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Podcast episode

How to Defeat the Dictators w/ Charles Dunst, Asia Group – EP180

Have democracies failed and is authoritarianism winning? How can democracies reinvigorate themselves? Does the West need to decouple from China? These and other questions are considered in Economics Explored episode 180. Foreign affairs expert Charles Dunst talks about his new book Defeating the Dictators with show host Gene Tunny. Among other things, Charles and Gene talk about the potential benefits of Public Private Partnerships (PPPs), such as Operation Warp Speed, the Trump administration’s COVID-19 vaccine plan. 

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You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About Charles Dunst

Charles Dunst is deputy director of research & analytics at The Asia Group, an adjunct fellow at the Center for Strategic and International Studies, and a contributing editor of American Purpose. He is the author of Defeating the Dictators: How Democracy Can Prevail in the Age of the Strongman (Hodder & Stoughton, February 2023). 

For further information about Charles, check out https://www.charlesdunst.com/

What’s covered in EP180

  • What is the Asia Group and what does it do? [1:35]
  • Is democracy no longer seen as the path to prosperity in developing economies? [5:28]
  • What are the most important organizing principles for a democratic system? [11:38]
  • Accountability and the lack of trust in government [16:34]
  • Best practices for running a democratic country in the 21st century [21:36]
  • Too much money in politics in the US [25:41]
  • Does the West need to decouple from China? [27:37]
  • The role of public private partnerships (PPPs) such as Operation Warp Speed [32:27]
  • How will dictators be defeated if we govern ourselves better? [34:59]
  • The importance of engaging in the conversation through social media and local governance [38:32]
  • Inequality and the Dream Hoarders [39:00]

Links relevant to the conversation

Defeating the Dictators (Please buy the book via this link to support the show):

https://amzn.to/3liQrjx

Matthew Engel’s FT article “The foreign states that own Britain’s railways”:

https://www.ft.com/content/e57c5fd0-bf54-11e9-9381-78bab8a70848

Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It

https://amzn.to/3LvCOrL

Track Nancy Pelosi’s stock portfolio:

https://www.capitoltrades.com/politicians/P000197

https://twitter.com/PelosiTracker_

Transcript: How to Defeat the Dictators w/ Charles Dunst, Asia Group – EP180

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Thanks for tuning into the show. This is episode 190 on defeating the dictators that’s the name of the new book by up and coming Foreign Affairs expert Charles danced, who joins me this episode. Charles is deputy director of research and analytics at the Asia group based in Washington, DC. I thought Charles’s book would be good to cover on the show, because the revival of authoritarianism around the world is not just a political and human rights issue. It’s an economic one, too. It has profound implications for our trading relationships with other countries. And as we’ve seen with the invasion of Ukraine, the actions of authoritarians can massively disrupt global markets. Please stick around to the end for some additional thoughts from me. Okay, let’s get into the episode. Charles danced, welcome to the programme.

Charles Dunst  01:35

Thanks for having me on.

Gene Tunny  01:36

It’s a pleasure Charles. Nicholas grew and passed on your details to me, regarding your new book, defeating the dictators and yes, very keen to chat about that. I understand you’re the deputy director of research and analytics at the Asia group. Could you just tell us a bit about the Asia group and your work there first, please.

Charles Dunst  02:00

Sure, the Azure group is a strategic risk advisor, essentially, for companies looking to do business in Asia, and we’re headquartered in Washington. But with offices in Tokyo, we have an office in Vietnam, we have an office in in New Delhi, I think we had one or one or two advisors at one point in Australia. But basically, it’s mostly companies looking to do business in Asia on things like how do I start selling cell phones in Vietnam? Or how do I start manufacturing something in India and kind of understanding those marketplaces given just challenges of doing business in those markets. And basically, people come to us looking at former US diplomats, people with longtime business experience in the region, who just need a new knee to help and we can kind of provide that expertise. And at the research team, I kind of said to denied point of the firm where I’m not super client facing in terms of on a day to day basis, I’m not necessarily engaging with, you know, X, X company or y company. It’s more so we look at pan indo-pacific issues. So we Lee, I write a daily news wire that goes to clients, that’s basically four stories from overnight, overnight us time, that happened throughout the region that matter for either business, economics or politics. So we do that we lead coverage on things like the Indo Pacific economic framework on the quad issues that don’t directly fall in one country team baskets, there’s something that’s not China’s specific or something that’s not Australia specific, we kind of handle the pan regional issues. And I handle a lot of the public facing media stuff, just given my given my own background as a journalist. So it’s a really interesting, firm really dynamic. And we just, I think our New Delhi office is now under a year old. So really, lots of lots of movement.

Gene Tunny  03:42

Raw. Yeah, absolutely. Okay. That’s very good. And depending on I mean, it’s hard to know what the right stats are. But India could well be the largest country in the world at the moment. I mean, given China’s declining population, so yes, makes sense to be boosting that Indian presence. Absolutely. Okay. Well, we better talk about your book. It’s getting some it’s got some good testimonials, is really impressive. You’ve got a testimonial from the current UK Chancellor of the Exchequer, Jeremy Hunt, you’ve also got one from? Is it McMaster, a former national security adviser? Yep. And then yes, yes, very good. So defeating the dictators. What motivated you to write this? Charles, why did you think this was an important book to write?

Charles Dunst  04:31

Sure. I mean, I’ve spent a lot of time living in non democracies or kind of countries on the on the cusp, as one might say. So I lived in Hungary when I was still in university. And I remember I was kind of a quasi young journalist at the time, and it was writing articles and pitching around articles about Hungary and writing academic work about Hungary. And it wasn’t getting so much attention because it was this was 2017. So kind of right before Orban became an internationally known figure, precisely because of his his illiberal ism. Ah cracy his notion of kind of setting the stage for folks who win elections legitimately come into government, and then do away with the liberal institutions within. And I basically lived in Hungary I then lived in Southeast Asia and I lived in London and I kind of travelled all throughout Eastern Europe, all throughout Southeast Asia spent a lot of time in the Middle East. And something that kept coming up, when you talk to the intelligence is of say, Hanoi, or the intelligencia. In Kabul, maybe less so Cairo, but the intelligence is certainly in the Gulf. There is this notion that democracy is no longer the path to prosperity, there is a sense that you can follow the models of the Singapore’s of the world that you can follow the model of China that you can follow the model of Saudi Arabia. And I think more and more when I travel around the developing world, that was something I heard, and particularly in our little Western bubbles, sometimes, particularly in the US and the UK, I think we don’t do such a great job of communicating the virtues of democracy, and basically answering the question why democracy for people in the developing world, because if you are Vietnamese, and you’ve seen your country’s GDP, and you’ve seen it grow so much, and you’ve seen your, your life expectancy increased so rapidly over the last 3040 50 years, it’s not entirely clear to me why you might look around and say, well, this system’s not working, we need a democracy, when you see January 6, there when you see three prime ministers in three months in the UK, so I wanted to write a book to make a very affirmative case for democracy. Because there are many books, I think, in recent years, kind of lamenting the decline, the decline of democracy and the rise of the Viktor Orban types. But I wanted to say, write something a bit more affirmative. And saying, well, here is what can be done to actually make sure democracy works once again. And when democracy works, once again, most importantly, you can keep democracy where it already exists. democracy works better in the United States. So if democracy works better in the United Kingdom, you’re going to get fewer elections of people like Trump, who may not necessarily be the biggest believers in the democratic system. And once you can kind of tamp that discontent at home, it’s my belief that democracies can serve as a better model for countries in the developing world, well, maybe this, they might not look at the United States and look at Australia, and look at the United Kingdom in five to 10 to 10 years and say, well, those systems are more innovative than the one in China that they’re more solid. I mean, that right now, I think, if you’re sitting in Vietnam, that might not appear to be the case. So I wanted to write a very affirmative case for democracy and looking how do we can advance our values and really practical ways?

Gene Tunny  07:32

Sounds? And we’ll use that affirmative case for democracy. What do you think are the key points in favour of democracy?

Charles Dunst  07:38

But key point for me is study after study still shows, despite the kind of discontent in our democracies that if you live in a liberal democratic society, or even just the democratic society, you are likely to live longer, you are likely to make more money. And I know there are no studies that can necessarily show this, but it is my belief that you’re likely to live a richer cultural life, and you are more likely to innovate, that is true as well, that the world’s best generally still comes from democracies. And this is not to say that Singapore and China cannot innovate. Of course, of course they can. And of course, great art and great movies and all that can come out of non democracies. But there is a reason why when you travel around the developing world, particularly in Asia, that the media is the the music people listen to his Japanese and Korean democracies, or the movies on TV are mostly American, maybe British, maybe Australian, but it’s not like Chinese, Chinese culture has become predominant in the developing world. And that is kind of a silly example. But it’s indicative to me, of the ways in which democracies embrace the kind of tumult and chaos of our systems and we are better for it in the long run. So it’s just about making sure that we are making sure that our systems are providing for our people, while also embracing this chaos that allows for a Jackson Pollock painting, or allows morikami to write when a cue for these are not works, that someone will be able to conceptualise in a non democracy and think that’s a very, very key point that the art and the innovations that are going to be really necessary for the future particularly think about things like climate change. Well, the Evie transition is going to be fixed by innovations that are primarily coming out of democracy, or democracies. And it’s the same thing on healthcare innovation. I mean, where did where did the COVID vaccines come from? Exclusively democracies, not only the United States, Germany as well, of course. So that was my affirmative case for democracy was starting at this point of saying, well, even the things look really messy. Right now, if you look around, you would rather be the citizen of a democracy than an autocracy bar, not

Gene Tunny  09:41

just on Vietnam, and that was an interesting point you made. Do they recognise that? I mean, a lot of their prosperity does come from embracing the market, doesn’t it from embracing the market and as someone who I mean, I’ve read a lot of Milton Friedman when I was younger, and I mean, Friedman used to make the case that the market and democracy were very closely entwined. Or that you can’t have one without the other. I think Friedman’s argument was. So the people in Vietnam recognise that the importance of the market, and then the importance of freedom more broadly,

Charles Dunst  10:17

I think not so much the notion of freedom more broadly. But I think there is a recognition of the need to have liberal ish economics, I mean, Vietnam, China, Singapore, these countries all got richer. I mean, certainly Vietnam is not rich, like Singapore is, but they all got richer by embracing liberal trade. And I think what’s really not troubling, but a little concerning if you’re in a democracy is that those countries and others have proved that you can have mostly liberal trade without liberal politics. And that is a very different scenario than with the Soviet Union, or the kind of Soviet bloc writ large, or China before dung XIAO PING, where essentially, these were the countries that were illiberal politically, and also illiberal economically, so they couldn’t really grow in any meaningful way. So those systems never had a tonne of legitimacy, because they never worked. Whereas now, I’d be hard pressed to say that the Vietnamese system has not worked, or that the Singaporean system has not worked. Clearly, you can get rich without democracy. And that’s a new relatively new point over the last 180 years. It really was this notion that the way to get rich in the post colonial era was to be a democracy. So the fact that you can actually decouple liberal values from liberal trade is definitely a concern. And part of the reason why why I wanted to write the book,

Gene Tunny  11:38

yeah, just on Singapore, you mentioned Singapore quite a few times in the book. And that’s an interesting example. And probably, I mean, that relied upon just that extraordinary figure of Lee Kuan Yew, didn’t it and someone who was, you know, almost just by his background, and by his education could be that benign dictator or authoritarian, that he was an exceptional individual and probably someone you can’t count on having another another kind countries. So I thought it was interesting. You did tackle that question of Singapore, head on in your book. So yeah, just an observation just while I remembered it on Singapore. Okay. In your book, you give a really good summary of your argument early on, and you’re talking about a No BS approach to the future, committing to our values and, and also to the practices but not buying into utopianism. I really like this, but you go that we must convince the world in practical terms why our organising principles remain preferable to those of autocracies both at home and abroad. We need to look our own failures in the eye while learning from the successes of others. You talked before about the affirmative case for democracy, but could you just restate or reiterate? What are those organising principles? What are the most important ones, Charles,

Charles Dunst  13:03

when I was talking about liberal organising principles, I’m really thinking about the things that are necessary to be a democratic system. So things like freedom of speech, things like free and fair elections, broadly open societies space for civil discourse, space for civil rights organisations, for civil society organisations, this notion that it is actually good to have a dynamic and open society where there can be really aggressive, loud debate and disagreement. And that’s not I don’t think that’s a bad thing. I don’t think it’s a bad thing that we can have really heated political debates. I’d rather that than the opposite of kind of no debate at all. So but I think we really do need to convince countries of well, why should I have? You know, why? If you’re Vietnamese, or your, you know, rich, Chinese rich, rich Chinese person, you turn on CNN, you’re gonna say, Well, why would I want that? Why would I want two people kind of debating angrily at each other over on TV? I mean, how is that helpful for my government? So I think we really need to say, well, here’s why. Because that loud debate tends to lead to a society that’s open enough to produce really strong innovations that’s really good, strong to produce the best kind of art. And these are all things that are vital to the future, but clearly just kind of walking around and dropping into annoyance. And well, you shouldn’t be like us, because our systems are open, and they’re so great isn’t enough, when there is a need to demonstrate very practically, well, why is the United States or why is Australia? Why do we offer a better path for prosperity broadly, than do China or Singapore? So that’s really how I how I thought about it.

Gene Tunny  14:41

Gotcha. Right. And what do you think the failure is? You talk about the failures, so we have to look at our own failures in the eye. What failures do you think are most significant?

