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The Final Report on the 2020 Summit is out. Not surprisingly, with the benefit of time and additional input from those who attended, it is much improved on the original draft. Now to see what the government’s end of year response will be.

You know so much confusion is flowing around FuelWatch econometrics that I think someone will need to set up a website to make transparent the information about the scheme. Anyhow, as that is unlikely to happen any time soon, let me highlight a couple of things today. Read more

I just thought I’d alert all parents to a site, Trixie Tracker that allows parents to collect data on their babies. I have written about it today over at Game Theorist.

Apparently, there is a fine line. From the New York Times: Facebook founder, Mark Zuckerberg skipped his “Art in the Time of Augustus” class:

When it came time for the end-of-term study period, he was too busy building the prototype of Facebook to bother to do the reading. So in an inspired last-minute save, he built a Web site with all of the important paintings and room for annotation. He then sent an e-mail to the students taking the class offering it up as a community resource.

In a half an hour, the perfect study guide had self-assembled on the Web. Mr. Zuckerberg noted that he passed the course, but he couldn’t remember the grade he received.

I guess this is either an example of Wikicheatia or of Study Group 2.0. I wonder if any of his classmates also relied on the ‘study guide.’

The ACCC has updated their econometrics on FuelWatch and it reinforces the positive effects of that policy found in WA. The new updates do two things. First, they respond to claims that price falls in WA were the result of the entry of Coles rather than FuelWatch. The ACCC uses a test for endogenous structural breaks to look for significant events. They find that both Coles’ entry and FuelWatch were such events but that FuelWatch’s effect was almost three times as large. Now, readers of this blog — although you might not know it — are familiar with the use of these tests in competition policy. They were at the heart of my submission to the Reserve Bank on credit cards demonstrating that payment system reforms were not associated with structural break points even though normal market events such as interest rate rises were. (By the way, Stephen King and I have a new article on those reforms in the Melbourne Review).

Second, the ACCC looks at the highs and lows of the petrol price cycle. They find that the introduction of FuelWatch in WA, not only reduced prices by 3.5 cents per litre on high priced days it reduces prices by 0.7 cents per litre on low priced days. So that means that even bargain hunters were better off. This appears to be all about competition rather than about the petrol price cycle per se. All very interesting.

Parentonomics‘ publishers, New South, are offering a 20 percent discount for pre-orders. Click here to access the special offer. (Pre-orders are Australia and New Zealand only — news on the rest of the world hopefully very soon).

Also, check out the quotes from Barry Nalebuff and Susan Athey about the book.

I keep hoping the whole petrol price thing would go away and vowed not to do any more interviews on it. However, the temptation to be on PM two nights in a row was too much. Here is the transcript from last night.

In today’s Australian, an article about potential shortages in academic staff. I was quoted: Read more

I was on ABC Radio’s PM program last night talking about parental leave. Specifically, I was critiquing the ACTU’s proposed scheme and lauding return to work tax credits. I was somewhat under the weather during that interview but I think I managed to get the point across.

So when FuelWatch was announced, I was cited in the media as the economist who liked it. And I did and still do in the sense that if competitors have easy access to price information so should consumers and that the WA scheme it was based on seemed to achieve that without economic cost to consumers there. But, at the same time, I wanted academics to be able to study the situation using the same data as the ACCC and had proposed a different system to the ACCC based on just the provision of that price information. Read more

I have an opinion piece in today’s Age on the recent changes to the Medicare Levy surcharge (it was somewhat edited before getting to press but the point has not been lost). Bottom line: as reflected in a previous post, I think that everyone has got it wrong and any migration from the private health system will probably save the government money.

Read more

Watching the discussion on my previous posts on FuelWatch, I can see that there are many myths being perpetuated. I thought I’d list them here. Read more

As regular readers know, I have been very concerned that schemes for paid parental leave do not add to the potential for gender-based discrimination in the workplace. My worry is that schemes that are government funded might still do this but creating incentives to take such leave in ways that are disruptive to workplaces. This will feedback into employers’ actions in creating workplaces and cultures that flexibly accommodate parents entering and leaving the workforce on a temporary basis. For this reason, I have favoured return to work tax credits to complement efficiently funded parental leave options.

Read more

From Boing Boing:

Joss Whedon fans have already organized a campaign to stop his new show, Dollhouse, from being cancelled, even though the first episode won’t air for another eight months. Whedonistas have witnessed so many kick-ass TV shows cancelled by callous goons from teeveeland, they’re girding their loins for the inevitable fight and not waiting around for the disappointment before working up a good head of bitter outrage. …

A Facebook fan page dedicated to the online campaign already has nearly 1,500 members.

Who says people don’t form and act on rational expectations!

[HT: Patrick Orndorff]May 25th is Towel Day in honor of the late, great, Douglas Adams. To celebrate all you need to do is stick out a thumb and carry a towel.

Why this day? It is apparently 2 weeks after the anniversary of his death and the organisers were too disorganised to do anything more clever than that.

