Why don't the anti-Collingwood mob lighten up?

I’m not a football fanatic. I watch a game on TV now and then during the season, but I don’t really get interested until the finals are on.


After watching both the AFL and Rugby League grand finals this weekend I couldn’t help notice that the losers of both contests looked as though they were about to go to the gallows. Perhaps they were worried about how their fans would react. Why don’t they – the players and fans - just lighten up? After all, football is only a game!

There is research suggesting that a lot of fans take losing very seriously. Researchers discovered that fans of a men’s basket ball team were more depressed after a loss than happy after a win. Compared to the winners, those who watched their team lose had darker moods, they were more pessimistic when rating their mental ability; and they predicted that an attractive person would be more likely to reject them.

I can’t help feeling a bit sorry for the St Kilda and Roosters supporters who had high hopes for the victory of their teams. But I admit to some schadenfreude about the other people who wanted Collingwood to lose. This year supporters of Collingwood’s traditional rivals, Carlton and Essendon, seem to have been joined by a motley crew of supporters of other clubs to form an ABC (Anyone But Collingwood) brigade, consisting of people who have nothing in common except their desire for Collingwood to lose the grand final.

One example of the attitude I am writing about will suffice. For reasons best known to herself, Judith Sloan began an otherwise sensible article published on Saturday in ‘The Australian’ about the ABC (Australian Broadcasting Commission) by suggesting that Collingwood supporters have a psychopathology which causes them to be one-eyed, irrational and rabid. Perhaps she thought that all Collingwood supporters had already cancelled their subscriptions to ‘The Australian’ after reading the attempt at humour at Collingwood’s expense in the lead article on page one the previous Saturday.

I find it difficult to understand why Collingwood supporters arouse so much antipathy. It can’t be because we win too often. After all, our last premiership was 20 years ago. Perhaps it has to do with the ability of supporters to remain enthusiastic despite all the defeats of the past couple of decades. But who could resist being enthusiastic about a young team that plays as though they really want possession of the ball and whose hand-passing leaves opponents flat-footed.

Winners are grinners. Photo by Sebastian Costanzo published in ‘The Age’, here.

Some might suggest that the anti-Collingwood mob don’t like us because they think we like being disliked. Ugh! That doesn’t make sense to me. But Collingwood supporters can sometimes appreciate a joke against themselves. This is probably because we get plenty of practice. The best anti-Collingwood joke I heard this week is this one. Question: ‘What do you call a Collingwood supporter in a suit?’ Answer: the defendant.

Will the elderly poor fare better under pensions means tests?

I ended my last post suggesting that it is absurd to provide pensions that are not subject to means tests because this involves taxing people of working age more heavily in order to add unnecessarily to the incomes of wealthy retirees. This raised the question of whether the elderly poor are likely to fare better in the context of the looming pensions crisis in OECD countries under means tested pensions or universal benefits.

This question is most relevant in countries that have not already adopted some form of pay-as-you-go universal aged pensions. Path dependency is involved. Once a country goes down the universal pensions path there are substantial political difficulties in back-tracking because this system encourages each generation of retirees to expect rewards for the taxes they have paid to support the preceding generations of retirees.

I expect that the political economy of how the elderly poor are likely to fare under alternative systems has been researched previously, but I haven’t yet found any papers that are directly relevant. So I will attempt to sketch out some preliminary ideas, based heavily on Australian experience.

One factor that will influence how the elderly poor fare under alternative pension arrangements will be their own political power as a group. This seems to vary greatly between countries depending on such factors as their use of voting rights. The presence or absence of means-testing could make an additional difference to the political power of this group since it identifies pensioners as a particular group of elderly people who have a common interest in lobbying for higher pensions. In that respect, means testing causes the interests of the elderly poor to differ from those of other elderly people.

Pension levels of the elderly poor are also likely to be influenced by the way the political objectives of other elderly people (and of middle-aged people who are planning for retirement) evolve under different systems. Peter Lindert’s analysis of the political economy of the public pension crisis seems to provide a good starting point to consider this. He summarises as follows:

‘At first, up to the 1980s, the rise of the elderly population gave the elderly more political clout in the industrialized OECD countries. The rise in their political strength was one reason why the relative generosity of pensions rose and budgets switched from fully funded pension systems to pay-as-you-go systems, giving one lucky generation higher pensions paid for in part by the younger generation. By the 1980s, the pressure on government budgets had become acute.

From that point on, the further rise in the elderly share of population began to undermine their political strength. True, pension budgets are not declining and are projected to rise a bit more as a share of GDP. Yet, the level of pension support per elderly person is destined to go on dropping as a percentage of the average income of the whole population’ (‘Growing Public’, Vol. 1: 208).

As the number of retirees rises relative to numbers of people in the workforce, their interests are increasingly aligned with those of the community at large in maintaining incentives for the goose to continue laying golden eggs. If excessive demands by retirees result in higher tax rates the adverse consequences for economic growth will be reflected back in their future pension levels.

