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Australia’s Treasurer Wayne Swan called for reducing restrictions on building houses, to improve housing affordability. The Treasurer’s comments came amid growing concern about housing cost escalation that has been highlighted by recent reports, including the 6th Annual Demographia International Housing Affordability Survey (which identified Australia as the most expensive nation surveyed).

Treasurer Swan told the Herald Sun in Melbourne “Unless constraints to the supply side of the market are addressed, our cities will not adapt to meet the needs of a growing population and we will see continued problems of affordability for ordinary Australians.” He continued: “We are not building enough houses and if this continues then we will all be paying increasingly more and more for our housing whether it be in terms of repayments or in terms of rent.”

Australia’s housing affordability crisis, has been the result of overly restrictive land use policies (called “urban consolidation” or “smart growth”), which by intensively controlling the land supply, raise its price and that of housing. This association between prescriptive land use regulations and the loss of housing affordability has been documented by a number of the world’s most eminent economists, such as Kate Barker, a member of the Monetary Policy Committee of the Bank of England and Donald Brash, former Governor of the Reserve Bank of New Zealand. Brash has said that “the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.

Indicating the “can do” attitude so typical of Australia, the Treasurer said: “We can and must do better than this.”

Warren Buffet, CEO of Berkshire Hathaway, and Henry “Hank” Paulson, former Treasury Secretary, were guests of honor at the annual meeting of the Omaha Chamber of Commerce this week.

That the two of them are together should be no surprise: Paulson orchestrated the largest bailout of financial institutions in the history of the world – and Buffett is an owner of some of the largest financial institutions. To put it bluntly, Paulson helped bailed out Buffett’s financial institutions and now Buffett is helping Paulson tout his book. It’s not a pretty picture.

Yet, the event sold out well in advance. Granted, Buffett’s contribution to Omaha’s economy cannot be minimized. Warren Buffet keeps Omaha on the global map – travel anywhere in the world, tell them you’re from Omaha and see whose name comes up first. He is also a regular contributor to charitable and social causes throughout the region. Berkshire Hathaway’s (NYSE: BRK) companies employ about 246,000 people – though only 19 of them are at the Omaha headquarters. None of BRK’s companies are among the top 25 employers in greater Omaha. (Nebraska Furniture Mart, with just over 2,700, ranks 32nd and is the only one in the Top 100.)

We all have 20/20 vision in hindsight, including Senator Chuck Grassley (R-IA). In April 2009, seven months after the Bailout passed, Senator Grassley said of Paulson that Congress “was awed by a person who comes off of Wall Street, making tens of millions of dollars. … You think he knows all the answers and when it’s all said and done you realize he didn’t know anything more about it than you did.”

The Troubled Asset Relief Program (TARP) was sold to Congress and the American public as an absolute necessity to save the American Dream of homeownership. It was supposed to be used to help homeowners with mortgages bigger than the market value of their homes. As soon as Paulson’s Treasury got the money they decided to bailout big banks instead. Since then, Paulson, along with current Treasury Secretary Timothy Geithner, and Federal Reserve Chairman Ben Bernanke have refused to comply with demands from Congress to produce documents about the TARP recipients’ use of funds. The legislation was passed and the funds were released, and Treasury gave the money to banks with no restrictions on its use – no monitoring, no reporting requirements, no nothing.

So, why would Warren Buffett look so favorably on Paulson? Warren Buffett – our widely revered Oracle of Omaha – is one of those who built the boom in the capital markets and are benefiting from the bust. No surprise then that Buffett whose primary business vehicle is a financial holding company, supported the bailout of financial institutions. BRK’s businesses include, among others, property and casualty insurance and financial holding companies.

Of course Buffett was in favor of the bailout – his companies directly benefited as did the investments made by his companies. He put $5 billion into Goldman Sachs preferred stock with a 10 percent dividend – a substantially better rate of return than the US government got on our $10 billion bailout. Berkshire Hathaway was the largest shareholder in American Express Co. when they received $3.4 billion from Uncle Sam. Paulson is now insisting that US taxpayers will profit from the TARP bailout – if we do, which I doubt, I’m sure we won’t profit as much as Buffett did.

