Vale Professor George Fane

28 May 2024

Professor George Fane ∣ 14 January 1944 – 12 November 2023

Retired Professor George Fane died suddenly at the age of 79 years on 12 November 2023.

George had a long association with the ANU, having been recruited by the Economics Department in the Faculty of Economics and Commerce in 1976. During 1988–91 he was seconded to the Economics Department in the Research School of Social Sciences. His next move was in 1992 to the Division of Economics in the Research School of Pacific and Asian Studies (now the Arndt- Corden Department of Economics in the Crawford School of Public Policy, College of Asia and the Pacific), where he worked until his retirement in 2006, having been appointed Professor in 2003. To our knowledge, no other economist can claim to have found an academic home in all three of ANU’s rather diverse economics departments.

Although George was born into a relatively poor family, it was very important to his father that his son would grow up as an English gentleman, and sacrifices were made to send George to a boarding school at the age of nine. Perhaps as the first sign of the academic career to follow he won a scholarship enabling him to pursue an education at Wellington College, a prestigious boarding school initially established for orphans of army officers. At Wellington he met a teacher who encouraged him to be controversial and questioning, a habit he maintained all his life.

George did well at school and received a scholarship to study chemistry at Oxford. He began the Chemistry degree but decided it was not for him and eventually moved to Politics, Philosophy and Economics. He graduated with a first-class honours BA and then went to work at the National Institute of Economic and Social Research, where he was part of a team developing a macromodel of the British economy. There he met his first wife, Marie Pennington, whom he married 1968. They soon set off to America for George to take up a Harkness Fellowship, studying for an Economics PhD at Harvard. His PhD supervisor was Professor Zvi Griliches, whose major fields of study included the diffusion of technological change in the economy, the role of education and its contribution to economic growth, methods for measuring the sources of economic growth, and the role of science in research and development. His influence can be seen in the title of George’s dissertation—The Productive Value of Education in Agriculture in the US Corn Belt, 1964.

One of George’s finest attributes was his intuitive understanding of economics, which was matched by few others. He loved thinking about and understanding economic issues, as was frequently evident from his insightful commentary at seminars and other academic presentations. Thus a great deal of his value to ANU’s intellectual environment was not recorded in academic journals; rather, he had a strong desire to help students, develop the economic strength of his colleagues and, through his presence, play a major part in developing the outstanding and widely accepted reputation of the ANU’s then Faculty of Economics and Commerce as Australia’s best place for good young people to learn economics. His influence was obvious to all those who knew his colleagues or visited the Faculty, and many of Australia’s outstanding bureaucrats and economists remember George as an important influence in their intellectual development.

A hugely important contribution during George’s time in the Arndt-Corden Department was his role in chairing the weekly PhD workshop. Here he played a firm but very constructive role in guiding the students. They (and their supervisors!) knew that once they had completed their seminar presentations, their dissertations could be expected to survive external examination. A valuable by-product of his proclivity for helping people get to the bottom of any issue they were trying to understand was a stream of jointly authored publications on a diverse range of topics, with PhD students (Helal Ahammad, Changmo Ahn, Craig Applegate, Theodore Levantis, P. Nandalal Weerasinghe) and colleagues (Ross McLeod, Martin Richardson, Ted Sieper, Ben Smith, Peter Warr).

George enjoyed debating and struck up a great and long-lasting friendship with Ted Sieper and other members of his then new Economics Department—who spent hours debating economics at the nearby Workers Club and in the Faculty tea room. He always favoured rational and logical arguments supported by evidence. He hated political correctness and the emphasis on what he felt were empty words rather than practical deeds to further desirable outcomes. He strongly favoured consumer sovereignty and leaving decisions up to the market. His favourite question in debates about policy was, ‘What is the externality we are trying to correct?’

One survivor from the Faculty’s heyday in the 1980s recalled that George had the most thorough grasp of both micro and macro theory of anyone in the Department, and that he was incredibly clear in exposition. This recollection reminds us of George’s amazing breadth of interests: at the same time the young Fane was grappling with David Laidler over monetarism (in the American Economic Review), he was sparring with Lester Thurow over public goods (in the Quarterly Journal of Economics).

George’s approach to both theoretical and empirical studies involved an insistence on analytical rigour, based on deep understanding of the economic issues involved. A good example of both was his acclaimed 2000 book Capital Mobility, Exchange Rates and Economic Crises, of which he was justly proud. Written in the wake of the Asian Financial Crisis of 1997–98, the book challenged the widespread post-crisis view that the best way to avoid such events was to control international capital movements. George used economic theory and empirical evidence to argue that avoidance of financial instability was best achieved by: raising the then-accepted minimum amount of bank capital from 8 to 16 percent of risk-weighted assets, and raising substantially the risk-weights for loans to emerging markets; fully opening the financial sector in emerging markets to foreign competition; greatly strengthening bankruptcy procedures in emerging markets; and persuading central banks to adopt flexible exchange rates, backed by credible targets for inflation or monetary growth.

