John Quiggin

* A reader suggests using that the term “Robin Hood tax” for the proposed tax on financial transactions is unfortunate, and that Global Financial Crisis Tax would be better. I agree. The ‘Robin Hood’ term applies to any redistributive tax, and is more directly descriptive of a progressive income tax. The ‘GFC tax’ term reminds everyone of the burden placed on the global community as a whole by excessive financial speculation.

* My colleague and co-author Grace Lordan, has an interesting post on health and discrimination

* Nine of ten authors on a list of “climate sceptical” papers have close links to ExxonMobil. Whocoodathunkit? [1]

** And surprise, surprise a large proportion of the “peer reviewed” articles are in sham journal Energy and Environment, while quite a few others are listed as “submitted”. Check the list here

fn1. Any commenters tempted to cry “ad hominem” at this point should look up “argument from authority” before making fools of themselves.

After the usual hassles, UQ School of Economics finally has its own videoconference facility, an IP-based Tandberg system, which should (fingers crossed) be interoperable with other standards-based systems. I just did my first conference, and it worked very well. Unfortunately, we are still waiting for an upgrade that will let me run a presentation at the same time as appearing on video. But I’m confident of ultimate success, so I’m now announcing that I’m available to give seminars and talks on a wide range of topics to anyone (subject to time and timezone constraints!) who would like to organise a videoconference. Email me j.quiggin at uq.edu.au if you are interested.

Despite strenuous efforts, it’s hard to avoid air travel in my line of work, and I’ve been doing more than usual lately. One strategy I use to reduce travel is to bundle multiple commitments into a single trip and I’ve done this reasonably effectively with my latest visit to Adelaide. I presented a paper at the Australian Conference of Economists, a public lecture for the Don Dunstan Foundation and an assessment of the economic outlook for the ACE Business Symposium as well as taking part in several meetings. (A couple of presentations are linked).

My presentations were mostly concerned with the financial crisis and its implications, but I also had meetings on water allocation in the Murray Darling Basin and on Internet access to public information and cultural assets such as image libraries. ???? ??????? 50 ???

While Michèle Lamont is visiting CT, and talking about cross-disciplinary comparisons and interactions, I thought I would raise a question about questions.

As background, my first “real” job was in a government research agency. Seminars were part of the process, and the norm was that senior staff would open the questions. In this context, it was almost invariably safe to ask “What are the policy implications”. That’s still true for some of the seminars I attend, but in others (economic theory, for example), such a question would be at best a faux pas, and the all-purpose question might be something like “Does this work in a monetary economy?”.

So, what are the all-purpose questions in different fields (or are there fields without such questions), and what, if anything does this reveal about those fields?

When a Man Loves a Woman trailer

In the grid parity discussion, reader Salient mentioned a report on energy generation options including solar thermal. There was a lot of interest, and Salient has kindly sent me the report, which is available here (7.5 Mb PDF).

The news from the fires in Victoria just keeps getting worse, with whole towns wiped out and more than 60 people confirmed dead. We can only hope the change in the weather will give firefighters a better chance. The loss of life in the Queensland floods has not been so severe, but there is still widespread devastation.

2009 is upon us, and making any predictions about it seems even more difficult than usual. The one event that is as certain as such things can be is that the disastrous Bush presidency will come to an end in a few weeks time. But how will Obama respond to the many and intertwined crises that he faces? Based on his own rhetoric and actions so far, and on the normal logic of politics, one would expect him to seek out the middle ground, which has shifted a long way to the right under Bush.

But these are not normal times. The logic of economic events has already pushed governments to take measures that would have seemed unthinkable only a few months ago. While bailouts and bank nationalisations have staved off total economic collapse, it’s clear that much more will need to be done, and that governments will have to do most of it.

At present, all of this is being treated as a temporary interruption to business as usual. The Rudd government, for example, having provided one massive stimulus to the economy and preparing for more, guaranteed bank deposits, bailed out childcare centres and so on, is still touting its credentials as “economically conservative”, a phrase that appears to entai a new search for possible cuts in public expenditure, and continued adherence to limits on the ratio of tax revenue to GDP. But (I’ll try to spell all this out more in later posts) the notion of economic conservatism, interpreted as strict adherence to the policy doctrines that have been generally accepted for the past twenty-five years or so, no longer makes any sense.

