the share of people whose pre-transfer incomes would put them in absolute poverty hasn't changed much. should we be bothered by that? should we have expected anti-poverty policy to address it? I guess I kind of think 'yes'?

As followed up by Medlock, building on a long line of argument from Bruenig and David Sligar, the problem with this argument is that we have good reasons for not expecting the welfare state to reduce pre-transfer poverty. The bulk of those in pre-transfer poverty we would not expect to work, including children, elderly, disabled people and carers. The insistence a welfare state promote self-sufficiency is thus misplaced, as the programs exist to support those outside the labour market.

To ask a more basic question however, if children do not work, and they don’t derive capital income, how are they ever not in poverty? The obvious answer is that they are supported by working adults, usually their parents. Effectively these workers transfer part of their purchasing power, in order to provide for them. The reason they may appear self-sufficient is that the household is considered a single production unit, from which pre-transfer incomes can be assessed.

This is a choice, we could just as well attribute workers’ incomes on an individual basis, reporting non-workers as receiving 0 pre-tax incomes.1 Under this arrangement huge swathes of the population would be reported as below the poverty line, before they receive transfers from family, friends, and other support networks.

The question is then not whether or not we want transfers, they are inevitable, but rather who should be responsible for the transfers. As Esping-Andersen writes in his The Three Worlds of Welfare Capitalism, a social conservative may prefer these transfers occur at the household, or family level, so as to encourage reliance on traditional family structures and patriarchal values. I disagree with this approach, building familial relationships on economic dependency seems to me to allow for many kinds of toxicity, and a poor foundation for loving families. It is however at least a coherent argument for encouraging intra-household transfers, in a way self-sufficiency approaches are not.

If however, your goal is effective poverty reduction and improving individual autonomy, you can’t do much better than a universalist welfare state. It’s transfers all the way down, so we might as well pick the one that works.

Welfare states are more than a collection of policies; to understand them an author requires a rare combination of skills. They must be historically grounded without nostalgia, they must be optimistic but not utopian. They must also fully engage with welfare states’ shift towards "liberalisation" being willing to grapple with the technical policy wonkery used to justify its shift, while recognising this framework’s ideological premises. On all these criteria Politics, Inequality and the Australian Welfare State After Liberalisation is a terrific piece and represents an ambitious attempt to provide a framework to understand the Australian welfare state in the 21st century.

Central to Spies-Butcher’s account is the concept of hybridity, by which the welfare state promotes a commitment to universalism while “mimicking elements of market competition” (2023, xiv). Adopting this approach allows the author to untangle the complicated process of ‘liberalisation’, which since the 1980s has sought to promote the use of prices and competition within the welfare state. The core of the book (Chapters 3-5) consists of case studies, examining differing processes of liberalisation: targeting, marketisation and financialisation. Each process contains two examples, one representing the logic of ‘dualism’ combining principles of need with achievement or status, the other representing the logic of ‘universalism’, emphasising only need.

Chapters 1-2 begin by establishing an overall framework for analysis, introducing the related concepts of hybridity and liberalisation. Spies-Butcher rejects accounts of liberalisation which present it as simply one of ‘winding back’ the welfare state, noting the qualitative and quantitative expansion of the welfare state over the period. The welfare state has instead been “reorganised to imitate and enforce market structures” (Spies-Butcher 2023, 2).The author provides a broad history of the welfare state, building upon Francis Castles’ model of Australia’s pre-liberalisation ‘Wage Earner Welfare State’ (WEWS), under which redistribution primarily occurred via labour market regulation, rather than social spending (Castles 1985). This provides a context for liberalisation in Australia, as well as a basis on which to elaborate alternative methods of welfare. Spies-Butcher follows Timus’ expansive understanding of “welfare” as including not only social spending, but also concessional tax arrangements (fiscal welfare) and benefits via employment contracts (occupational welfare). Importantly, the methods differ markedly in public visibility and democratic oversight; tax deductions for instance both disproportionately benefiting the wealthy and often excluded from public accounts.

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Chapter 3 examines the targeting, or conditionality, of social benefits: contrasting family benefits (representing universalism) to unemployment benefits (representing dualism). He discusses how 1980s feminist reformers within bureaucracies and policy machinery ‘femocrats’ challenged asymmetries built into the family benefits system to advance a more egalitarian, universalistic form of welfare. For example, the neoclassical concept of “Effective Marginal Tax Rates” (EMTRs), whereby means testing and taxation are integrated into a combined framework, were utilised to argue against means testing, due to their effect on female labour supply. Thus, Spies-Butcher states femocrats “used mainstream economic arguments to contest economically rationalist bureaucracies”, combined with political mobilisation to achieve universalist outcomes (2023, 54). Despite greater conditionality being enforced in subsequent decades, he argues the system has been resilient to retrenchment (a point I will discuss further). Spies-Butcher contrasts this to Australian unemployment benefits, very briefly discussing how they have progressively become less generous, more stigmatised and subject to increasingly onerous work requirements.

Chapter 4 focuses on ‘marketisation’, the application of competition and prices to the provision of social services, comparing Medicare, as universalist, with early education and care (EEC), as dualistic. He presents Medicare as an archetype of hybridity, utilising market mechanisms to bypass both constitutional and fiscal barriers which had blocked earlier healthcare nationalisation attempts. Further, competition was used to promote universalism, Medicare expanding bulk billing via monopsony power and competition between GPs. Spies-Butcher, however, outlines important ways the Medicare model diverged from standard neoclassical reasoning regarding health insurance, notably that distribution was based on an accepted social need for healthcare, thus “a lack of needed medical care [was treated] as a market failure, rather than simply the outcome of [insufficient] willingness to pay” (Spies-Butcher 2023, 74).EEC is then examined as a contrast, a system in which government funding was increased substantially, but universalism was never achieved. Particular attention is given to asymmetric public accounting rules which facilitated privatisation, discussed further below.