The last of these recommendations mirrored the advice given many years earlier by George and Ted Sieper to the Campbell Committee of Inquiry into the Australian Financial System, set up in 1979. The report advocated abandoning exchange controls and floating the dollar, which went against the strong advice of Treasury and the Reserve Bank. Although the committee’s recommendations were ignored by the Fraser government (which had initiated the inquiry), they would form the blueprint for this and many of the economic policy reforms implemented by the ensuing Hawke and Keating governments. The removal of exchange controls and floating of the dollar—along with other financial reforms recommended by Campbell—reflected the general principle that the best results for the community will be achieved if the financial sector is subject to as little government interference as possible. This view arose out of a general predilection for free-market outcomes, but it was supported by a great deal of economic analysis.

Both Sieper and Fane were strong and consistent advocates of these views about the economic role of government, and the dramatic shift in exchange rate policy can rightly be seen as a rare and astounding achievement by academic economists, some of whom choose instead the safe option of arguing in support of policies they know to be politically popular. As both would have predicted, the sky did not fall following the shift in policy. George’s work also had an impact on fiscal policy, which can be seen in citations of his work in the ‘Henry Review’ (Australia’s Future Tax System Review, 2010).

George’s consultancy work in 1991 for Australia’s Economic Planning Advisory Council (EPAC) on taxation and inflation was influential for some time in the council’s deliberations. The same can be said of a consultancy by George’s close colleague Ted Sieper, for a 1995 EPAC Inquiry into Private Infrastructure Financing, where Ted’s work—building explicitly on discussions with George—led instantly to major reform of the structure of tax concessions for such investments by the then Treasurer, Ralph Willis.

Along with a younger colleague, Martin Richardson, George also made important contributions regarding the (recently reemerging) issue of ‘negative gearing’ via papers in Agenda and the Economic Record. One aspect of these papers was an explicit demonstration that negative gearing is a feature, not a defect, of a tax system that correctly taxes (real) capital gains, and George articulated a very neat illustration of how negative gearing prevented the double taxation of investment income. He also showed that an approximation of an accruals-based capital gains tax (CGT), using information readily available to the Tax Office, could significantly reduce the lock-in and other distortions of a CGT based on realisations only.

George’s move to the Economics Division of the Research School of Asia and the Pacific in 1992 was followed by a new concentration—albeit not exclusive—on economic policy in developing countries. His publications in this period often were engendered by consultancies undertaken for the World Bank, in particular, but also for the Asian Development Bank, the United Nations Development Program, the United Nations Industrial Development Organisation, the Central Bank of Sri Lanka, and Indonesia’s Ministries of Industry and Finance. These consulting assignments took George to a very diverse range of countries—in particular Indonesia, but also including Thailand, Laos, Cambodia, Malaysia, Bangladesh, Sri Lanka, Papua New Guinea, Iran, Yemen, Georgia, Uzbekistan, Ethiopia, Ghana, Madagascar, and Trinidad and Tobago. In 1997 his interest in developing countries led to Visiting Fellow appointments at both the Harvard Institute for International Development at Harvard University, and the OECD Development Centre in Paris.

George’s academic interest in developing economies—perhaps not unrelated to having been borne in British India—can be traced back as far as 1971 when he was still a PhD student. He came into contact with Professor Hollis Chenery at Harvard, and this appears to have led to his first solo publication, on ‘Import Substitution and Export Expansion’, in the Pakistan Development Review. He would later produce a report (jointly, with Chris Phillips) for Indonesia’s Department of Industry, resulting in the widely cited ‘Effective Protection in Indonesia in 1987’ in the Bulletin of Indonesian Economic Studies. This seems to have been an intellectually rewarding experience that perhaps provided the impetus for his eventual move to Economics RSPAS, the then home of ANU’s highly regarded Indonesia Project.

George continued to engage with developing Asia for some years after his retirement in 2006, serving as Visiting Professor in the Summer School of Thailand’s Chulalongkorn University. The ANU, and all of us individually, have benefited enormously from our association with George Fane. He is greatly missed.

Ross McLeod

Prepared with information contributed by William Coleman, Anne Daly, Bob Gregory, Hal Hill, Chris Jones, Martin Richardson, Peter Warr and Glenn Withers.

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