Paulson claims, in his book, that he turned to Buffett for advice about saving Lehman Brothers from demise. This strikes me as a very odd story, considering that Buffett told the press in March 2009 that he couldn’t understand the financial statements of the banks getting the bailout money. Add to this the fact that Senator Ben Nelson (D-NE) told me that he talked with Warren before voting for the first bailout package. (I button-holed him after lunch with the Sarpy County Chamber of Commerce) and you begin to get the real picture – the government was taking advice from financial institutions about the bailing out financial institutions.

To bring the problem full circle, consider this. In January, a bi-partisan Financial Crisis Inquiry Commission was appointed to find the answers to the causes of the financial crisis. They may not have to look any further than the nearest mirror. USA Today reported earlier this month that the members of the panel “have consulted for legal firms involved in lawsuits over the crisis.” A Commission composed of members who earn their livelihood from financial institutions is unlikely to solve the mystery of the causes of the greatest financial collapse in the history of the world.

Like the Commission, Hank Paulson and Warren Buffett are part of the problem – not the solution.

Darwin, capital of Australia’s Northern Territory is located next to the sea, across from the Indonesian archipelago. Darwin is also located next to a sea of developable land in one of the world’s least developed nations. Only 0.3% of Australia’s land is developed, approximately 1/10th the rate of the United States or Canada (in the agricultural belt) and even less compared to European nations.

Local Officials Report Erroneous Data: Yet, Darwin has severely unaffordable housing in our 6th Annual Demographia International Housing Affordability Survey. Upon initial publication of this year’s report, local officials identified a mistake in the median house price figure that they had made available to the press (and that we had used). Rather than a median house price of $607,000 (US$510,000), they announced that the median house price in September 2009 was $499,000 (US$425,000). Officials also corrected the median house price figure for the previous quarter.

Housing Affordability: Still Dreadful” The result was that the Median Multiple (median house price divided by median household income) fell from 8.6 to 7.1. Affordable markets have a Median Multiple of 3.0 or below. As originally reported Darwin was the 4th least affordable market out of 272. We have revised our report to reflect the newly revised data. Darwin is now rated as 13th least affordable market, which is only marginally less dreadful.

Still As Unaffordable as New York or London: This was cause for celebration by the Chief Minister (Premier) of the Northern Territory, Paul Henderson, who noted that housing was less expensive in Darwin than in Tokyo. We do not know the Median Multiple for the Tokyo metropolitan area, because data is not readily available. However, Darwin is as expensive relative to incomes as New York and London.

Darwin: A Metropolitan Area in Housing Stress: At the median house price, the median household will pay half its income for the mortgage. This is well above the "mortgage stress" level of 30% as defined by government agencies. The overwhelming majority of Darwin’s future households will be faced with housing stress or could be life-long renters. The price for most residential building lots (blocks) in the new suburb of Johnston is approximately the same as the US median house price, even after adjusting for currency differences.

High Demand Markets are More Affordable: Atlanta and Dallas-Fort Worth each have added the equivalent of Darwin’s population annually during the 2000s and have exhibited far higher underlying demand for housing. Yet housing is affordable (Median Multiples under 3.0). If Darwin had the same price to income ratio as Atlanta, the median house price would be little more than $150,000.

Extinguishing the “Great Australian Dream:” It was not always this way. Before the widespread adoption of “urban consolidation” policies (also called growth management, smart growth or compact city policies), sufficient land was always available to build on across Australia. In the last two decades, however, urban consolidation policies have ravaged Australia’s household wealth, driving prices to the highest levels in the English speaking world.

Few places in the world are more unaffordable than Darwin. Few places have more land to grow. Heavy handed and stingy planning has extinguished the Great Australian Dream in Darwin.

Former chief economist of the Organization for Economic Cooperation and Development David Henderson coined the appellation, “Global Salvationism,” to describe the kind of behavior one witnesses at gatherings such as this past week’s World Economic Forum (WEF) in Davos, Switzerland. WEF was created in 1971 so that elites from around the world could gather to “map out solutions to global challenges,” according to WEF’s website. This year’s forum is entitled, “Improve the State of the World: Rethink, Redesign, Rebuild.” WEF’s program summary explains the urgency of the task facing those gathered in beautiful eastern Switzerland this way: “Improving the state of the world requires catalyzing global cooperation to address pressing challenges and future risks.” In an effort to compound jargon with alliteration, WEF uses “rethinking” in the titles of 29 conference sessions, “redesign” 16 times, and “rebuild” 9 times, for a total of nearly one-quarter of all the sessions. With all the turmoil created by the global recession and other “pressing challenges” in 2009, the world’s elites came together this week ready to re-do about everything.

