Saving Economics from the Economists

I just read a column by a purported economist that makes me see red. In case the link isn't publicly available, the comment that Robert Gottliebsen makes in the context of the ACCC's decision to block NAB's takeover of AXA is this:

But when the share analysts start to think more deeply about the issues raised by the ACCC decision to block NAB's offer while giving the green-light to AMP's alternative offer, it becomes clear that, over a wide area, mergers in Australia are now going to be much more difficult. What we are seeing is a dramatic widening of competition policy and shareholders' interests can sometimes be cast aside (italics mine). The best illustration is telecommunications where [ACCC Chairman] Graeme Samuel and the government are reshaping the industry and shareholders in Telstra are the sacrificial pawns.

I can't believe it - Gottliebsen seems to be saying that what's good for consumers (i.e., competition) is bad for shareholders!

On the contrary, Mr. Gottliebsen, you should surely know that the lack of competition benefits neither consumers nor shareholders. Oligopolistic markets are known to be wasteful, paying shareholders less than their due and charging consumers more than their share.

When the US Justice Department broke up AT&T in the early eighties, shareholders actually saw the value of their shares go *up* after a few years, thanks to the improved efficiency forced on the company's parts.

These are not just idle comments by one without skin in the game.

I'm both a customer and a shareholder of Westpac's and I believe the ACCC's lack of teeth with regard to the St George takeover has impacted me adversely on both counts. The spread they gain through their increased oligopolistic position is simply frittered away on inefficiency and waste. Where, indeed, is the impetus to improve when the landscape today is far less competitive than just a couple of years ago?

I'm both a customer and a shareholder of Telstra's and I applaud the government's surprisingly tough stance against it. It couldn't happen to a nicer monopoly!

I'm both a customer and a shareholder of NAB's. I'm happy about the ACCC decision to block NAB's takeover of AXA but I believe the same ban must also extend to AMP. We need more competition in every market, not less. It's not just consumer protection but shareholder protection as well. It shouldn't take an economics degree to see this.

I think Australia's status as one of the most diffused shareholder bases in the world has created a class of shareholder-consumers afraid to revolt at higher prices because they falsely perceive a benefit from that as shareholders. That fallacy owes much to the demagoguery of economists like Gottliebsen who, for reasons known only to themselves, continue to peddle the myth that the interests of consumers and shareholders are somehow opposed. The only real opponent is oligopoly and its resultant waste. Both consumers and shareholders stand to gain when waste is eliminated, and competition is the only way to achieve that. Surely a free-market economist should be able to see that.

To paraphrase Raghuram Rajan, it seems we need to save Economics from the Economists.

Earth Hour Observed (2010)

Just like the last two years, we observed Earth Hour again.

This time, it was particularly easy. We were going out to a friend's house for dinner, so we just made sure we turned off all the lights before leaving :-).

At our host's place, we finished dinner before 2030, then turned out the lights and had an hour-long conversation by candelight.

The Four Pillars Policy Has Come Home To Roost

I've been saying this for years to anyone who will listen - Australia desperately needs more competition in its banking sector. The financial crisis only made the Big Four banks the Only Four banks, St George and BankWest having been gobbled up by Westpac and CBA.

And now the other shoe has dropped - onto consumers, hard.

Westpac has raised residential mortgage interest rates by 0.45%, almost double the RBA's rise of 0.25%.

Why? Because they can. No amount of outraged squealing by the Treasurer is any help. This is not a centrally planned economy for the government's opinion to make a whit of difference to the actions of large commercial players. The only thing that can keep commercial players honest is competition, and the Australian government (whether run by Labor or the Liberals) has squandered any chance of having a competitive market through their longstanding and craven Four Pillars policy.

I have always said we need a Ten Pillars policy. Break up the banks and let them compete. All talk of needing to be big to survive is just self-serving talk. In fact, they'll be less wasteful and more profitable as a result. And consumers won't have to put up with the outrageous actions of oligopolies.

Recipe for Potato-Bean Mélange

Potato-Bean Mélange

I was wondering what to do with a can of beans (Four-Bean Mix), and this dish followed.

Ingredients:

2 Desiree potatoes (the kind you can cook with the skin)
4 medium-sized red (Spanish) onions
1 tin of beans (I used a four-bean mix, as I confessed earlier)
1 red capsicum
1 small cup of green peas
1 cube of vegetable stock
Chilli sauce instead of chilli peppers (for a change)
Ginger powder
Cooking oil (grapeseed oil is best)

Procedure:
Chop the onions and potatoes separately into medium-sized pieces. (I use this very convenient chopper with a coarser setting. The finer setting chops into smaller pieces, which I don't want for this dish.)



Chop the capsicum into finer pieces.

Steam the potatoes and peas in the microwave for 6-8 minutes using a steaming container and set aside. (Sprinkle a little salt onto the potatoes before steaming.)

