John Quiggin

The long-discredited Oregon petition against global warming seems to be getting another run – presumably it is circulating somewhere in the wilder reaches of the blogosphere. Miranda Devine gave it a run in yesterday’s SMH, in a piece loaded with errors and inventions.

Her basic complaint is that efforts like the Oregon petition, Lomborg’s Copenhagen Consensus and so on, are unfairly attacked by greenies. Leaving aside the fact that these dishonest stunts deserved to be attacked, Devine is the last person who has any right to complain about excessive vitriol in debate. She can dish it out, but she can’t take it, apparently.

I was watching Costello discussing the likely increase in interest rates on the news last night and he said something “Whenever you have a single digit in front of your interest rate, it’s low”. I couldn’t see a reference to this in the papers today, and I wonder if any readers can locate a transcript or similar.

This is all relative of course. My first home loan was at 9.5 per cent and that was considered outrageously high. For those who experienced the economic management of Howard and Keating in the 1980s, such a rate came to seem amazingly low. But with the levels of indebtedness prevailing now, I’d have thought 9.5 per cent would be ruinous for many.

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Regular reader Nicholas Gruen has suggested that we discuss the possibilities of a single party holding government nationally and in all states and territories. I’ve taken the liberty of posting some of his message as a discussion starter.

Civilised discussion and no coarse language, please.

In the weekend edition of the Fin (reproduced here), Justin Wolfers writes about a betting market on the Iraqi election turnout, run by the Irish betting exchange Tradesports. The bet turned on whether turnout would exceed 8 million and was roughly even money before voting began. The price of the contract rose sharply on early reports of turnouts over 70 per cent, then fell back again when to around even money when it became clear these reports had little basis. The final official turnout was about 8.4 million.

Attentive readers will recall that something very similar happened in the US election when early exit polls favored Kerry. Modifying an old aphorism to say that “two striking observations constitute a stylised fact”, I think we can now say pretty safely that political betting markets display the wisdom of crowds who read blogs.
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If you’re in WA, you’ve got a little more than 24 hours left in which to make up your mind (if my posts haven’t convinced you already). Nic White has comprehensive coverage of the issues. As always, Rob Corr is worth a read as well.

After a longer break than I’d planned, I’m back for the second and final instalment of my series on the efficient markets hypothesis and its implications for Social Security reform and other issues. The first instalment is here.

Last time, I pointed out that, under the strong assumptions needed for the efficient markets hypothesis to hold, the diversion of social security funds to personal accounts makes no difference at all, since everyone can already choose their optimal portfolio, borrowing if necessary to finance equity investments. A more realistic version with borrowing constraints or high borrowing costs implies that either private accounts or diversification of the holdings of the Social Security Fund can be beneficial, and also that a range of other government interventions will be beneficial. (See also Matt Yglesias

In this post I want to look at the case I think is actually relevant, namely, where the efficient markets hypothesis is violated in so many ways as to be a poor guide to economic policy of any kind.
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Thanks to Bruce Littleboy for pointing me to this complete translation of Hayek’s 1981 interview with the (pro-Pinochet Chilean) newspaper El Mercurio in which he stated

Personally I prefer a liberal dictator to democratic
government lacking liberalism.

As the interview makes clear, Hayek supports the Pinochet dictatorship, on the assumption (correct in the end) that it would eventually give way to a more liberal regime. Of course, many supporters of dictators make this assumption and all dictatorships, like all governments, pass away sooner or later.

Plenty of people have made worse political mistakes than backing Pinochet, most obviously those sections of the left who supported Stalin, Mao and their lesser accomplices. Still, the fact that both the Mont Pelerin society and leaders of the free-market right like Thatcher and Reagan gave their enthusiastic support to this mass murderer should be remembered when they, and their followers, try to claim the moral high ground as against the moderate left.

Fellow ag economist David Pannell has a go at the economics of the WA Liberal’s canal project, with quite a few cites to my piece in the Fin a couple of weeks ago. For any WA readers this proposal alone is a good enough reason to put the Liberals last.

is a response to the push to cut the top marginal tax rate. As well as criticising a variety of spurious arguments on the topic I make the point, in line with Reserve Bank Governor Ian Macfarlane (and even Peter Saunders of the CIS) that the real problems in our tax system are high effective marginal tax rates for low-income earners and the incentives to speculate in real estate rather than invest in the production of tradeables, incentives that contribute to our massive trade and current account deficits.

Just as US soldiers and National Guards who’ve completed their tours in Iraq are being conscripted by stop-loss orders, recalls and the like, then sent back for a second round, Australia has received new orders. The New Europeans (Spain, Poland, Netherlands and so on) are all pulling out, and its up to us to fill the gap.