Charles Dunst  14:53

I think honestly, one of the biggest ones that I talk about very frequently is this is more of a problem I would say in the US in the UK than Australia, but broadly kind of the mismanagement of globalisation in the sense of thinking that we could essentially export manufacturing to places like Vietnam and China without experiencing any domestic discontent at home, that people who would had who’ve had who have had these manufacturing jobs for generations are mining jobs for generations, would lose them turn around and say, I’m all good. Okay, and wouldn’t revolt in one way or another, and particularly in the US the it is this programme designed to kind of ameliorate that loss with some economic assistance, but it’s kind of a mess and doesn’t really work effectively. And that, to me is so indicative of the problem that the United States China, the UK comes through this free trade through globalisation, we all got richer, but the average person did not get as rich as their as the god the government did, or as the kind of top 1% did. So I think there’s this increased frustration, it’s saying, well, people turn against globalisation, because they turn away because they’re mad or with the way globalisation was managed. And I think really pushing back against that is really important and saying, Well, trade isn’t the problem, or liberalism isn’t the problem, the problem was the way it was managed. And that gets into the broader question of inequality, where, particularly in the United States, particularly in the United Kingdom, inequality is one of the major fuels beyond anti immigration politics beyond I would argue, kind of very strong, populist politics, that lead to things like Brexit or elections of people like Trump. So that those are kind of two big ones. And the other, I think, really, really vital. One is a relative lack of accountability and which is fueled a lack of trust. I think there was a notion if you talk to enough people in the UK or the US and even even Australia times, that there are two sets of rules that there’s a set of rules for normal people and a set of rules for everyone else, me everyone else who kind of that top 1% of rich people and rich people in the government. And that view in the US, I think about the example of the fact that there are so many Congress, people who trade stocks, I’m sure some of them are I’m sure many of them are not doing it illegally, technically. But clearly, you’re privy to some kind of information as a lawmaker with a certain type of security clearance that you probably should not be allowed to turn around and trade stocks. And even when a lawmaker is caught either not filing their stock disclosures on time, nothing seems to happen. They pay a little slap on the wrist fine, and then they’re done. And that’s fuel this notion that if that’s a normal person, that person is getting punished very severely. And I think making sure that we’re restoring accountability is key. So it’s about economics, but it is also about things like accountability, which leads to distrust in government. And when when your government lacks trust, it’s really hard to do just about anything.

Gene Tunny  17:50

Wrong. Yeah. Yeah. Good point. I’ll put a link. I think there’s a Twitter account that tracks Nancy Pelosi stock portfolio. So Pelosi has been one of the strongest performers in the Congress. And I don’t think she’s the top performer. But I’m sort of stuck fix, which is, you know, far exceeds market performance. So yes, does does raise some questions there. Charles, do you have any reflections on how democracies fared relative to autocracies during the pandemic?

Charles Dunst  18:22

Yeah, I mean, I think certainly the US performance was was quite poor. And I don’t think that’s anything intrinsic to democracy. And that’s kind of how I would approach the UK as well as there was nothing intrinsic to democracy that made them fail on the pandemic, it was more so we were just the two of those two countries, my country and then the United Kingdom, kind of had not great leaders for pandemic management when a pandemic happened. Whereas certainly, there are other democracies that did much better, certainly South Korea did much better. Certainly, Taiwan did much better. Certainly, Japan did much better for a period. And when you think about the autocracies, Vietnam had a very strong performance for a while. And again, that’s not because Vietnam was an autocracy, it’s because Vietnam had an extremely high level of social trust, that this is trust in government and social trust between one another so in the government, the government was extremely blunt, and extremely honest with its people and said, This is going to be very painful economically. But please stay home, stay off the streets, and we’ll get through it. We’ll get through it as a country and there was really smart messaging of talking about it like it was another war like the Vietnam wars, the another foreign invader was gonna be kind of overstating, but it was another war, the long line of wars against the Vietnamese people, and they banded together. And for a long time, Vietnam, controlled the pandemic extremely well, kind of until the Omicron variant showed up which no one could contain. So Vietnam performed quite well. And I think the the example people go to all the time, and I think kind of wrongly, to talk about COVID and a COVID. Management in a positive light is China where people say, well, zero COVID policy was great. And I think the irony is that The zero COVID policy was maybe very effective and could have been more effective for like a year, in the sense of if you can manage to have these strong lock downs, where you kind of say, well, you know, please stay home, whatever, whatever. And then you get vaccines and you get good vaccines, the Western vaccines and you get your way out, maybe I would sit here and say, well, that’s not a policy I would sign up for. It’s too restrictive, keeping people at home that long. I mean, as a as a democratic citizen, I am not in favour of giving your government that much power. But I do think the irony of the Chinese approach was they kind of demonstrated the efficiency kind of quote, unquote, efficiency of autocracy of saying, well, we can because we have so much power, we can shut everything down for a year, and then we’ll open up it’ll be fine. But the irony is that autocracy was then the reason she didn’t things her personal disdain for the West, was the reason why China didn’t accept the COVID vaccines from the West, that there was no way of reopening, without what models they were probably a million people who died when China reopened. And certainly that’s a lower death fold in the United States. But most of the US deaths took place before the vaccines were if it were available. So I do think at this point, it’s very hard to sit here and say, well, the autocracies managed COVID. So much better than democracy. did. I just don’t think that’s the case. I think it is. Countries with a large amount of social trust in their governments managed COVID better than others. And that’s kind of the Taiwan case. That’s the South Korea case. Those are both democracies, and they manage COVID better than most countries because, I mean, in Taiwan more so people do trust the government raw,

Gene Tunny  21:35

okay. Are they places to learn from? Are they countries and economies to learn from? You mentioned that in your book, you look at examples of good governance from everywhere past and present to detail best practices for running a democratic country in the 21st century could? What do you think those best practices are? And what examples Could you point to Charles?

Charles Dunst  21:58

Yeah, I mean, in Vietnam, I think one example, I’d point to a lot of government’s focus on winning social trust, and the focus they spend on being communicative to their people. And even in a one party state, I think there’s a recognition of what because there are not elections are not real elections, you need to win over that social trust much earlier. And you need to kind of maintain it much earlier, because there is no way at the ballot box of kind of seeing how citizens actually feel. So you need to be a little more transparent and communications at times. And some of the other examples I think about where I would like if democracies had more put on paper and more of these long term plans. People like to make fun of China’s five year plans because they are modelled off the Soviet five year plans, which of course, set these targets Soviet Union was never going to hit. But I do think the idea of democracies happening, well, maybe let’s have a 10 year critical minerals plan, or a 10 year health care plan. Because far too often, those plans are very much focused on security and defence, which are important. It’s important to have maybe a four or five year review of the state of your country’s defence infrastructure, or of your security infrastructure, what are your cybersecurity infrastructure, but I would like that apply to other things I’d like that applied to things that actually matter to normal citizens on a day to day basis. I think the idea of saying, Well, what’s our healthcare sector looking like right now? What’s our infrastructure looking like right now? On what do we want it to look like in 10 or 15 years? And I think that’s something that there are a few autocracies, particularly China and Saudi, spend a lot of time putting out these reliefs, five years to five year plans, or in Saudi Arabia, kind of the vision 2030 plan, and of course, because they’re autocracies, I would argue that they’re probably less likely to actually fulfil many of those goals. And certainly I don’t think Saudi Arabia is on perhaps the greatest trajectory. But I do think the idea of putting things on paper can be really beneficial. And one other example I don’t, I’m not gonna run through all of them. But one good one that I thought the UAE has pulled out in recent years, is they ranked every health care centre in the country, and then publish the results, and said, you know, this one in Dubai is great, this one in Sharjah is terrible. And it I really do think that’s not the worst idea, particularly in a smaller, smaller countries, you can do it state by state or city by city, where I’m from New York City, I can only imagine if New York City, the New York City government, basically brought in an unbiased agency and have them rank the New York City hospitals, and the ones that are at the bottom, clearly, you’re going to be motivated to perform better, because nothing motivates people like a fear of being embarrassed. So I do think that is this kind of odd way of being accountable and transparent. Of course, as a democracy, you can be more transparent in those rankings and and you can be more accountable than an autocracy ever could. So that was kind of the main thesis of the book was well, there may be things that autocracies put out plans or they look to build social trust, kind of in ways that I think are, are okay are kind of they’re interesting, but because democracies are a kind of a superior system, any of those reforms that we look to put in place into a liberal democratic system, I think we can do better.

Gene Tunny  25:09

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  25:15

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Gene Tunny  25:44

Now back to the show. Just thinking in the States, one of the things I hear a fair bit is that there’s too much money in politics in the US. And that’s related to that was at Citizens United that decision. Do you have any thoughts on that? Is that an issue that the lobbyists have too much power to sway the the people in Congress, and they’re, you know, they’re looking for donations and all of that. So do you have any concerns over that?

Charles Dunst  26:13

Yeah, I mean, I think I definitely do have concerns about it, even if at times, it’s slightly overstated. I think maybe in the media of how much power lobbyists actually have preside over the reality is perception at one point or another. And people do think that the lobbyists do have so much power in one way around that. And something I suggested in the book is to essentially, make sure you’re being much more transparent about where the money is coming from and who it’s going to where if the Supreme Court made a ruling, clearly the money is going to keep flowing. There’s no way around that at the moment. But what a government can do, what the US government can do is create a really accessible online database that very clearly demonstrates, well, where’s the money going? Who is it going to, and there are efforts to do that. But you know, the current system is so not user friendly, it’s so difficult to go online and actually look at who’s donated to who, there’s certainly some kind of dark money that doesn’t come that doesn’t isn’t clearly registered. And I think it would be very helpful just to have this transparency, it’s a way to kind of mitigate the problem. Because if you’re a politician running for Senate or running for Congress, and you know that every donation you accept from they come from a big corporation, or every lobbyist to meet with is going to be very much public, it’s going to be a very easy to access database, you might be a little bit more hesitant to take those meetings. Whereas now you do have to register those meetings, but no one knows where to find them, and no one’s actually looking. So that’s not a wholesale solution, but I think we could mitigate the problem.

Gene Tunny  27:37

Okay, a lot ask you about how do we think about and how do we deal with authoritarian countries? So at the moment, the major ones are China and Russia? I mean, obviously, we’ve cut off a lot of ties with Russia due to their invasion of Ukraine. But what about China? I mean, in the last five years, there’s this new concern about China as a strategic threat. And they’re increasingly calls to decouple to. I mean, there are some rather extreme proposals out there, almost trying to cut ourselves off from China and not trade with China. Which, you know, in Australia, we’ve actually had some retaliation from China. And that’s affected some of our exports. But I mean, China has been a major destination for our exports. So that would be very difficult for us. How do you think about that? How should we engage with these authoritarian regimes in the future?

Charles Dunst  28:38

Well, I think it’s important not to, of course, lump them all together, where I think approaching China is very different. We’re approaching Russia at the moment, where certainly, I’m in favour of the broad sanctions policy against Russia saying, Well, this is a country that invaded its neighbour, I don’t know if there’s anything wrong with setting this precedent of Oh, you don’t get to evade your damper. I just kind of continued business as usual, at least with with the broader West. When it comes to China. I think the question is, how do you compete responsibly? I don’t think the idea of complete decoupling is, is really workable, if you’re the United States, if you’re the United Kingdom, if you’re Australia, because the economies are too intertwined. I mean, this is not the Soviet Union, where basically our economy didn’t really touch theirs. Whereas every basically every field is these overlap again, do I think there’s anything problematic about selling a refrigerator to China? or selling shoes to Chinese consumers? No, I that’s not a concern for me. But I do think there was a question of, well, where do you draw the line? What kind of tech is to sell what kind of goods are too sensitive to be sold to to a one party state in China, in which basically, the government does kind of oversee everything and it does seem like if you are selling some type of technology to a private firm, you could never be just how sure how private that firm actually is. And if the government could step in and kind of take that tech in one way or another. Every country is going to define a different only, but basically do I think there’s anything wrong with not selling military applicable semiconductor technology to China? No, I think that’s fine. I think basically recognising that this is a country helmed by a government that does not, frankly seem super interested in positive ties with the West. And that, of course, has been more aggressive in the broader Indo Pacific in recent years. Think about the South China Sea, you think about the drills around Taiwan, I think it makes a lot of sense to deny them certain technology. But the broad way I think about relationships with autocratic countries is just to make sure they’re in our own benefit. Where when you think about us ties with Vietnam, the current state of us Vietnam ties seemed very much in America’s interest. You know, you get a trade partner, you get, broadly a security partner, we raised human rights with them privately. I think we’ve successfully made some advancements on LGBT rights in Vietnam has been broadly kind of a success. Certainly Vietnam is not just liberal society, or is Liberal government as we would like them to be. But we don’t have the luxury of saying we’re only going to engage democracies, there are more autocracies than there are democracies today. So we do have to engage Vietnam, we do have to engage Saudi Arabia, we do have to engage Oman, and we do have to engage Rwanda. It’s just making sure that those relationships are in our benefit, and that we’re using them in our national interest, whether that’s trade, whether that’s security, and making sure that we’re not, we’re not giving the autocrats too much credit, if that makes sense. So we’re not overstating well, how important is the US, the US Saudi relationship, when I don’t think we should just sweep, sweep things under the rug, because we think that relationship is important. I think it requires a real reevaluation of well, how important is that relationship? Actually? How much how much do we actually care and it’s gonna be different for every country, it’s gonna be different. Of course, Australia has a different relationship with Vietnam, United States does, but I think that my broad sentiment is, it’s not reasonable to cut off all ties with autocracies, but it is about managing those relationships carefully.