The picture is similarly cloudy in relation to foreign policy issues. While Obama has garnered immense goodwill simply for not being Bush, that will dissipate fast in the absence of concrete steps, many of which are likely to be resisted by the Foreign Policy Community. Starting with the closure of Guantanamo Bay and an unequivocal repudiation of torture, extraordinary rendition and so on, the US government needs to admit that it is not above both international law and the laws of the United States itself.[1] The increasing evidence that military victory in Afghanistan is unattainable implies the need to think about possible routes to a partial and negotiated peace – as one of the few participants in the conflict from anywhere near the region, Australia should be particularly concerned.

Last but not least, there’s climate change. The Rudd government has given a pretty clear demonstration of how not to adjust climate change policy in the light of a macroeconomic crisis. It remains to be seen whether Obama will do better, whether he can carry the US with him and whether the world as a whole can come to an agreement that has any chance of success.

fn1. All this will be complicated by the latest disastrous events in the Israel-Palestine conflict, as they develop over coming weeks. As this topic tends to hijack comments threads, while adding nothing to our understanding, I’m going to delete anything about it, except in the specific context of US policy.

As I mentioned, I coloured my hair to raise funds for the Leukemia Foundation, as did some others in the Risk and Sustainable Management Group. Now, thanks to the marvel of cameraphones, here are the pics

The Interim Report of the Garnaut Review is just out. Over the fold, I’ve attached the report and also a quick response from me for Crikey, largely based on hearing Garnaut a couple of weeks ago.

Read more…

I’ve been too busy to post on a lot of things so I thought I’d just post some quick links with minimal comment. Some very important, and some not.

* One measure of the death toll in the wars launched by Saddam and then by Bush is the number of Iraqi widows, estimated at between one and two million. Widows are largely excluded from paid work and many are in a desperate position.

* A while ago I pointed out that the paperless office is finally on the way to reality. Today’s NY Times takes the story a bit further.

* What have the unions ever done for us
[youtube]http://www.youtube.com/watch?v=184NTV2CE_c[/youtube]

* Finally, some real progress in the struggle against malaria.

The recent announcement that the production of genetically modifed canola will be permitted suggests that the long controversy over the GM issue is drawing to a close, with a reasonable chance of an outcome that should be satisfactory to most.

GM foods can be produced and sold in Australia, but, in general, must be labelled as such. Producers and consumers can decide to avoid GM if they want to, but those who are willing to embrace GM will not be prevented from doing so. There’s a problem here in relation to canola, since it’s mostly processed into oil for use in margarine and other products and this isn’t covered by the current labelling requirements – this should be fixed.

The policy decision reflects a pretty clear scientific consensus that the products in question are safe to consume, and also a long period of experimental work with genetic modification. With a few exceptions (notably those driven by Monsanto in the US), this work has been carried out with admirable caution, beginning with the Asilomar conference in 1975, which may be seen as the first application of the precautionary principle. Given the experience of the past thirty years, and the scientific understanding that has developed over that time, it seems pretty clear that any risks associated with GM are modest and manageable, not the potential catastrophes that worried the participants at Asilomar.

Read more…

Ratify Kyoto – it’s a stroke of a pen, needs no legislation, is a simple Yes-No decision and will have a big impact.[1]

Straight after that, though, something much harder. Rudd needs to reverse the decline in ethical standards that we’ve seen under Howard, and which began much earlier, going back at least to the 1970s. Arguably, Howard’s ultimate fate was sealed within a few days of taking office with the abandonment of what he later called ‘non-core promises’. That set the pattern for the many lies and improprieties that followed.

Unless the government acts now, before it has anything it wants to hide, the temptations of office will be too much. Some of the elements needed:

* An end to political advertising on the taxpayer’s dollar. After Howard’s disastrously counterproductive blitz on WorkChoices, this ought to be a forced move. But no doubt there are already plenty of self-rated smart operators in the backrooms thinking about how to use the resources of government in the interests of party

* A ministerial code of conduct. John Howard’s 1996 code would be a good starting point. His abandonment of this code to save Warwick Parer was a defining moment in his government’s decline and ultimate downfall. By contrast, Peter Beattie’s willingness to lose his own deputy premier and numerous other ministers has led to political success despite numerous scandals.

