy to see groupthink on all sides of politics. Take the case of anthropogenic climate change, where scientific evidence has grown stronger – while political support has weakened.[7] As psychologist Jonathan Haidt puts it, ‘once group loyalties are engaged, you can’t change people’s minds by utterly refuting their arguments’.[8]

It shouldn’t be this way. Any politician who is truly committed to evidence-based policymaking ought to be willing to admit when their policy doesn’t work.[9]

* * * * *

Looking out over this audience, I know that each of you have the best education that time, money, and Australia’s national university can deliver for you. You are extraordinarily well-prepared.

And yet for all that preparation, none of you has the guarantee of where you will end up. Each of your careers will be shaped by luck.

So you should enter the world of full-time work with a willingness to experiment, and a recognition that the optimal job match may not be the first one you try.

My friends who work on the economics of marriage argue that the same principles apply there too.

On the social side, join more than one club. If you want to invest, buy shares in more than one company. In 1990, Harry Markowitz won the Nobel Prize for his work on portfolio investment strategies – formalising the old adage ‘don’t put all your eggs in the one basket’. It’s not bad advice in other contexts too.

Allow yourself some safety to experiment. When things don’t work out, learn from the experience. You must ‘make peace with your losses’.[10] This isn’t easy. In her book Being Wrong, Kathryn Schulz compares the feeling of being wrong about something fundamental to feeling like a toddler lost in Manhattan.[11]

But if you can master the art of experimentation and learning from your mistakes, you’ll achieve a great deal. Without the willingness to risk failure, you may never truly succeed.[12]

You should also be open to serendipity. Accidents can lead to breakthroughs. In 1928, Alexander Fleming’s dirty laboratory led to him discovering the world’s first antibiotic in a contaminated petri dish.

Serendipity is literally in our DNA. Evolution is a series of random experiments carried out by nature. Each of us is the product of millions of years of experiments by nature.

When experiments succeed, the result can be an extraordinary breakthrough like the Spitfire. But very often, experiments fail. That shouldn’t stop you from pursuing life with a spirit of sceptical experimentation.

Apply the same principles to those around you. Don’t try to surround yourself with people who are infallible, but with people who try to learn from their errors. In your workplace, try to create an atmosphere in which people are able to take risks. Never assume that the most senior person in an organisation has nothing to learn from the most junior.

You may have driven your parents and your lecturers crazy by asking ‘Why? Why? Why?’. Don’t stop now – it’s always worth asking whether things can be done better.

Being sceptical doesn’t mean lacking passion. You can be passionate about the change you want to see in the world – yet willing to be guided by evidence on the right way to achieve your ideals.

Leigh Sales points out that many of the great breakthroughs in history have begun from a position of scepticism. Copernicus asked whether the earth sat at the centre of the universe. Martin Luther asked whether God’s forgiveness could be purchased with money. Mary Wollstonecraft asked why women didn’t have rights. Nelson Mandela asked why South African blacks were kept separate.  Each refused to accept the prevailing wisdom.

As the saying goes, the reasonable person adapts themselves to the world; the unreasonable person adapts the world to them. Therefore all progress depends on unreasonable people. So go forth, and be unreasonable.

---

[1] This account is drawn from Tim Harford, 2011, Adapt: Why Success Always Starts with Failure, Hachette, London.

[2] Philip Tetlock, 2005,  Expert Political Judgment: How Good Is It?  How Can We Know? Princeton, NJ.  Princeton University Press.

[3] The phrase ‘dart-throwing monkeys’ comes from a review essay by Louis Menand, 2005, ‘Everybody’s an Expert’  New Yorker, 5 December 2005.

[4] Nassim Taleb, interviewed by Russ Roberts on EconTalk, 16 January 2012. http://www.econtalk.org/archives/2012/01/taleb_on_antifr.html

[5] Leigh Sales, 2010, On Doubt, Melbourne University Publishing, Melbourne.

[6] Doris Kearns Goodwin, 2006, Team of Rivals: The Political Genius of Abraham Lincoln, Simon & Schuster, New York.