Gene Tunny  31:59

Okay, Rod, I’ve got two more questions, if that’s okay, I’ve got a question about PPP, public private partnerships. One thing I really liked about your book is, is your openness to the potential gains from these arrangements, these cooperative arrangements between public and private sectors? Could you tell us a bit about PPS, please, Charles, and what you see is their merits?

Charles Dunst  32:27

Sure, I mean, I’m in favour of public private partnerships, only when the goals match at the beginning. And one example I talked about here very frequently, is operation warp speed in the United States, which was the development of the COVID 19 vaccines. And basically, the government gave out a pot of money to companies to develop the current vaccines as quickly as possible. And certainly, while some of these companies share, they probably had a profit motive very well. So thinking, well, this is a terrible pandemic, we need to get our vaccines out as soon as possible. And that was the government goal as well. So clearly, the goals were very meshed from the beginning. And even if the companies in the end are going to make profit, the goal was not necessarily on profit, the goal was then actually delivering. Whereas some of the examples that I’ve other people have raised, particularly when I talked to British media, as well, our our PPVs haven’t necessarily worked as well. And I would argue, well, that’s because the goals weren’t aligned from the beginning, where the government wondered one thing, and the other party was much more focused on profit than anything else. So making sure that you’re partnering with responsible private sector actors, he’s really key. I mean, he should not just be throwing money at private sector firms hoping they’re going to deliver, it needs to be a 5050 partnership goals need to be aligned. But when PPP is work at their best level, I think they serve to actually boost trust in democratic governments, because poll after poll shows that and I showed it for last three or four years, that the private sector is actually more trusted than the government. And that’s true across Europe. It’s true in the United States are basically people look at their governments think of them as sclerotic, and think of them as old and not super effective. When they look at Tim Cook and Apple, they look at the company at Tim Cook, they look at something someone like Pfizer and say this, these are great look at these great innovations they’re doing, look at the iPhone, look at the vaccines, look at the pharmaceuticals. And people do tend to trust the private sector more. And I think governments would be wise to leverage that trust in a way that also helps the government’s deliver. And I think it’s just a question of making sure you’re doing that in a responsible way. And I think there’s this irony, I raised it all the time. That’s the study from a few years ago showing that in the United States, when Americans get good public service, they actually believe that it’s coming from the private sector, because the idea of effective government service is like incomprehensible. Because our system doesn’t work. So well at times that people think, well, of course, you know, I got this, I got this great assistance, I got this homeowners assistance, or I got this vaccine, it must be from the private sector, even when it’s actually from the government. So it’s just one way of basically saying well, publicising, that cooperation, I think can actually help boost trust.

Gene Tunny  34:59

Yeah. Yeah. Okay. And you mentioned that there have been failures of P PPS in Britain that have meant that people in Britain have been negative about them. And we’ve had some notable ones here in Australia too. But what I found interesting is you noted one of the great successes or most successful PPS in the book. So I’ll, I’ll put a link in the show notes to your book, Australia’s upgraded the Ballena bypass highway, completed in 1996, along with four private firms, as in conjunction with the government seven months ahead of schedule and for USD 100 million less than estimated. So that’s an impressive example. And so one I’ll probably use in the future. So yeah, good, good work finding that one. Excellent, Rado? So my final question, Charles is, I mean, how do you think this will will actually work? I mean, how, in what ways will the dictators be defeated? If if we in the democratic countries govern ourselves better? What’s the mechanism here?

Charles Dunst  35:58

I think the mechanism works twofold. Where primarily, if democracies are working better at home, you are less likely to elect people like Viktor Orban, or like Donald Trump, or like ei or Bolsonaro, who come to power through liberal democratic means, and then don’t necessarily govern in a liberal, democratic way, who have little concern, I would argue, in most cases for those liberal institutions, particularly in thinking about Orban Bolsonaro, where there’s no sense of respect for freedom of the press, there’s an effort to stack the judiciary, these are all things that can hollow out democracies from the inside. My argument is that if democracies are delivering better on economic issues on issues like the social safety net, and issues like infrastructure, if people feel optimistic about their future, which many people in democracies Do Not at the moment, they are less likely to vote for reactionary people like these that can erode democracy internally. So that is way one to defeat the dictators at home. And point to is only if you can defeat the dictators at home and prevent that autocratic impulse from taking root at home. Only then can you turn around and actually say, well look at how good we are, as a model. Look at how the United States is outperforming China or look at how Australia is outperforming Singapore, and more people in the Vietnams of the world, or people in I don’t know in a rock or in Egypt might actually look and say, well, we would like to be a democratic system. Even if we don’t agree the United States of the West, then everything. We see how well Australia is functioning, or we see how well Taiwan is functioning. Were looking at how sclerotic Saudi Arabia is their kind of messy, messy internal politics, that corruption scandals, we don’t want that. But it’s making sure that we are working well enough to fend off the autocratic impulse, and simply just that we can be the world’s model once again. Gotcha.

Gene Tunny  37:45

Okay. So showing that you’re the world’s model. Okay. Yeah. Any final thoughts? Charles, before we wrap up? Yeah,

Charles Dunst  37:55

the one thing I would just say briefly is one thing is the line, I keep using it over and over again. But I think it’s important is the lack of faith in democracy right now is really troubling to me. But something I want to say that’s positive is faith in democracy is not necessarily the problem. We all should believe in democracy and work for it. The problem is faith and democracy is automatic functioning, and the sense that everything will work without our engagement. I think the key message of the book for citizens for people who are not lawmakers, not politicians, not in government is just make sure we stay engaged. And we keep pressuring our politicians to actually make democracy work for us.

Gene Tunny  38:31

Got you. And that’s through, I suppose social media or in through, I guess, you’re engaging in the conversation? Is that what you mean?

Charles Dunst  38:40

engaging in the conversation, making sure you don’t miss elections, engaging in your local governance? I mean, it can be on a school board in the United States, you can be in your city council, you can all these local thought their town council, I think far too often we look at our messy politics or messy governments, they just write it off and stop being engaged. But I think engagement is really key to making anything work down the line.

Gene Tunny  39:01

Okay, very good. I guess one more thing, just looking back on my notes. You mentioned one of the big issues with inequality was inequality, I should ask before we go, I mean, do you have any thoughts on how that can be addressed? Or use proposing specific measures to address inequality in your book?

Charles Dunst  39:17

Yeah, one of the things I talked about was inequality in terms of education. And the notion that, basically, I think far too many democratic governments are not starting or not looking at the unequal starting points of children. And basically saying, Well, you know, once you get to university, it’s meritocratic. Its meritocratic when you get into your universities. But of course, if you are born into a lower income household, you’re less likely to have certain academic achievements that gets you into one of those schools. And if you don’t get into one of those top universities, you’re less likely to earn as much money as those who do. And I think there’s this increased need to actually look at starting points and say, Well, how do we make sure that we are doing all we can to let the talented children from lower income households actually rise? Is to top tier universities. And that’s how I think about inequality. There are certainly broader economic reforms that other folks have proposed. But I think about inequality in terms of the lack of meritocracy in the way that basically it does seem like we’re perpetuating kind of an elite with the same people and go to the same schools, their kids go to the same schools, because they have a nice starting point. But I want to make sure that we’re kind of giving more believing and more active inequality of opportunity.

Gene Tunny  40:28

Yeah, and there’s probably another episode in that, talking about how we improve that. But yeah, just wanted to check on that. Because that’s, that’s clearly one of the big issues. Yeah, but I hear about the dream hoarders Is that what you call them in the States? Of hurt? That’s one of the terms that’s been applied to your just that self perpetuating elite or whatever? Have you referred to it? So yeah,

Charles Dunst  40:52

I’ve never heard that one. But that’s a good one. Yeah,

Gene Tunny  40:54

I think that’s what yeah, I’m trying to remember who wrote that book. I’ll put a link in the show notes. So yes, it seemed a bit overly negative to me. But, but I think the data do show that the US is not as there’s not as much social mobility, as people might think, and not as much intergenerational mobility as you might like, relative to some other countries. So I think that’s an uneven in Australia, and in Britain, it’s not as high as as we would hope so. Absolutely. Good point. Okay, Charles Dance from the Asia group. Thanks so much for your time. I really appreciate it. And good luck with the book. I’m sure it will go. Well, I think the message is an important one. And I really enjoyed reading it. So thanks so much. Thank you. Okay, I hope you found that informative and enjoyable. I think Charles is someone we’ll be hearing a lot more from in future years, so I’m very glad I could interview him about his first book. I must say I was impressed by Charles’s passionate advocacy for democracy, and his call for existing democracies to provide better examples to other countries. I hope that Charles is right that we can inspire movements for freedom in non democracies by improving our democracies at home. Maybe that’s a vain hope, but at the very least our own countries will be better run. In our conversation, Charles and I touched on a few ways that democracies could be strengthened. I liked how he talked about improving our education system so that all children get the best start in life. I found a link to the book on the dream hoarders that I was reminded of while chatting with Charles and I’ll include it in the show notes. I think it’s worth having a look at. As always, feel free to email me at contact at economics explore.com. I’d love to hear from you. Thanks for listening. rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

43:46

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Credits

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Categories
Podcast episode

ROI of education: how economists estimate it + US economic update – EP152

Do you get a return on investment if you get a university or college degree? Does the taxpayer get an ROI for any subsidies provided? Economics Explored host Gene Tunny discusses how economists crunch the numbers on the ROI of education with his colleague Arturo Espinoza. Gene also gives an update on the US economy, covering the strong jobs growth figure for July 2022 among other indicators.  

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

Links relevant to the conversation:

Macrobond charts and commentary on the US economy (PDF)

Sheepskin effect (Wikipedia)

Estimating the return to schooling using the Mincer equation by Harry Anthony Patrinos, World Bank and Georgetown University (PDF)

Evaluating the Return on Investment in Higher Education: An Assessment of Individual- and State-Level Returns by Kristin Blagg and Erica Blom, Urban Institute

Reassessing the College Wage Premium Payoff by Jack Salmon, Mercatus Center, George Mason University

Rich Roll’s podcast

Graduate Winners: Assessing the public and private benefits of higher education by Andrew Norton

Estimating the public and private benefits of higher education report from Deloitte Access Economics

Median weekly hours data by qualification for Australia (Australian Bureau of Statistics)

Transcript: ROI of education: how economists estimate it + US economic update – EP152

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:01

Coming up on Economics Explored.

Arturo Espinoza Bocangel  00:04

The mincer equation suggests that each additional year of education produces a private rate of return to schooling about five to 8% per year.

Gene Tunny  00:17

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist based in Brisbane, Australia, and I’m a former Australian Treasury official. 

This is episode 152 on  the Return on Investment in Education. Joining me is my Adept Economics colleague, Arturo Espinosa. Arturo, good to be chatting with you. 

Arturo Espinoza Bocangel  0_00:00:41_

Hey, Gene, it’s my pleasure to be here. 

Gene Tunny  0_00:00:44_

Excellent, Arturo. So, today, what I’d like to talk about is the return on investment in education. So, whether it makes sense for people or rather the typical person to go to university or college. So, we’re talking about the typical person rather than a Bill Gates or Steve Jobs who dropped out of a top university and ended up founding a billion-dollar company, despite that. There are always going to be exceptional individuals who can thrive even if they don’t finish university. So, we’re not necessarily talking about them. Okay. 

We’re talking about the relationship between education and earnings and GDP at that population, or the whole economy level or for the average rather than specific individuals. And this is based on a question that came from one of my listeners – Dave, and he asked what I thought about this issue. Can economists demonstrate whether there is a return on investment in education? So, I thought this would be a good topic to cover on the show. So, if you’re happy to chat about it, we can get stuck into that a bit later. Okay. 

The first thing I want to do though, is I just want to go over this issue of what’s happening in the US again. So, I published an episode last week on US recession; is the US in recession or not? There’s a big debate about it. And the funny thing was, just as I was about to publish it, the Bureau, I think it was Bureau of Labor statistics released the new jobs figures, and they were strong. And that has really changed people’s views on how the US economy is going. It lends support to the view that the US is probably not in a recession at the moment. So, that came out just before I published it. And I thought, Okay, well, I’ll publish it, I’ve got the episode ready. I’ll cover this in the next episode, because it’s an important update. 

And this new report showed that; and this is according to the Guardian, and their quote in the actual data. So, it’s right. The US added 528,000 jobs in July, the jobs market return to pre pandemic levels, the US has now added 22 million jobs since reaching a low in April 2020. Unemployment rate dipped to three and a half percent. Okay. So, this has meant that the talk about the US recession that’s died down a bit, because this jobs report was so good. And just today, we’ve learned about new inflation data in the US that so it looks like inflation on a monthly basis is much lower. So, that’s suggesting to some economists that maybe the Fed doesn’t have to hike rates as much as was previously expected. And therefore, there may be less risk of the US going into a recession because of what the Federal Reserve’s doing. Of course, these are month monthly data. And I one thing I always caution about monthly data is you don’t want to read too much into month-to-month changes, because there could be statistical error; statistical noise in the data. And you can be misled by that. So, you want to look at things over, over many more months than that. So, that’s the one thing I’d say about that. 