Why a towel? (Over the fold)

Read more

As I have written before (here and here), the Australian Pharmaceutical Benefits Scheme (PBS) is a remarkably efficient way of rewarding innovators while ensuring low price dissemination of pharmaceuticals. A new paper by Frank R. Lichtenberg and Gautier Duflos documents just how efficient (abstract over the fold). It looks like getting drugs earlier gives you on average a year more life. And the cost to the government of that year: around $10,000. Quite a deal. Read more

If you look a little to the right you might see something new: ads. Now that the blog is off the university system, it has costs that I would like to cover. They are not substantial, but still. Anyhow, I am trying out these Google ads out to see what they bring. Half of this site’s visitors come through searches and those are my ad targets. For regular readers, I recommend a feed reader or the email subscription service, neither of which will contain ads.

The other day, I speculated that we could do better than the WA model in making petrol pricing information more available. But that led me to wonder: if the communications technology was ideal (as it pretty well is or at least will be within a year or two), what would be the ideal system for consumers?

Well here it is: a driver is setting out or driving around and wants to find the best petrol price. They send a request (from a computer or mobile phone) to the FuelWatch website that gives their location, their destination, the degree to which they will deviate from an optimal route and the time frame upon which they would like price offers (this last bit, I’ll explain in a moment). Then, the site would give them a series of prices and locations that will be fixed (capped) for the time frame they have nominated. The driver, then chooses a petrol station and can make a purchase at that price.

So what does this require of the petrol stations? First, they have to upload their prices. They have to be contingent prices based on the time frame a driver might want them fixed for. So a station could offer a 149 cent per litre offer if the driver wants it fixed for 30 minutes but possibly a different price if they want it fixed for some other length of time. There is no reason why the price offers should not be for arbitrary lengths of time up to 24 hours. Beyond this and we have an issue associated with consumers gaming the system (you know, asking for a week long commitment, but never exercising it).

Second, they could change these price offers at any time. However, this means that if they raise their prices they still have to honor offers made to consumers for fixed periods that cover this.

The end result of this would be to dramatically reduce the cost of searching for the best deal but if you chose not to search, it could well be that you end up paying more. So be it. Nonetheless, I suspect that this would be enough to end and not just move out to two weeks, the petrol price cycle.

And here is the really good news: absent the current FuelWatch, there is nothing stopping the petrol industry just setting up this mechanism. It is just a market for short-term futures on petrol prices. Of course, if we rush headlong into the current proposed FuelWatch design, it will rule out design innovations. Do we really want to do that?

As regular readers know, I am for the information provision that FuelWatch is going to provide. But what of the requirement that petrol stations fix their prices for 24 hours? Where did that notion come from?

It appears that it was because it was done in Western Australia and we have been able to evaluate the impact that scheme. That is a reason but is it good enough? After all, the WA scheme can be improved upon. Moreover, there is a good theoretical reason why 24 hours is a long time: petrol stations like to change their prices over the course of the day. In addition, by adhering to 24 hours, we can’t do things like asking retailers to fix prices but for decreases as they would all end up nominating a high price and not, in effect, fixing anything.

What if we required prices to not increase for an hour? Whenever the station changed its price it would send it in to the authority who would post it. Other than that if the minute handed passed 12, it would be presumed that the current price could not be increased for the next hour. This would make enforcement possible but also allow for intra-day prices changes. Put simply, I think the government needs to do better than simply replicating the WA scheme.

The change in the thresholds for the Medicare Surcharge has generated much discussion over what it will cost and who will pay (see Tim Dunlop’s useful summary and follow-up here). What I think is that all of this highlights why our health insurance and funding system needs and overhaul. To demonstrate this, let’s follow a dollar around the system. Read more

It has been a big week for me in terms of web site changes. Anyhow, I have revamped my research and publications website. The previous one was a single page and 10 years old. With 200 pieces on it, it just wasn’t cutting it anymore. So using the latest technology here is the new site.

While the site was down, a couple of interesting links emerged that are worth a pointing to:

• James Farrell summarises arguments for paid parental leave and sensibly concludes that I am on the right track. He also points to a Paul Fijters post that summarises the tensions in the debate (well before I got to them).
• Tim Dunlop joins the income-contingent loan advocacy fold. We need a club name (you know, like Mankiw’s Pigou Club); I guess the Chapman Club seems like a goer.

Well, today, this blog was migrated (successfully it appears) to a new host outside of the Australian University system. Should relieve some traffic issues and downtime problems that we have been facing of late. The new host is BlueHost and I must say their technical support have been great (email responses within the hour). Feel free to let me know, however, if there are any teething issues.

I have an opinion piece in today’s Age (over the fold) outlining my ‘return to work’ proposal to deal with issues associated with parental leave. I note that it stands in marked contrast to new proposals to pay for parental leave.

Read more

I am giving a couple of seminars around the country on a new paper with Fiona Murray (MIT) and Scott Stern (Northwestern) entitled “What drives scientific disclosure?” Here is the abstract:

We examine the incentives of scientists funded by profit-motivated capital to publish scientific knowledge. In a negotiation game, it is demonstrated that scientist utility from kudos gives them power to negotiate such disclosures regardless of whether they receive a share of the commercial returns or not. We demonstrate that strengthening intellectual property protection increases the equilibrium level of disclosure. When public funds are available we demonstrate that allowing patenting reduces the total level of funded research projects. Finally, we examine whether disclosure is increased or not when scientific races for priority occur alongside patent races.

The seminar times are as follows:

1. Friday 23rd May, 11am: University of Queensland, St Lucia (Room 103, Colin Clark Bldg)
2. Thursday 5th June, 2pm: Australian National University (Room 1012B, H. W. Arndt Building)

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