Thinking is underrated. It’s amazing what can come into your mind when you think about something for long enough. You see a problem and then think about it. Then think about it again. Turn the problem over. Think again. Use the completely illogical to develop the sensible, the rational and the meaningful. Then think again. Soon patterns appear and understanding develops.
In my maths classes at school the teacher taught us one method, so I would try to find another method. Just for fun.
I have done this many times with issues that I see. One of my proudest thinking efforts was to design a simple way for people to make and receive payments between different banks in near real-time. I took my idea to many banks but no one adopted it. Next year, in Australia there will be such a payment system (government-mandated), almost as good ; almost identical as my design in the way it works, but not as good as my vision.
More recently, I came up with a way to reduce the income taxation and welfare system complexity to a minimum and increase fairness. Just by thinking about a problem and thinking about it again and again. A couple of wild ideas thrown together produced the best possible result.
I am not a genius (I have proof of that) but I do like to think problems through. In most cases good thinking reduces problems by finding their underlying simplicity. Most people aren’t into simplicity. They make their money creating complexity. You often hear these people using the ultimate retort of “simplistic” solutions being useless. But it is simplicity that leads to great advances. I would like to retort that those who have “complextic” solutions need to do more thinking.
Recently I have been thinking about the best way for Australia to become a republic without ending up with the circus we just witnessed in America. I have some ideas developing on this whereby we do away with any person as president and have a virtual president, an ideal president, a president of ideals. More on that later.
Housing affordability crisis. Must do something! Must appear to do something! Must achieve nothing.
I have a job where things often go wrong. I have to make them right again. I’ve learnt that rushing about trying random solutions rarely works. There are some rules to follow.
1. Define the problem precisely. 2. Isolate potential causes taking account of when and where the problem is manifest and when and where the problem does not occur. 3. Test potential root causes against other available information. 4. When you are sure what the causes are then you can derive a solution that you know will work.
Recently, we have had a lot of debate, once again, about how to solve the housing affordability crisis. As far as I know, no one has actually defined the problem, let alone specific root causes. They will achieve nothing.
When you read the text of Trump’s speech, http://edition.cnn.com/2017/01/20/politics/trump-inaugural-address/index.html you can see his technique. Firstly, he creates the straw man and then he knocks it down. He paints a picture of government (Obama?) only concerned with its own comfort while the country has fallen into misery. Like the last days of Louis XVI? Is that really true? He will come and restore true democracy. (Because of his amazing compassion and empathy?) Only the weak of mind would be fooled.
None of what he proposes is likely to be achievable. He paints a picture where Mad Max gets his gang together and says he is going to build a new airport or build a new wall to keep the evil guys out.
He correctly identifies a root problem of poverty in old cities, but does not address the absurd inequality that lies at the root of poverty and crime.
You have to admire his ambitious goals, but a goal is not a policy. Everybody wants what he says he wants, but his only stated policy is protectionism and every high school student studying economics can tell you that is not the path to wealth.
His other implicit policy is for America to be united by patriotism, but he is somewhat delusional since for most people what he says is often quite divisive.
Another grating aspect of his speech is the banal and trite metaphors, “we all bleed the same red blood”, “I will fight for you with every breath in my body.” Not exactly poetry except in his own mind.
Could be. The new administration is looking a lot like Planet of the Apes!
The housing affordability crisis doesn’t happen by chance. It is the result of careful planning. Markets rarely create their own failure. It takes government for that. Only governments have the power to influence the market that much. That we have a crisis is proof that government policies are working! Think about it.
The government influences markets via subsidies, rules and taxes. You only have to think about government policies for a short time to realise what they have done. Think about tax and housing. Think about rules and housing supply. Think about policies affecting demand. Think about CGT and housing. Think about social security and housing. Did you do it? Then you have the answers.
The government has won. It has created a crisis, but it can’t go back. No political party ever won government telling people it would reduce the value of their homes!
In my working life I have often had to battle complexity. People of great intelligence see an issue that needs attention most react and say, “What should we do?” The result is a series of complex plans to address the problem. Often these plans work for a short time, but as circumstances change other problems arise and then people say, “What should we do?”
Multiple iterations result in the overwhelming complexity that plagues government services and revenue collections. We can see this in the recent bizarre activities at Centrelink. I did some calculations in my head and the number of permutations permitted by the various payments systems existing in the welfare system amount to many trillions, while the number of beneficiaries are measured in only millions. That’s complexity overkill. It’s no wonder that it’s beyond the capability of an individual public servant to be certain that any individual qualifies for a specific benefit at what particular rate. Only a computer can work it out and this week we learnt that even the computer gets it wrong.
So why don’t we ask the question, “What should we stop doing?” We should stop trying to fine tune and target every payment in every case. We shouldn’t have both the welfare system and the tax system handing out welfare. What do I mean? Consider the tax-free threshold. It sounds fine doesn’t it? Lower wages pay less tax. But actually, every income earner gets the benefit of the tax-free threshold. So that is possibly $65 billion dollars that is effectively welfare given to everyone! And lower tax rates for lower incomes takes that figure to over $100 billion.
Just think about how much money that is. Suppose we collected that tax and gave it back as a welfare payment? The result would be similar. Taxes would be flatter. And what about if people were unemployed? They would still get the payment. Then it would be welfare in the traditional sense, but they wouldn’t have to make a claim. They wouldn’t have the chance to cheat or get overpaid. They would still have the same incentive to work as everyone else. No welfare-dependence and no poverty traps.
As the French say “Voila!” And as the Romans used to say, “quod erat demonstrandum.”
The problem with the Centrelink scandal is that the welfare system is so complex that no one can understand it. This means that people can cheat and get away with it or just make simple mistakes and end up with huge debts. The answer from the government has been to introduce a computer to churn through tax data to find over-payments but the computer also can’t get the sums right!
A solution to this is to simplify things entirely. First recognise that tax and social security overlap already. We hand out welfare liberally through the tax system but miserly through the welfare system. We should stop tax-free thresholds and progressive income tax and and liberal loopholes for the well-at-heel. Replace that with a flat tax and social security payments for all, payments that are not affected by income. When a person experiences a short-term unemployment, these payments continue, removing the need or opportunity to apply and make mistakes or cheat the system.