监管和繁文缛节如何使家庭更贫困（英文版）.pdf

HOW REGULATION AND RED TAPE MAKES FAMILIES POORERDaniel Wild, Research FellowMarch 2018This page intentionally left blankHow Regulation and Red Tape Makes Families PoorerDaniel Wild, Research FellowHOW REGULATION AND RED TAPE MAKES FAMILIES POORERAbout the authorDaniel Wild is a Research Fellow at the Institute of Public Affairs. He specialises in red tape, regulation, economic policy, the philosophy of free enterprise, and criminal justice. Daniel  has authored research papers on economic policy, environmental regulation, and criminal  justice reform. Daniel frequently appears in the media, and has published a number of opinion pieces in The Australian, The Daily Telegraph, The Sydney Morning Herald, The Courier Mail, and The Spectator. Daniel has also made a number of radio and television appearances, including on 2GB, 3AW, Sky News, and Channel 7 News. Daniel previously worked at the Commonwealth Department of the Prime Minister and Cabinet where he analysed global and domestic macroeconomic policy. Prior to that he worked at  the Commonwealth Department of Finance where he worked on regulatory reform. Daniel holds an honours qualification in economics and a degree in international studies from the University  of Adelaide.This page intentionally left blank1How Regulation and Red Tape Makes Families PoorerContentsExecutive Summary 3Introduction 5Definitions 8Sectoral Analysis 9Other factors driving price changes 22Conclusion 23This page intentionally left blank3How Regulation and Red Tape Makes Families PoorerExecutive Summary Over the past two decades prices have been rising rapidly in some sectors while declining in others, compared with inflation and wages. The purpose of this paper is to analyse what the key factors are that explain these price patterns. In doing so this paper analyses a number of sectors which are key household expenditure items and investigates what factors are driving increases or decreases to prices. This paper finds that there are a range of factors pushing prices either up or down, such as the prevalence of international trade, how labour-intensive an industry is, and the changing nature of consumer preferences. However, the main finding, shown in Chart 1, is that prices have been rising most rapidly in industries which feature high levels of government intervention through regulation and subsidies. Conversely, prices have been falling in market-based industries which feature limited government intervention and openness to international trade and competition.Chart 1: Price Changes in Highly Regulated Versus Market Based Sectors11 All data is in nominal terms for purposes of comparison between price changes in relevant sectors and wages and economy-wide inflation. The reason these items have been selected is that they are a large and growing component of overall household expenditure.Note: Food is in grey because it is a mix of government regulated and market-based.4 Institute of Public Affairs Research ipa.au The cost of essential household services, such as education, housing, insurance, child care, and electricity, have grown rapidly over the past two decades. Over the past twenty years, the cost of the following services has increased: Housing +330 per cent. Child care +310 per cent. Electricity +215 per cent. General insurance +209 per cent. Education + 174 per cent. Property rates and charges + 177 per cent. Prices in these sectors have increased much faster than the economy wide inflation rate of 68 per cent. Prices have also grown much faster than average wages, which have grown by 90 per cent over the past twenty years. This paper finds that the primary cause of rising prices is government intervention through a combination of regulation and subsidies. Regulation causes cost-push inflation by increasing business operating costs, reducing market supply, and reducing competition. Subsidies cause demand-pull inflation by inflating demand for services above what would prevail in a market-based setting. The coincidence of regulation and subsidies leads to a price spiral: supply restrictions push up prices which governments respond to with higher subsidies, which in turn further pushes up prices. In some sectors, prices have been rising even as quality has been declining. For example, electricity has become less reliable and more intermittent over the past twenty years, while education results in schools has been declining. While prices have been rising rapidly in sectors which are heavily regulated by the government, they have been falling in other sectors. The prices in the following sectors have decreased over the past two decades: T.V.s and computing 92%. Motor vehicles 22%. Household appliances - 18%. Clothing -4%. Personal care -1%. The price of these services has been decreasing even as their quality has been increasing. Prices in these sectors are declining because, a) they are less regulated, b) the government does not provide subsidies, and, c) these sectors are open to international trade. In order to alleviate cost pressure governments should deregulate the child care, education, health care, insurance, and electricity markets and remove subsidies.5How Regulation and Red Tape Makes Families PoorerIntroductionAustralian families are working harder than ever before, but many are struggling to meet the financial and time demands of modern life. This year the Commonwealth, state, and local governments will confiscate a record $540 billion in taxes, approximately 30 per cent of GDP, from Australian workers, families, and businesses. At the same time real income growth has been stagnant in the private sector for the past two years. Adding further pressures to household budgets has been a rapid growth in the cost of key household essentials, such as electricity, insurance, education, housing, and child care.Over the past two decades the price of housing has risen by 330 per cent, child care by 310 per cent, electricity by 215 per cent, general insurance by 209 per cent, and education by 174 per cent. This is compared with an average price rise across the economy of 68 per cent and an average increase to wages of 90 per cent. There is a substantial body of evidence demonstrating that government intervention is a key cause of rapidly rising prices in a number of sectors. Government intervention causes prices to rise through both what economists describe as cost-push and demand-pull inflation. Cost-push inflation is driven by regulation. Regulation increases costs in two key ways. Firstly, it adds to the cost of providing a given good or service. This extra cost is passed on to consumers, in full or in part, as higher prices or fees. Secondly, regulation makes it more expensive to start a business. This increases the barriers to market entry which reduces competition. Markets which are less competitive are less responsive to the needs and preferences of consumes. Consequently, less competitive markets feature higher prices and lower quality services than more competitive markets.At the same time, governments provide extensive subsidises to consumers in the markets listed above. This increases demand which causes demand-pull inflation. In a market-based economy, higher demand causes prices to rise. Higher prices increase profits for incumbent businesses which, in turn, creates incentives for new businesses to enter the market. The entry of new