The pursuit of self-interest (where such self-interest may include contributing to the interests of certain others) would only generate sustained improvements in social welfare (lets say economic potential) with unfettered competition and perfect information.  Neither exists in the real world so the power of the Invisible Hand is constrained.  You could perhaps set up an institutional structure for unfettered competition (although this would involve massive disruption to existing structures that protect incumbents) but perfect information is impossible to obtain.  Removing information asymmetry would be all that we could hope for (but the incumbent problem arises again).

I agree that the onus is on government to convince the public that a particular policy is beneficial.  I don’t think the focus on outcomes is any use, for much the same reason as a prediction that mortgage rates will rise is not much use.  The intention and likely effect of the policy is the important thing.  You never know whether the “outcomes” that you see are because of the policy or something else unobserved, no matter how much econometric wizardry you do.

“I agree that a country should not be run like a corporation, although the government could learn some things from the way successful businesses are operated.  I still think that the state’s role goes beyond static redistribution.”

Fair enough, and a valid point of view.

“I am curious about “saying that growth doesn’t magically appear is a stretch” … so growth does just magically appear?  real per capita GDP growth?  The Invisible Hand may be powerful, but not that powerful”

It is, as long as the institutional structure is appropriate.

I think we both agree that government has a role in setting up the appropriate institutional structure (laws etc).  I would just be cautious about taking this too far – the burden of proof has to be on additional government action improving outcomes, and this isn’t always the case 😛

“guess you forgot to add the redistributions to meet the social contract are now massive borrowings by the billions from foreigners”

If the borrowing is “structural” then this is due the poor choices by government – and the fact they aren’t balancing the books.  If the deficit is “cyclical” then it implies the foreign investors would be happy to loan the money at a relatively low rate of return due to the cominbation of credibility and low risk of repayment.

“Govts cant pick winners but neither can anyone else, except maybe Buffet, Gates and a few. But what govts can do is create a climate for growth. I dont see the taxation system here as a good climate for growth and thats why over 52000 people left for Au last year.”

People can’t pick winners – but the big difference between an individual and a government doing it is whose funds they are risking.  Personally I don’t think massive migration to Australia should be seen as a problem as itself, as you say it may be a symptom of something (such as the tax system) – it is important to look at these sort of issues rather than walk around and say what the government should invest in for a direct ROI like they are a corporation.

“Gotta laugh at the ANZ economist who just a month ago was predicting higher mortgage rates and today ANZ anmponces a 5,25% rate. Whatever happened to your predistion ANZ ?”

To be fair, the environment changed substantially – and if I recall, ANZ was on the low end for increases, which is why they were suggesting floating.  The world is uncertain, they were just providing a narrative to help us all understand it.

I am curious about “saying that growth doesn’t magically appear is a stretch” … so growth does just magically appear?  real per capita GDP growth?  The Invisible Hand may be powerful, but not that powerful. 🙂

Regarding the ANZ prediction, everyone knows that predictions are made on the basis of information available at the time the prediction is made.  Implicitly the prediction assumes nothing unexpected happens.  Since the unexpected can always happen, predictions are never guaranteed to be right.  Most of the time that they are right, it was just good luck.  🙂

Govts cant pick winners but neither can anyone else, except maybe Buffet, Gates and a few. But what govts can do is create a climate for growth. I dont see the taxation system here as a good climate for growth and thats why over 52000 people left for Au last year.

Gotta laugh at the ANZ economist who just a month ago was predicting higher mortgage rates and today ANZ anmponces a 5,25% rate. Whatever happened to your predistion ANZ ? Eat it up humble pie

“Fact is Matt governments including this one pick winners”

Which is what I was complaining about.

“Thats a stupid government policy but not as stupid as THE STUPICITY this government forced on us.”

Why exactly are you disagreeing with the post, did you read it?

“Ill stick to BERL Matt, they make more sens”

What an incredibly arbitrary comment – feel free to like other economists more though, ultimately we all use the same framework so if they are clearer to you they are doing a better job 🙂

I think saying that growth doesn’t magically appear is a stretch – but of course I would agree that government should help with the institutional setting.

The primary goal of government is redistribution to help meet the social contract though, it also helps by sorting out co-ordination problems and pricing externalities – but none of this is the justification for much of upcoming policy 😉