Chapter 5 examines ‘financialisation’, the “linking of citizens’ future access to social goods and income to financial markets”, comparing student loans, as universalist, to retirement incomes, as dualistic (Spies-Butcher 2023, 9). The discussion of retirement incomes is naturally the broadest in the book, ranging from the failure of Australia to adopt an earnings-related social insurance pension and the rise of superannuation, to housing/superannuation tax policy. Australia’s Intergenerational Reports (IGRs) are also discussed at length, a particularly insightful section, analysing their initially highly asymmetric models of accounting, focusing on minimising social spending rather than efficiency, and later broadening to include climate risks and social investment. Spies-Butcher recognises that positioning HECS as a universalist hybrid policy is controversial, as the system was introduced alongside the reintroduction of student fees. However, in reclassifying government spending on tertiary education as ‘private’, and treating student debts as a financial asset, the system managed to expand availability within a publicly funded model, while staying within politically imposed fiscal constraints.

The concluding Chapters 6 and 7 provide lessons from Australia’s experience of liberalisation, both in terms of hybrid policy making and political strategies. Spies-Butcher argues that hybridity advances not by rejecting the logic of competition, but by “applying economic principles more consistently and symmetrically” while adopting “social definitions of need” in distribution (2023, 138). Thus, means testing is converted into EMTRs, tax deductions into tax expenditures, and social spending into social investment. He concludes with a degree of optimism, suggesting that social reproduction may constitute the new centre of power for the welfare state, specifically workers in education and care. While more fragmented than the industrial working class, these workers have the advantages of being both trusted and decentralised, making them useful vectors of community organising.

Spies-Butcher is at his best when discussing the financial logics, measuring, and budgetary rules which dictate both the operation of the welfare state, and how it is perceived. These sections are a pleasure to read. The author combines a deep understanding of the intricacies of technocratic concepts with a broader appreciation for their ideological underpinnings. They are also deeply important. To the extent neoliberalism has restructured the welfare state to entrench inequality and hierarchy, this is often done not by outward endorsement of inequality, but by the rendering of such structures as invisible. For instance, when considering welfare policy via tax deductions he notes these “disappear from public accounts, and from the routine oversight of democratic governance. For most citizens who are neither wealthy nor tax accountants, it appears as if nothing is happening” (Spies-Butcher 2023, 39).The reclassifying of these deductions as measured Social Tax Expenditures (STEs) thus served as a method by which activists made inegalitarian welfare policy visible, and thus contestable.

Each case study contains at least one section discussing such rules, ranging from the integration of taxation and means testing in EMTRs, to the separation of private and public accounting. A particularly memorable section concerns the rise and fall of ABC Learning, in which fiscal rules prevented governments from borrowing to establish new childcare centres, as the public assets would be invisible on budget documents, encouraging governments to provide demand-side subsidies for parents instead. By contrast, ABC Learning was able to borrow against the intangible assets of government licenses which allowed it to receive government subsidies. Thus, asymmetric accounting rules promoted privatisation at the expense of both efficiency and equity.

Spies-Butcher’s discussion of family benefits is the work’s weakest section (Chapter 3), in terms of his overall argument. Despite classifying it as a ‘hybrid’ model of welfare, the Family Tax Benefit Part A (FBT A) is far from universal, and has become less so over the decades, benefiting an estimated 46% of children in 2020-21, down from 66% in 2000-01 (Stewart et al 2023, 1). Additionally, the payment adequacy has declined substantially, having been indexed to CPI rather than the pension since 2009. This is likely the outcome of weaker political constituencies, as compared to those for HECs and Medicare, casting doubt on the feminist-femocrat alliance posed in the chapter.

The chapter is engaging and informative, the work of femocrats providing an interesting example of progressives adopting the frameworks of liberalisation to promote egalitarian outcomes. The inadequacy of the FBT A, however, also undermines the position that these frameworks were effective hybridity, protecting the welfare state from retrenchment. As Spies-Butcher outlines, EMTRs may be useful for egalitarian purposes, as it “treats all income, public and private, similarly, and all state claims on income, both means-testing and taxation, similarly… reflect[ing] and facilitate[ing] a form of universalism” (2023, 54). This is accurate on a theoretical level, but hard to justify in relation to the FBT A. As was outlined by Apps and Rees (2010), upon its introduction in 2008, the FBT A created EMTRs peaking at 65.5% for middle income secondary earners, when adding the effects of Personal Income Tax, Low Income Tax Offset and Medicare Levy. EMTRs may therefore constitute a model for a future with universal family benefits, but do not seem to have substantially impacted the design of the FBT A.

The work would also have benefited from a more critical analysis of ‘hybridity’ as policy strategy. Hybridity is posed as a process by which “[e]galitarian policies overcame resistance from an increasingly pro-competition state”, pursuing egalitarian goals within the liberal paradigm of prices and competition (Spies-Butcher 2023, 4). Later, it is clarified that “[w]hat distinguishes hybrid policy from other forms of equally technocratic liberalisation is a connection to social definitions of need” (Spies-Butcher 2023, 138). Hybridity then may be thought of as adopting liberalisation’s methods, while seeking egalitarian ends.

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The adoption of liberalisation’s methods and terminology by egalitarians may however not be a purely neutral act. Spies-Butcher suggests that hybrid policies are “less universal than social democratic systems of social insurance” and it is worth considering the extent to which hybridity forecloses alternative policy options (2023, 12). In this respect, Medicare is distinct from other examples of hybridity, its broad structure preceding the neoliberal turn, originally being introduced by a more explicitly social democratic government as a way of achieving its goals within specific Constitutional constraints.

