John Quiggin

After summarising the generally gloomy prospects for IraqPaul Krugman writes in today’s NYT

much of U.S. policy in Iraq – delaying elections, trying to come up with a formula that blocks simple majority rule, trying to install first Mr. Chalabi, then Mr. Allawi, as strongman – can be seen as a persistent effort to avoid giving Grand Ayatollah Ali al-Sistani his natural dominant role. But recent events in Najaf have demonstrated both the cleric’s awesome influence and the limits of American power. Isn’t it time to realize that we could do a lot worse than Mr. Sistani, and give him pretty much whatever he wants?

He’s right, but it’s important to look ahead to the next step. Sistani has rejected violent resistance to the American occupation, but has always opposed the occupation and has refused to meet with the Americans or their representatives. Assuming elections go ahead and a Shia majority government is elected, it will be under intense pressure to demand the withdrawal of US troops, regardless of the security situation.

Among the possible responses to this, the really stupid one (and therefore the one the Bush Administration will probably pick, if Bush is re-elected) would be to invoke Article 59 of the Transitional Administrative Law approved by the unelected Iraqi Governing Council, which allows for US troops to remain in effective control of the country until a permanent constitution is in place.

A more plausible solution, but one that would probably be unacceptable even to a Kerry Administration, would be to hand over command of a scaled down (but still mostly American) force to a UN commander, operating subject to the control of the elected government. The Iraqi government would probably accept such a compromise.

The final option would be to pull out as requested, and leave the Iraqis to sort out the resulting mess. It’s looking increasingly likely that this will be the actual outcome, and perhaps it would be better than what we have at present.

The seasonally adjusted balance of trade in goods and services came in a deficit of $2.7 billion. If continued at an annual rate, this would amount to about 4 per cent of GDP, implying a current account deficit in excess of 67 per cent.

There’s plenty of debate about whether large current account deficits can be sustained indefinitely. But there isn’t (or shouldn’t be) any such debate about large deficits in the goods and services balance. A large and stable deficit on goods and services necessarily leads to an explosion in net debt and in the current account deficit[1]. This can’t be sustained, and therefore won’t be, but the process of adjustment may not be pleasant.

As various people have pointed out, one contributory factor is the poor performance of the “elaborately transformed manufactures” sector, on which high hopes were set in the early 1990s. More generally, it’s difficult to square this outcome with claims of a miraculous productivity performance in Australia.

I don’t suppose that this will have much impact on the election campaign. But it helps to point up the fact that the government’s reputation as good economic managers is as much the product of good luck as of good judgement. Running sustained large current account deficits is a gamble that world capital markets will continue to take the relaxed view of such deficits that they have in the last decade as regards OECD countries, rather than suddenly changing their minds as they have done in relation to Mexico, Asian countries. Argentina etc.

fn1. If the rate of growth of nominal GDP is higher than the rate of return received by foreign lenders and investors, a small deficit on goods and services can be consistent with a stable ratio of debt to GDP. But that isn’t the case for Australia. The ten-year government bond rate is 6.25 per cent, which is about equal to nominal growth, and private borrowers would mostly be paying rates higher than this.

Following up Brian Bahnisch’s guest post, I’m presenting another from Jack Strocchi. It should be obvious that I don’t agree with Jack’s view of Howard as a Straussian/Machiavellian, telling “Noble Lies” to lead us all to his vision of tolerance. But I’ll leave it to others to make up their own minds.

I found the discussion of Brian’s post very interesting. Jason Soon has some more thoughts, with which I broadly agree, though I’d concede that excessively narrow utilitarianism can lead to the kinds of moral blindness pointed to by Brian.
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In thinking about the likely role of bloggers in the forthcoming election, I thought I’d start by looking at the listing of Oz political bloggers put up by Ken Parish, which is about the most comprehensive there is. What’s immediately apparent is the almost complete absence of any serious contribution from supporters of the Liberals.
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Tonight’s election news had both parties engaging in dreadful beatups. The Libs tried to turn a Labor policy of a 0.1 per cent addition to the Superannuation Guarantee Levy into “a new national payroll tax’. This is so bogus I can’t imagine it lasting past tomorrow.

Meanwhile Labor plugged away on the line that Costello will replace Howard sometime in the next term of office, and that Howard is being dishonest by not admitting this. Of course, this will probably happen, but it might not. Having predicted before the 2001 election that Howard would not serve a full term, I’m not going to make any predictions or demand any promises on this one. If you vote Liberal, you might get Howard, you might get Costello, you might get someone else. I suppose it’s unlikely that Labor would dump Latham in his first term if he won, but give him a couple of terms in office and the same question will arise.

The headline for William Safire’s Op-Ed piece in today’s NYT is “Four connected elections”, and the teaser is

More than one election will affect the young democracy in the land of Saddam’s former tyranny.

Obviously, there’s the election in Iraq itself, and the US election in November. Then there’s another Presidential election in Afghanistan. What’s the fourth? You might expect that the first national election to be held in one of the original “Coalition of the Willing” countries since the war would count for something. But actually, it appears that Safire counts the outcome in Najaf[1] as a ‘primary’.

I’m well aware of how little we are noticed, but even so I opened Safire’s article expecting a mention of Oz. For anyone who thinks that our policy of unwavering support for the US buys us anything in the way of gratitude, or even attention, this is a sobering reminder of our insignificance in American eyes.

fn1. Which by the way, he grossly misinterprets. Sistani, who he correctly presents as the big winner, has been an unwavering opponent of the US occupation. However happy he may be that Sadr is out of Najaf, he is unlikely to countenance a continued presence once a Shia majority government is installed.

