Nathan Taylor

I recently had the pleasure of presenting at the WA Council of Social Services on the Changing Economic Context for both Australia and WA in particular.

The presentation can be found on this link: WACOSS presentation.

The message of the presentation was:

“Australia as a whole and Western Australia in particular have almost never had it as good as I has been. Unfortunately the bloom is coming off the economic rose and the sweet economic spot is ending. This means future prosperity will be more difficult to attain. A condition that is likely to continue in the longer term as international competitiveness makes Australian jobs more vulnerable to change and competition.

(The terms of trade reached an all-time peak in 2011. Indexed values , 1870-2912, year ended June (1901-200 average = 100). The source is the RBA.

Economic Growth

 What cannot be understated is how incredible the economic expansion has been. The last time Australia experienced anything like the last two decades economic growth was when gold was first discovered in Victoria. That discovery triggered a three decade expansion but from a very low base

 In contrast, while Australia is part of the third world economy, it is fully developed. As a consequence, the economic expansion has resulted in much higher levels of prosperity.

According to CEDA’s research, Australia’s two decades expansion is likely to continue for another ten years. No doubt there will be financial crises and recessions in various parts of the world economy over the decade, but Australia’s two  decade expansion  has so  far survived a depression in South East Asia and Korea, the Russian and Long Term Capital Management crises, the 2001 tech wreck and advanced economy recession, the quintupling of oil prices, several wars in the Middle East, the global financial crisis and subsequent advanced economy recession, and now the Euro crisis. It is not easy to contend that bad news in the global economy will necessarily terminate Australia’s economic expansion.

 The economic growth that has occurred in Western Australia cannot be understated. It has occurred over a relatively short time, causing significant challenges for the WA community, with many winners and some distinct losers. You have lived and breathed the challenges this has created for the community and know them better than I.

But the challenges economic growth creates are set to rapidly change. The sweet spot for economic growth is effectively over.

 This is because the mining boom is changing. It is shifting into its third phase, which will be a sustained improvement in national incomes from exporting minerals, particularly as the mining investment comes on stream.

 What it will mean though is the period of a high Australian dollar will continue, just as the boost to employment and wages fades. Meanwhile, business investment will change focus, from income producing ventures to cost saving ones.

 When business was rapidly expanding to take advantage of the economic opportunity presented by the terms of trade, it made sense to throw money at problems until they went away. Now, the likelihood is that the focus will shift to cutting costs and improving efficiencies in all areas of business.

 Economic consequences: the bargaining position of workers, particularly unskilled workers, is rapidly eroding under their feet. Now the economic challenges will be that people who have known nothing but economic prosperity, who have  no habits of savings, who live from pay check to ridiculously large pay check, are likely to find themselves in less favourable conditions.

 This is not to suggest this change will happen today or tomorrow. But it will happen. In particular, we are hitting peak construction this year and the drop off could well be more pronounced than we’d have thought.

The longer term challenge for Australia is: where do we fit into the global economy? Our economy fits into the supply side of the developing world, evidenced by the strong economic growth and high rates of investment in the Australian economy.

The big challenge is our non-commodity based sources of historical comparative advantage (economist speak for where we make the most money) are rapidly eroding.

The economic development of much of the third world, which has fuelled our current economic expansion, will also increase the level of competition the rest of the economy faces in the longer term. For example, when South Korea developed its modern educational system:

“the very vocabulary to talk about modern science and mathematics hardly existed in the Korean language and had to be invented before textbooks could even be written.”[i]

Concerted efforts to improve scientific and technical education underpinned South Korea’s emergence into a modern developed economy. A similar transformation is underway in China and India. In 2002, the total number of STEM field [ii] first university degrees awarded in Asia was just over one million, with almost half a million in China alone and a further 176,036 in India. By 2010 the total STEM degrees awarded in China had risen to 2.6 million, with the figure anticipated to rise to 3.5 million by 2015.[iii] China alone will produce more STEM degrees in 2015 than all of Asia did as first degrees in 2002. India is experiencing similar growth trajectories.

This shift is reflected in this chart: how Australia’s education system compares internationally. Are we in danger of becoming a nation of dunderheads? (Where we ever not?)

What this change will do is undermine the return to skill labour that Australia has enjoyed. As more and more skilled people enter the global workforce, and technological developments make it more and more capable of outsourcing, there will be ongoing downward pressure on skilled workers like there has been on areas of the unskilled workforce.

Think credit analysis at the National Australia Bank being outsourced. The capacity to do it (without it being exercised) will diminish wages.

We will look back on this time as being among the best of times. National prosperity has never been this good before and, unless we take significant action to ensure it continues, it is likely it will never be again.

Harvard Medical School researchers have been having a lot of fun with the bounded nature of human attention. They did so with the startling study whereby radiologist examining lung scans failed to notice the superimposed image of a man in a gorilla suit.

