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An Engineer’s perspective of Australia’s Economic Nation-Building Logic

Economists advising Politicians on nation building are like the blind leading the blind. Historical facts prove that Australia's economy is managed by targeting consistent rates of extreme GDP growth. Let's define the facts before we review this problem. Economists and politicians apparently don't do this.


Facts

  • Australian GDP growth has averaged roughly 3.2% per annum since 1901 and has been relatively steady for the last 30 years
  • Australian population growth has averaged roughly 1.6% per annum since 1901 and has been relatively steady for the last 30 years
  • GDP growth per capita has averaged around 1.032/1.016 = 1.6% per person per annum since 1901.
  • Australia's annual population growth was roughly 4 times the OECD country average in 2012 due to a longstanding policy of mass migration
  • GDP is defined as the final market value of all goods and services produced in the Australian economy over a given period of time, and is the main measure of economic growth in the economy. This totally ignores what Economists call Externalities. Engineers call these Unknowns. If an Unknown is essential for design, the design cannot proceed
  • A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters
  • Therefore if GDP growth is stabilised at a lower rate of 1.6% per annum instead of 3.2% per annum, trade and industrial activity could be stabilised at a lower rate of expansion without causing a recession
  • This is analogous to a truck driving down a road. If it's travelling at 3.2%, slamming the brakes on is analogous to a recession. The faster you're travelling the harder it is to slow down, and the more wear and tear on the truck. Speed amplifies volatility. Volatility is difficult to manage when it causes impacts like rapid rises in unemployment, etc.............
  • Externalities

    What Economists can't cope with is Externalities. These can be defined as:

    • A consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices, such as the pollination of surrounding crops by bees kept for honey.
    • The cost or benefit that affects a party who did not choose to incur that cost or benefit.
    • Neoclassical welfare Economics asserts that, under plausible conditions, the existence of Externalities will result in outcomes that are not socially optimal. Those who suffer from external costs do so involuntarily, whereas those who enjoy external benefits do so at no cost

    From an Engineering perspective, growth of the world economy over the last 100 years using Economic criteria that virtually ignores Social and Environmental Externalities (ie the adverse consequences of growth) is analogous to an Engineer designing a building and calling the strength of the concrete an Externality. It's like advising that the design is OK, but we don't know whether the building will collapse - and we don't really care. So why is it that Politicians take the advice of Economists? Well you might ask. Are they both grossly negligent or do they have an excuse? "GROSS NEGLIGENCE. Lata culpa, or, as the Roman lawyers most accurately call it, dolo proxima, is, in practice, considered as equivalent to dolus or fraud itself, and consists, according to the best interpreters, in the omission of that care which even inattentive and thoughtless men never fail to take of their own property."

    Carbon tax

    In the recent past we've seen half-cocked Economic plans for a Carbon Tax. This is an attempt to deal with the single Externality of global warming. But what about all the other Externalities that have never been addressed? Why not deal with the root cause of most of them?

    In Australia a root cause (ie the weak concrete) of ALL negative social and environmental Externalities is extreme population growth, and this is clearly being used by Australian politicians to drive extreme GDP growth. If population growth was zero, the negative Externalities directly due to population growth would be eliminated and the remaining Externalities would be related to HOW the stabilised population behaves. This is like stopping the construction of any more buildings with the wrong concrete and focussing on repairing what we already have.

    Who would you trust to design a building; a Politician, an Economist; or an Engineer - whose objectives include using the right concrete?

    Need for coherent plan, public inquiry, petition

    We have a Nation to Renovate. We need the vision, and the common sense, to question the status quo.

    It is clear that neither Politicians nor Economists can draw this conclusion and prefer business as usual - The Ostrich Mentality. Externalities like the consequences of extreme population growth don't even get a mention in public policy debate with politicians.

    We need a Public Inquiry to determine the optimum rate of population growth using terms of reference that have never been used before.

    We need to all print copies of the link to the petition, go from door to door to ask people to sign, or simply put the link into their letter boxes with your own explanation of why they should sign.

    Please help with this:
    Australia requires a public inquiry to determine a basis for the optimum rate of population growth

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Comments

Economists are like priests of days gone by. They claim that the society needs to be run by them, and when failures occur, rather than it being their fault, it's because people weren't following them closely enough. People used to whip themselves till bleeding and going without comfort and convinced this was for 'the good'. Today, we let our standards of lifestyle fall and impoverish ourselves with increasing economic inefficiencies, and are convinced this is for 'the good'. People who say we should accept high house prices and crowded roads and degradation of social cohesion for 'growth' are to me, exactly like those religious zealots of days gone by who used to self-flaggelate, live a life of chastity and privation and self imposed harsh conditions for religion. Silly. It made no sense. Neoclassical economics is the new religion and our politicians don't know anything else.

This article made the very pertinent point that advice on running a country must extend beyond just that from economics. In fact, economists should be far down on the list, because they can't say why a decision should be made, only what would happen. But look at the qualifications of our leaders. Very narrow, and few, if any of them have ever had truly productive work.

DennisK, The correct tags for italicisation (aka 'emphasis') are shown in these examples: <i>exactly</i>, which is rendered as exactly, or <em>why</em>, which is (usually) similarly rendered as why. The [i]why[/i] style of rendering is similar to what is used in the WikiText markup language, except that double brackets are used. - Ed