The demographic transition stemming from lower birth rates and increased longevity is far more advanced in some countries (e.g. Sweden) than in others (e.g. Australia). Signs that the increase in the elderly share of the population may be beginning to undermine their political strength are only now beginning to appear in Australia, with a foreshadowed increase in the age of eligibility for pensions.

Australian experience suggests that when the aging middle classes have political clout they can exercise it to look after their own interests despite means tests for aged pensions. The relaxation of means tests, combined with tax concessions to encourage investment in private superannuation, has resulted in total government support for retirees being remarkably similar across a wide range of income levels (shown here). This suggests that total government support for retirees would be much the same under a flat rate universal system without incentives for private superannuation. Complicating matters further, however, the government has allowed people to access tax-privileged superannuation funds in lump sums prior to pension age. This has provided an added incentive for people to retire early, splurging lump sums and living off accumulated wealth until they become eligible for the aged pension.

As the increase in proportion of elderly people in the population in Australia reduces the per voter political power of this group, I would expect the per voter political power of the elderly poor to diminish to a smaller extent than that of the much larger group who hope to benefit from the private superannuation tax and pension means test rorts. I expect incentives for early retirement implicit in the superannuation arrangements will be an early casualty as attempts are made to contain government spending on retirees. If a choice has to be made at some time in the future between, say, maintaining the current level of the aged pension in real terms and maintaining superannuation tax concessions, I expect that maintaining the aged pension levels would be likely to win the political debate. Similarly, given a decline in grey power on a per voter basis I doubt whether superannuation tax concession would win the political debate if a choice has to be made at some time in the future between maintaining these tax concessions and an overall lowering in income tax rates to promote economic growth.

I suspect that the elderly poor would be less able to protect their interests under a universal pension because the support arrangements would not enable them to distinguish themselves as a group whose economic interests differ from those of other elderly people.

Does Wagner's law make sense?

Wagner’s law refers to the proposition of Adolph Wagner (1893) that there is a positive relationship between the level of economic development and the size of government. The underlying idea seems to have been that the demand for services provided by government tends to rise strongly as average incomes rise.

I think Wagner’s law still has a huge influence on the thinking of many economists. This influence is evident in the tendency of many economists to view big government as the norm for high-income countries. For example, it explains why economists pose questions like: Why doesn’t the US have a European-style welfare system? This is an odd question because there is considerable variation in the size of welfare states even within Europe and Swedish-style welfare systems are certainly not common among high-income countries outside of Europe.

The influence of Wagner’s law on the modern thinking of economists seems to rest on it being an empirical regularity or stylized fact. If you overlook the wide variation in size of government in high income countries, Wagner’s law does appear to fit some of the facts. Looking back at the recent history of individual OECD countries, most of them clearly had smaller governments 50 years ago when their average incomes were much lower. Yet, a recent study for the UK and Sweden from the beginning of industrialization until the present (a period of 177 years for the UK) found that Wagner’s law does not hold in the long run. The data are inconsistent with Wagner’s law in the initial industrialization phase (prior to 1860) and since the 1970s (Dick Durevall and Magnus Henrekson, ‘The futile quest for a grand explanation of long-run government expenditure’, INF Working Paper 818, 2010).

The Durevall and Henrekson paper also rejects a rival theory – the ratchet theory – that government spending ratchets up in times of crisis (wars, social upheavals, recessions) and then tends to remain at the new higher level. The expansion of government spending in the 25-35 years following WW2 cannot be explained in terms of a ratchet effect.

Some people might try to rescue Wagner’s law by arguing that it always applies at some stage during the process of industrialization. Thus it might be argued, for example, that Wagner’s law will result eventually in the development of big governments in jurisdictions such as Hong Kong and Singapore that have been able to restrain growth in government, even though they now have relatively high average incomes. However, there do not seem to be any reasons why governments of high income countries would necessarily find it harder than governments of medium to low income countries to resist political pressures to become more heavily involved in activities such as funding of retirement incomes and provision of education and health services. Nor would they necessarily find it harder to resist arguments for the social welfare safety net funded by taxpayers to rise more than proportionately as incomes rise.

If we were desperate to rescue Wagner’s law perhaps we could argue that bigger government is an inevitable response to political pressures associated with the demographic transition - declining birth rates and aging population age structures – associated with economic growth. On this basis Peter Lindert argues that we should expect an expansion of the welfare states in East-Asian countries ‘as they age and prosper’. In OECD countries, including Japan, political systems responded to an increase in the proportion of old people in the populations by providing pensions for aged persons. The further aging of populations has led to increased government spending on pensions - a major factor associated with the growth of government spending in high income countries. Lindert asks: ‘Do we really know that China, Singapore and other East Asians will be more resistant to rising transfer budgets than Japan has been, when they approach Japan’s income level and age structure?’ (‘Growing Public’, Vol 1: 221).

My answer to Peter Lindert’s question is that I don’t know how East Asian governments will respond to an increase in grey power. Perhaps they will see what lessons they can learn from the experience of the big government welfare states of Europe and decide that there is a better way to fund retirement incomes. They might even decide that the compulsory savings approach that has applied in Singapore since 1955 is preferable to the absurdity of providing pensions that are not subject to means tests. Why should people of working age be taxed more heavily in order to add unnecessarily to the incomes of wealthy retirees?