It just goes to show how difficult it is to forecast or even to understand even to nowcast, even to understand where the economy is at the moment. And there’s a big debate still about what’s happening in the US. I received a great note from the macro data service that we subscribe to here, in Adept Economics. They said that’s macro bond. And they’ve looked at a range of data they sent out a great note on this. I’ll put a link in the show notes. And they’ve looked at the various indicators that the NBER, the National Bureau of Economic Research; what it looks at when it calls the business cycle in the state It’s and it’s not just GDP. It’s things like well, nonfarm payroll employment, personal consumption expenditures, real industrial production, real manufacturing and trade sales, real personal income, excluding current transfer receipts. And there’s a chart that they have there that shows that if you compare those indicators; these six major indicators with where they were earlier in the year, in January, most of them are still above where they were, except for real manufacturing, and trade sales in this chart here. So, I’ll put that chart in the show notes or a link to that so, you can see that. 

But what that’s telling us is that some indicators are suggesting there could be a downturn, others aren’t necessarily suggesting that. And the jobs market data, as we noted before, are incredibly strong. On the jobs market, on the labour market, I do have to note that the very high rates of job openings that they’ve had, so the jobs that are available, that is starting to come off from the very high level. So, there’s a chart that macro bond has produced from the job openings and labour turnover survey, and we had numbers up around 12 million, so 12 million vacancies, 12 million vacant jobs, and that’s fallen to below 11 million now, if I’m reading that chart correctly. Still, much higher than it was pre pandemic. So, it looks like there’s still very strong labour demand in the States, but it is coming off. 

Okay, so what do we make of this? It’s all a bit of a confusing picture. It’s probably too soon to tell whether the US is in recession or will go into recession. That said, I think Janet Yellen, the Treasury Secretary did make a risky call when she was so adamant that the US isn’t in one at the moment, because there’s always a chance that the economy could react badly or households could really react badly to these interest rate increases to try to control inflation, and then you do end up in a downturn. And then, months later, Janet Yellen is having to apologise for that, because she spoke too soon. 

Okay, so the main topic is going to be return on investment in education. So, we’ll get on to that now. And there are some big questions around this issue of the return on investment in education. So, what are those big questions? Okay. One, does it make sense for individuals? So, for people to go to college or university. 

Okay, now, there’s a general expectation or a general view that, you’ve got to finish high school, right? I think all the data suggests, you’ve got to finish high school, there are big returns to finishing high school. If you don’t finish high school, then your career prospects are limited, you’re going to end up in minimum wage jobs for the rest of your life. So, we know that completing high school is a positive thing. And therefore, state governments and school boards around the world fund secondary education. 

There’s a bit of a question now about well, what about tertiary education? And does it make sense for individuals to go to the tertiary education? And this is a question that economists are well placed to answer because it’s a question about the return on investment, isn’t it, Arturo? It’s a question of what you’re doing is there’s a tradeoff there. I mean, you’re sacrificing earnings that you could make today; you’re forgoing some earnings by going to college or university, rather than going straight into the workforce or working full time, you could have a part time job, of course, you’re spending all of this time. So, there’s an opportunity, cost of your time, three or four years in university or even more if you want to be a doctor, and then that’s in the hope of having higher earnings over your lifetime. So, you’ve got to think about well, does that make sense as an investment? Does it makes sense to make that investment? Now, those foregone earnings, any tuition fees, you may have to pay? Or loans you have to take out and then pay back? Do you get compensated for that through your lifetime from higher earnings? I mean, the general answer, the broad answer is yes. I mean, if you look at the data, people with higher education degrees, earn more on average than those without; we know that. We’ll go over some figures a bit later in this episode. We’ll look at some of the studies. So, we know that occurs, the question is, does that compensate you enough for the cost of the tuition and also the foregone earnings? So that’s the basic economic question, isn’t it?

Arturo Espinoza Bocangel  10:11

Yes, definitely. Yes. Individually, you will face that important decision between, okay, if I study one additional year, how much I will receive as a return. For example, in my case, I study Economics in Peru, then I was there around five years, and then I decided to study overseas. And I choose to study Mastering Economics and Public Policy here in Australia, because at that moment, I expected to receive or a higher return for those years of education. That was a purely economic decision. So, that’s why I’m here now in Australia after finishing my Masters, and now I am working with you.

Gene Tunny  11:10

Very good. Yes, yes. I think what you find too with students who come from overseas to either Australia or to United States or UK, I mean, there’s also a benefit from coming to an economy with higher productivity on average or higher earnings. So, there’s certainly a benefit there, that helps out too, and also, there can be benefits to some people, because if you get permanent residency or citizenship in a country, that can be a great benefit to people to, of course. 

Now, we’ve been talking about financial benefits. One thing I should acknowledge, because I know if you’re, you know, some people might bring it up in the audience, because it is a point that does get made from time to time. It’s this point that they are going to be non-financial returns to tertiary education. Okay. I mean, university is one of the best, the some of the best years of your life, really. I mean, if you get involved in various activities at uni., you make great friends. I mean, you could join a debating society, various other clubs, you make friends for life, interesting people, a great conversation. So, there are all of these non-pecuniary returns as well. But we’re not factoring those into this discussion, because you can’t really measure those. 

So, we’re talking about does it make sense for individuals to go to college? And yes, economists can attempt to estimate this, given the available data. And the way they do this is through these mincer earnings regressions. Now, I’m going to ask you about those a bit later, because you’ve been looking at that. And that’s after Jacob Mensa, who is a Professor of Economics at Columbia University in New York City. The studies of the returns to education, they’ve been helped out a lot by just the great data sets we have now in many countries. However, in Australia, we have this Hilda survey, this household income and labor dynamics Australia survey, which is a longitudinal survey. So, it’s panel data, you’re tracking individuals over time. In the US, there’s the Panel Study of Income Dynamics, which is the gold standard panel data, set or longitudinal data set, and that’s what the Hilda was trying to replicate.

So, one big question is does it make sense for individuals to go to college? And then, I think the other big question is, does it make sense for the government to subsidize college investment? University investment, to subsidize tuition to an extent. And what we find is that, I would say in most of the OECD economies, or in most of the advanced economies, there are very substantial subsidies to higher education in Europe and the UK, in Australia, although it’s a mixture here. I mean, we’ve got an income contingent loan scheme, which was called HECS I think now it’s called help, but it’s the higher education loans program whereby there’s some subsidy for your tuition, but the rest of it you effectively borrow from the government and you have to pay it back through the tax system. So, this HECS/help system okay. You’ve heard of that, haven’t you?

Arturo Espinoza Bocangel  14:36

Yes, I heard something about it, yeah.

Gene Tunny  14:39

So, in the 70s, the government at the time, the Whitlam government, I think you helped me out on a presentation we were looking at that; just the changes that came in during that government in the 70s. It made university education free, and that led to the Commonwealth would just subsidize the whole cost of course. And that led to a big increase in tertiary education. But by the late 80s, it was clear that that was very expensive, and that they had to introduce this HEC scheme as Higher Education Contribution Scheme where people would contribute when their income got over a certain level. So, it’s an income contingent loan. And this was something that was designed by Bruce Chapman who was an economist today. 

Initially, the amount of HECS you had to repay was pretty low, I hardly had to pay anything back when I went through in the 90s. But over the years, it’s become a bit more substantial. But still, there is a very generous subsidy from the Australian Government to higher education here in Australia. I think there’s some support in the states in the US, depending on what sort of college you go to. There are state colleges, there’s state university system saying California, there’re student loans you can get, there are scholarships; I think there are more private scholarships in the US than there are here in Australia. But generally, there’s less public support, less public subsidy for university or college education in the US than there is an Australia. We’re not as generous here in Australia as they are in the UK, or in the continental Europe, in France or Germany.

Arturo Espinoza Bocangel  16:28

What about those developing countries, like Peru, and Chile? I know that those ones are still providing scholarships to study overseas. So, they tend to promote national student to study around the world in order to enhance their knowledge and then come back.

Gene Tunny  16:56

Yeah, yes. Yeah. I’m not an expert on that, Arturo but yeah, if actually, we probably should look at what’s happening in some of those other countries, in Latin America sometime that would be interesting. Okay. 

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  17:16

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. 

Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  17:45

Now back to the show. 

So, they’re the big question. Are there returns to individuals to go to college? Does it make sense for the government to subsidize college? And look, there’s another, there is another question that sometimes comes up, but it’s not one we’re going to explore in great detail on this episode. Have you heard of this sheepskin effect?

Arturo Espinoza Bocangel  18:12

Gene, more or less, yes, yeah.

Gene Tunny  18:14

So there’s this idea; there’s this effect called the sheepskin effect. It’s named after the fact that, I think once upon a time, university degrees, so if you got it from Oxford, or Cambridge, or Harvard or Yale back in the, the 18th century, or whenever or 19th century, your degree was on sheepskin. So, I think that’s where it comes from. But there are some economists who have speculated that if you look at the average earnings of people who complete year 12, or finish school, or finish a university degree, versus those people who nearly finished it or similarly experienced or similarly clever, or whatever as the people who actually did get the degree or the diploma than the people who got the degree or the diploma, get an extra benefit, it looks like they get a boost in their earnings relative to those people who look very similar other than the fact that they just didn’t get a qualification. 

So, there’s this view that, well, there’s this sheepskin effect. And some economists have speculated that that means that a lot of education is just sorting, it’s just figuring out who are the highly productive people that doesn’t actually confer much of a productivity benefit itself. All it is, is it’s signaling, it’s signaling that these people are high quality individuals. And that’s what the benefit of that education is. Yeah, I mean, one of the prominent economists associated with that view is Brian Kaplan. He wrote a book – The Case Against Education for Princeton University Press he’s associated with, might be George Mason, I better get that right. I’ll check and put it in the show notes, but he’s often on Ross Roberts’s podcast – Economics, or Econ Talk, I mean. He’s quite prominent in making in expressing that view. 

I’ll put some links regarding that sheepskin effect. I’d like to think that a lot of the benefit from education is certainly it is from lifting your productivity or making you think critically, I mean, as a former university teacher, and as you are, I mean, you’re doing some tutoring there, you would like to think that most of the benefit that you see in terms of higher earnings of university graduates is related in some way to what they learn or the development of critical thinking skills at university. 

Okay. So, just note that as a bit of a caveat or a qualification on what we’re talking about today, and maybe we’ll come back and look at it in a future episode. Any of these topics, Arturo, anything in economics; there’s just so much you could talk about, there’s so many studies, so many different perspectives, we just have to limit it to what we’re looking at today. 

Okay, so you found an interesting study on the return on investment in education. It’s a Cross Country Study, is it? Can you tell us about that. 

Arturo Espinoza Bocangel  21:25

It’s a very interesting study, and the author is Harry Anthony Patrinos, he’s an advisor from the World Bank. And he also specialized in the Economics of Education, particularly the return to school in school based management, demand side financing and public-private partnerships. So, his study, which is related to the return to school in using the mincer equation. Basically, he highlights that the mincer equation suggests that each additional year of education produces a private rate of return to schooling, about 5 to 8% per year.

Gene Tunny  22:11

That’s a real rate of return, is it? And so, that would mean, it’s a relatively good investment. If you think about what’s the cost of borrowing or what’s the opportunity costs.

Arturo Espinoza Bocangel  22:24

With the current fee for example of inflation, that is not going to be a good value. 

Gene Tunny  22:32

But is that a real return? I think it wouldn’t it be.

Arturo Espinoza Bocangel  22:34

It could be, but I’m not sure.

Gene Tunny  22:37

Okay, I will check that and put it in the show notes. How does he interpret it? Does he interpret that as a positive? Is he saying that it suggests that education does yield a good return?

Arturo Espinoza Bocangel  22:49

He’s positive. That is the main message that another important findings related around the world. So, in general terms, the returns to tertiary education are the highest. So, that mean that people who will study university level or trying to get a university degree, they will get a higher rate of return.

Gene Tunny  23:19

So, there are big gains from going to university then. So, he’s looked at all around the world, has he?

Arturo Espinoza Bocangel  23:26

Yes. it’s like considering most of the countries. Yep.

Gene Tunny  23:33

And has he just reviewed existing studies? Or has he done his own data analysis?

Arturo Espinoza Bocangel  23:38

It’s he’s own analysis. 

Gene Tunny  23:41

Okay. Oh good. Well, I’ll put a link to that in the show notes so people can check that out. Generally, that makes sense, right? I mean, there are various studies that show there is a positive and a reasonably good return on investment, private return on investment for education for university or college education. And you talked about the mincer equation. So, what that’s trying to do, you’ve got this statistical equation, econometric equation where you’re getting data on earnings of individuals, is that right? And then, you’re looking at the different characteristics of those individuals, their sex, their age, their years of experience; whether they’ve got a qualification on all the things that you think could influence their earnings, and then you’re testing whether the contribution or whether there’s a statistically significant relationship between having a degree and your earnings and what’s that contribution, what’s the uplift to earnings from that degree, is that right?

Arturo Espinoza Bocangel  24:47

Yes, that’s right. That means your equation estimate the average impact on one additional year of education on the wage. Yeah.

Gene Tunny  24:56

Okay. So, then you could also use to determine whether; can you use it to determine whether a qualification, university education helps gives you an uplift?

Arturo Espinoza Bocangel  25:10

Gerry’s methodology when you use categorical variables.

Gene Tunny  25:16

Okay, categorical variable, okay, good.. So, you could you could determine that. I mean, there are a wide variety of ways to do this; many ways to skin a cat, probably many ways to specify the variables in a mincer earnings regression. Okay, so that’s that study that you mentioned. We’ll put a link in the show notes to that. 