By contrast, consider current policy debates regarding EEC. It is notable that even for proponents of universal childcare, the discourse surrounding it overwhelmingly focuses on the female labour force participation rate, as well as child outcomes (see e.g. Wood et al. 2020, Productivity Commission 2024, v). However, as Spies-Butcher correctly notes, from an egalitarian perspective, the current means-tested system has two distinct objections in that “the current system serves as a form of gendered taxation, a system which is both discriminatory in principle and that creates obvious disincentives for women participating in paid work” (2023, 91). This former, egalitarian based objection to means testing is absent from a discourse for which supporting labour supply is seen as EEC funding’s primary purpose.

Spies-Butcher describes the failure of EEC to achieve universal provision as being both a political failure, being characterised as “middle class welfare”, as well as running into “austerity biased accounting structures against public investment” (Spies-Butcher 2023, 92). It may however also be worth considering whether the strategy of hybridity itself limits the potential for more social democratic models of EEC provision.

This work is nonetheless an impressive achievement. I have never read a book which so well encapsulated the strange and sometimes bewildering structure of the Australian welfare state. In providing a thorough understanding of how we got here and where we may be heading, Spies-Butcher manages to bring together the language of the activist with that of the bureaucrat. It deserves to be read, and I look forward to his future works.

The views expressed in this review are solely those of the author and do not reflect the views of the Australian Competition and Consumer Commission (ACCC)

References

Apps, P., Rees, R. (2010). Australian family tax reform and the targeting fallacy. Australian Economic Review, 43(2), 153-175

Castles, F. (1985) The Working Class and Welfare: Reflections on the Political Development of Welfare State in Australia and New Zealand, 1890–1980. Allen and Unwin.

Spies-Butcher, B. (2023). Politics, Inequality and the Australian Welfare State After Liberalisation. Anthem Studies

Wood D, Griffiths K, Emslie O (2020) Cheaper childcare: A practical plan to boost female workforce participation. Report, Grattan Institute, Australia

Productivity Commission 2024, A path to universal early childhood education and care, Inquiry report no. 106, Vol. 1, Canberra

Books are rated on a scale of: Excellent, Great, Good, Fine, Bad.

Legalizing the Revolution: India and the Constitution of the Postcolony - Sandipto Dasgupta - Excellent

A terrific work, analysing the Indian Constitution from a post-colonial perspective. The overall theme of the book is that of an ‘unfinished revolution’: India achieved independence without going through the sort of revolutionary transformation usually associated with Constitutional drafting. Because of this, the document served as a way to attempt legislate these changes, a “revolution without a revolution.” The beginning and ending sections are the strongest in my opinion, particularly those relating to Rights and Repression and, Property and Labour.

The Curious Culture of Economic Theory - Ran Spiegler - Great

This book is in many ways unique, I haven’t read anything quite like it. Critiques of ‘mainstream economics’, while often insightful, are usually confined to outsiders of the profession. Spiegler however offers an interesting cultural criticism of the discipline from the inside, covering a broad range of areas, including pure theory vs applied econ, and how we conceive of rationality. I’d very much recommend, it’s a technical but highly readable work, and at times quite funny.

The Right to Strike in Australia - Shae McCrystal - Great

McCrystal is a leading Australian Academic on the process of union bargaining in Australia. This work assesses how well Australia protects ‘the right to strike’ as required under international law. It’s somewhat dated, being published in 2010, but mostly holds up very well and doesn’t pull its punches. Overall a terrific piece, and I would definitely recommend it.

Unless you have a special interest I’d recommend skimming through the beginning section on international conciliation mechanisms, it’s necessary but very dry and the meat of the book occurs later.

The Great Transformation: The Political and Economic Origins of Our Time - Karl Polanyi - Great

Reread Polanyi’s classic, which details the emergence of market society and the “double movement” whereby societies developed to protect people from market forces. The integration of economics and anthropology was groundbreaking and its broad themes of humans craving stability remain true.

While a classic the book does have a somewhat unusual structure, beginning with an interesting, but largely unrelated discussion of global finance as a force for piece in the 19th century. The arguments are also sometimes somewhat confusing, as Milanovic recent wrote about, for instance: both critiquing Ricardo for his opposition to the Poor Laws, whilst also arguing the Poor Laws created terrible outcomes.

1.      people can be paid for donation, and;

2.      blood is openly sold, distributed by willingness to pay (WTP).

As a result, the market clears and waiting lists disappear.

I’m sure most of you have mixed feelings about (1), there may be something distasteful in transforming a previously altruistic, community-based practice into a commercial one. There may also be the worry that commercialising something can ‘crowd out’ moral motivations, as Michael Sandel often suggests. However, people may be persuaded if the effect on supply was substantial enough. Sure I would like people to be motivated by altruism, but if it results in lives saved, it may nonetheless be worthwhile.

Most people would however consider (2) morally abhorrent. Blood is clearly essential for life, and thus WTP will reflect the parties’ ability to pay much more than any difference in preferences. Letting the price “float” would therefore likely result in blood being allocated upwards, towards the rich.

Note however, that the waiting list can disappear based solely on (2). Holding the supply constant, introducing markets on the demand side can eliminate “queuing” by replacing waiting with prices.

What is the purpose of this rather bizarre hypothetical? It is to demonstrate an asymmetry in the way many people think about the efficiency of markets, at least for essentials. I refer to it as Supply-Side Primacy (SSP): simply put, people view the supply-side effects of price rises as their primary virtue, not its demand-side reallocation.

A similar concept to SSP can be found in James Tobin’s classic On Limiting the Domain of Inequality in which he distinguishes between General Egalitarianism, or the egalitarianism of incomes, and Specific Egalitarianism, the egalitarian distribution of specific goods. In this, he states:

[A] crucial issue is the elasticity of supply, in the short run and the long run, of the commodity in question. When the scarce commodity is in fixed supply, then arrangements for distributing it equally, or on any other non-market criterion, can be made without worrying about efficiency. This is also the case in which social concern about specific inequality make the most sense.

Note here that Tobin’s concept of ‘efficiency’ is different to how economists usually conceptualise allocative efficiency, which does not require supply to be flexible to justify distribution based on WTP.