* A revival of the Westminster system. It’s too late to go back to the old idea of an apolitical public service, but a clear statement of the roles of ministers, departmental heads and public servants is needed. In my view, we should accept that the departmental head is the personal appointee of the minister, and they should share responsibility for the acts of the department. In particular, any information known to the department head should be presumed to be known to be minister. All public servants below that level should be permanent and apolitical

* Keeping promises. Rudd made some pretty bad promises to get in, such as matching tax cuts and keeping the private health insurance rebate. The standard approach of incoming governments in Australia has been to fabricate a crisis and dump the promises. While this has an obvious appeal, its long-run effect is corrosive, and is reflected in Howard’s downfall.

fn1. As pointed out in comments, it’s not as easy as that. But the fact that some exceptional measures need to be taken to get an immediate start on ratification will only increase the impact of the decision.

UpdateA more comprehensive guide from Miriam Lyons at the Centre for Policy Development

Greg Sheridan pushes Tony Abbott as Deputy Leader for a Liberal Opposition.. As Mick at LP notes, it looks as if I’m going to be disappointed

I’m writing a piece (in the form of a debate with Jason Potts) on the Internet and non-market innovation (open source, blogs, wikis and Web 2.0 more generally) and the editors asked us to say something about digital literacy. I’ve never paid much attention to this metaphor, maybe because of excessive exposure to its predecessor, computer literacy.

It strikes me though, that discussion of digital literacy focuses almost entirely on reading (how to navigate the Web, find reliable information and so on). The things I’m talking about are forms of writing.

Thinking about the rise of text literacy, the distinction tends to be blurred a bit, because most (not all) people who learn to read also learn to write. Still, there’s plenty of discussion of the importance of writing to groups (women, working people) traditionally excluded from written culture.

So, I’m surprised at the neglect of this point in relation to digital literacy, especially because the Internet has done so much to break down the asymmetry between a small group of writers and a large group of readers that characterises most communications media. Having said this, I’m sure this point has been made many times before, and I invite readers to write in with good references.

As an aside, “computer literacy” programs in the late 70s and early 80s had, if anything, the opposite problem. Lots of emphasis on how to code in BASIC and very little appreciation of the potential for computers as tools for general use.

As Andrew Sullivan notes, Glenn Reynolds no longer even claims to be a libertarian[1], and his repudiation of this former position is shared by a number of leading shmibertarians, who are now happy enough to identify as orthodox Republicans. I haven’t yet seen anything similar from some others, such as the Volokhs, but the idea that a relaxed attitude to sex and drugs, and support for economic policies that favour your own social class, can trump the authoritarian implications of militarism, from Gitmo to collusion in government lies, is now pretty much dead. Insofar as an idea can be tested by experiment, prowar libertarianism has been tried and failed (a bit more on this from Jim Henley)

The implications go further I think. Given that the Republicans are now definitively the war party (not that the Democrats have yet become the peace party, but that’s another story), it’s hard to see how libertarian Republicans can survive, any more than Dixiecrats survived Nixon’s Southern strategy. The recent decision by RedState to ban Ron Paul supporters is a pretty clear indication of how real Republicans think about this. This has big implications for a thinktank like Cato, which has opposed the war (but very sotto voce – a visitor to their website would be hard pressed to tell that there even was a war) while remaining within the Republican tent.

Of course, it goes the other way. It’s hard to witness the catastrophic government failure that has characterized every aspect of this war without becoming more sympathetic to certain kinds of libertarian (and also classically conservative) arguments, particularly those focusing on the fallibility of planning.

fn1. Apparently my ignorance of the further reaches of US party politics may have led me to overstate Reynolds’ candor. What’s being announced is, apparently, a break with the Libertarian Party, leaving him free to label himself a (small-l) libertarian. Thanks to Kevin Drum for pointing this out. Jim Henley, linked above, also commented on this distinction, concluding “I doubt it matters. In a corrupt political discourse, no label is much use.” and that’s about where I stand.

