Abbott shows leadership potential

The government should be commended for its vision and willingness to take a brave decision on a $20 billion fund to support medical research which will largely benefit people overseas and the young while imposing a great big cost of living impost on families doing it tough. One wonders where it might lead next?

You’ve got to give them their due, the government has made an incredibly gutsy and farsighted decision to establish a $20 billion fund to support medical research, funded through making those who incur health care costs to contribute towards them. 

Australian medical research has delivered some amazing breakthroughs that have greatly improved our lives.

Also, the private sector tends to underinvest in medical research, much like other forms of scientific research, because of what are known as externalities. In this case it’s a positive externality, where you do something that does someone else a favour but you can’t charge them for this service. Medical research involves development of knowledge which, unlike a physical commodity, tends to leak out to others. It’s a bit like smoke from a chimney tends to fall on neighbouring properties and not just the person with the fireplace (negative externality).

So it makes sense for the government to get involved.

The government has been gutsy because it has chosen to inflict a ‘cost of living impost’ on ‘families doing it tough’, when the reality is that much of the benefits from our medical research will actually flow overseas.

That’s because, in case you hadn’t noticed, diseases tend not to distinguish between a human living in Australia, Germany, the US or even China and India. While there are some genetic and cultural traits in some regions that can make diseases more common, cancer and heart disease and most other priorities for medical research tend to kill lots of Americans and Chinese, not just Australians.

In addition the government has been incredibly farsighted, as well as politically brave, with this medical research fund. That’s because many of those that will be paying this great big cost of living impost when they visit the doctor will, in many cases, see limited benefit from the fund’s research. That’s because it can often take decades before research bears fruit as successful treatments for sickness and disease. The biggest beneficiaries will be the young and future generations who don’t visit the doctor all that often and won’t be paying the co-payment.

But as Treasurer Joe Hockey says, Australians are generous people. We’re a people that has always been prepared to “pay it forward”, he says.  

And $7 for a visit to the doctor, what’s that? According to Hockey, it’s less than the price of a packet of cigarettes or two middies of beer.  

So as Hockey says, we’ve got to keep this in perspective.

And in the end we’re going to lead the world rather than follow, and create the world’s largest medical research fund in the world. We can take pride that, as Hockey says, we’re not leaners, we’re lifters in the global fight against disease.

Of course, truth be known the fund will only spend the interest earned. It will still be a drop in the ocean relative to the total medical research expenditures of the big pharmaceutical companies and big economies such as the United States.

But we’ll be punching above our weight and showing leadership and isn’t that a good thing?

Who knows what might be next.

Maybe we’ll stop pointing the finger at impoverished Indians’ growing CO2 emissions as an excuse for us having the most emissions intensive electricity supply in the developed world.

Maybe we’ll say, hey, the Chinese, the Americans, the Germans, the Japanese and even the Indians are doing some great things to advance clean energy technologies to make them cheaper and more accessible for all of us. We should do our bit too.

We might make polluters pay a levy that will correct the negative externality associated with greenhouse gas emissions.

Of course, this will lead to an increase in the cost of living of about $10 per week for families doing it tough. But what’s that? Still under the cost of a packet of cigarettes or just three middies of beer, based on Hockey’s arithmetic.

Actually come to think of it, a levy on polluters will raise revenue for the government. Maybe rather than hurting the poor and the vulnerable, we might reform and reduce income taxation on them. We could free them from paying tax on the first $18,000 they earn, instead of being slugged the moment they earn above a paltry $6000 per year. We could also increase pensions a bit, too, so overall the poor would end up better off out of this whole thing.

Now of course, just like the doctor co-payment there is a risk of perverse outcomes. 

In the case of the doctor co-payment, people might delay treatment and get so sick it costs us more to treat them later. Or they’ll just leak into public hospital emergency departments taking up valuable resources better dedicated to critically urgent patients.

In the case of a polluter levy there’s a risk that it could undermine some Australian businesses' competitiveness, and they get displaced by equally polluting production from overseas. But of course, the number of businesses for which this is a genuine problem are pretty small. 

So rather than not doing anything at all, we might provide the small number of business at risk from overseas competition with levy exemption certificates (free pollution permits). If these businesses manage to reduce their emissions they could sell these to another business that has to pay the levy. That way they’ll still see an incentive to clean up their act.

But of course why would we want to do all this? I mean, why would you ever listen to scientific researchers from leading universities around the world. Science researchers only care about getting another research grant to feather their nest. They aren’t interested in helping the rest of us, are they?