I’ve had a look at some studies from the States and from Australia. And for the US, I’ve looked at this; there’s this great briefing note that’s come out of the Urban Institute. And that’s a leading think tank in Washington, DC. It’s not particularly partisan. As far as I can tell. I think they do good work. I’ve had one of their people on my show in the past. Steve Rosenthal is a tax policy expert. And we talked about all of the various tax loopholes there are in the in the US. So, this paper from the Urban Institute that I think is really good is called Evaluating the Return on Investment in Higher Education: An assessment of individual and state level returns by Christian Blag and Erica Blom. So, they’re looking at does it make sense for individuals, for private people to go to college? Does it make sense for the state government in the relevant state government in the US. I think, because state governments have a big role in the provision of the college or they’ve got their own state-based university systems. 

Here in Australia. Even the, even though the universities have been set up under state acts of parliament, typically, so there’s a University of Queensland act here in Queensland, there’d be a University of Sydney act in New South Wales. Even though that’s the case, the federal government has largely taken over university, so the funding of universities and administration of them or the policy settings for universities. 

So, what this Urban Institute study finds or rather a review, and they do do some number crunching themselves, I should note. So, they find that, for most an investment in higher education yields a substantial economic and personal return, but this investment may not pan out for some students. okay, so we’re talking about students on average, or the majority of students; some people can obviously go to uni., and you know, maybe they have some bad luck. Or maybe they study something that’s not really in demand. So, we’ll talk about that a bit later. Because we’re economists we know that supply and demand is everything, ultimately, okay. And there are big differences in returns for different fields, and also between the level of the degree. So, they go, a bachelor’s degree recipient will typically have higher earnings than an associate’s degree recipient, and a Harvard graduate will likely earn more than a graduate from a nonselective four-year school. However, the relationship between the students selected degree level major and institution can be complex, in some degree major scenarios may not pay off until later in life or ever. Right. Okay. 

Now, in that Urban Institute paper, they present some return-on-investment estimates. So, what economists call internal rate of return, which is a yield – an investment yield. So, what’s the rate of return you get on that investment? And so, they find, like, depending, and I’ll put a link to it in the show45 notes, but depending on the degree area, and depending on the level, it differs. So, business management looks pretty good. So, if you go to a private, not for profit, four year college and you do business management, you’ll get an 18% return on investment. The way to think about that is well think about, if you made an investment in the stock market, and you were getting, I don’t know, 7 or 8% or whatever, even less a year. And that’s not what you’d compare with that business management, that yield of 18%. Now, if they’ve calculated that properly, that should be a real rate of return. So, that’s a very good real rate of return, 18%.

So, business management, good stuff. I mean, we’re economists, so we’d probably fall in business management, unless we’re in social and behavioral sciences. Those rates of return are a little bit lower, humanities a bit lower too. Life sciences here are in your near calculations; they have relative well, much lower rates of return. So, 9% compared with the 18%, for business management, the worst here looks to be education at 7%. And yes, so education seems to be less lucrative than these other fields.

I’ll put the link in the show notes to that so you can check that out. 

There are various studies of the returns on investment to different fields, and it’s going to depend on your country and depends on supply and demand too. I mean, if you’re in the US, for example, and you get an IT degree, or you specialize in artificial intelligence, or whatever the latest hot thing is, or data science, and you’re probably going to get a higher return on investment, because there’s a big demand for that sort of thing at the moment.

So, the Urban Institute paper moves on to talk about the return to the state government, whether it makes sense to have subsidies for tuition. And look, they just, we don’t really know as to how to work out. There are so many things to consider. You get additional tax revenue being; one of the big gains that governments get from subsidizing higher education is that if you get people more educated, more productive, they’re going to earn more, they’re going to pay more tax. And the way that; this is particularly the case in Australia because of the progressive nature of our tax system. So, as you earn more, you go your higher tax bracket, your marginal tax rate increases. So, there’s a big benefit to government. And we’ll talk about that a bit later. 

I think, in the States, there is still a benefit to the state governments and they would be to the federal government, I think it’s probably less than what it would be in Australia. And one of the things that makes this so challenging is its tax, but it’s also the fact that the government could save money in other ways, too. There could be lower crime with if people are better educated, and then you don’t spend much on crime. There could be less spending on social services, on your transfer payments for those people. Well, we know that if you’re more educated, you’re less likely to become unemployed, you’re probably less likely to need unemployment assistance. Yes, that’s true. And you could also be healthier too. And you could save; I think there there’s some evidence that people who are better educated are healthier, in fact, I think they work out more. 

Now, once upon a time, if you had a manual job, you would be fitter and healthier than someone who didn’t. This back in, I don’t know, early 20th century or something. But what’s happened? Nowadays, if you’re more educated, you’re more likely to work as a professional, then you’re probably more likely to go to a gym and go cycling, go swimming, than someone who isn’t.

Arturo Espinoza Bocangel  33:09

I know that there’re a lot of paper related to if you’re more educated, you will consume healthy foods. 

Gene Tunny  33:19

That’s true. You’ll consume healthy foods and you probably don’t consume as many; you don’t have the unhealthy stuff. You probably don’t drink as much. You’re not having a beer after work every day. Yeah. 

Not that I’m saying everyone’s doing that, we’re talking about averages. Because there’s certainly going to be, well, people who are highly educated, successful who are alcoholics right? And who have to sort themselves out. Rich Roll was a good example of that. Rich Roll is an ultra-endurance athlete. He’s got a great podcast. And he’s in California is in Malibu, and like, he talks about how he was, he’s a Stanford Law graduate, sort of a college swimming champion. And he was a lawyer, highly successful, but just drinking too much. partying too much, and it just caught up with him and he had to have a complete change of lifestyle and, and go to Alcoholics Anonymous, his story’s incredible. So, if you’re in the audience, and you’re interested in that, I’ll yeah, I’ll put a link to Rich Roll’s podcast because he’s fascinating. Okay. 

The other thing to think about with the public return to education is spillover benefits, or the fact that if you have a more educated population, then that lifts other people up too. It’s sort of like that whole rising tide lifts all boats, or maybe that’s not the right analogy. But essentially, you If you’ve got more educated people in the workforce and other people can learn off them. And also, it can lead to greater innovation. And there are spillover benefits from innovation. So, more educated people, more creative people, they can solve problems, they can innovate and develop new products. And that provides a benefit. 

And in that Urban Institute paper, they talk about some study by Moretti. So, a 1% increase in the supply of college graduates raises the wages of high school dropouts. 1.9%. Okay. Who knows? I’d have to look closely at that study to see whether that’s plausible. There’s probably an effect is possibly it’s probably not that high. And the Urban Institute paper acknowledges that there was a paper from Smo, Lu and Angrist, 2000, that finds smaller spillover effects, I’ll have to look at how what the magnitude of that is. 

The general point is that there’s going to be some spillover benefit, or some benefit that’s wider than just the benefit to you, the benefit to the government through the taxpayers, through higher educated people paying more taxes. That’s difficult to measure, positive, but just very difficult to measure. Right. 

So, what they say, in conclusion, is that; we can’t work it out. There’s a benefit to the state governments as a benefit to the public, we can’t really work it out. So, we can’t tell you whether, on average, it’s the state gets a return on investment. 

Now, we can for Australia. There’s some good evidence in Australia that there is a return on investment, not just to the individual, but to the government as well, which I’ll go over a bit later. Before we move on to Australia. I just want to talk about the trend over time. There’s a lot of discussion about whether the college wage premium in the states, what they call the college wage premium, whether that has stagnated. And there’s a note that I’ll link to from Jack Salmon, who’s a research associate at Makeda Centre at George Mason University. So, there are some big names at George Mason people like Tyler Cowen, and he’s got a great podcast. And he’s one of those renaissance man, just talks about everything; brilliant guy,  and also the host of Macro Musings, David Beckworth is there too, he’s at Makeda center. 

And what Jack Salman writes is that he talks about; there’s been a stagnation in the college wage premium over the last 15 years. And the problem, and this is an issue for the future. So, generally, college has been a great investment in the States, but it’s becoming less, so as the cost of going to college has risen. So, what he’s saying is that this college wage premiums remained flat. So, the uplift you get in your earnings, but at the same time over that 15-year period, the cost of college has grown by more than 50%. So, the cost of college is just growing massively. And when I’m not sure why that is, but I mean, it could be, I guess it’s your input costs, isn’t it? It’s the cost of skilled labor to do the teaching. It’s the whole Bowmore cost disease thing that we know about.

Arturo Espinoza Bocangel  38:35

Inflation too.

Gene Tunny  38:37

I guess what they’re saying is that it’s higher in other sectors of the economy, it’s higher in higher education. And perhaps it’s you know, it’s sort of, I guess, the fancy facilities that they need to provide nowadays, the, the theatres and stadiums, etc. 

He’s just highlighting that, look, there’s this issue, there’s this growing issue that it could mean that for many people, it doesn’t pay off. But generally, it’s been a good investment but your individual returns may differ from the average. So, if you’re looking at making the decision whether to go to college or not, it’s got to make sense for you. 

Nowadays, I mean, I think there are a lot more there probably, a lot of opportunities to make money outside of university or college more than there were once upon a time. I mean, I’d still recommend people go to university, but when you think about all the opportunities; there are freelancing, opportunities to teach yourself via online courses, opportunities to then make money from freelancing or if you’re really good, and you’ve got a huge audience, you could become a YouTube star. I mean, that’s a very limited number of people though, so maybe that’s not a legitimate career, aspiration or strategy. 

I mean, what do you think, Arturo, do you think generally University is a good idea?

Arturo Espinoza Bocangel  40:00

I think in general education, for example, there are some technical education also. If our society may have higher population, or highly educated population in relative terms is going to bring positive externalities. Or whole the society, I’ve seen that this is always education is, I think the best option.

Gene Tunny  40:38

Right? So, you’re talking about externalities. So, these are the external benefits beyond the returns to the individual. Are you talking about things like lower crime. I mean, what other things you’re talking about? Are there no cultural improvements? I don’t know. I mean, yeah, I guess there is a view that having a more educated population does have wider benefits than just to the individual. I mean, greater and more knowledgeable society, right? More informed public debate. So, we would hope that our political leaders make that decision. 

Okay. I think that’s a good observation. So, before we wrap up, we might better cover the Australian evidence. The two studies; and I’ll link to them in the show notes, I found that are relevant to this is there’s a study by Deloitte Access Economics, and there’s one by the Grattan Institute. The Deloitte one was from 2016. And it found that on average, 52% of the observed differences in earnings between bachelor degree holders, and those without any post school education, can be attributed to qualification effects rather than demographics or innate ability. Okay, so they’re finding that, there’s some self-selection of high performing individuals into bachelor’s degrees. So, some people are more conscientious and productive are going to study, they’re going to do that anyway, rather than go into the workforce full time early. So, some of the difference in average earnings between bachelor degrees and people who don’t have them, that’s going to be due to the fact that, yeah, they’re just more conscientious or they’re harder working. 

But then, what Deloitte saying is that they’ve done some econometric analysis, and they’ve concluded that half of that gap, or that difference, half of the higher earnings is due to having the bachelor degree, so, the university education. 

Now, one thing I should have checked was, what are the data tell us about average earnings of bachelor’s versus not having any post school, I’ve got the figures over a lifetime, we’ll talk about later. But I have to look at that. But if you think about it, I mean, if you’re on minimum wage here in Australia, and that’s probably what you’d be on, if you don’t get a higher education degree, you would be getting maybe 40 to 50k, if you’re full time. Okay, so the national minimum wage is 812 60 per week. So, what does that equate to over the year? Yep, so that’s, that’s 42,255 over the year, so I was sort of in the ballpark, which is good. And if you think about it, if you get a university degree, and you graduate, and you’ll get in, if you get into a graduate position, then you’re going to be at least in that 55 to $60,000 range. And then as you progress through the career, you’ll get up to 80 or 100, or even higher. So, yeah, there’s definitely an average difference in the averages for people with bachelor’s and not with bachelors with no post school. So, I’ll put a link to ABS data on that so you can check that out. So, generally Deloitte find that it makes sense for individuals. It looks like it’s a good investment. 

So, we might talk about the final study that we’re going to consider today; it’s from 2012, but it’s a very good study. I think the findings probably still are relevant today. And it’s by Andrew Norton, who was at Grattan Institute at the time. I know Andrew quite well. He used to be at Centre for independent studies, which I’ve had a lot to do with here in Australia. And Andrew in his analysis concludes that graduates do well out of higher education. They have attractive jobs above average pay and status. They take interesting courses and enjoy student life. And that’s what I was talking about before those non-financial benefits. And then given these large benefits and with the help student loan scheme in place, that’s at higher education loan program. Most subsidies are for courses that students would take anyway. Benefits greatly outweigh the costs for most students and the minority of graduates who don’t win through higher income never pay for their degrees as a result of the help scheme. In effects, today’s tuition subsidies redistribute income toward graduates at the expense of the general public, particularly those who do not go to university. 

Okay, so the point of Andrew’s report back then was to argue that, people who go to university are doing incredibly well. So, therefore, the government should require them to contribute more of their income when they succeed later in life. And I think the government may have adjusted those repayments. I’ll have to check, but Andrew was essentially saying that back in 2012, the way that the policy settings were the rate of recovery of the money of this HELP loan, or the government wasn’t requiring you to pay enough of your education, there was there was a heavy subsidy. So, he’s saying they should cut that subsidy. That was back then. I mean, there’s still heavy subsidies now. But I haven’t seen this study replicated recently, just to see how extensive that is. There are big returns and he’s got these great data here, he’s got in one of the tables, table seven, median gross lifetime income by level of education. And let’s look at Niles; he’s got to split by male and female, it doesn’t have it for people, for everyone. So, year 12, if you get year 12, your median gross lifetime income is $1.7 million. But if you get a bachelor degree, it’s $2.8 million. So, the difference for a male between getting year 12, and a bachelor’s degree, if you get your bachelor’s degree, you earn $1.1 million; that’s Australian. So, if you’re in the States or somewhere else, just note that the Australian dollar sort of, averages around, I don’t know 75 US cents, okay. 