Of course, even if one is sceptical towards the usefulness of WTP as a benchmark for a particular scarce good’s distribution, the solution is not necessarily a form of price control. Using the above scenario, if blood was “sold but at a low price” it would likely not reach those most in need.

SSP does however help us understand a different way in which markets and prices can be conceptualised, as well as the structure of many essential government services. For a real life example, consider the development and distribution of the COVID vaccines. While creating incentives for production were paramount, there was never a serious movement that the “shortage” be ended by auctioning off the limited supply. Under such clear examples of specific egalitarianism, supply is paramount, and WTP relatively unimportant.

Books are rated on a scale of: Excellent, Great, Good, Fine, Bad.

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As Gods Among Men: A History of the Rich in the West - Guido Alfani - Great

A wonderful work detailing how ‘the rich’ have been understood in the West across centuries, focusing on their various roles, and backgrounds over the time. Important insights on how justifications for ‘the rich’ have become less convincing in the era of the modern welfare state. My one caveat would be that the book is rather long, although an enjoyable read.

Economics for the Common Good - Jean Tirole - Good

A good overview of the discipline from a leading economist. The first sections of the book are particularly useful if you want to understand why economists think the way they do. I personally found them a little same-y as I’d read these arguments many times before. If that is the case for you, focus on the latter sections which include more specific policy recommendations.

Development As Freedom - Amartya Sen - Excellent

Sen’s works are always great and this was well worth a re-read. If you haven’t read any Sen before, this is a great place to start, both being written for a popular audience and providing a broad overview of his work, covering his philosophical approach, as well as his contributions to development economics, particularly famines.

Why Australia Prospered: The Shifting Sources of Economic Growth - Ian W McLean - Great

Engaging analysis on Australia’s growth history, arguing that our source of growth has changed markedly over time. It’s a long and sometimes dry read but worth the effort. Also includes some discussion on the economic policy debates over the period, which are worth reflecting on. One aspect I would’ve preferred more analysis on was the post WW2 trajectory, although this may be personal preference, I don’t find the 19th century sections as interesting.

Alan Partridge: Big Beacon - Steve Coogan - Great

Coogan’s fictional persona Alan Partridge has always been a favourite of mine, and this work didn’t disappoint, although not quite as good as I, Partidge or Nomad. The construction worker’s strike, and Partridge’s reaction to it are particularly good.

Limitarianism - Ingrid Robeyns - Good

Useful framework outlining her theory of ‘Limitarianism’, that we as a society should structure the economy to prevent extreme wealth. The book is engaging and thought provoking, particularly in the earlier sections, which discuss how the reasonable ‘max wealth’ is likely to be lower in countries with strong welfare states, as wealth for many people exists effectively as insurance, whether it is for education, retirement, or illness. I do think more could’ve been dedicated to actual policy, as I found and excessive amount described why Limitarianism is also good for rich people.

Books will be rated on a scale of: Excellent, Great, Good, Fine, Bad.

Some of the comments are likely to be longer than others, but that’s not an indication of quality, rather its usually dependent on how long ago I read it and whether I took notes.

The Great Escape: Health, Wealth, and the Origins of Inequality – Angus Deaton -
Excellent

This book is excellent, a wonderful example of a leading economist writing about what they know, in Deaton’s case: health, poverty and welfare. Broadly covers development in these areas over 250 years. Would recommend this book particularly for getting to know broad historical trends, such as the movement of preventable deaths from infants to the elderly, and his discussion of economic debates, including the Easterlin Paradox.

The work is weakest in the final chapter, where Deaton suggests that foreign aid does not help developing countries and likely hinders them, due to its ability to undermine accountable institutions. He has useful insights, such as critiquing what he calls the “hydraulic” approach to foreign aid, whereby one assumes that if dollars go in one end, outcomes must come out the other. The political economy argument against aid is however too strong in my opinion, given the unavoidable uncertainty in this area.

The Road to Serfdom – Friedrich von Hayek – Fine

This work can be broken down into roughly 4 broad themes, of varying quality:

·        Critique of central planning: well written and insightful.

·        Individualism vs collectivism: somewhat interesting, though inadequately presents the issues involved.

·        Theory of how planning can turn a democracy into dictatorship: a slippery slope argument which subsequent history has not borne out.

·        An intellectual history of socialism and fascism: highly partisan and bad scholarship, the worst sections of the book.

The most useful insights, concerning the information gathering role of markets, are better and more concisely presented in his The Use of Knowledge in Society, and similar themes are further elaborated in Seeing Like A State by James C Scott. Because of this, I do not think the work holds up today, and is primarily useful as a historical document. If you are going to read it, the ‘Definitive Edition’ is excellent, combining the work with related materials. If people are interested, I may write a longer review for the book’s 80^th anniversary.

Invisible Women: Data Bias in a World Designed for Men - Caroline Criado Pérez – Great

Pérez’s classic on the data gap for women is insightful and engagingly written. It’s broad in coverage, reflecting on topics ranging from snowploughing to product safety. My personal favourite sections were on the workplace, childcare and retirement, probably because they’re welfare state related.

It’s worth noting that the book can be difficult to read in long stretches, as the volume of data presented  can become overwhelming. For this reason, you should remember to note down key statistics you’re interested in, as they can be forgotten given 100 other stats.

How the World Became Rich: The Historical Origins of Economic Growth – Jared Rubin and Mark Koyama – Good

A good read, this book provides a broad overview of the debates surrounding economic development, providing useful summaries of the diverging views in the area. If you haven’t engaged with the literature before it would be a great place to start, particularly if you use it as a springboard to engage with the sources discussed. I would likely have rated this book as Great if I hadn’t read much in development econ before, but if you have already, it can be a little dry and I’d suggest Thirlwall and Pacheco-López’s Economics of Development: Theory and Evidence for a deeper, and more technical analysis.