While I’m on the Oz, this exceptionally confused piece from Paul Kelly gets just one thing right. Howard’s refusal to ratify Kyoto, despite accepting all the key terms, is evidence of paralysis. I can’t be bothered attempting a point-by-point rebuttal, so I’ll just state the facts about which Kelly seems to be confused
* The Kyoto Protocol constitutes the agreements to act under the UN Framework Convention on Climate Change for the period up to 2012
* The basis of the agreement was that developed countries would cut emissions first, and that less developed countries would do so in later rounds (the post-2012 round is about to be negotiated)
* Suggestions to “amend the Kyoto Protocol” make no sense, since it’s only got four years to run anyway, and its successor is about to be negotiated
* The reason Howard is paralysed is not because he is dogmatically inflexible on symbolic issues (look at his backflip on reconciliation) but because ratifying Kyoto would put him into direct conflict with George Bush, and he is incapable of taking such a step

The NYTimes experiment with putting premium content behind a paywall lasted a bit longer than I expected, but eventually the cost, in terms of separation from the Internet at large, has outweighed the benefits. The NYT columnists and archives will now be available to all readers. (Hat tip, Andrew Leigh).

As Jay Rosen says, this is good news for the conversation that is the blogosphere. Paywalls are an obstacle that we can’t get around individually, since, even if I have free access to a site, there is no point in linking it for readers who have to pay.

But there’s always a downside. The Times decision has been motivated not only by the increasing costs of a closed system but by the increasing returns to advertising, of which the lion’s share is driven through Google (and to a lesser extent, other search engines), which rely on links to place their ads.

In my experience, growing returns to advertising are being manifested in more, and more obtrusive, ads. This may signal a renewed arms race with ad blockers. I’ve just installed Adblock Plus on Firefox, and am waiting to see if that gets me blocked from ad-dependent sites.

Read more…

I was on Lateline Business last week, with a couple of sentences out of a 10-minute interview on the possible privatisation of Medibank Private. Here it is for your enjoyment

Medibank.mov

Over the fold is my piece in today’s Fin
Read more…

I’ve spent a fair while talking and thinking about the Peak Oil Hypothesis, and a couple of thoughts have struck me. Looking at the data, graphed below, the big increases in oil prices in the last five years or so seem to have done nothing to call forth additional supply. And for the last couple of years, output has actually declined. In that sense, it looks as if those pundits who claim that oil output has passed its historical maximum may be able claim vindication.

On the other hand, the term “peak” tends to imply a steep ascent, followed by an equally steep descent. Looked at on a time scale of several centuries this will be about right. But, year to year, the pattern is better described as a plateau with a slight downward slope.

Read more…

Conservative: As an antonym to ‘progressive’, the term ‘conservative’ is affected by many of the same confusions.

First, a conservative may be one who, like Burke, believes that that social change should be gradual and organic, rather than rapid, top-down and rationalistic.

Second, a conservative may emphasise obligations to society and community rather than, or as a counterbalance to individual rights . Since societies and communities tend to change more slowly than individuals, this is broadly consistent with the first definition. Closely related to this group are conservationists, who seek to conserve the natural environment often at the expense of short-term benefits to individuals.

Third, a conservative may defend more specific traditional institutions such as monarchy or private property.

Fourth, the term ‘conservative’ is used as the official name of some right-of-centre political parties and as a general descriptive term for right-of-centre politics

Given a historicist belief that history inevitably flows in a given direction, defined as ‘progressive’, a conservative is one who seeks to halt or slow down that flow. Assuming further that the trend of history is towards the political left, all these definitions fit together pretty well. Even in this case, a conservative of type 3 must gradually adjust to lost ground. A contemporary supporter of absolute or even limited monarchy in Australia and the UK would not be a conservative but a reactionary.

As with ‘progressives’, though the big problems emerge when the trend of history changes. Consider, for example, the role of trade unions. As long as trade unions were growing in power, conservatives of all types could join in resisting this trend. But now that unions are in decline, there is a sharp conflict between different types of conservatives.

On any abstract definition of conservatism, it’s clear that conservatives should support trade unions. They are traditional institutions dating back to the 19th century and beyond, they endorse conservative values of community solidarity and they are under attack primarily because they are seen as an obstacle to radical change. And of course this attack is being led by Conservatives in the sense of definition 4 and, to a lesser extent, definition 3.