Are some questions too difficult? Part II: How can we understand teenage drug use?

This post continues my discussion with Ruth about teenage drug use. In the last post Ruth, a nurse who has worked in psych wards and prisons, illustrated the nature of the problem by telling the sad story of a man who has been suffering from drug induced psychosis (DIP) over a long period following an incident just before his 18th birthday.
Ruth continued:

It is well established that the human brain does not finish physiological development until well into the 20's, and that smoking one cone (none before and none after) alters brain wave functioning for up to 7 years. Together, these 2 facts paint a dire outlook for teens taking drugs of any sort.

Just as an aside, much of the cannabis available on the streets these days is lined with heroine as a 'good business measure' on the dealers part. No wonder most big time suppliers don't take drugs of any sort. For them, the cost is too great as they see first hand the longer-term effects of their drugs on their clients. Maybe that is a clue for helping - that the dealers are some of the few non-health workers who see these same people year after year. Most of us loose touch with people around us after just a couple of years, which is not long enough to see the long term effects of drug taking. These 'big guys' of the drug world understand the cost of drug taking, especially the cannabis suppliers. They have said to me as their intake nurse in the prison system over and over "I'm smart miss; I sell it, I don't smoke it".

On another note, the use of cocaine in the legal and corporate worlds is astounding - a colleague of mine who works as a consultant in this industry and who has a counselling background estimates that nearly 1/3 of these professionals are taking cocaine just to get their work done in the time allocated. These people do not tend to end up in mental health wards though, but those who take a lot of cannabis do. As a result, we are dealing with the impact of cannabis much more commonly than with cocaine for example. Which leads to the next question, What affect will the lifestyle and workstyle we currently assume to be acceptable have on our society and on our youth? And are we prepared to address it?

In our initial discussion Ruth and I agreed that the problem cannot be solved by just warning young people about the consequences of drug use. Young people are warned already about the mental health risks associated with drug use. Yet a lot of them don’t heed the warnings.

Ruth’s asked: ‘What is all that about?’ I said that I thought that was the right question. We shouldn’t just jump to the conclusion that this is a law and order problem. It might be possible to reduce levels of cannabis use among young people by putting more of them in jail, but that would hardly enhance their lives.

Ruth responded:

Nice point! In fact, there are those who prefer to live in a prison than on the streets, but the real issue is getting more of those people into care when they need it and into mainstream society when they don't. And that's the real issue we face in the western world - there is simply not enough resources to address the overwhelming problem of acute mental health issues in our youth. Not enough money, not enough staff, not enough vision. Especially not enough vision. The solution has to come from the opposite side of the spectrum - enticing people to want to hold onto their reality instead of giving their reality to their dealer, or their doctor. Which is definitely not a law and order problem.

My starting point in thinking about why some young people might use cannabis despite mental health warnings was Gary Becker’s rational addiction model. We are talking about DIP, schizophrenia and depression rather than addiction, but the principles are the same. The point is that the behaviour may be consistent with maximizing the discounted value of future happiness as perceived by the individuals concerned. In observing their behaviour we might observe that their discount rates are high and their assessments of the probability of being affected by mental illness are low. Well, economists say that kind of thing. Other people would be more likely to say that they are being short-sighted and excessively optimistic in their assessments of the risks involved. Nevertheless, it is possible that those assessments are quite rational.

When I put this to Ruth she replied:

Despite addictions and hallucinations and even delusions, those with mental illness retain the ability to make rational decisions about their own welfare in light of resources available to them and their experience of reality. Young people in particular take drugs in order to escape their reality. Those without a functional psychosis - read schizophrenia and 'traditional' type mental illnesses - who experience acute addictive / psychotic phenomena induced by drug taking spend a good deal of their lives straight, going about their work, their relationships in the usual manner. These are often people who own their own business, hold well paid responsible jobs and otherwise live perfectly acceptable and rewarding lives. And yet they have a real need to escape the reality of their lives - the cost of living within normal reality seems to outweigh the risk of loosing their cognitive autonomy. And this is what concerns me most of all.

Have we not created a world our youth want to live in? Rational theory must tell us that we have to act, that the cost of not acting far outweighs the cost of thinking, of postulating, of delaying what one day must be done. If our youth want to find another reality then surely we are charged with the responsibility of providing a liveable reality for them and for us. And for their children.

My feeling is that Ruth and I are both putting the problem back into the too hard basket. Rational addiction theory tends to put the onus on young people to make good choices even though adults must share responsibility with school age children for the choices they make. Yet, if we see the problem in terms of creating a world that our youth would not want to escape from, we may put real world solutions beyond reach. Perhaps it is a normal part of human nature to seek temporary escape from the reality of our own lives, no matter how good that reality might be. There is no problem in seeking temporary escape by reading novels or going to the movies. The problem is that some people seek forms of escape that may ruin their lives or the lives of others.

The discussion is continued here.