Over the past decade Australia bet hundreds of billions of dollars that the rest of the world wasn't serious about tackling climate change. It looks like we lost. World demand, and in turn the prices we receive for our precious raw materials, are collapsing under the weight of the oversupply we helped cause. While demand for coal stubbornly refuses to live up to the optimistic forecasts of Australian politicians, the price of renewables keeps falling faster than its most ambitious boosters predicted.

The bad bets we have made on fossil fuels will haunt us for decades but, like drunks leaving a casino with empty pockets, we are quick to focus on the "upside" of our massive losses: It was fun while it lasted. I nearly made a fortune. I think that croupier really liked me.

Denial is as common as it is unhelpful. The plain fact is that Australia hosed the benefits of a once-in-a-century resources boom up against the wall. While Norway managed to accumulate a trillion dollar sovereign wealth fund from the sale of its oil, we managed to give away such big tax cuts that governments now argue they have no choice but to cut spending on education. Worse still, we now enter the "renewable century" at the back of a pack that 20 years ago we led. Well played, Australia, well played.

It gets worse. While our politicians drone on about how building mines "creates jobs", what history, economics and common sense tells us is that it is the quality of our investments that matter, not the quantity. The hundreds of billions of dollars that we invested in the expansion of coal and gas exports that the world doesn't want is money that we don't ever get back. It's money we didn't spend on factories, public transport or educating our kids. Our future prosperity is determined not by the size of the things we build, but the future usefulness of the things we invest in. It's not looking good.

As those who lost millions investing their money in emu farms and Christopher Skase's properly developments well know, your superannuation balance on retirement owes as much to the quality of your investments as it does the size of your contributions. The same is true for countries. Investing in good ideas is a good idea, and investing in bad ideas feels like a great idea, until it turns bad.

The problem is that the politicians who claim to "manage" our economy have confused the short-term benefits of "economic activity" with the long-run benefits of "economic prosperity". While spending billions of dollars building something (anything) will inevitably create some jobs, what determines our long-term economic prosperity is the usefulness of what was built, not the number of people who built it.

Over the past decade Australia has built about 30 new coal mines, over 4000 coal seam gas wells and spent more than $200 billion building gas export facilities. The resource construction boom employed tens of thousands of workers, the vast majority of whom were poached from existing manufacturing and construction jobs, rather than trained from the ranks of the unemployed.

But, and this is a big but, if we had spent the same amount of money building schools, hospitals, roads and public transport for our rapidly growing population we would have, you guessed it, created lots of jobs in construction. Significantly, we would have also invested in the assets that we inevitably need in the future.

While all construction projects "create jobs" in the short term, only good investments deliver benefits in the long term. The real skill of "managing the economy" is not to balance the budget, but to ensure that investment, be it private or public sector, is channelled towards good ideas and away from bad ideas.

But wait, I hear you cry, it's not the government's job to "pick winners". We live in a market economy ... let's break that down.

Australian taxpayers have spent tens of billions of dollars building the train lines and the ports that remote mining projects need. Those same billions spent building infrastructure in our cities would have created just as many jobs in the short term, while delivering reduced congestion and higher productivity for decades to come.

Australian taxpayers also spend billions of dollars on tax concessions and direct subsidies to the mining industry. We even give some miners free coal and free iron ore (known as "royalty holidays"). And thanks to Sam Dastyari's Senate inquiry we know the big miners are not big tax payers. Again, every billion we spend on dud projects is a billion we didn't invest in our kids, our researchers or our cities' infrastructure.

Australian governments, state and federal, Labor and Coalition, try to "pick winners" all the time. Tony Abbott wanted to give $16 million to Cadbury, Barnaby Joyce wanted to give $25 million to SPC Ardmona, the Greens love giving subsidies for renewable energy and both major parties have a long history of subsidising the mining industry. The issue is not whether or not we should "pick winners" but which industries are likely to help us win.

A century ago Australian governments decided, quite rightly, that the health and education industries were so important for our economy and our wellbeing that the government should invest heavily in them. Fifty years ago Australian governments decided electrification was so important that they should invest heavily in power stations, poles and wires. Road building, mass transit, sewerage and water supply are other prominent examples of how the strategies of "picking winners" and ''market capitalism'' have coexisted over time.

Australian public debate is now so broken that when governments cut spending on schools and universities and increase subsidies to coal mining it is not seen for what it is, namely, government belief that investing in fossil fuels will deliver more benefits in the future than investing in education.

Don't get me wrong, we elect governments to make decisions like that on our behalf.

And we should either reward or punish politicians based on our assessment of their performance. The biggest problem is not that our representatives are determined to invest so much of our money into losing industries, it is that they are allowed to deny that they are even doing it.

But just as most Australian investors don't dump super funds that invest heavily in the declining fossil fuel industry, most Australian voters won't dump political parties that squandered the last resources boom and are determined to miss the approaching renewables boom. The upside of living in a rich country is that, individually and collectively, we can afford to waste huge amounts of money in the short term. Like splashing out on luxury cars or high fashion, while it might be fun at the time, it's often only in retirement that the costs become apparent.

Australia is a rich country blessed with an educated population, valuable natural resources and a stable democracy. It is not the stories we tell ourselves, the excuses we make or the accounting and definitional tricks our politicians use that will determine our future prosperity and happiness, it is the quality of the investment decisions we make. A hundred years ago, we bet on education. Today our government sees education as an expense we can't afford and fossil fuel extraction as an opportunity we daren't miss. Who knows, maybe they are right. Cross your fingers, people.

Climate change and confusing 'economic activity' with 'economic prosperity'