Gen F'd?: How Young Australians Can Take Back Their Stolen Futures – Alison Pennington – Great

A compellingly written critique of Australia’s economic policies, and how they can be changed. I particularly enjoyed Pennington’s description of unions, and the ways in which unions based on rank and file mobilisation are distinctive to those that are more similar to an ‘arms-length insurance product’. I do wish the work had dug deeper into the specifics of Australia’s Industrial Relations regime, however the book is written accessibly for a popular audience, rather than economists/lawyers like myself.

Global Inequality: A New Approach for the Age of Globalization – Branko Milanović – Excellent

Milanović is a favourite economist of mine and this book was worth reading for a second time. As is common in his work, the book weaves a deep understanding of the economics of inequality with politics, history and ideology. The book describes inequality as taking place in ‘Kuznets Waves’ rather than a unidirectional process. If you enjoy this work, would recommend his Capitalism, Alone which builds more on the political economy arguments.

Our Lives in Their Portfolios: Why Asset Managers Own the World – Brett Christophers – Great

Having greatly enjoyed Christophers’ Rentier Capitalism I approached this book with high expectations. The book is great, though not quite as good as Rentier Capitalism, focusing on the role of asset managers in contemporary capitalism (which he calls ‘asset manager society’). It is an engaging analysis, running through how asset managers became so dominant, the structure of such organisations, and its implications. To his credit Chrisophers avoids the trap of romanticising small capital, mum and dad landlords etc, providing coherent reasons as to why asset manager society is different to previous modes of capitalism, and the risks involved.

1. Economics would like to be a ‘hard science’, above political disagreements; and

2. Useful policy analysis usually requires a decision on what we ought to value and by how much, inherently political decisions.

To resolve this issue, economists often rely on the ‘revealed preferences’ of consumers. Rather than assessing what ought to be done, it is argued, economists should assess how successful the economy is in satisfying the preferences consumers already have, and we can determine their preferences by observing their actions.

There are 2 clear advantages to this approach. Firstly, it is seen as avoiding the paternalism inherent in social planners attempting to reshape the world based on the planner’s own worldview. Secondly, focusing on someone’s actions rather than statements can provide a more accurate picture of the trade-offs they are willing to make under scarcity, something much more difficult in surveys.

The simple version of revealed preferences is also highly intuitive. Say I have a friend, John, who says he loves the opera. His actions however contradict these statements, when faced with the choice between going to the opera and almost any other activity, for instance, watching TV, John always chooses the latter. I would then have strong evidence that John does not enjoy the opera, despite his statements to the contrary.

This reasoning however becomes far less tenable for decisions in more complex scenarios. The controversies concerning the costs of climate change im Nicholas Stern’s excellent Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change are an illustrative case.

The costs of climate change will primarily take place in the future, sometimes far into the future. The question then is, how should we value these costs, compared to costs in the present? How does one appropriately distribute the costs of the climate transition between generations of people?

The exact rate at which one chooses to compare time periods, often referred to as the ‘discount rate’ has dramatic effects on the total cost, due to the magic of compound interest applied backwards. As Stern notes, a 6% discount rate would mean a cost today is valued as x18 more than one in 50 years, and x339 more than one in 100 years. Under such rates, costs in the very long run are valued infinitesimally small.

How does one establish such a rate then? A common response in economics is by examining behaviour in capital markets. It is argued that the intertemporal question for climate change is basically the same as a discount rate applied to investments, and that we can learn what this rate is by looking at rates of return in capital markets.

Note however that the question of intertemporal valuation is enormously more complex than whether consumers exhibit a preference for apples vs peaches. Stern notes important reasons why capital markets are a poor guide in this circumstance, including:

1. An assumption that past rates of return will continue in the medium to long-term future, a problematic assumption given certain risks of climate change;

2. That capital markets, particularly over the long term, are subject to major imperfections due to information asymmetries ;

3. That there is no “substantial financial or other market that applies to collective decision-making over a century or two”, rather most markets are for individual decisions and concern a much shorter period; and

4. General problems with conflating the time-preferences of current investors with the interests of future generations, who are not the ones investing.

Faced with such problems, Stern rejects their use for estimating climate change costs, and makes a strong ethical case for a discount rate of almost 0, primarily based on the principle that future generations ought to be treated equally to the present.

A full account of the controversy of Stern’s discount rate is beyond the scope of a blog post. Stern’s willingness to engage in ethical debates however ought to be congratulated, along with his unwillingness to engage in what we may call Revealed Preference Overreach.

Revealed Preference Overreach is an unfortunate tendency for some economists to go beyond the generic usefulness of revealed preferences as a form of data, and rather as a substitute for politics. It seeks to avoid the messy business of ethical argumentation by appealing to the apparently implicit beliefs people already have. It argues that debate is unnecessary, as it has already been voiced by The People, via their actions in the marketplace.

Such an approach however does not resolve ethical issues, it merely obscures them. The correct response to such complexity is not to shy away from ethical judgments, nor to try and determine the implicit beliefs of others by reference to their behaviours on other matters, but to openly discuss the ethical implications of our decisions within a democratic polity. As Amartya Sen writes:

If informed scrutiny by the public is central to any such social evaluation (as I believe is the case), the implicit values have to be made more explicit, rather than being shielded from scrutiny on the spurious ground that they are part of an “already available” metric that society can immediately use without further ado.

Within such a discourse, Stern’s approach should not be thought of as paternalistic, but rather as an honest appraisal of the ethical issues involved, to be accepted or rejected in democratic politics. When it comes to fundamental issues that require ethical valuation, there’s no avoiding it.

This Krugman quote has proven so popular with economists it’s almost become a mantra, to repeat every time one discusses productivity or living standards. There’s good reason for this, productivity is important, extremely so.

Productivity discourse however suffers from a problem. While it is important, it is also famously difficult to reliably increase. While modern growth theorists can often agree on very basic prerequisites to economic growth: rule of law, basic education etc, how to bring it about in a modern rich economy is highly fraught. There is general acceptance of a global productivity slowdown, but not on its causes and how if possible, it is to be reversed.