And for women, the difference is $800,000. That’s going to be partly because many women take time out of the workforce because they have children, and they’re the primary carer for children, or for sick or disabled relatives or elderly relatives.

So, that’s good that Andrews got those stats in there. Just bear in mind, that’s 2012. So, those numbers would be inflated now, because you’d have to adjust for inflation since then. 

One of the neat things that Andrew does is he calculates to what extent the government wins from having graduates because of their higher earnings and their higher tax paid. And this is his point that I think in Australia, because of the way our tax system works, it’s highly progressive. Then as people get higher education, they earn more, they become doctors or lawyers, or public servants, or economists or physiotherapist or whatever, then they’re paying more of their income in tax. And the government does extremely well out of that. And this is great. So, Andrew concludes it benefits. The net public financial benefits for the median graduate. Yeah, it’s strongly positive. Okay. So, for engineering, for example, you’ve got, you’ve got a net public financial benefit of $425,000. Over the lifetime, dentistry looks really good. If you’re a male dentist, you get; this is for the government net public financial benefits. So, it looks like it’s nearly 800 to 900,000 on that chart. Medicine, similarly. Law, a little bit lower, but still, you know, 700, 800,000. Commerce, bit over half a million. 

Quite substantial returns to the government. So, that’s to the government from just your medium graduate. So, if you think about, well, then there are the ones above that, and there’ll be contributing even more than that. But then as you go down the scale, the amounts decrease, but even so, even for education or nursing graduates, it’s still a $200,000 net public financial benefit. It gets lower as you go to agriculture. For males, it looks like it’s 150,000. For females, if they’ve studied agriculture, I don’t know, 50 to 100,000. Humanities, sort of around 100,000. On net still positive. 

The one field where there was a negative return and this is something that Andrew points out is performing arts. Performing arts graduates have a negative $40,000 net public financial benefit from studying. And he’s written that at least financially, the public would have been better off if the performing arts graduates never went to university. So, that is just going to reflect the types of people who study performing arts and then it’s going to be more creative people, and they’re going to be artists, and they’re going to have spills out of the workforce, or might be working in cafes, where they’re trying to get their big break. And it’s such a difficult thing to have a career in, really. I mean, it’s one of the things where, if you win, if you become Chris Hemsworth, or Margot Robbie, right, you’re going to be a superstar, you’re going to make millions of dollars, but most people who are in performing arts, they’re not in that league and so yeah. Okay, so that makes sense. 

And then, Andrew cites some studies of the rate of return, the yield, the internal rate of return on education in Australia, from people like Jeff Borland and others, and they generally show that the decision to attend university is financially sound in Andrew’s words. So, high internal rates of return on education investment, Jeff Balland found 12% for both genders. 15% for males 17% for females.

There was another study by Daly, et al. So, Daly and others, 2006: males 15% females 12%. Right. Overall, big returns from the going to university. And, you know, even though more people have gone through university in recent decades, at the same time, you’ve had this sort of skill biassed technical change, you’ve had a greater demand for universities that these graduates at the same time. So, even though in the states it looks like the college wage premium has stagnated, you still do have reasonably good returns to higher education; you do still in Australia. I think it’s probably for the average person or the average person looking at going to university, it’s sensible. It’s financially sound. I mean, I would certainly recommend it. And particularly being a former university teacher, and still having a connection with the University of Queensland and in various different ways. I’m sure you probably would too, Arturo recommend? Anything we missed anything we should cover in a future episode on return-on-investment education?

Arturo Espinoza Bocangel  52:41

Probably, the gap between female and male return? Yes. It’s quite notorious. How Australian male are receiving more or higher wages than female?

Gene Tunny  52:57

Well, we’ve covered that gender or talked about gender pay gap in previous episodes. A lot of that gap can be explained by observable characteristics or the industry or occupation that people are in. But yeah, there is still a gap that you can’t explain, and hence, possibly could be attributable to discrimination of some kind, but it’s not the bulk of the gap, it’s a few percentage points, if I remember correctly. But yes, that is an issue that we could revisit in a future episode. 

Okay, well, Arturo, if there’s nothing else, I think we better wrap up because we’ve gone for nearly an hour. And yeah, it’s been great chatting. So, thanks for joining me today.

Arturo Espinoza Bocangel  53:40

No, thank you, to you Gene for having me. 

Gene Tunny  53:43

Very good. Thanks Arturo. 

Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. 

If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com and we’ll aim to address them in a future episode. Thanks for listening. Till next week, goodbye.

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Thanks to Josh Crotts for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.auPlease consider signing up to receive our email updates and to access our e-book Top Ten Insights from Economics at www.economicsexplored.com. Also, please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.

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How I became an economist + advice for aspiring economists – EP141 transcript

Show host Gene Tunny (Left) having morning tea with Indonesian Ministry of Finance officials in October 2015, during a break from a short course on public policy processes.

In Economics Explored episode 141, host Gene Tunny discusses his career path as an economist and offers advice for aspiring economists in an interview with Francisco Garcia, host of the University of Queensland Economics Society (UQES) podcast Worldonomics.

You can listen to the episode using the embedded player below or via Google PodcastsApple PodcastsSpotify, and Stitcher, among other podcast apps. A transcript and relevant links are also available below.

Links relevant to the conversation

University of Queensland Economics Society

https://podcasts.apple.com/au/podcast/worldonomics/id1513275367

Transcript of EP141 – How I became an economist + advice for aspiring economists w/ show host Gene Tunny

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:01

Coming up on Economics Explored. And that was great because I got to spend a bit of time in Perth and Perth is a great spot. I love Cottesloe Beach, for example. And, yeah, there’s a great couple of great pubs there and there’s the Indiana tea house and it’s just magic walking along the beach in the morning.

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist based in Brisbane, Australia, and I’m a former Australian Treasury official. This is episode 141 on how I became an economist, with some advice for aspiring economists.

This episode is based on a longer conversation that I had with Francisco Garcia from the University of Queensland Economics society. The conversation was for the society’s podcast; World and omics. So, if you enjoy Economics Explored, you might like to check out the UQES podcast too, after you listen to this episode of this podcast, of course.

I really enjoyed my conversation with Francisco. And it made me realize just how important certain skills and traits have been in my career so far, these are things I’ve had to work on, and that I’m still working on. One of those traits is being helpful to others. Because A, it’s a good thing to do and B, you never know just who will help you out in your career journey. It may not be who you expect at the time.

In the show notes, you can find relevant links and details of how you can get in touch with any comments or suggestions. And if you sign up as an email subscriber on our Economicsexplored.com website, you can download a copy of my eBook, Top 10 Insights from Economics.

Now for my conversation with Francisco Garcia of the UQ Economic Society. Thanks to Francisco for a great conversation and for letting me borrow the audio for this show. Thanks also to my audio engineer, Josh Krotz for his assistance in producing this episode. I hope you enjoy it.

Francisco Garcia  02:14

Hi, everyone. Welcome to another episode of our career pathway series. Today we’re joined by Gene Tunny, Director of Adept Economics. Gene, could you introduce yourself?

Gene Tunny  02:28

Hi, Francisco and if you’re in the audience, glad to have you with us. My name is Gene Tunny. I’m the director of Adept Economics. That’s a consultancy firm. We specialize in economic modelling, economic analysis, lots of cost benefit analysis, economic impact studies. And we’re based in Brisbane, Australia, although we work across Australia, we’ve done some work internationally too.

Francisco Garcia  02:55

Amazing. Thank you so much, Gene. We usually in our podcasts, we start with a fun question. So, Gene, if you were an animal, what animal would you be?

Gene Tunny  03:07

I think I’d be a tiger. Yeah, for sure. Just because, yeah, I guess I like the masculinity and the aggressiveness of the tiger. So, either a tiger or a lion. Yes, for sure.

Francisco Garcia  03:24

Oh, that’s amazing. That’s really good. Yeah. Fantastic. So, Jane, let’s start about your experience at UQ. So, what motivated you to study Economics?

Gene Tunny  03:41

Well, we have to go back a fair way. When I think about that, what motivated me to study Economics? So growing up in the 1980s, I don’t know if you’re familiar with Australia’s economic history, but we had a lot of economic challenges in the 80s. And we had a treasurer of Paul Keating, who was probably the most prominent treasurer we’ve had in the last several decades and in terms of getting out in the media and talking about economic issues. And I suppose, because there were all these economic challenges. So, it was obvious, perhaps, that we’re going to hear more from the treasurer, but Economics was always in the news in the 80s.

First, there was the flooding of the dollar in 1983. And then, there were, well, we had all these issues; with well, there was still some inflation, high unemployment as a legacy of the recession in 1983, we had what was seen at the time as a balance of payments crisis, we started having these big current account deficits, and then we had the dollar depreciated. And there were just all of this news about the economy and all of this discussion about what has to be done and there was talk about Australia becoming the Banana Republic, there was an infamous interview that the treasurer of the Australian treasurer, Paul Keating gave with John Laws, probably about 85 or 86. When he says if we don’t sort this out, we’ll end up as a Banana Republic by which he meant that we wouldn’t be a nation with a higher standard of living, we would end up at a lower level of economic development with perpetual political crises, unstable governments, and all the things you associated with that high budget deficits, high inflation, that sort of thing. And it really, captivated people; there was a lot of interest in economic issues, a lot of concern about the economy, and that motivated, well, that led to support for a lot of change. And so, there were things that the government of the day did cutting tariffs, and also, there was private there was privatizations of, of a government owned bank, the Commonwealth Bank; Commonwealth Bank used to be owned by the government, eventually, well, I think it was the next government how government had sold off Telstra; various micro economic reforms.

And this stuff was always in the news. When I was younger, this is going to sound a bit dorky. But I remember I used to watch business Sunday, when I was at school, and people like Terry McCrann, and who else was on it, some other prominent commentators at the time. And so, I just grew up absorbing this stuff and being interested in economic issues.

And so, I did study Economics in high school, but, it wasn’t really a major, I didn’t think of as a career path. I just did it because I was interested in the issues. What I did want to do, I did want to study law, I wanted to become a lawyer. Just because law was seen as an occupation, or something you did, if you were an academic high achiever. It was seen as a high-status profession. And so, I wanted to do law, so, I enrolled in law at UQ, and had to choose another degree because the double degrees were very popular at the time. And I had thought about either commerce or; I think I was initially thinking about commerce, that’s right. And nothing against accounting, I think accounting is important. I just thought based on what I was interested, I’d probably enjoy Economics more.

I wasn’t thinking of being an economist or having a career as an economist at the time, I was probably more interested in studying law; in becoming a lawyer, but I thought I Economics would be a good thing to pair it with.

So, that’s sort of how I ended up studying Economics that had to do with growing up with this stuff. Australia, having had that experience in the 1980s, all of those economic challenges, it’d been talked about within the community; it’s on the news, it’s on the radio, even, you know, ordinary people in the community are talking about this stuff more so than they are today, I think. So, it’s just generally fascinated by it. And I’ve been fascinated with Economics ever since. And so that’s why, it probably makes sense that I have gone down this route.

Francisco Garcia  08:28

Well, that’s amazing. Yeah, that’s really interesting. And so, I think you started then, law and Economics. So how was your experience at UQ?

Gene Tunny  08:42

I think it was excellent. Despite the fact that in the 90s, when I went UQ, it was a bit rundown. Now you go to UQ, it’s just beautiful. And you’ve got all these beautiful new buildings, and everything’s well maintained.

When I went in the 90s, In the early 90s, it was this period after there’ve been some reforms to the system, there was this dark analyzation; there was an expansion of the number of universities in Australia, and I think that meant less money for existing unis such as UQ.

UQ just didn’t seem to have the money to maintain the facilities. I remember that old physiology lecture theatre was just so rundown. So was engineering. But despite that, I shouldn’t be saying that. I’m just remembering what it was like back then. The facilities weren’t great. But what was great was just the environment and coming from high school where you just, I mean, you have to learn all of these formulae and you’re just getting drilled all the time, just having tests all the time and you have to turn up at this time for this class; it was just all very, what’s the word, regimental or authoritarian and uni was less so. I mean, you still had, you really did need to go to lectures, but no one was really forcing you to go. You went because you needed to go to be able to do well on the course. You go to uni; you’d know what it’s like. I mean, you meet a diverse range of people. You don’t just meet the people that you went to school with, you meet people from a wide range of backgrounds, and in even different parts of the world. You’ve got lecturers who, some of whom are great researchers who are well renowned in their field and really challenged you. And I thought it was fabulous, you know, learning and obviously you learn new things. And, you actually learn things more quickly than at school.

So, yeah, I thought it was fantastic. I really enjoyed University. And UQ I think is a great uni. Despite the built environment at the time being pretty rundown. It’s such a beautiful campus and the Great Court is, I mean, that’s got to be one of the best. quadrangles courts of any university within Australia. It’s just such a beautiful place. And when you have the jacarandas blooming in October to signify the exam period coming on. It just looks beautiful.

Francisco Garcia  11:31

That’s so true. The Great Court, it’s amazing, surrounded by sandstone buildings. Like I haven’t seen anything like that. But I think you just ruined the Jacaranda moment for me. I never associated it with the exams period.