[7] From 2006 to 2012, the share of Australians who agree that ‘global warming is a serious and pressing problem. We should begin taking steps now even if this involves significant costs’ has fallen from 68% to 36%, while the share who say ‘until we are sure that global warming is really a problem, we should not take any steps that would have economic costs’ has doubled from 7% to 18%: The Lowy Institute Poll 2012: Public opinion and foreign policy

[8] Ezra Klein, ‘Unpopular Mandate’, New Yorker, 25 June 2012, pp.30-33.

[9] For one example, see Andrew Leigh, ‘Lessons Important For Us All’, The Chronicle, 3 July 2012. http://www.andrewleigh.com/blog/?p=2868

[10] Daniel Kahneman and Amos Tversky, quoted in Tim Harford, 2011, Adapt: Why Success Always Starts with Failure, Hachette, London. Another way of putting this is that you should avoid the sunk cost fallacy.

[11] Kathryn Schultz, 2011, Being Wrong: Adventures in the Margin of Error, Granta Books, London (cited in Tim Harford, 2011, Adapt: Why Success Always Starts with Failure, Hachette, London).

[12] Had time permitted, I would at this point have embarked upon a lengthy paean to randomised policy trials.

Here's my Chronicle column for this month.

Lessons Important for Us All, The Chronicle, 3 July 2012


In his splendid new book, Thinking, Fast and Slow, psychologist Daniel Kahneman talks about how reluctant we are to change our minds. To illustrate his point, Kahneman tells the story of how and his fellow psychologists would evaluate candidates for leadership in the Israeli army. They would set difficult challenges – such as one in which a team of eight soldiers had to use a long log to get each of them over a six-foot high fence without touching the fence. At the end of the exercises, the psychologists were confident that they had determined which of the soldiers had leadership potential.

Every few months, the assessors had a feedback session, in which they could compare their ratings with the opinions of commanders in the field. It turned out that the expert ratings were ‘largely useless’ – yet the psychologists kept on with the exercise nonetheless. They knew that as a general rule, their ratings were only slightly better than chance. Yet on an individual level, the psychologists still held to the belief that their method worked.

As a rule, politicians are not known for their willingness to change course when confronted by evidence that a government program isn’t working. John Maynard Keynes apparently said, ‘When the facts change, I change my mind. What do you do, sir?’. But a parliamentarian who changes his or her position risks being lambasted as a flip-flopper.

Yet occasionally, we politicians do change our minds. Take the case of the Schoolkids Bonus. In 2007, Federal Labor went to the election promising to introduce an Education Tax Refund, which would let parents eligible for Family Tax Benefit Part A to claim some educational expenses back on their tax return.

Because the scheme ran through the tax system, parents only got the money if they could produce receipts showing that they’d bought educational items. It sounded like a good plan, but it turned out that remarkably few parents received it. Of the 1.3 million who were eligible, 1 million failed to claim the full amount of the refund.

When we looked across postcodes, it turned out that the claim rates were lowest in the most disadvantaged parts of Australia. It looked like many parents were forgetting their receipts, failing to file a tax return, or both. What sounded like a good program wasn’t working for the neediest.

So from last month, we’ve decided to scrap the Education Tax Refund, and replace it with a guaranteed payment called the Schoolkids Bonus. Eligible families will receive an annual payment of $410 for each child in primary school, and $820 for each child in high school. Parents will still spend more than that on their child’s education, but we now know that the money’s getting to the neediest.

Admitting error isn’t easy, but in creating the Schoolkids Bonus, I’m really pleased we’ve learned our lesson and improved the program. Most importantly, I’m glad we’ve helped the neediest Australian kids with their lessons too.

Andrew Leigh is the Federal Member for Fraser, and his website is www.andrewleigh.com.

On ABC Radio National's Saturday Extra program, I spoke with Geraldine Doogue about rising inequality and unchanged (for now) social mobility. Here's a podcast.

At one point in the podcast, I mentioned an article of mine which found that a majority of High Court associated in the period 1993-2000 attended just three universities (Sydney, UNSW and Melbourne). Full article here.

Mobile offices tomorrow (Sat 30 June): 10am at Gungahlin (Hibberson St outside Big W), and 11.15am at Dickson Woolies.

Drop by and say g'day.