While radiologists are incredibly well trained to spot tiny nodules that could become cancerous before other people even seem them. This task consumes their attention and so they fail to see what they are not looking for. But the radiologists failed because they are focused on a challenging task that requires their attention, that attention is not available for other purposes. Namely spotting the blindingly obvious gorilla! In fact, 83 per cent of the radiologists missed it.

Extraordinary! Can you see it in the image below?

It is pretty obvious when you look for it.

Think you wouldn’t be fooled by such a silly test? Check out this incredible video for another absolutely ridiculous example of how we miss what is exactly in front of our face. It turns out that approximately half of people who watch the video miss the man in the gorilla suit dancing in the middle of screen!

Humans are, above all, social animals. Our social skills enable both our species and our individual survival. While I have written about how the impulse to maintain a consistent social facade can exert a strange unconscious bias on our actions. Sometimes it also makes us do very odd things consciously too!

One such situation is the recent public scandal surrounding some happy snaps of public personality Chrissie Swan. In a vain effort to maintain the social appearance of proprietary, Snow offered to pay $10,000 for some images, but was outbid by a magazine (who knew they still had money!)

To my mind there is absolutely nothing scandalous about what Snow did in smoking, or in trying to buy the images. After all, she has gone through a very public mea culpa associated with the incident. She knew smoking would have consequences for the unborn baby and was struggling not to smoke. Whatever mild damage may be done by the smoking will be more than made up for by having a parent who loves her/him.

What is interesting is the social condemnation directed at Swan for trying to hide her addiction from the public.

However, I disagree with the opinion piece by Anne Davies when she said:

“The fact is we tolerate tobacco and alcohol products despite overwhelming evidence that both pose significant health risks to those that consume them, pregnant or not.

Pregnant women face the same challenges as the rest of the community in kicking the habit and deserve support, not derision. They just happen to be easier targets for the morality police.”

The undeniable difference is when you or I scarf down a donut and bottle of rum (why not?) it is having an influence on our own state of health. A pregnant mom is an entirely different affair as the consequences fall on another party who has no control over the situation and will deal with the consequences for the rest of their life. So there is a reason for social disapproval. If that social disapproval motivates Swan and others to drop the cigarettes, all to the better for them.

Just don’t call it hypocrisy when Swan tries to buy the images.

The perception of scarcity is a major motivator to action.

Ask anyone who has stood in line on boxing-day sales to purchase something they would have walked past the week before, they will say they are there for the sales. But a key part of the motivation is simply the fact that they might ‘miss out.’

Scarcity is a huge motivator for action – just think of the market for diamonds – but it is the perception of scarcity that is equally important.

On the centennial of Grand Central Terminal in New York, this article highlighted an awesome example of inducing scarcity to change behaviour. It revealed that all the display clocks in the Grand Central Terminal all run exactly one minute early.

While this time difference is not enough to make people question it, it is enough to motivate people to get to their train on time. As a consequence, the Grand Central Terminal has the least slips, trips, and falls of any railroad in the United States.Considering it is the largest rail station, and has many marble floors to boot, that’s a very impressive outcome.

I remember having dinner overlooking the central terminal of Grand Central on New Year Eve and watching the hoards of people criss cross the station. A veritable hive of humanity. So the mistiming is certainly deliberate. Trains run through the Grand Central Terminal with a 98 per cent on time accuracy. That is not something that happens if you are so lackadaisical with timekeeping that you get it wrong by a minute consistently.

Since the industrial revolution, and the general outbreak of the scientific method, humanity has dramatically improved our collective understanding of the world around us.

One important area where there has been a lot of research is in how we most effectively learn. An interesting meta study was conducted by the Association for Psychological Science, and Kent State University professor John Dunlosky, into the evidence behind how we learn and what strategies are the most effective.

As a compulsive underliner, and sometime note taker, it is enlightening to learn that there are other strategies for studying that are more effective. In fact, Annie Murphy Paul described the effectiveness of these techniques as among the worst. Saying:

Highlighting and underlining led the authors’ list of ineffective learning strategies…studies show they offer no benefit beyond simply reading the text. Some research even indicates that highlighting can get in the way of learning.

The best strategies? Spread study sessions over time and undertake practice testing. They represent the most productive strategies for learning information and helping make sure you remember it.

While our species is almost 200,000 years old, in many regards we are still adolescence coming to understand ourselves and our world for the first time in a meaningful way. I suspect that people will look back on us, and the way we conduct our affairs, in a similar fashion to the way we (or I at least) view people from medieval Europe.

Like many young Australians, I spent a lot of time as a kiddie playing Monopoly. Never once did it strike me that the purpose of the game was to teach good old fashioned communist values. But apparently that was exactly the purpose of the original version of the game.