Gene Tunny 

Oh, haven’t you? Ah, yeah.

Francisco Garcia 

Maybe it was my first semester too. But no, I’m kidding. It’s so beautiful. Like not only at UQ but close by in St. Lucia. Right. Like, I’m impressed with how good it looks.

And Jean, you also did an honorshonors. I understand it’s in the field of Economics, not the honorshonors from law, right? Yeah. Would you mind sharing how was that year for you?

Gene Tunny  12:21

Oh, that was great. I mean, that was probably after I’d studied a few years, I’d done both law and Economics. And I think at that stage, I was leaning toward perhaps, pursuing a career in Economics, or it was an option. I thought of it as an option. And hence, I thought, well, it would be good to do honorshonors in Economics for a couple of reasons. One, because I thought I’d learn new skills. And you have to do a thesis as part of that, and so that you get good experience writing reports, doing Economic Research; I thought that was important.

Possibly what tipped me into doing it was I did have some great lectures that I think, you know; one of the things you look back on, maybe you don’t realize at the time, but you look back, and there are some lecturers who do stand out and really, challenged you, and really made Economics enjoyable, and just made you see where it could go, what the big questions were, what good economic research and analysis looks like. And in the final year, when I did third year, there were two in particular; I don’t mean to sort of denigrate any of the others I had who were excellent, but the two are, I remember, were Harry Campbell, who was a professor of Economics there. And he did micro Economics, he did a really good class in Advanced Micro Economics. And that was fabulous. And Phil Boardman who did advanced macro Economics. And they’re both exceptional. And, both Phil and Harry and other lectures I had made me think, well, maybe I should think more about Economics.

The other thing I had in the back of my mind as well, it’s another year, I can always do law, I can finish the law degree afterwards. And it would be good to have; because at the time, maybe it’s less so now. But, in the 90s, it was very competitive to get into positions inside the Reserve Bank or the Treasury or the Productivity Commission. So, the top employers of economists at the time in Australia, I mean, they’re still good places to work, but there are more avenues now. More places to apply. You really needed an honors degree to work at those organizations and ideally, a first class honors degree. So that was in the back of my mind, too. Yeah, so that’s essentially why I applied, I thought it would be a good way to expand my skills. I was inspired by some of the people who were teaching me and also I thought, well, if I did want to get a job at somewhere like Treasury or reserve bank, then it would be good to have.

Francisco Garcia  15:17

Yeah, amazing. Yeah, that definitely explains it. It’s quite a good motivation. From what I heard, I think people planning to work at least at the RBA, I think it’s kind of recommended to have at least the honors. So yeah, no, I don’t think things changed too much from that. So, after finishing your honors degree. You worked for the public sector for quite a few years, right?

Gene Tunny  15:51

Eventually. So, I started doing a PhD at UQ. I never finished it. I mean, one of my great disappointments; I never really finished that. But after that, toward the end of it, I thought I wouldn’t mind getting some applied experience. So, I applied for a job in a research unit that was run by John Mangan. I don’t know if you know, John Mangan. He was a professor at UQ. And then he ended up running the Institute of Business Economic; very good liberal economist, very practical, great person.

John was the Research Director at this labor market research unit that was set up by the BT government, which was a Queensland State government here, back in the 90s; late 90s, early 2000s. And it was dedicated to doing research into the labor market, because we still had relatively high unemployment at that time. It might have been 8 to 9%; I can’t remember the exact number. But it was higher than it really is desirable. I mean, now we’re down to around 4%, right? So you think of that it was twice what it is now.

So, they set up this research unit. And I saw that and I thought, well, that would be a good place to work. So, I applied there and ended up working there. And just yeah, really found in working in that environment. Yeah, I enjoyed it. I enjoyed being involved in a job where you could do both Economics, you could do economic analysis, and research. And also, you could have some involvement in the policy process. And so yeah, that was essentially why I went that way. I thought, well, I really do want to do applied work. And yeah, there was that opportunity. So, I took that up at the time.

Francisco Garcia  17:57

Now that’s very interesting. Yeah, I didn’t know about the beginning of the PhD. But that’s super interesting. Well, I think then, after you work there, then you work a few years in the public sector, right? I would like to know, how was it? And how did you end up at Australian Treasury?

Gene Tunny  18:21

Oh, yes. So that research unit, I should have mentioned was in a public sector agency, it was in the Department of Employment and Training. And, yeah, I worked in that department for a few years. And then what happened? It was a big department and they got broken into two and I went from the one department to the breakaway department, which was industrial relations toward the end of my time in Queens and Public Service.

I went to work for a unit called the Workers Compensation Policy unit. And that was really good. There was a lot of really good applied work there, a lot of good policy work, whereby we were making changes to the funding; the way workers compensation was funded in Queensland. I had a really good boss there, Paul Goldsborough, someone who was a mentor to me, and I mean, very good policy operator; I learned a lot from him and he was very generous to me and very important in my career progression. So, incredibly grateful to him.

I got to know Paul; this is how funny things are right? I mean, so much, is influenced by things that you think are quite random. Okay?

One thing important that happened to me was when we had the labor market research unit, we were on the sixth floor of the Neville Bonner building on William Street in Brisbane. It was by the river. Jim saw it was a Lord Mayor thought it was the ugliest building in Brisbane, I think that was a terrible thing to say. He just didn’t like the modern architecture; I quite liked it. And being by the river, it was great, because you could easily get out onto the bike path. And I used to ride in from Auchenflower at the time, and it was easy to get out to go for a run along the river; I thought it was fantastic.

But anyway, we’re on the sixth floor of this building, Neville Bonner on the same floor as the director general. And across the hall, from me; across the corridor was the Workers Compensation Policy unit at the time ran by Paul. And I just got to know Paul, just because you know, you’d run into each other. And we have a laugh together. And occasionally, I’d help because I had good analytical skills. And so, I’d often help people in his team and with their briefings when they had to calculate different numbers they needed for their briefings. Because with workers comp, there’s a lot of analysis of how claim rates have changed, and that sort of thing.

So, as a percent of the total workforce, are there fewer injuries today than there were, you know, whenever in the past, and you’d analyze it by different occupations and different regions and things like that. So, there was a bit of number crunching, I’d help them out with that from time to time. And so, I got to know Paul. And then when he needed someone to help out on this cabinet submission on the funding of Workers Compensation in Queensland, whereby we introduced an explicit levy to fund workplace health and safety. So, I ended up going over to Paul’s team Workers Compensation Policy unit, which was part of the Workplace Health and Safety Division within the Department of Industrial Relations. So, I went over there; I moved out of the labor market research unit, and for a year or so, maybe a bit longer than a year, I was doing really practical policy work with Paul and you know. I really enjoyed that and we would be briefing the minister’s office or the minister would get into Parliament House and, you know, provide briefings to the minister, it was just really stimulating; really enjoyed it; I learned a lot about practical policy-making.

Francisco Garcia  22:36

Well, that’s super interesting, and how, how interesting it is how careers play out, right? It’s just someone that you were working and, and Matt in the same floor.

Gene Tunny  22:50

Yeah. And I think those opportunities are there all the time. And I guess the lesson is, I suppose you know, be friendly, be as open as possible. And yeah, because you never know, where those opportunities can come from. And when I look back, I mean, having been opposite, Paul, was so incredibly important, because if I was on a different floor, I wouldn’t have got to know him. And then I may not have ended up working for him for that time. And then, you know, getting that experience.

Paul’s been important in other regards too. There was also a great Director General, we had Peter Henneken, who was also influential to me. Paul and Peter were good mates. And Peter was a former Commonwealth public servant. So, I learned a lot from Peter too.

But how Paul is important in my story, too, is that it was Paul who took me to the breakfast that was; it was a function of the, I think it was the Australian Institute of Public Administration, the Queensland branch, and they held a breakfast sometime in 2004. Maybe it was June or so. And the speaker was Ken Henry, who was then Secretary to the Treasury. So, this is how I ended up at Treasury.

Although I’d always had in the back of my mind; always had the idea, it would be good to work in the Treasury one day, or I’d like to sort of, work on national economic policy issues. So, when I was really young, not always look at the bank notes, or the currency notes, and you’d see on the notes that there’s the signature of the Secretary to the Treasury, along with the Governor of the Reserve Bank, and when I was young, they were all signed by either Frederic Wheeler, or John Stone who followed Fred Wheeler. And I always wondered, well, who are they and they must be important people if they get to sign the bank notes. I always had this idea that the Treasurer was an important institution and could be a good place to work.

So, Paul took me along to this breakfast in June 2004. And Ken Henry spoke, and it was the time that Treasury was doing all this work on the intergenerational report on the ageing of the population and what that meant for future GDP growth and what that meant for the future budget.

Ken Henry was incredibly analytical, but he could explain what he was doing very simply. And, you know, he just went through it all and told us what the facts were and what they meant for the budget. And he had some great charts as well. You know who I’m talking about with Ken Henry? Very impressive operator. He worked for Paul Keating, at one stage; he was one of Keating’s advisers; very polished, very well presented, very calm; Ken was great. And I remember coming out of that thinking, I want to work for that guy. So, I wanted to work for Ken Henry.

So the next time that there was a Treasury, bulk round advertise; Treasury, every six months, has a recruitment round, where they just advertise for policy officers. And, I thought, Oh, this is great. I may as well apply; throw my hat in the ring. I applied for a mid-level position in the Treasury, which was sort of equivalent to what I had in the Queensland public service. And yeah, I don’t know. I think I was competitive for various reasons. I think I had a good CV at the time, I think I was confident, because I had some successes within the Queensland public service. And probably what got me over the line, though, was because I had been to that talk of Kens. I was able to say how much I respected what Treasury was doing, how much I was excited about it, how I really want to work with Ken. And, and I think that probably got me over the line just because it gave me that extra enthusiasm.

Possibly, because I’ve done work in labor Economics, one of the members of the recruitment panel, Steven Kennedy, who’s the current Treasury Secretary; maybe that impressed Steve, and I’m not sure. So. Yeah, that’s sort of how I ended up in Australian Treasury. Having gone to that breakfast that Paul took me to, was, I think that’s part of the story for sure.

Francisco Garcia  27:58

Wow, that’s true. Again, it’s incredible how things play out. And I’m sure that being that you’ve been in the same breakfast as him and saying that you really wanted to work for him helped you to join the Treasury. And how was your experience of working at the Treasury?

Gene Tunny  28:24

Oh, fantastic. I mean, I think lots of great experience and lots of high points. There were some low points, I mean, I did eventually leave. But mostly, it was very educational, a lot of hard work as well. And very important. I mean, you just realize that you can have an influence on economic policy at a national level, but you do need to do the work and you need to be well prepared. You’ve got to think about all of the issues and just what the impacts of policy can be.

I found it very rewarding. I mean, I worked on various different things; G20 matters, budget matters, industry policy matters, such as car industry assistance. And also, well, budget policy toward the end, the response to the financial crisis, debt policy issues, all of that sort of thing. So, a wide range of experiences within Treasury that I found rewarding.

Just toward the end, there was a very difficult period. And I think for a lot of people in Treasury, to around the time of the financial crisis; very long hours and very challenging issues. And at that time, probably around sort of mid-2009, I thought, well, now could be the time to take up a different opportunity and so I came back to Brisbane from Canberra to work with a good friend of mine Tony Hand, who I met at UQ when I was studying there and he was now running the Brisbane office of Marsden Jacob, which was a consultancy firm. And so, I decided to come back and I thought, well, Tony be good to work for again, and he’s someone who I was inspired by and very impressed with because he was incredibly analytical. He thought about things, very rigorous, nice person, great person too. I thought it would be a good time to come back. So I came back to work for Marsden Jacob.

Francisco Garcia  30:47

Ah, wow. Yeah. That what I believe during the crisis, it might be definitely not the easiest time to work in a Treasury or anything related to economy of finance, and many other places. I was working for, P&G at the time. And I remember, I was an intern, almost of none of the interns were hired as a full time at Procter and Gamble, especially the ones in Sales; I was lucky to be the one in IT. So, I got the job, but a lot of people didn’t. So, not that easy.

About Marsden Jacob, would you mind sharing a little bit what you guys did over there?

Gene Tunny  31:34

Okay. Well, it’s a consultancy firm. So, it does work for clients. And it had a bit of a specialization in Natural Resources and Water and agriculture – agribusiness. Projects I did there included things like analyses of irrigation, investments, that sort of thing. Investments in, there are things called lateral move machines and center pivot machines for irrigation, or they could be building a larger dams for example; those sorts of projects.

So, we did some analysis of that for a department, which was subsidizing some of those investments. There was some money that was set aside for improving water use efficiency on farms for as part of the Murray Darling Basin Plan. That was a sort of thing we’d do.

We were contracted by the Natural Resources Department here in Queensland to do that sort of analysis to help them assess different proposals for that scheme. That was one example. There are examples of, you know, evaluation of different policies, such as the TravelSmart programme in WA; so one of the most enjoyable projects I did when I was at Marsden Jacob was a review of this programme to encourage public transport and also active transport, so cycling and walking in Perth. And so, we looked at a whole range of data to look at, was this actually having an impact? What’s the return on investment there?

And that was great because I got to spend a bit of time in Perth and Perth is a great spot. I love Cottesloe Beach, for example. And, yeah, there’s a couple of great pubs there, and there’s the Indiana tea house and just magic walking along the beach in the morning.