This brings us to the second Krugman quote, this time on the endogenous growth model, which seeks to model technological change:

“too much of [endogenous growth theory] involved making assumptions about how unmeasurable things affected other unmeasurable things.”

The comment is not without merit. The famous Romer model includes variables for new ideas and their originality. The model is useful, but the measurement problems means it hardly provides guidance on concrete policies to spur growth. Further the Schumpeterian aspects of the model suggest that sometimes monopoly power is good, and sometimes it is bad, adding further complexity to our models of perfect competition.

The problem with productivity discourse is then not that productivity is bad. Almost nobody objects to producing more with less. The issue is that increasing productivity possesses two attributes, it is both very important, and hard to reliably increase. This is a dangerous place to be. In leu of strong evidence either way, it is incredibly tempting to suggest whatever policies you already preferred and label them as “productivity promoting”. The argument often resembles a motte and bailey, the author beginning their argument with the “productivity is important” statement, listing their preferred policies as “methods to improve productivity”, and then retreating to the “productivity is important” point when the merits of these policies are questioned.

In sum, one should be highly suspect in assessing someone's suite of policies to improve productivity growth: how are we measuring outcomes? Is this a level or rate effect? Are we assuming we'll overcome the global slowdown? Are among the first questions one should ask for these programs.

The problem Keynes described was simple, how to keep aggregate demand low during the war while distributing the burden equitably.

The Framework

Keynes treats inflation as fundamentally a collective action problem. With supply fixed, increased money earnings cannot increase consumption at a societal level. However, each individual can increase their relative share by spending more, and is therefore incentivised to do so. He compares the problem to one of traffic, each individual’s spending devaluing those of their colleagues:

An individual cannot by saving more protect himself from the consequences of inflation if others do not follow his example; just as he cannot protect himself from accidents by obeying the rule of the road if others disregard it. We have here the perfect opportunity for social action, where everyone can be protected by making a certain rule of behaviour universal.

The Solution

Keynes’ plan consisted of 4 parts:

1. Establish a system of deferred pay across all income groups. This was seen as having two key advantages. Firstly, it would allow a more equitable distribution of immediate income, and secondly, that shares in the national debt could be dispersed throughout the population rather than be concentrated in the hands of the rich, as it does usually. To the extent new taxes were introduced rather than deferred pay, Keynes preferred they be levied on higher income groups.

2. Establish a capital levy, similar to a temporary wealth tax, to reduce the national debt following the war. Keynes preferred that this levy take place in instalments, rather than as a one-off payment, to facilitate the tax’s collection and reducing its disturbance. He also noted that this may facilitate an eventual permanent capital tax which would be a valuable addition to our fiscal machinery and has certain important advantages over income tax.
   
   While Keynes supported this measure, he was clear the tax could not resolve the aggregate demand problem during the war, simply redistributing the assets of the rich to the state, noting:
   
   The main point is that a Capital Levy now would do little or nothing to solve the immediate problem. A Capital Levy on a scale worth having could not be met out of the current consumption of the wealthy. They could only pay it by handing over assets to the Government, the capital value of which would be of no assistance whatever to the immediate financial task.

3. Establish an effective floor to prevent poverty during the war, including through exempt minimum, a sharply progressive scale and a system of family allowances. Keynes writes eloquently on the need for such a minimum even during this moment of crisis.
   
   At first sight it is paradoxical to propose in time of war an expensive social reform which we have not thought ourselves able to afford in time of peace. But in truth the need for this reform is so much greater in such times that it may provide the most appropriate occasion for it.

4. Finally, provided the above conditions are met, Keynes suggests to link money incomes to changes in limited rationed articles, and to endeavour to prevent these essential articles rising in prices.

The No Plan Result

Keynes was very clear that without any plan, the ensuing inflation would lead to far less equitable results. As goods are fixed in the scenario, he predicted the price of consumer goods will rise and this inflation will swell the relative share of the owners of the means of production.

aggregate incomes will indeed rise… (apart from the effect of any rise in the price of goods bought by the Government), but not everyone’s income will rise in the same proportion, if at all. The initial increase of income will mainly belong to a limited class of individuals and of trading and manufacturing companies, whom (without intending any insult, for it is by no fault or intention of theirs) we can call for short “the profiteers.

He predicted a substantial portion of these funds wouldn’t be further circulated as it with either be: saved, retained as profits within the companies, or taxed by the government.

In response to the inflation, workers may be expected to push for higher wages, Keynes predicting some wage-price spiral effects, but that eventually the burden would be distributed to groups with relatively fixed incomes.

Keynes’ Legacy

While many elements of the work are clearly dated, Keynes reminds us of the inherently political natural of how aggregate demand is managed within a democratic society. In situations where aggregate demand must be reduced, the question remains how.

Economic Theory

1. Economics in Two Lessons - John Quiggin
   Quiggin manages to present economics simply, while keeping the limitations and contingency of models front of mind. A great starting material to understand the basics of econ and why economists care so much about opportunity cost.

2. Economics Rules - Dani Rodrik

   A robust defence of economic modelling, as well as its flaws. Would recommend to anyone unsure why economists are so obsessed with 'models', and why they matter for policy formation.

3. The Darwin Economy - Robert H. Frank

   The best book I've ever read on the economic problems caused by positional goods. Much of our hard efforts are effectively zero sum, competing for resources that are inherently limited. This has egalitarian implications for policy.

4. The Conservative Nanny State - Dean Baker

   Baker does a great job of explaining how the way markets are structured can promote or reduce inequality.  Work covers: occupational licencing, patents and taxation. Baker also puts it up free online which is great.

5. Thinking Like An Economist - Elizabeth Popp Berman
   Recommend this for economists to read as it runs through the development of the "economic style of reasoning" that dominates contemporary policy debates. It's worth remembering there are alternative frameworks for policy.