Heat 3-4 tablespoons of grapeseed oil in a large pan and then sprinkle ginger powder into it. Add the onions and then the capsicum and sauté both well.

Dissolve the cube of vegetable stock in a small cup of hot water and then pour into the pan. (Vegetable stock cubes tend to have oil, so hot water is required to avoid messy fingers.)

Add the potatoes, peas and beans and stir. I prefer to wash and strain the canned beans because I don't trust the liquid they've been soaking in for months ;-).

Add as much chilli sauce as you like. I like lots ;-).

The potatoes may not have fully cooked. So cover the pan and leave to cook on a low heat for a few minutes.

Serve with naan, roti or bread.

[Secret ingredient: If you're South Indian or through some inexplicable means possess mild idli chilli powder (affectionately known as "gunpowder"), add 3-4 teaspoons of it to the mix along with the potatoes.]

Come Back, Peter Costello, All Is Forgiven

One hardly knows who is doing what to whom in the Liberal Party these days. I like many of the things Malcolm Turnbull stands for (e.g., ETS, the Republic), but I suspect his autocratic and idiosyncratic style will turn off voters just as it's turning off many of his party colleagues. I wouldn't trust either Joe Hockey or Tony Abbott with ten cents, the former because he comes across as somewhat shifty (on TV at least), the latter because he's a religious nut.

I must say I'm fairly satisfied with Kevin Rudd at the moment, although I question his resolve against illegal immigration (Howard was actually much better there) and I have increasing misgivings about his and Wayne Swan's commitment to bringing the budget back into surplus. I don't think these guys really get it on this fundamental economic principle.

So while I don't believe Australia is in a leadership crisis yet, it would be good for the Liberals to get their house in order. It's too late for 2010, because the psephologists tell us the swing to Labor in 2007 was a two-election swing, meaning that 2013 is the earliest the Liberals can hope to make it back. But the earlier they start, the better.

So who do I think is the best leader for the Liberals?

Peter Costello.

I think Peter Costello's journey to the very top has been a series of missed opportunities. He'd been repeatedly stiffed by John Howard who failed (we're told) to honour his promise to stand aside at some stage, and he (Costello) announced his retirement just when things were getting interesting. But who knows, he could yet be persuaded to come out of retirement and take charge.

He's one guy who understands the value of a surplus budget. Heck, he's the only guy in recent history who delivered one. And he took a strong stand in favour of cultural integration as opposed to weak-kneed laissez-faire multiculturalism. I'd vote for him, and definitely if the Labor jokers don't demonstrate serious intentions of fixing the budget soon.

When Looks Improve With Age

I saw a photo of (Lotus Notes creator and now Microsoft's Chief Software Architect) Ray Ozzie recently, and was struck by how smart and distinguished he looked.


A quick search for other photos of Ozzie turned up this shocker from 1974.


Yes, I know they all looked like that in 1974, but it was still quite a jolt to see.

This reminded me of that other famous person who was known for growing more handsome and distinguished as the years went by - Gianni Agnelli of Fiat.

Here's the young Agnelli...


And the same man after a few decades had worked their magic.


I guess there are advantages to starting off ugly. Things can only go in one direction thereafter ;-).

Recipe for Protein Potato Mash

Protein Potato Mash

Mashed potatoes taste great, but they're very starchy, and in these health-conscious times, starch is a no-no ("No starch for me," said Tom stiffly). Here's a recipe to take some of the guilt off a deliciously salty mashed potato dish.

Ingredients:
3-4 Desiree potatoes (the kind you can cook with the skin)
1 tin Cannelini beans (you can use any bean or combination of beans instead)
1 cup hommus (chickpea paste)
1 small cup of green peas
A handful of pine nuts

3 cloves of garlic
1 chilli pepper (Jalapeno)
1 piece of ginger (same overall size as the garlic)

Cooking oil (grapeseed oil is best)

Procedure:
Grind the chilli-garlic-ginger mixture into a paste.

Chop and steam the potatoes in the microwave for 10-15 minutes using a steaming container until well-cooked.

Steam the green peas in the microwave for 3-4 minutes using a steaming container.

Heat 3-4 tablespoons of grapeseed oil, pop mustard seeds into it and wait till they start to crackle.
Add pine nuts and chill-garlic-ginger paste and saute for a few minutes till pine nuts turn light brown. Add the steamed potatoes and stir for a while. Drain the cannelini beans and add to the mix, stirring constantly.
The potatoes and beans should start to get mashed. Add the hommus and keep stirring. Add about a tablespoonful of salt little by little, taking care to ensure that the amount is just right for your taste.
I prefer to let the mixture get somewhat dry and powdery before adding the green peas, but you could add them while the mixture is still "wet" and stop after stirring them in.

Serves 2-4. Will serve as a standalone dish or stand in for a daal.

Oh, and hommus tends to be a wee bit bitter, so I also added a tablespoonful of maple syrup at the end without telling anyone ;-). I know, it's whatever meets my eye...