Alex Robson

Australia's Carbon Tax: An Economic Evaluation

Australias carbon tax has been in place since July 2012. Following the 2013 federal election and change of government, it is likely that the tax will be abolished. This paper evaluates Australias carbon tax experience and draws lessons for policymakers in other jurisdictions who may be considering following the Australian example and implementing their own carbon taxes or cap and trade schemes. Overall, the policy was poorly thought through, badly implemented, and lacked majority public support before it began. Australias carbon tax experience is an interesting case study in how not to go about implementing climate change policy.

Comparing Capital - and Trade - Weighted Measures of Australia's Effective Exchange Rate

Effective exchange-rate overvaluation is considered a leading indicator of currency crises. Yet, existing measures of nominal and real effective exchange rates focus on international trade in goods and neglect the importance of international trade in assets. This article develops a range of alternative effective exchange-rate indices for the Australian dollar, based mostly on international investment stocks and flows. Capital-weighted exchange-rate measures of the Australian dollar, in nominal and real terms, reveal a stronger exchange rate over recent decades than suggested by the standard measure. Similar measures for other currencies could improve understanding of exchange-rate behaviour.

Contests between Players with Mean-Variance Preferences

We study contests between players who rank uncertain outcomes using two parameters: the mean and the variance. This framework admits situations where players do not obey the axioms of expected utility maximization and represents an interesting modification of the usual assumptions in the contest literature. We demonstrate the existence of a unique equilibrium in the case of many heterogeneous players and examine a number of features of equilibrium behaviour. In a contest between two players who value the prize equally but have different strictly positive variance aversion parameters, the player with greater aversion to variance will put in less effort than the player with lower aversion to variance. If there are two identical variance averse players in the contest, we obtain an irrelevance result: even though the players are variance-averse and do not obey the axioms of expected utility theory, in equilibrium their efforts are identical to the equilibrium efforts of players who are risk neutral expected utility maximizers. Finally, we derive equilibrium efforts for the symmetric n>2 player case, and show that variance aversion unambiguously results in less rent dissipation than the risk neutral case.

Law and Markets

The Legal Foundation of Markets Courts, Legal Rules, and Markets The Coase Theorem Accident Law and Markets, Part 1: The Unilateral Care Model Accident Law and Markets, Part 2: The Bilateral Care Model Markets for Potentially Harmful Goods The Economics of Property Rights Contract Law and Markets Crime, Punishment and Deterrence Topics in Corporate Law and Competition Law Litigation, Settlement and the Market for Lawyers

The Analytics of the Australian Private Health Insurance Rebate and the Medicare Levy Surcharge

This paper presents an analytical framework for examining changes in the Private Health Insurance rebate (PHIR) and the Medicare Levy Surcharge (MLS), and uses it to establish three key propositions. First, increases in the MLS rate tend to reduce the elasticity of demand for private health insurance. Second, simultaneously increasing MLS rates and thresholds has a theoretically ambiguous effect on PHI take-up rates. Third, means testing the PHIR can never increase PHI take-up, and will reduce it in some circumstances. The paper concludes with a discussion of the possible consequences of recently proposed policy changes to private health insurance in Australia.

Pre-Existing Distortions, Inter-Industry Rent Seeking, and the Welfare Cost of Policies Subject to Influence

It is well known that when there are existing distortions in related markets, partial equilibrium estimates of the welfare costs of new distortions using the standard “Harberger triangle�? may be misleading [Goulder and Williams (2003)]. We show that similar general equilibrium considerations also play an important role in the development of accurate estimates of the costs of rent seeking. Producers in other markets will have an incentive to engage in additional rent-seeking activity to suppress or encourage the establishment of new distortions in hitherto undistorted markets. In these situations, the total amount of resources spent on trying to encourage or discourage a new distortion or increasing an existing distortion can exceed the sum of the partial equilibrium Harberger (1964) “triangle�? and Tullock (1967) “rectangle.�? The analysis and results contrast sharply with standard general equilibrium measures of the welfare costs of distortions and the general theory of second best, which hold that introducing a new distortion or increasing an existing distortion may, in some instances, be welfare-improving.

The Coase Theorem

When do legal rules matter for efficiency? This chapter presents and discusses the Coase Theorem (1960), which is one of the most important and remarkable findings in economics. The theorem states that under certain conditions legal rules will have no bearing on the economic efficiency of resource allocation. As long as there is some legal rule in place, then an efficient outcome will ensue.

Courts, Legal Rules, and Markets

What role do legal rules and courts play in a market economy? What role should they play? Why do courts make the decisions that they do, and what are the some of the problems that arise with collective legal decision making?

The Economics of Property Rights

This chapter examines one of the most important institutions in market economies: private property rights. Private ownership of property rights over an asset typically consists of a ‘bundle’ of rights, which usually include: 1. The right to use the asset; 2. The right to exclude others from using the asset; and 3. The right to dispose of the asset.

Topics in Corporate Law and Competition Law

One of the key insights of the Coase Theorem is that the inefficiencies and difficulties that are associated with uncompensated positive and negative external effects can be mitigated if parties are permitted to bargain. For firms, one extreme form of bargaining is to permanently internalise externalities by merging. This can happen through formal merger negotiations or via takeover bids. This chapter examines some of the economic issues that arise within firms in response to different legal rules, and when firms seek to internalise externalities by merging. The Chapter also studies a wide variety of economic issues that arise in corporate law and governance, and competition law.