   The Welfare State

6. The Three Worlds of Welfare Capitalism - Gøsta Esping-Andersen
   A giant in welfare state discourse. The 3 categories of welfare states: liberal, conservative and social democratic is a great framework to get you thinking.

7. The Economics of the Welfare State - Nicholas Barr

   The main textbook on welfare state econ and still a classic. Covers everything from theories of just distribution to pensions to health insurance. Great starting resource.

8. Welfare State as Piggy Bank - Nicholas Barr

   Barr is a preeminent economist on the welfare state. This book focuses on the underappreciated efficiency role of welfare states from pensions, to unemployment to education. Definitely worth engaging with.

9. The Economics of the Public Sector - Joseph Stiglitz and Jay Rosenberg

   This excellent work analyses the public sector's role in economic development, covering market failures, public goods, and income distribution. Often used as a textbook, an essential resource.

10. Making Social Spending Work - Peter H Lindert
    Lindert is a great historian on social spending stats. This is a wonderful overview of the area: showing the tremendous importance of welfare expenditures relative to charity, and the tax + spend efficiency of the welfare state.

11. Development as Freedom - Amartya Sen

    A wonderful overview of Sen's policy views, definitely not just for developing countries. Book for instance covers: means testing, theory of democracy, and the capability approach.

12. Bigger Government - Marc Robinson

    An excellent primer on the government's biggest expenses and what will shape them in the future. The scale of expenditures is something often missed in discourse on public spending.

13. Tax and Government in the 21st Century - Miranda Stewart

    My favourite reference for all things tax. This book is comprehensive, covering tax from economic, legal and political perspective. Also details tax's development historically, which is important context.

14. The Humble Economist - Tony Culyer

    Health policy is a vital commitment of the welfare state, and health economics is a key part of it. Tony Culyer is a great resource on this, understanding both the area, and limitations of conventional welfare econ frameworks.

15. Understanding the Private-Public Divide - Avner Offer
    Offer focuses on the role of the state in long term planning. This framework is a great addition to conventional accounts of market failure. From pensions to education, the welfare state looks to the future.

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    Empirics
    

16. Mastering 'Metrics - Joshua Angrist and Jörn-Steffen Pischke
    An excellent and very readable introduction to econometric methods by 2 leaders in the field. Brilliant place to get the basics of the language and techniques used in empirical economics.

17. Good Economics for Hard Times - Abhijit Banerjee and Esther Duflo
    Great, entertaining overview of current areas of debate and what the empirics currently suggest. Great reference book, topics ranging from growth to trade to immigration.

18. Mis-measuring Our Lives - Amartya Sen, Jean-Paul Fitoussi, and Joseph Stiglitz
    GDP gets a lot of criticism, some warranted. This work by leading economists re-examines GDP, focusing on: undercounting production, quality of life, and environmental sustainability. A great rundown of an important stat.

19. GDP: A Short But Affectionate History - Diane Coyle
    GDP gets a lot of flak, some justified, some not. This is a great intro to understand why macroeconomists still find it useful.

20. Seeing Like a State - James C. Scott

    Scott critiques top-down development projects, highlighting the importance of local knowledge and organic systems, offering insights into the limitations of centralized planning. Worth bearing in mind during policy design.

21. The Value of Everything - Mariana Mazzucato
    A terrific history of the ways we measure production and what activities are considered valuable. As argued, the way we calculate GDP contribution can itself be a political decision. This is an important element to analysis.

22. How China Escaped the Poverty Trap - Yuen Yuen Ang

    An excellent work on complexity economics, describing how optimal institutions develop and change through the development processes. Worth considering for both rich and poorer countries.

23. The Uncounted - Alex Cobham

    This work focuses on how power shapes our stats, specifically via: 1) the powerful excluding themselves to avoid accountability and 2) the vulnerable being excluded to avoid addressing their problems. These constraints are key to good advice.

24. Invisible Women - Caroline Criado Perez

    This work explains the many ways our current data exhibits a gender bias. By positioning men as the default many of our systems are not built to include women. Important to note when constructing good policy in a world designed for men.

    
    Inequality
    

25. Inequality - Anthony Atkinson

    An absolute classic on what Inequality looks like, what shapes it, and how it might be combatted. Atkinson was a giant in inequality discourse and this book covers almost anything you could want including: taxes, capital ownership and labour.

26. Global Inequality – Branko Milanovic
    Milanovic specialises in global inequality stats. This work examines the changing importance class and nationality over the last centuries, or in his words "From Karl Marx to Frantz Fanon, and Then Back to Marx".

27. Capitalism, Alone – Branko Milanovic
    Milanovic is a leading expert on global inequality. This book builds on his earlier work, viewing global inequality within a coherent political economy framework: "Liberal Meritocratic Capitalism" Vs "Political Capitalism". Useful framework.

28. Social Mobility - Lee Elliot Major and Stephen Machin
    Terrific book if you're interested in social mobility, both its levels and how it can be improved. Works great as a reference book, providing an overview of the available evidence.

29. From Here to Equality - William A. Darity Jr. and A. Kirsten Mullen
    The best book I've encountered on reparations, detailing both the historical crimes and a reparation program. The last chapters are particularly interesting from a policy standpoint, running through different methods of calculations.

30. What Works - Iris Bohnet

    A terrific overview of the empirics of gender equality, and how we can overcome it. Refreshingly focuses on structures, not individuals.

31. The Technology Trap - Carl Benedikt Frey

    While productivity enhancing tech increases total production, its distributional impact on sections of the population can be disastrous. This history puts this in perspective, if we want to avoid modern luddites, the gains must be shared.

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    International
    

32. The Globalisation Paradox – Dani Rodrik
    Great work on the nuances of globalisation. While recognising its wide benefits, we should remember the trade-offs: national self-determination, democracy and economic hyper globalisation conflict, we can only have 2 focuses.