However, whereas the problems with the term ‘progressive’ are, in my view, so severe as to render it useless as a description of political views, this is not true of ‘conservative’. The absence of any monotone linear trend does not invalidate conservatism in the sense of the first definition. Rather it strengthens it. If the policy trends of this decade may be reversed next decade, then in makes sense to move slowly and to distrust impressive-looking theoretical blueprints.

Having witnessed a massive reversal of policy trends in my own lifetime, and having been on the losing side for most of the past few decades, I am now a conservative in the sense of definition 1. I hope that, should the tide of policy debate turn in favour of social democracy once more, social democrats will avoid the hubris that characterized the Left before the 1970s and the Right thereafter, and will favor slow and careful change based on broad social support.

Update Coincidentally, Stephen Barton at Online Opinion has a piece headlined “Conservatism is not evil, stupid nor ignorant – it’s just misunderstood. ” Since he starts by quoting a member of Margaret Thatcher’s radical free-market government, he clearly does not refer to conservatism in the sense of definitions 1 and 2, despite the obligatory nods to Burke and Oakeshott. Rather he lists a number of conservative politicians and activists and asserts that, contrary to popular opinion, they aren’t “evil, stupid nor ignorant’, characteristics he instead attributes to people on the other side like Clinton, Whitlam and Keating.

Back in the Triassic Era of blogging, I ran for a while a weekly feature called Word for Wednesday, loosely modelled on Raymond Williams Keywords. I thought I’d repost one entry in response to this interesting debate starting with Henry Farrell at Crooked Timber

Progressive Definition 1: In its political sense, progressive means ‘on the side of progress’. This incorporates a factual assumption that history is moving in some definite direction, and a political program aimed at accelerating that motion and overcoming obstacles to it. Antonyms are ‘conservative’ and ‘reactionary’.

Read more…

Over at Club Troppo, James Farrell summarises the main elements of the economic research agenda on happiness, and some of the standard objections to it. For those who came in late, and probably didn’t imagine economists ever thought about happiness, the crucial finding is that “Cross country data shows pretty consistently that on average happiness increases with income, but at a certain point diminishing returns set in. In the developed world, people are not on average happier than they were in the 1960s.”

The data that supports this consists of surveys that ask people to rate their happiness on a scale, typically from 1 to 10. Within any given society, happiness tends to rise with all the obvious variables: income, health, family relationships and so on. But between societies, or in Western societies like Australia over time, there’s not much difference even though both income and health (life expectancy, for example) have improved pretty steadily for a long time.

I’ve long argued that these questions can’t really tell us anything, and an example given by Don Arthur gives me the chance to put it better than I’ve done before, I hope.

Suppose you wanted to establish whether children’s height increased with age, but you couldn’t measure height directly.
Read more…

Following the publication of this piece in the NY Times, I’ve had a string of email exchanges with Hal Varian, cc:ing Brad DeLong in the role of interested onlooker. I was surprised by the NY Times article since it included both a correct statement of the way in which Stern treats discounting and income redistribution (roughly speaking a 1 per cent change in income has the same value whenever it is incurred and whoever receives it) with a lot of statements that were either misleading or downright wrong, implying that the near-zero rate of pure time preference in the Stern Review implied a near-zero discount rate for cash flows.

Since Varian is one of the brightest and most technically careful people in the economics profession, I was unsurprised by the correct statement, but very surprised to see errors I’d already refuted when put forward by Arnold Kling, Bjorn Lomborg, Megan McArdle and others. Email revealed that the main problems arose from editorial attempts to ‘simplify’ things for readers, but we still have a lot of disagreements about the justifiability or otherwise of inherent discounting.

In any case, all this has spurred me on to produce my long-promised review of Stern on discounting, at least in draft form. Read, enjoy and criticise.

Although I haven’t had time to post on the Switkowski report on this blog, Nanni has it covered in a couple of posts over at the RSMG blog, as well as the related topic of carbon trading.

Mark looks at the implications of higher water prices for dairy farmers and concludes that they ‘may not be priced out of the market as some commentators may have thought.

I report some good news for RSMG. We are ranked in the top 20 per cent of economics research institutions in Australia.

Finally, David is starting a discussion paper series. The first and second are on biosecurity and pest management.

