26 May 2012

Government failure is not an excuse for more privatization

According to the Institute of Public Affairs's article Behavioural Economics: An Excuse to Tax and Regulate, claiming that free markets are inefficient because people are irrational does not give an excuse for government to intervene because bureaucrats are also irrational people. According to IPA, there may be market failure, but there is also government failure. IPA states the following:

Cooper and Kovacic argue that the bureaucrats who regulate those decisions are likely to have biases that undermine the effectiveness of government intervention.
Regulators are like the rest of us. They are over-confident, thinking they can understand complex behaviour. Hindsight bias leads them to believe events are more predictable than they are. And, unsurprisingly, they are driven by action bias - a tendency to favour interventionist solutions when faced with a problem.
In fact, regulatory biases could be worse than market ones. Behavioural economics tells us that irrationality is everywhere. But the marketplace provides firms and consumers with instant or near-instant feedback. In a competitive market, psychological bias can lead to failure or loss of market-share. With such feedback, market participants will change their actions. Make a mistake, lose money... do better next time.
This is a fair argument. It is true that bureaucrats are far from perfect. But government failure is not really the product of irrational behaviour. Rather, government failure is usually the product of rational behaviour. In a free market capitalist system, what tends to happen is that a very wealthy class or merchants or capitalists emerge. This is what happened during the Industrial Revolution in Britain when a class of merchants started to challenge the power of the aristocracy or gentry. When a powerful class of capitalists emerge, they tend to influence government. Given that bureaucrats and politicians are rational self-interested people, they are also corrupt and accept benefits from wealthy capitalists. Hence free markets are not really the answer to government failure. Free markets only exacerbate government failure as free markets lead to wealth concentration in the hands of capitalists and this in turn leads to corruption and government failure.

The answer to government failure is democracy. The way to make sure that governments don't always give in to the demands of capitalists is to try to force them to give in to the demands of the people, e.g. by members of the public demanding action from their representatives and voting according to what they want. It may be true that the demands of the people can lead to economic inefficiency, e.g. trade unions, welfare, and so forth are all economically inefficient according to mainstream economic textbooks, but these policies protect the people and if the people do not demand it then the government will simply give in to the demands of capitalists and what capitalists want (i.e. a monopoly for their businesses) is also inefficient. In other words, economic inefficiency will always exist because government officials are rational. They will auction off their position to the highest bidder. The best fairest outcome occurs when what government can give (i.e. the funds from taxation revenue) is distributed more or less equally.

20 May 2012

Sacrificing sunlight for affordable housing

According to Chasing the sun among high-rises a heated issue, there is significant resistance to high-rise development in Melbourne's CBD, mainly because of fears that high-rise buildings would destroy sunlight.

Victoria is facing a massive housing affordability crisis that is  resulting in middle-class people paying exorbitant rent or massively inflated prices (and therefore interest repayments) on their homes. Giving first home owners grants only increases demand for houses and pushes house prices up even more. The answer is to increase the amount of accommodation. One way of doing this is to build outwards. Another way is to build upwards. In the face of a housing affordability crisis that is crippling this country, I am surprised that there are people more concerned about sunlight at lunchtime. Governments need to let property developers build more accommodation. Increasing supply is the only way prices will go down.

14 May 2012

The Advantages of Online Dating

I have read a piece in Scientific American titled The Scientific Flaws of Online Dating. The article pretty much said that online dating is flawed because humans are not good at selecting compatibility based on details found on a profile, such as income, height, or age. This, in my opinion, is a poor reason for someone to not try online dating mainly because this flaw exists in offline dating as well. If your friends set you up on a date, they are selecting based on very superficial traits such as income, height, and age as well. If you go to a pub or bar, you are doing the exact same thing, judging someone based on physical appearance and then, when you're talking to a potential date, you ask about income, occupation, interests, and so forth.

One of the key advantages of online dating, in my opinion, is that you are in control, as opposed to using your family or friends to set you up with someone. This makes it easier to walk away from a bad relationship. For example, if your friend sets you up with someone and the relationship goes bad, your relationship with your friend can suffer. Furthermore, negative rumours may spread among your circle of friends. Finding someone online allows you to date in secret and, if something goes wrong, your circle of friends or your family are unaffected. Some argue that the ease of walking away from a difficult relationship in online dating is a negative, as it makes it more difficult for you to stay close to someone you like. I disagree. If I am with someone, I don't want her to stay with me because she feels she is trapped. I want her to be with me through her own choice. If she is staying with me because she doesn't want to cause problems with her friends or family, we may not be compatible, and this incompatibility can manifest itself into problems later on.

Another argument against online dating is that it is easy for people to lie in their profiles. They could give the wrong height, income, or age. This also applies with offline dating. When your friends set you up with someone, your friends may have received incorrect information. Poor profile pictures is a problem that exists in online dating that would not exist e.g. if you met someone at a bar. However, if you meet someone online and then go on a first date, only to realise that he or she looks nothing like the profile picture, simply finish up the first date and then end it there. Simple.

Another potential issue is privacy. If you put your profile up, your friends, family, and coworkers may find it and this may cause embarrassment. This is a fair point, but I get around this problem easily by putting up a very bland and generic profile. Most dating sites nowadays allow you to put up private pictures that are only revealed to people you approve. This means I can browse profiles of other females and if I see someone I like I can share my private pictures with her. Of course this would not really work well if everyone does this. But that is not the case.