Of course, there’s no mention of the US in Howard’s announcement. Supposedly, this is a response to personal requests from the British and Japanese Prime Ministers. Older readers will recall that exactly the same farce was played out with our commitment of troops to Vietnam. Anyone who believes the government’s line might reflect on what kind of response Blair and Koizumi would get if they requested from Howard something the Bush Administration didn’t like, such as ratification of Kyoto.

There’s no strategy here, just hanging on and hoping things will change for the better. There’s no sign so far that the presence of 150 000 troops has done any good. The insurgency/resistance/terrorists are far more numerous now than they were a year ago. They gain legitimacy when they attack foreign occupiers, and lose it when they attack fellow-Iraqis. I hope that the new Iraqi government, when it emerges, will maintain its campaign commitment (watered down at the last minute) to demand a schedule for withdrawal, but if it doesn’t, Australia and Britain should be pushing the US to set one.

Tthe decision raises some other big issues for Australia that don’t seem to have been considered. In particular, there’s the possibility of war with Iran. Have we received assurances either that there won’t be any US military action against Iran or that, if there is, Iraq won’t be used as a base? To ask this question is to answer it.

I sent in my donation to MSF just now, and I’ve had confirmation from several co-sponsors that they’ve done the same. The number of comments was a bit disappointing, but I’m happy to say that most people so far have responded by giving more than they promised. I’d like, once again, to thank everyone who participated.

As part of the general increase in repression in Iran in recent years, several bloggers have been arrested and imprisoned. You can keep up with developments and suggested actions with The Committee to Protect Bloggers

The Monday Message Board has a lively discussion of the Habib case, and I thought I’d make my own observations. Based on the evidence I’ve seen, I’m fairly confident of three things

* Habib was up to something connected with Islamic militants in Afghanistan

* After his arrest he was tortured (in Pakistan and Egypt) and subject to cruel and degrading treatment (in Guantanamo Bay)

* The Australian government knew about and approved Habib’s treatment[1].

A lot of participants in the debate seem to assume that, if you accept the first point, the second and third don’t really matter. I would have hoped that this kind of position didn’t need to be refuted, but that’s apparently not the case, so I’ll try.

Update A lengthy comments thread already, but it’s interesting that no-one, as far as I can see has disagreed with my factual conclusions. If there are people out there who think that Habib is an innocent bystander they haven’t shown up here. And, although there are plenty of commenters willing to defend torture, no-one, it seems, is willing to put their name (or handle) to a claim that the government is telling the truth.
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I’m being besieged by spammers and have been forced to crank up the defences, with the inevitable “collateral damage”. What I’ve worked out so far for those who want to avoid this category:

(1) Don’t use lots of hyperlinks
(2) Send from a regular working email account – Spam Karma doesn’t seem to like anonymisers and so on needful things dvd download

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Civilised discussion and no coarse language, please.

As promised, this is the post for my second “cash for comment” appeal. I’ll be giving $1 per comment, once again, up to a limit of $1000 (last time there were about 500 comments). I plan to donate the proceeds to Medecins Sans Frontieres, and express a preference for projects related to the The Global Fund to fight against AIDS, tuberculosis and malaria . These diseases kill over 6 million people each year, and the numbers are growing. Of course, cosponsors are welcome to nominate their own preferred charity.

As before, I’m also hoping for cosponsors, who agree to put in 5,10, 20 or 50 cents up to whatever limit seems appropriate. When the appeal is done, I’ll email to tell you how much you’ve promised. You then send the donation to MSF or your preferred alternative. If you can advise me when you’ve done it (and if you want, send a copy of the receipt) that’s great, but this entire appeal is being done on the basis of trust. I’ve already had one offer of 10c per comment, which I hope to confirm soon.

As regards your comments, anything you want to say is fine (civilised discussion and no coarse language, please), and it doesn’t have to be more than a word or two. But I’d be interested in discussion on the issues raised by exercises of this kind, for example, priorities in aid, the role of private philanthropy vs governments, NGOs, business and so on.

I’ll just mention that I’m financing my contribution partly from the payment I got for a review of Lomborg’s book, Global Crises, Global Solutions, coming out of the Copenhagen Consensus. Although I had some severe criticisms of that exercise, there were some important positives as well, and the assessment of health initiatives was largely consistent with the priorities identified by the Global Fund. So it seems appropriate to allocate the proceeds to a high-priority good cause.

The appeal will continue until 6pm Sunday Queensland time. I’ve got a few things on over the weekend, but I’ll try to post some updates.

Update 11pm Friday The appeal has barely begun and already cosponsors have promised 80 cents a comment, in addition to my $1. That’s a target of $1800. So please, spread the word.