So, I really enjoyed that; it was probably the highlight of Marsden Jacob. Think about a lot; there’s a lot of travel. One thing with consulting, because you often have clients all around the country, occasionally internationally, you do a bit of travel and Marsden Jacob; because it was a national firm meant that I was travelling quite a bit.

So, a wide variety of projects, some private sector projects. Some helping a manufacturing business; look at the Economics of their product, like what cost savings does their product, what could it deliver to customers such as a council for example. One client that I did work for initially at Marsden Jacob and then later I’ve done work for them at through Adept Economics was a company called Urban Turf Solutions, UTS which produces synthetic turf. The artificial grass and I did some work showing just the cost effectiveness of that product just how much you save by not having a mullet, and not having to weed, not having to use pesticides etcetera.

So, they’re all the savings from having that product. And so, I was able to demonstrate that. I did work for the education department here in Queensland, looking at the Economics of a new school that they were looking to set up in Townsville at James Cook University. It didn’t go ahead at the time. The Economics of it weren’t great, because there were already a lot of high schools in Townsville with spare capacity. I don’t know what the situation is now. But at the time, it just wasn’t the right time for it. Yeah,  various different projects.

So, it was very enjoyable. And yeah, I really did enjoy the travel now that I think about it. I got to go to lots of interesting places, you know, travelled across the country, I really enjoyed that.

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  35:56

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  36:25

Now back to the show.

Francisco Garcia  36:29

So now finally, we are at Adept Economics. Gene, can you tell us how it was to start Adept Economics and what you guys have been working with?

Gene Tunny  36:44

Okay, it was actually easier than I expected to start the firm, at least in terms of the mechanics of it. It’s just incredibly easy to set up a business nowadays with modern technology and software services. So that sort of thing was quite straightforward. I mean, I had to just have to get an Australian business number. So, you will register for GST. You’ll need a website that you can find; there are cost effective ways to get a website. I knew someone who was able to give me a good deal on developing a website, you could also use something like I think it’s Squarespace or Wix, you could probably do it yourself. There are so many good templates out there.

The challenging part is, of course, getting the business, getting the revenue, getting the clients; I guess I was lucky in that I already had a really good network. And there are people I’ve done work for, as a consultant already through Marsden Jacob and I didn’t steal any clients or break any agreement I had with the company. I think that sort of thing is, is not cool. So, I didn’t do anything like that. But I didn’t steal any exclusive clients or clients that I got through Marsden Jacob.

There were clients that only came to me when I was at Marsden Jacob because I was there. So, they’re effectively my clients. So, I knew that because I was able to bring in work when I was at Marsden Jacob that I could probably do it on my own. It was one thing I found when I was working for Marsden Jacob which is a very good firm, I don’t want to run them down at all. But when you work as a consultant, you often; and a lot of firms are like this, you eat what you kill, if you know what I mean. You often have to bring in the business. Some other firms are set up a bit differently. So, if you’re in a big four firm, there’s the finder, minder, grinder model, whereby if you’re the grinder, you’re the junior person, you just do all the sort of data analysis, I was going to say data entry, but no one does that anymore till you just get everything online or just read things in from the PDF. Then, do the charts – the grinding work, reading the papers, summarizing information into tables, that sort of thing.

Then, there the mind, is the manager who oversees the work. And then there are the finders. They’re the partners; they’re the ones who have all the connections and they’re the ones who bring in the big contracts.

In boutique firms, in smaller firms, you often end up having to bring the work in yourself, you’re the one who’s sort of, needs to bring in the clients and then you work on those projects. You can team up with others in the firm to help you win projects. But it does help a lot if you’ve got your own network and you can bring them in. And so, from my experience in Marsden Jacob, I realized I could probably do that; it wouldn’t be as easy as it was in Marsden Jacob because I was working with others there in the firm on to get different projects and the company did have a, it had an established presence in the market. So that was helpful. But I thought I am doing a lot of things on my own already. And I can probably, it probably made sense for both me and for Marsden Jacob as well for me to leave the organization. And so, I went out and set up on my own. Yeah, seems to have worked out, I have managed to keep going, to stay in business. And you know, the goal now is to try and grow that business to expand.

Francisco Garcia  40:53

That is that is very interesting. And if you would summarize a little bit, what type of work do you guys do in Adept Economics, what would they be?

Gene Tunny  41:09

It’s all sorts of things. It’s business cases. So, for example, I’ve looked at the Economics of an algae farm for a company Woods group out at Gunde-Windy. So, they’re developing an algae farm, they’re looking at producing some products, using that algae, some food supplements, potentially an omega 3 rich oil from the algae. And so, I’ve helped them out with some economic analysis.

More recently, I helped out a managed fund or a fund manager here in Australia – Coolabah Capital. I did some work for them, forecasting state budgets. I’ve done work – well, I do a lot of work with Nicholas Gruen, who’s an economist in Melbourne, quite prominent economist. He’s got a business called Lateral Economics. So, I often work with Nicholas on projects for various clients. We did something earlier this year. And the year before for Services Australia, which is the agency which oversees Centrelink, basically. And we did some analysis of the potential benefits of a programme of work; they’d been undertaking called the welfare programme infrastructure transformation. So, Services Australia has been putting a lot of effort into upgrading their systems to make them all run more smoothly and make it easier for Australians to access their services via myGov. So, making that experience better, which is potentially going to save users a lot of time and deliver value to the community. So, Nicholas and I did some analysis for them of that.

Also, we’ve done economic impact studies, looked at various policy issues, negative gearing, for example, for a financial planning firm, I’ve helped; I helped Toowoomba Council get some funding, I think it was about 5 million, they got some funding to upgrade a railway goods shed that they had in Toowoomba. So, I helped them with their funding application for that. Because whenever businesses or councils are making applications for funding for grants, they’ll often need some sort of economic study, or if they want to get a development approval or some sort of tick, they’ll often need an economic impact study, or a cost benefit analysis to show that this project will deliver these benefits to the community or create these jobs.

So, there’s a bit of work doing that sort of thing. I’ve also been involved with the whole process around Paradise dam, and looking at the Economics of that dam and what the costs of the community would be if they didn’t repair the dam properly, which would mean that you might not have as much investment in macadamias, and high value crops as otherwise, and then that would be a loss to the community. So, I was involved in that process.

The State Government has decided that it will repair that dam, which is good news. So, it was a dam that was damaged when there was a big flood back in 2014. And they lowered the dam wall temporarily because they were worried about dam safety. There is a risk because if a dam was damaged, then if you get enough water behind it, the dam could crack, the dam wall could fail. It could break open water, lots of water rushes down into the valley, and obviously bad results. You don’t want that. So, government’s right to probably right to lower the dam, then they were thinking, well, maybe we don’t put it back where it was because, well, they were arguing that that additional water wasn’t necessary because it wasn’t purchased. But what the community argued was, well, we will purchase it in the future, because we’re investing in all of these high value crops. So, there was a bit of an economic analysis there that I did of what the future looked like. So, and that arguably did help that contributed to the state government’s decision to repair that dam.

So, wide range of things and can be, stuff can be influential in decision making, and government decision making. I’ve also done teaching, as part of my work through Adept, because I have that flexibility, effectively self-employed, I mean, I’ve got a research assistant who works for me. But I’m effectively, self-employed. I can choose my own sort of jobs; I can do what I want to do. And one of the things I like doing is I like doing some teaching, from time to time, I’ve done a bit of work with UQ International Development with the University of Queensland economic development. Then the economic development arm of UQ. And they do a lot of capability, building courses for foreign officials, particularly in our region.

So, I’ve done several courses with Indonesian officials from their finance ministry or Ministry of Economic Development, bapandass; things, courses on just general public policy, processes and cost benefit analysis, natural resource Economics. What else have we done stuff on? Infrastructure financing, a range of courses. And that’s been a great opportunity, because that’s meant that I’ve had an interaction with officials in Indonesia and learned a lot about the issues affecting their economy. And I’ve also travelled over there and delivered courses in Bandung, in Java; And that’s generally where we’ve held them. There’s a great hotel on a gorge there. The, I think, it’s the Padma Bandung; it’s a great hotel, a beautiful location. Indonesia is a beautiful place, very lush. And I mean, you’ve got old Java, you know, fascinating place, Jakarta is a huge mega city. And there’s also Bali, I mean, Bali is an amazing Island, just one of the most beautiful places in the world. So always love working with, doing work for UQ International Development and doing those courses for Indonesian officials. It’s such a great opportunity and privilege.

Francisco Garcia  47:56

Gene, at this point of the podcast, we might start wrapping up, right? I think, like we explored your whole career. And so back to Adept Economics, if our listeners are interested in working with you, what advice would you have for them,

Gene Tunny  48:16

I would say that they really should work on developing their skills; just be as good as you can be in your field. I mean, that is just so invaluable. Just become the best economist or the best financial analyst or, or whatever it is you’re doing. Just become the best you can be or the best Economics or finance student at UQ or whatever university you are.

Really develop those skills and be able to demonstrate that you can apply those skills; and that’s not necessarily with work experience that could be through articles, or it could be through a sub stack or it could be through recording your own videos or doing your own podcasts. I mean, what’s amazing nowadays is that, with technology, everyone has access to the means of production, okay? Like 30 years ago, when I was at uni, I mean, the idea that you could record yourself with reasonable quality and broadcasted to the whole world was just ridiculous. You couldn’t do that, you’d need to have your own radio studio to do that right? I mean, we couldn’t do this sort of thing.

Likewise with video, I mean, maybe you could you get a camcorder and record yourself on on a videocassette, on a VHS tape, but you can’t broadcast, you’d have to you know, you’d have to send it to Channel Nine and they’re not going to do anything. They’re not going to broadcast your amateur video recording. But now, that everyone’s got access to the means of production, and as a uni student, if you’re asking on behalf of uni students, you can create content. You can write papers; you can write articles. So, I’d be trying to develop those skills. I mean, some work experience could be good if you can. I’m limited in what I can offer, because I’m just a small operation. And I can’t I don’t take on interns generally, because I just don’t have the capacity. But some other organizations do take on interns. So, if you get an internship, or a part time job, but it’s not essential, because there are other ways of demonstrating those skills.

Really work on your craft. A couple of books I can recommend, well, a few books, actually, there’s one book by Seth Godin Linchpin; “Be Remarkable”. So, one thing that Seth Godin says is remarkable people don’t have CVs. Now, this sounds a bit crazy. What are you talking about? What he’s saying is that if you’re truly remarkable, then it’s your work that speaks for you, you’ve got products or content out there. And it could be papers, it could be articles on websites, it could be podcasts, it could be videos; that’s what is important nowadays, in the modern economy. And in, in this new world that we’ve been living in, that started off in the mid-90s, with the arrival of the World Wide Web and in which has just transformed the way we live and the way we work. It’s just so profound. And yeah, that means that there’s an opportunity for everyone, if you can work on developing your skills and producing good content, you can reach an incredible number of people.

I wouldn’t think about well, what do I need to do to work for a particular firm? I’d think about how do I make myself as remarkable as possible in this field? In the field that I’m interested in? Look at what the people who are at the top of the field; well maybe a few years ahead of where you are? What are they doing? What have they done? What are they producing? Can I do something similar? Can I engage with them? Can I comment on their blog? Or could I, you know, provide? Is there some way I can add value to them? Can you email them? Can you say, Hey, I listen to your recent episode, do you know about this book, or this article; you might be interested in this, that sort of thing?

I don’t know, there are a whole range of things you can do. But it’s about being remarkable. Just trying to learn as much as you can and also interact with the people ahead of you in the field, I think that can help. So that’s one thing, try and be a linchpin that Seth Godin spoke linchpin. I read that; I think that’s what encouraged me to start blogging back in 2010. Because I read Seth’s book. And Seth is very strong on this point about well, remarkable people don’t have CVs, their work, speaks for them. And that made me think, okay, if it’s not for where I’m working, like, is there anything about me that’s remarkable, right? Like what do I have to show that I’m a good economist, that I’m someone people should pay attention to. And that encouraged me to start doing more work, to start trying to write more, do blogging, write articles for publication, that sort of thing.

So, I know that sounds hard, but that’s what you’ve got to do, unfortunately, in this modern world. Well, not unfortunately because if you produce good work that that’s good for you that that makes you feel good. And you’re participating in this great thing we’re all involved in; this great conversation. So, I think that’s one bit of advice.

Also, I’d be reading books by Cal Newport; or following Cal Newport, his stuff, his Deep Questions podcast is excellent. His book, Deep Work, which encourages you well, I think is a good guide on how to be incredibly productive, how to be focused. The type of work you should be doing is the deep work really, really delving into a topic. Making sure you understand it, really do the focused work and try and produce a product that you can present to the world and get feedback on; something that is remarkable. He’s trying to get you to that position where you’re so good, they can’t ignore you. That’s another one of Cal Newport’s books I’d also recommend.

So yeah, that’s what I would say. Just really focus on being as good as you can and figure out how you can demonstrate that. So, you try and try and produce work that will impress people that people will; maybe impress is the wrong word, that others would be interested in reading and can give you feedback on and then that will help you progress that will help you improve over time.

Francisco Garcia  55:20

What a fantastic advice like a range of advice here. Gene Tunny, thank you so much for joining our podcast. It was a pleasure talking to you.

Gene Tunny  55:34

Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com and we’ll aim to address them in a future episode. Thanks for listening. Till next week, goodbye.

Credits

Big thanks to Francisco Garcia from UQES for interviewing me and for letting me borrow the audio, and to the show’s audio engineer Josh Crotts for his assistance in producing the episode and to Peter Oke for editing the transcript. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

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