Christopher Ketcham, via Andrew Sullivan, claims that Monopoly started as The Landlord’s game in 1906 and was designed as a teaching tool for the philosophy of Henry George, a nineteenth-century writer who had popularized the notion that no single person could claim to ‘own’ land. The game became the one we know when a professor:

“taught it to his students at Wharton in order that they might learn, in his words, “the antisocial nature of monopoly,” and in particular “the wickedness of land monopoly.” The students apparently taught it to their friends…The game spread widely over the next several years, to the hometowns of Nearing’s students and to other universities. It would slowly lose its anti-monopolistic message, however, as players came to the conclusion that Magie’s vision of Georgist redistribution was not nearly as entertaining as ruining one another.”

I have to say, not once did my brothers and I come to the conclusion we should cooperate to collectively own the factors of production while playing monopoly.

This blog takes a closer look at the marriage/civil partnership survival statistics from the UK and speculate on reasons for the discrepancy between hetero and homo relationships.

The chart below details the number of divorces or dissolutions for heteros and homos. As you can see, while opposites may attract, the statistics suggest they can also repel.

The difference between civil union dissolution and divorce is approximately the same for every year. But it is important to note that this analysis is limited because only four years of civil partnership dissolution data are available.

While the report Civil Partnerships Five Years On does not speculate as to why there might be a discrepancy between the two it does raise some differences between the two types of relationships. These include:

• The age of people forming civil partnerships was older than marriages; and
• Higher number of people forming civil partnerships were ‘single’ ie had never been in a civil partnership or marriage before.

Being older when forming a relationship may be a significant advantage for its longevity as the partners have got their life in order as it were. Or it could be that the fact that the civil partnerships were only available from December 2005 meant that many people who had been in long term relationships took advantage of being able to get them recognised.

The notion that more people in civil partnerships were ‘single’ is an artefact of the system. No doubt many of those people had been in serious relationships in the past, it was just the legal system did not recognise them.

The most charitable (for heterosexuals) interpretation of the data is that there was a large cohort of gays who had been together for a long time and leapt at the chance to have it formally recognised. The long period of legal non-recognition had already weeded out those who wouldn’t make it.

Personally, I believe that the main reason gays and lesbians tend not to break up at the same rate as the heterosexual population is that it has simply taken more effort to form the relationship in the first place. So Britney Spears would never have made it down the aisle to any of her various husbands had she been a lesbian. What the statistics are showing are the relationship survival of people who have been through a winnowing as it were. It may be that in time, as more gays and lesbians marry early in their relationship things will even out. Time will tell.

It is interesting that more women than men dissolve their same-sex civil partnership in the UK. While lesbians constituted only 45 per cent of all civil unions formed from 2005 to 2010, they were 62 per cent of all dissolutions. In contrast, gay men dissolved their civil relationships at a rate of only 1.6 per cent. This is apparently consistent with other countries with same-sex partnership laws, such as Norway and Sweden.

There could be many reasons for this, from lesbians having a higher divorce rate than men entering civil partnerships or from them having more children in their relationships (a key source of stress). An alternative point, put forward by Andrew Sullivan, is that women tend to file for divorce more frequently than men do. This is a finding consistent across time and across cultures. Maybe, despite all social assumptions to the contrary, men make more stable partnerships?

Behavioural economics is the study of the breakdown of human rationality. But this misrepresents the situation.

In my view, deviations from ‘perfect’ rationality are because we live in what we economics call a constrained world – or a world where there are limitations on our memory and ability to make decisions. Humans are not supercomputers capable of processing endless data inputs to evaluate every single decision in our life.  There is only so much mental recall we can bring to bear on a situation.

I tend to think of human thinking failures as ‘super rational’ rather than sub rational in that they are a result of a brain optimised for the world we live in rather than for an academic test case of rationality.

A wrinkle on this idea is contained in a recent study into the Marshmallows. Seriously.

A classic study using Marshmallows was conducted in 1972 and found a significant link between a kiddie gobbling up a marshmallow and later success in life. I kid you not. Apparently, the study stumbled onto a link between a child’s self-control and their future capacity to withstand temptations and to be goal orientated.

In the study:

A marshmallow was offered to each child. If the child could resist eating the marshmallow, he was promised two instead of one. The scientists analysed how long each child resisted the temptation of eating the marshmallow, and whether or not doing so was correlated with future success.

The findings were:

The first follow-up study, in 1988, showed that “preschool children who delayed gratification longer in the self-imposed delay paradigm, were described more than 10 years later by their parents as adolescents who were significantly more competent”.

Other results found a strong relationship between the amount of self-control a kiddie was able to exercise with:

1. Higher academic results;
2. Reduced likelihood of substance abuse; and
3. A raft of other positive outcomes for life.

The theory was that kids who could control their impulses best were more likely to be goal orientated and able to resist fleeting temptations.

