Some visuals from the Australian Federal Budget 2015-16

A 5-page visual of interesting picks arising from the 2015-16 Australian Federal Budget! 

The 'dull' budget can be summed up as an attempt to bring Australia to surplus (Government Revenues > Expenditure) in about 5 years mostly through spending cuts to buckets such as education, welfare and health sectors.

A few Nobel Prize facts and reflections on economics

Perhaps the most stunning of the Nobel Prize statistics is the fact that for every 1 woman that has won, 18 men would have already won the prize. The common explanation to this 'boy's club' question over the years has been that there have been far fewer women in science than have men, a field in which the Prize is heavily skewed. Assuming that the whole world provided similar opportunities for all and social expectations shifted to accommodate a world where women are treated the same as men, perhaps we shall see more women on the forefront of science, literature and peace in the years to come.

Another interesting conjecture to note is the role economics has played over the years, since 1901. One of the cornerstones of economics is a theory referred to as the rational-expectations theory, the idea that people make choices based on their rational thinking, available information and past experiences. Economists then go ahead and extend this theory to come up with the efficient-market hypothesis, the absurd idea that financial markets reflect all available information and therefore inherently tended towards efficiency and stable risk dispersion. These two theories have been central to mainstream economics for more than 40 years. Most followers of economics can see that these models blind economists to reality and certain that the universe was unfolding as 'in equilibrium', they failed both to anticipate the financial crisis of 2008 and to chart an effective path to recovery. The economic crisis has produced a crisis in the study of economics – a growing realization that if the field is going to offer meaningful solutions, greater attention must be paid to what is happening in university lecture halls and seminar rooms.

Perhaps a great starting point in this reformation exercise should be a denouncement of rational expectations and efficient-market modelling and considering what behavioural economics has to offer; which embodies the mindset that people could actually sometimes be have irrationally and contrary to predictions of economic models. Notable individuals that have won Nobel Prizes in behavioural economics are laureates Gary Becker (motives, consumer mistakes; 1992), Herbert Simon (bounded rationality; 1978), Daniel Kahneman (illusion of validity, anchoring bias; 2002) and George Akerlof (procrastination; 2001).

References: FT website, The Nobel Prize official website.

[DK 15/03/15]

Don't blame the whole 'dismal science'!

In response to this interesting article from Business Daily Africa, Why development economics is biggest challenge to growth, I'd say:

It's the massive generalisations within the 'dismal science' that are of concern and that's what should really come under fire, not the whole science. I still think there's some hope if economics is done a little differently. For instance, I'd go straight for the famed General Equilibrium as an example of one massively broken theory that's taught to new economics students so religiously. If you choose to do the unorthodox qual and quant economics (which is what Behavioral Economics mostly stands for and that I'm quite a fan of), I believe the results will be much more palatable to current affairs. For instance - as mentioned by a previous commenter adopting a different risk management methodology, or viewing public and private debt in the truer way that that debt should be looked at in stead of masking it frivolously in the way current  governments are doing (or should have learned not do having been burnt by the recent crisis).Then I believe you will still have some pretty strong cases to lobby the body politic with i.e. call them to action issues like the massive rising income inequalities of the present times, debt escalations (because as clearly experienced in the US with the largely sub-prime loan-backed crisis, when debts rise above a certain threshold, debt deflation kicks in [poor Eurozone is experiencing deflation at the moment], and then asset prices go to the floor).