Update Saturday 4pm I expected to get more comments than last time and fewer cosponsors, having already leaned on the generosity of my regular readers. In fact, it’s been pretty much the reverse. Comments have been a bit slow coming on, but the support from cosponsors has been truly impressive. Roughly in order

An anonymous regular reader has offered 50c per comment
Ken Harwood has offered 20c
Jonathan Lundell has offered 10c
Harry Clarke has offered 20c
Mister z has offered 10c
rdb has offered 10c
Emma has offered up to $100 (not sure what rate)
matthew Klugman has offered 10c

If my arithmetic is right, that’s a total pledge of $2.30 a comment. Given that it looks pretty unlikely that the upper limit is going to be reached, I’ll pitch in another 70c, and bring it up to $3. Is this a bargain, or what?

Update 2pm Sunday We’ve just passed 150 comments, so the amount raised is over $500, which is not bad, although there’s a lot more than this still on the table. Let’s hope we can make at least 200 by 6 pm (four hours to go).

Additional cosponsors

Peter Fuller offers 20 cents per comment – up to 500 ($100)
Bill Gardner offers 0.25 / comment, up to A$100.
Caitlin offers $50 if we reach 500

I forgot to mention in the earlier update that Jack Strocchi has offered 10c, subject to the requirement that I should say something nice about Bill Gates and his charitable efforts. Sooner done than said!

Appeal ended 6pm Sunday A total of 156 comments and a bit over $500 raised. Not as successful as last time, but a good effort nonetheless. Tomorrow, I’ll be getting in touch with the many generous cosponsors to tell them how much they’ve promised. Thanks very much to them, and to everyone who took the time to comment and think a little a bit about the issues. Thanks also to Tim Blair, Mark Bahnisch, Claire from Anggargoon(?) and others who linked. My Trackbacks aren’t working properly so there may be others I’ve missed.

fn1. At my absolute discretion, I’ll delete bots, spammers, repetitive commenters etc. If you don’t trust me to act fairly in this respect, or any other, don’t participate.

The fundraising appeal for tsunami relief was a big success, and it seems to me that the exercise is worth trying again. As a community, we seemed to be happier when we were focusing at least some of our thoughts on helping others than in our usual isolated consumer mode, and I can’t see why we shouldn’t consistently maintain something like the effort level devoted to the tsunami appeal. Giving away 2 per cent of our income (say, an hour’s pay each work for a full-time worker) to international relief efforts would make a huge difference. Australia alone could finance a pretty large slab of the various ambitious projects for global health that have been put forward. If all the whole developed countries contributed at this level, much of the misery that afflicts the world could be prevented.

So, I’m going to be giving away $1 per comment, once again, up to a limit of $1000 (last time there were about 500 comments). I’m also hoping for cosponsors, who could agree to put in 5,10, 20 or 50 cents up to whatever limit seems appropriate. I plan to donate the proceeds to Medecins Sans Frontieres, and express a preference for projects related to the The Global Fund to fight against AIDS, tuberculosis and malaria . These diseases kill over 6 million people each year, and the numbers are growing. Of course, cosponsors are welcome to nominate their own preferred charity.

I’m going to give a bit more notice this time, especially in the hope of attracting some new cosponsors. I’ll put up the post calling for comments sometime on Friday, and keep it open until Sunday evening.

At Troppo and elsewhere, there’s been a lot of discussion of postmodernism, the English curriculum and so on. Nothing appears to have changed[1] since the last round of this stuff nearly three years ago, when one of my early posts began:

The postmodernists have been copping it from all directions lately, mostly in relation to their claimed infiltration of the High School English curriculum in New South Wales and elsewhere.

fn1. Nothing except that linkrot has long since consumed all the links, and the comments are similarly lost
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In an interesting tribute to the impact of blogs, the latest issue Centre for Independent Studies magazine Policy includes a lengthy article by Sinclair Davidson, entitled Taxation with Misrepresentation (PDF), which appears to be a response to this blog post, criticising an earlier article in the same journal. If only all the posts here attracted a similar response.

At this stage, it doesn’t appear that the article adds much to the discussion that took place at the time. For example, Davidson has a lengthy defence of the morality of tax avoidance and of Garfield Barwick’s excellence as a judge, but doesn’t respond at all to the substantive point that his figures on taxable incomes are distorted by the effects of tax avoidance/minimisation/effective planning. Call it what you will, the game is about making your taxable income less than your actual income.

One interesting claim is that 60 per cent of households get more in welfare benefits (including family payments) than they pay in tax. Davidson refers to his own unpublished calculations as the basis for this claim. I’ll wait until I’ve seen a bit more detail before responding.

Anyway, as I say, it’s good to see that blogs are having an impact, at least to the point of provoking a reaction.