businesses then puts downward pressure on prices, so that, over time, prices return to their long-run average. However, fewer new businesses are able to enter markets which are highly regulated. This means that government subsidies increase prices, and the bulk of the higher prices go to incumbent businesses. That is, the government effectively taxes families through constraints on market supply, and distributes this back to business owners in the health, education, child care, and insurance sectors. There are also associated economy-wide efficiency costs as families are forced to spend more money than what would prevail in a market-based economy on highly regulated services, and less on sectors which are less regulated. This results in an inefficiently large amount of resources going to heavily regulated sectors causing them to grow in size and an inefficiently low amount of resources flowing to less regulated, market-based sectors causing those sectors to shrink in size. There are a number of other causes of price increases in the aforementioned sectors, and not all of them are to do with government intervention. Nor can all such causes conveniently be defined as good or bad. Nor can all of these causes be resolved by changes to public policy. At least not without incurring other, perhaps less desirable, consequences. Economies are complicated. It 2 This paper takes inspiration from Perry, Mark, “Chart of the day: Price changes 1997 to 2007”, American Enterprise Institute, (2018), aei/publication/chart-of-the-day-century-price-changes-1997-to-2017/6 Institute of Public Affairs Research ipa.auis not always easy or possible to understand the total range of root causes of changes to prices. A single decision made by someone living miles away can affect the price of coffee at a local caf. One such example of a relatively innocuous cause of prices increases is rising incomes. As incomes rise people become willing to pay more for a given good or service. This could, perhaps, just induce general inflation, rather than faster inflation of specific goods or services over others (education over computers, for example). However, people can become willing to spend more on one set of services over another at a faster rate than alternative goods or services as their income rises. For example, a family whose income rises rapidly may be prefer to spend a larger share of that rise on their childrens education, rather than on more or better food. Other costs are also relatively capped. A mortgage, for example, is fixed for a long time even as income rises and so takes up a smaller share of income over time. Energy costs are similar: there are large fixed costs (i.e., to run the basics such as a fridge or lighting) but, beyond attending to those fixed costs, the marginal cost of, say, adding additional outdoor lighting, is fairly marginal.The evidence supports hypothesis. Higher income households spend a smaller share of their income on energy and housing costs than lower income people, meaning the cost of these items does not rise linearly with income. According to the Australian Bureau of Statistics (ABS), low income households spend about 4 per cent of their gross weekly income on household energy costs, compared with about 2 per cent for middle income households, and 1 per cent for higher income households.3The ABS data could even understate the regressiveness of higher energy prices. For example, the Finkel Review into Australias energy market, referencing the Australian Energy Regulators 2016 Annual Report, argued that “a typical low income household spends around 4 to 9 per cent of its disposable household income on electricity bills.”4However, prices have not uniformly risen over the past two decades. In fact, prices have decreased in many sectors, in some cases significantly. The price of televisions and computing equipment have dropped by 92 per cent over the last two decades. At the same time the quality of these products, such as computing power, and sound and visual features, have increased dramatically.  Similarly, the price of motor vehicles has decreased by 22 per cent, household appliances by 18 per cent, and clothing by 4 per cent. There are three key reasons why prices have fallen in these sectors. Firstly, businesses in these sectors are less regulated by government. This means the costs of starting a business are lower, barriers to market entry are fewer, and competition is fiercer. Secondly, as governments do not control market supply, they also typically do not subsidise demand. This reduces demand-pull inflationary pressures.  The third key ingredient is free trade. Free trade is a key mechanism to increase competition as it gives consumers access to products produced overseas, as well as those produced in Australia. This puts downward pressure on prices, as well as expanding choice and improving quality. There are many reasons why market-based economies are superior to economies which feature substantial government intervention. One of these is the incentive problem. In an economy where governments confiscate a large share of profits or earnings, or interfere in the normal market process to favour self-interests (crony capitalism), the incentive to work hard, earn more income, and develop human capital is muted. The second is the information problem. Information about preferences, value, and commercial decisions is scattered across the community and society. It is 3 Australian Bureau of Statistics, Household Energy Consumption Survey, Australia: Summary of Results, 2012, Canberra, Australia, (October 2013)4 Australian Government, Independent Review into the Future Security of the National Electricity Market, Canberra, Australia, (2017), pg. 1447How Regulation and Red Tape Makes Families Poorernot available at a central location to government officials. Market-based economies respond to, and aggregate, this information through voluntary transactions. The outcome of this aggregation is price formation.Prices aggregate the information which is dispersed across societies, and fundamentally reflect relative resource scarcity. The price of an item may rise, for example, because of a surge in demand for that item (perhaps because of a new trend). The relative price rise of this item sends a signal to producers and suppliers that the value of that product, relative to other products, has risen. Those producers and suppliers then respond by directing more limited resources to the production of that item, and fewer resources to the production of other items. This allows a market-based economy to better satiate consumer preferences than alternative forms of economic organisation. In that sense, prices are an important signal that coordinate the actions of dispersed economic actors in a direction that is socially beneficial. Government distortions of price signals such as through regulation, distort this allocation process. Rather than prices reflecting underlying consumer demand, government intervention results in scarce economic resources following to political actors, and their favoured interest, rather than to everyday consumers and businesses. 55 See Hayek, F.A, “The Use of Knowledge in Society”, The American Economic Review, Volume XXXV, Number 4, (September 1945), and Hayek, F.A, “Prices and Production”, Augustus M. Kelly Publishers, New York, (August, 1934)8 Institute of Public Affairs Research ip