A recent study has suggested that things may be more complicated because it examines whether the kids beliefs about the likelihood of getting a reward influenced their self-control. The idea being – if a kid comes from a stable home life where their parents follow through with threats and promises (ie a smack for being naughty and a sweet for being well behaved) then the kiddie is more likely to believe the promises of others.

In contrast, a child raised by less stable parents (for instance, anyone suffering mental illness or substance abuse) would be less likely to wait to eat a marshmallow. Not only is the second child less likely to believe the promise of a second marshmallow, they may have concerns the first one will be taken unless they eat it straight away!

The study tried to test this hypothesis by splitting a group of kids into two. Both groups were promised minor rewards before the marshmallow test was conducted. In one group, the experimenter gave the kids the preliminary rewards (ie good colouring in sets, nice stickers) while in the second group they failed to do as they promised.

The result was striking. Kids who had a rational belief that a promise is not likely to be fulfilled did not wait very long at all for a second marshmallow. They scoffed it almost straight away. In contrast, the other group waited almost four times as long – and many did not eat it at all – instead waiting patiently for a second marshmallow. The children’s ability to exercise self-control was influenced by their belief in the likelihood of reward for doing so.

Where kids were given reasons to trust that promises would be fulfilled, they actually were able to withstand temptation a great deal longer than in the original study!

This is not to suggest that children are perfectly rational. But sometimes what appears to be irrational actually makes sense when considered in a broader environmental context.

It’s a lot to read into a marshmallow, but by-god I enjoyed gobbling it up!

We all tend to believe that we have fixed attributes and that our abilities are absolutes. We might be bad at “doing the books” but we are great selling customers on the benefits of a new product.

Alternatively, we may see ourselves as being highly creative while also being efficiently organised. Sure, we might have a bad day and “score” a little lower in one of our skills than we generally do. But generally most of us believe we know our true potential and abilities.

Unfortunately nothing could be further from the truth.

This study explored the influence of conflicting stereotypes on performance, that of being Asian with presumably superior mathematical skills with the stereotype that woman are presumably inferior in the same area (Shih, M., Pittinskyl, T.L., and Ambady, N. 1999, ‘Stereotype susceptibility: identity salience and shifts in quantitative performance’, Psychological Science, vol. 10, no. 1, pp. 80-83).

The study involved one mathematical test, two surveys (one evoking the subjects femininity, the other their ethnicity), and some willing volunteers (female and Asian preferably!)

The women who were randomly assigned to the survey that reminded them of their ethnicity scored significantly higher on a math test than those who first completed a survey that evoked their gender. What this means is that the mathematical abilities of these test subjects were significantly altered by having their attention indirectly focused on a social stereotype that they may or may not believe in.

It is not like they were told, being Asian = being good at maths while being female = being bad at maths. Nor is it like these study subjects were told about the stereotypes and then told, “Hence you will be good/bad at maths” – the stereotype that directly and significantly influenced their mathematical prowess was buried in their social programming. It is not reflective of how the women in question perceived themselves.

This is a pretty incredible outcome. It means your abilities and skills are sufficiently malleable that simply having you think about a topic related to a social stereotype will significantly influence your performance. Even when the stereotype is more suitable to the 1950s than to the noughties, they still have a significant power to influence us.

The next blog will explore how race influences academic success and social interactions and the ramifications for Australia’s appalling gap in conditions between indigenous Australians and the rest of the population.

It will also suggest how women (at least the non-Asian women) can improve their inability to do maths!

In the classic showdown between pigs and sharks, it turns out pigs win hands down.

As I have discussed before, people are not very good at assessing extreme risks. Doesn’t matter if it’s good or bad, our emotions get in the way whenever there is an unlikely but dramatic outcome. That is why we have lotto but not nuclear power plants. Our emotions get in the way of our estimation of the situation.

There are fewer things as viscerally terrifying as a shark attack. Not only is it horrifically violent and painful, there is something about being in a foreign environment and vulnerable that makes it particularly terrifying.

Perhaps this explains something a little odd that happens when I tell people I was in a team that did the Rottnest Channel Swim they inevitably ask about sharks. Seriously. Despite the fact you can almost walk from Perth to Rottnest on the back of boats and swimmers, people are always concerned about sharks.

It turns out you should be more worried about being attacked by pigs than sharks. Six times more people are killed in the USA and Canada each year by pigs than sharks kill worldwide. But we aren’t afraid of Babe are we?

In Australia the possibility of drowning is twenty times more likely than it is to be bitten by a shark. But no one asks if you have flotation devices when you go swimming.

Finally, it appears you are ten times more likely to be bitten by a human being in New York City alone than by sharks throughout the world.

Sharks are PR victims of poor human decision making.