Central to WEF’s annual objectives is what to do about life’s inequities and imbalances. Hardly anything warrants “catalyzing global cooperation” more than the ongoing effort to make poverty history, reduce inequality, and correct global imbalances. WEF has announced that global development is taking center stage on the third day of the event.

How ironic, then, that just prior to their gathering, Maxim Pinkovskiy and Xavier Sala-i-Martin updated findings from their 2009 National Bureau of Economic Research paper, “Parametric Estimations of the World Distribution of Income,” on the economics website VOX. Their findings show precipitous drops in global poverty since 1970—just about the same time WEF began meeting in Davos (Mark Perry wrote about the original paper here).

Between 1970 and 2006, the global poverty rate fell nearly 75 percent. During this period, the percentage of the world’s population living on less than a dollar a day fell from 26.8 to 5.4 percent. The world’s population grew 80 percent during the same period, which makes the poverty reduction all the more astounding. The global Gini coefficient, a standard measure of inequality, fell from 67.6 to 61.2 percent, indicating a drop in inequality as well as poverty. The same trend is found in other measures of inequality besides Gini.

And when one computes a measure of global “welfare” understood in the old-fashioned sense of well-being, we find that life has gotten better faster for a larger share of the world’s population than perhaps any time in history. By deriving a calculation of well-being from GDP and inequality measures, the authors show that between 1970 and 2006, global welfare more than doubled, growing faster than GDP.

The authors also consider the World Bank’s new purchasing power parity (PPP)–adjusted measures of GDP and find that while global poverty increases overall, the rate of poverty actually drops faster since 1970 than it does under more conventional GDP measures. In other words, under the PPP model, the world looks a lot poorer in 1970 than it does using more traditional measures of poverty, but today, the poverty rate is nearly the same regardless of whether one uses the PPP or more traditional measures (see the graph below). Using the World Bank’s adjustment actually has the effect of making it look like we have been doing a better job of reducing poverty over the past three decades, despite how the world looks poorer in any given year.

(Chart available at http://www.voxeu.org/index.php?q=node/4508.)

Now, just days before Pinkovskiy and Sala-i-Martin published their VOX article, Princeton’s Angus Deaton shot to pieces the idea that one can accurately measure global poverty and inequality across countries in his presidential address to the American Economic Association. Deaton’s argument is persuasive and serves as a good reminder that economic measures across different societies are nearly impossible to establish with perfection and complete accuracy. That said, it is interesting that Pinkovskiy and Sala-i-Martin find the same drops in poverty across the various methodologies they test. Something is going on here.

One might draw the conclusion that the precipitous drop in poverty corresponds with the beginning of the WEF meetings in 1971. Maybe the elite gathering has worked! Or, one might conclude liberalization of states and economies is working. During roughly the same period covered by the authors, the percentage of free countries in the world increased from 29 to 46 percent, according to Freedom House’s annual ratings. Liberalization and economic growth go together. One might also conclude that China’s explosive growth, which has carried Asia as a whole from 19 percent to 28 percent of the global economy during this period, has had a significant impact on poverty reduction, not to mention India’s rapid rise in its share of global GDP.

Instead of rethinking, redesigning, and rebuilding the world, WEF’s best minds might consider devoting a full day to understanding what worked the past forty years and figuring out how to “repeat” it.

This post originally appeared at The Enterprise Blog at The American.

Ryan Streeter is a senior fellow at the London-based Legatum Institute and can be followed on Twitter here.

The St. Louis Post Dispatch characterizes high speed rail as a “bridge to the 19th century,” in noting its opposition.

I couldn’t have said it better, though I tried in my Wall Street Journal Oped (“Runaway Subsidy Train”). As usual, some of the best lines in this article fell on the “cutting room floor,” as editors can allow only so many words. The two most important points were:

The biggest problem with high speed rail is that it requires huge expenditures of public funding in a market (intercity passenger transport) that does not require subsidies. Much of the impetus comes from generous donations to political campaigns by vendors who live off public funding and by a naive cadre of virtual sheep who believe anything that runs on rails walks on water.