Matthew Yglesias had a well-argued piece a couple of days ago on Social Security and the Efficient Markets Hypothesis (EMH), in which he quoted me on the (generally left-wing) implications of rejecting the EMH. This spurred me to start on a post (or maybe a series) on the EMH, the equity premium and the implications for US Social Security reform. Most of what I have to say is consistent with what Matt and others have said previously, but perhaps there will be a bit of a new perspective.
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Yesterday’s Fin had a piece by Louise McBride arguing for cuts in personal income tax rate, and including the claim that, according to Tax Office stats, Australian companies had a total taxable income of $1.1 trillion, far more than individuals (about $300 billion), even though individuals pay far more in income tax.

One thing I recommend to my students is to keep in their minds round number estimates of as many key economic magnitudes as possible, so they can be alerted by implausible claims, and can cross check. My first example is that Australia has a population of roughly 20 million, GDP of roughly $800 billion and therefore per capita GDP of $40 000 (the population number is close enough to do for quite a few years, GDP needs updating every couple of years to be within 10 per cent).

Alert readers will already have noticed that McBride’s stats imply that company profits are approximately 150 per cent of GDP. I know capitalism has been doing well, lately, but this seems unlikely. Unfortunately, I won’t have time to chase down the actual source for a while, so if anyone does have some free time to look at the tax stats and give me a hint as to what is going on, that would be great.

This is a good day for the planet, which has had mostly bad days lately. Still, even with US (and FWIW, Australian) participation, Kyoto would only have been a first step towards tackling global warming. As it is, we have a first step towards a first step.

“Quiggin Responds to “Neither Borrower nor
Lender Be” by Thomas J. Grennes” has been published in The
Economists’ Voice.

You can access it by going to this URL

To encourage readership, simply refer people to that page.

Inspired by this site, the crew over at Troppo Armadillo have started some interesting discussions of Tintin, Asterix and cognate topics such as postmodernism and English teaching. Well worth a visit.

Having seen Mamdouh Habib’s 60 Minutes interview the other night, I’m keener than ever that he should have his day in court. I think it’s clear enough that Habib’s allegations that he was tortured in detention are true in general (why else would he have been shipped to Egypt?) and that the Australian government either knew or, in its Children Overboard mode, chose not to know about it – most likely some mixture of the two.

That said, Habib said nothing[1] to refute the government’s allegation that he’s a terrorist, claiming that he would give his answers in court. I certainly hope that this takes place. Both Habib and the government have a lot of explaining to do, in my view.

At this distance in time, I find it hard to believe that there’s much in the mooted excuse that producing the government’s evidence would compromise intelligence sources. Habib’s alleged crimes took place in 2001, when the Taliban was still in power, and Al Qaeda was operating more or less openly. The failure to detect the S11 attacks [on the government's own account, a matter of common gossip for Habib] suggests that there can’t have been much in the way of intelligence penetration of AQ at the time and the destruction of the Taliban government must have rendered most such sources obsolete.

fn1. To be clear, he denied the allegation, but did not respond any questions about the details.

It’s sixty years ago since the destruction of Dresden by British and American bombers an event that is still being debated. Chris Bertram at CT has some thoughts and links on the historical events. Here’s a personal, contemporary view from occasional guest poster Tom Oates.

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It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. I probably won’t get around to commenting on the morganatic marriage of Charles and Camilla, but others may want to do so.

This piece by Nicholas Kristof encapsulates everything I don’t like about ‘evolutionary psychology’, particularly in its pop mode. Kristof makes the argument that the success of the religious right is due to a predisposition to religious belief grounded in supposed evolutionary advantages, supposedly reflected in a particular gene, referred to by its putative discoverer as ‘The God Gene’. This is pretty much a standard example of EP in action. Take a local, but vigorously contested, social norm, invent a ‘just so’ story and assert that you have discovered a genetically determined universal. Kristof doesn’t quite get to the point of asserting that there exists a gene for voting Republican, but it follows logically from his argument (Dawkins defends the idea of a gene for tying shoelaces, for example).

Where to begin on the problems of all this?
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Well, I just bought my first pack of hot cross buns. Until now, I’ve vaguely tried to adhere to some notion of what’s appropriate to the season, but I guess I have to accept that Easter begins as soon as the last marked-down mince pies and Christmas puddings have been cleared from the shelves. Then I suppose there’s a month or two each for Mothers’ Day and Fathers’ Day before Christmas starts again in October (plus the various smaller occasions like Valentine’s Day).

My capitulation to the Zeitgeist on this matter doesn’t worry me too much. After all, I like hot cross buns. But I’m getting increasingly frequent comments on my furrowed brow. It’s no longer seen as the product of deep thought, but rather an indication that I’m too cheap to spring for Botox.

This regular feature is back. The idea is that, over the weekend, you should post your thoughts in a more leisurely fashion than in ordinary comments or the Monday Message Board.

Please post your thoughts on any topic, at whatever length seems appropriate to you. Civilised discussion and no coarse language, please.