Read, enjoy and comment

There’s been a bit of publicity about a recent study of the effects of the Australian gun buyback. The central finding of the authors was that, while gun homicides declined after the buyback this was merely a continuation of a pre-existing trend.

I’m dubious about the whole approach. In the absence of a well-founded explanation for the trend, there’s no reason to treat maintenance of the trend, rather than the level, as the null hypothesis. The rate of gun homicides has clearly fallen (the authors find the same for suicides), so the data supports the policy, contrary to the claims.

And eyeballing the data, I’m doubtful that it’s even sufficient to establish the existence of a declining trend for the period up to and including 1996. It might be argued that the Port Arthur massacre in 1996 should be excluded and that a downward trend would then emerge, but, given that this was the even that precipitated the buyback, this seems like begging the question to me.

In any case, Andrew Leigh has the ultimate knockdown objection. If you look at the confidence intervals, the only way the gun buyback could have been shown to work, on the authors’ tests is if gun homicides fell below zero by 2004. Clearly, even if you buy the declining trend story, a linear trend is just wrong.

Mark Bahnisch has more, though quite a few commenters don’t seem to appreciate how conclusive Leigh’s refutation has been.

Reader Proust points me to this helpful BOM site showing rainfall trends in Australia. You can choose your own region, season and time period.

Here’s the most relevant to consideration of the effects of global warming, the trend since 1970, which demonstrates how much drier the climate has become over the period in which warming has been observed. As various people have pointed out, is was even drier during the famous Federation drought at the beginning of C20, so the role of global warming isn’t conclusively established, but it would certainly seem unwise to bet on a rapid return to the average observed in the historical record

I spent yesterday at the Gold Coast, at a pre-conference Workshop on Water leading up to the International Association of Agricultural Economics Conference which starts today.

My presentation gave some simulation results on the impact of climate change. It’s still preliminary, but for those interested here is the presentation.

There’s a big area set aside for WiFi users at the Conference, including at least one possible liveblogger, who has already chided me for my failure to report promptly. The competition in econoblogging is definitely getting keener, in all senses of the term.

There’s a lot of interesting stuff around just now on the question what we should and shouldn’t do with measures of aggregate economic performance and welfare. I talked about this in my BrisScience lecture. I make (again) the point the Gross Domestic Product is a bad measure of a nation’s economic welfare because it’s Gross (doesn’t net out depreciation of physical or natural capital), Domestic (doesn’t net out income paid overseas) and a Product (takes no account of labour input)).

But if GDP isn’t a good measure, what is? There are a bunch of alternatives in the air at present such as Gross National Happiness and the Genuine Progress Indicator (the latter has been advocated by Clive Hamilton and the Australia Insitute. These ideas have been getting a fair bit of criticism lately. Andrew Leigh has a go at Gross National Happiness while Nick Gruen writes on the Genuine Progress Indicator for New Matilda. This is subscription only, unfortunately, but when Nick completes his two-part paper, I’ll try to comment more. Andrew Norton at Catallaxy has also written a lot on this.

My general view is close to Nick Gruen’s. We should be trying to get at a Net measure of Full Income (including leisure and taking account of resource stocks) but none of the attempts so far have been really satisfactory. More on this when I get some leisure (As If!).

I’ve been sent a critique of Alan Wood’s piece in the Oz claiming that global warming is a hoax. It’s written by a climate scientist who knows what he is talking about on this issue. Wood obviously doesn’t know or doesn’t care.

I was very disappointed in Wood’s piece. While his economic views are very different from mine, his columns on economic issues are usually rigorous, and if he makes a factual claim, it’s generally reliable. But his standards seem to desert him when he writes on this topic.

The response is in the (now relatively uncommon) form of a point-by-point fisking. Wood’s text is in plain type and the comment’s in italics.

One fairly trivial point is quite revealing. Wood claims, incorrectly, that the Mann “hockey stick” graph was “for a time, incorporated … into the IPCC’s logo.” As the analysis makes clear, the repetition of this bogus factoid indicates that Wood is sourcing his material from the denialist echo chamber, and not doing his own research. This is standard practice for our legion of rightwing hacks (and quite a few lefties as well), but it’s not the kind of thing I’d expect from Alan Wood.

Read more…