33. Straight Talk on Trade - Dani Rodrik

    Rodrik is a must read on trade theory, both understanding trades' benefits, and the trade-offs countries make when they design policies. A terrific introduction if you're interested in the area.

34. The Economics of Belonging - Martin Sandbu

    Sandbu present a detailed and appealing set of policies to address the left behind without giving up the benefits of global integration. A strong social democratic vision and a great read.

35. Six Faces of Globalisation - Anthea Roberts and Nicolas Lamp
    Presents 6 competing narratives people have about globalisation. It's worth engaging with all of them the understand current debates, challenge your priors and learn other worldviews.

    
    Land
    

36. Rethinking the Economics of Land and Housing - Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane

    This book calls for recentering land in economic analysis, rather than often being regarded as just another form of capital. Worth engaging with given rent/homeownership's current importance.

37. Walkable City Rules - Jeff Speck

    An incredible and accessible rundown of how we can make our cities more walkable: healthier, wealthier and more environmentally friendly. His earlier work, Walkable City is easier but less thorough.

38. Human Transit - Jarrett Walker

    Walker delves into designing effective public transit systems, providing valuable insights for urban planning and transportation. The best book I've read on the subject, breaking processes into their basics and with useful diagrams.

    
    Philosophical and Utopian

39. Envisioning Real Utopias - Erik Olin Wright

    This amazing Wright work focuses on how we can aim towards utopian goals within a feasible framework. If you've never read a Wright book I'd strongly recommend him, he was a brilliant thinker.

40. Economics of Feasible Socialism - Alec Nove

    Written in the 80s-90s, this work proposes a feasible explicitly socialist economy, in which markets remain but capital is publicly owned. It remains a great read, understanding the role of markets in a progressive framework.

41. Another Now - Yanis Varoufakis
    An unusual work, this is a utopian fiction book in a style similar to William Morris’ “News from Nowhere”. Details a future society based on Varoufakis’ ideals, with interesting economic structures and monetary system.

42. Free and Equal - Norman Daniels

    Terrific new book, basically asking how a Rawlsian framework can solve the current problems our societies face. Incredibly well done covering social, economic and political aspects of reform.

43. The Myth of Ownership - Liam Murphy and Thomas Nagel

    This book challenges conventional welfare econ paradigms. In particular, that its starting point should be 'pre-tax income' (PTI). They argue PTI has no moral significance, as property rights, like taxes, are created by the state.
    
    Miscellaneous
    

44. Rentier Capitalism - Brett Christophers

    A brilliant and insightful analysis of the concept of the 'rentier' in the modern economy, specifically the UK. Broad coverage, including: finance, natural resources, and Intellectual Property. A long but fulfilling read.

45. Between Debt and the Devil - Adair Turner

    An incredibly interesting analysis of the role of debt in the modern economy. Importantly focuses on privately created debt as well, and its potentially destructive effects. Turner is one thinker definitely worth reading.

46. Citizens Wealth - Angela Cummine

    Sovereign Wealth Funds (SWFs) are often floated as a method for socialising the returns of capital, particularly natural resources. This book is an excellent breakdown of the area, and how they can be made more transparent and democratic.

47. Exit, Voice, and Loyalty - Albert O. Hirschman

    A simple argument: consumers may influences firms either by stop buying their products (exit) or attempting to influence the decision makers (voice). Which aspects of life are best governed by which mechanism matters immensely.

48. Creating A Learning Society - Joseph Stiglitz and Bruce Greenwald

    This gem begins with the insight: when technology is endogenous, the presumption of perfect competition leading to efficiency breaks down. Correct policy then becomes v complicated. Essential reading for productivity discourse.

49. Inflation and the Making of Australian Macroeconomic Policy, 1945–85 - Mike Beggs
    Terrific work placing the development of Australian macroeconomic policy within its historical context. Demonstrates the interactions of macro policy within other conflicting aims, as well as contending class forces.

50. Markets in the Name of Socialism - Johanna Bockman
    Fascinating look into the relationship between socialism and neoclassical economics. Useful lessons for policy makers on the purpose of markets for social goals.

1. Natural: those that cannot be avoided; or

2. Contingent: that they exist, but only under particular legal, political, and/or social structures.

To demonstrate, let’s look at the consideration of pharmaceuticals in Bhattacharya et al’s ‘Health Economics’.

Firstly, we have the drug approval process. As this process is imperfect and costly in both time and resources, regulators have to contend with a trade-off between Type 1 errors, false positives, and Type 2 errors, false negatives. A stricter process will likely delay good drugs from reaching people in need, or even rejecting good drugs, while a more lax process will inevitably mean some bad drugs are approved. Such a trade-off is inherent to imperfect information, and would exist under any social structure.

Secondly, consider the trade-off of drug patents. Patents are effectively a temporary monopoly, incentivising the production of new pharmaceuticals by allowing firms to charge monopoly prices for their inventions over a period of time. The trade-off then faced is between current consumer welfare, who will pay higher prices (or even be priced out), and incentives for innovation.

However, there is nothing ‘natural’ about such a trade-off, the trade-off is contingent. It reflects the policy choice to fund innovation via a patent system. We may believe that this is the most effective method to encourage innovation, but it nonetheless reflects a choice. There are alternative methods which can be used to incentivise innovation, and each has their own contingent trade-offs.

Stiglitz and Greenwald (2014) for instance consider the following trade-offs as applying to patents and government funded R&D.

“The patent system (in principle) attempts to balance out the dynamic gains with the short-run costs of the underutilization of knowledge and imperfections of market competition… when the government finances research and disseminates it freely, there is still a static distortion (from the distortionary imposition of taxes), but no distortion in the dissemination and use of knowledge.”

So, when analysing a trade-off, it is worth considering to what extent it is contingent. Are there other overall frameworks that would better deal with this issue? A fixation on a particular contingent trade-off can miss the forest for the trees. There will always be trade-offs, but some trade-offs are more unavoidable than others.