Writing a defence of Ross Cameron, and political hypocrisy in general, Greg Barns puts forward the startling proposition that it’s OK for politicians to keep a mistress at taxpayers’ expense[1].

For the body politic in France, Italy, Spain, Portugal and their former colonies, the fact that their political leaders attend church on Sundays, preach the need for less corruption and moral virtue during the week, but keep a mistress at taxpayer’s expense merely raises a resigned shrug of the shoulders.
 
This latter approach is not only more realistic but recognises the point .. that there’s little reason to expect that the personality type attracted to politics is a human of impeccable moral virtue.

If Barns himself should ever run for office, we can’t say we weren’t warned.
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Here’s a guest post from regular commenter Brian Bahnisch, on the philosophy behind our stance on asylum seekers. It raises some important (though not entirely new) questions about the adequacy of utilitarianism in contexts like this.
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It’s time for the Monday Message Board, where readers are invited to post their thoughts on any topic (civilised discussion and no coarse language, please). There will doubtless be plenty of posts from me on the election, and plenty of room for discussion, so I’d encourage Message Board comments on other issues.

Commenter “tipper” supplies the numbers on an issue I’ve discussed previously, observing

Centrebet has the Coalition at $1.55 and Labor at $2.30. For the non-punters, that means you have to bet $7 to win $4 on the Coalition and $10 to win $13 on Labor. I think I read somewhere recently, that the bookies have picked the elections better than the polls for the last couple of years. So go all you “true believers”, make an honest quid for yourselves, for the first time in your lives, by proving the bookies wrong. Or as John would put it, prove the “efficient market hypothesis” wrong.

If I’ve done my arithmetic properly, and allowing for the bookies’ margin, I get the implied probabilities as 0.60 for the Coalition and 0.40 for Labor. The polls have Labor ahead, but looking at all the discussion, I’d say that the consensus view is that the election is a 50-50 proposition, and that’s also my subjective probability.

How good a test of the efficient markets hypothesis will this be? Bayesian decision theory provides an answer[1]. If our initial belief is that the EMH is equally likely to be true or false, and the Coalition wins, we should revise our probability for the EMH up to 0.55. If Labor wins, we should revise it down to 0.45.

As regards the betting option, there’s a collective decision problem here. Given my subjective probabilities, a bet of $100 on Labor would have an expected net payoff of $15, but $15 isn’t enough to cover my transactions costs for placing the bet, etc. A bet of $1000 would have an expected net payoff of $150, which would be worthwhile in these terms. Unfortunately, the 50 per cent chance of losing the $1000 comes with the additional cost of having to explain to my (non-Bayesian) wife what a good choice I had made ex ante . The net expected benefit comes out as a big negative here.

fn1. The workings are easy for those who know Bayes’ theorem and accept the modern subjectivist interpretation , but they won’t make much sense to those who don’t.

Before we get bogged down in the election, I thought I’d do a quick post on this piece that caught my eye. It was a piece in the Age in the long-running dispute between Melbourne University Private and Senator Kim Carr, Labor Science and Research Spokesman. Here’s what caught my eye.

[Carr] claimed five of the 12 research publications MUP had produced up to June 30 this year did not meet Commonwealth Department of Education, Science and Training guidelines and suggested there were doubts about another five.

The university, in its final submission to the committee on Thursday, denied making any false claims, maintained its research report had been properly audited, and said its research publication rate was almost twice the national average (emphasis added).

I thought this must be a misprint. An entire university with 12 publications in a year? I get more than that[1], and so do quite a few other researchers. And how can this possibly be “above the national average?”
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PM Calls Oct 9 poll In the face of such a long-anticipated announcement, I haven’t anything new to say right now, so I thought I’d invite commenters to post their predictions. Any sort of prediction is welcome, but I’ll have a contest for the commenter who can give the most accurate forecast of the number of House of Representatives seats won by the Coalition. The prize, if any, will be announced later.,

A lot of people have pointed to a survey reported in the Telegraph and accepted the misleading interpretation of the results given by the Tele’s Malcolm Farr. First, the results. Of those surveyed, 47 per cent thought Howard had lied on children overboard, 31 per cent did not believe he had lied, and 22 per cent were uncommitted. On a second question, 60 per cent said it would not influence the way they voted, 31 per cent said it would and 9 per cent were uncommitted. The heading is “If PM lied, few care” and the opening para is “A large majority of voters have said the issue won’t influence their polling booth choice – even if they think the Prime Minister didn’t tell the truth.” This is wrong in almost every way a survey report can be wrong.
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The right wing of Ozplogistan has lined up fairly loyally behind Howard until now. There are plenty of people happy to vote for a liar. But is anyone out there loyal enough to advocate voting for a spammer ?[1],[2]

fn1. OK, it’s Howard’s son who actually does the spamming, but it’s Howard’s money and message.

fn2. While I’m at it, a quick note on my previous post on “legitimate” companies that employ spammers I emailed two of those mentioned (couldn’t find an email address on the website for the third) but got no reply.

Brad de Long gives a rather unenthusiastic case for thinking Kerry will be a better economic manager than Bush. The first and most convincing of his proposed reasons is that

The Bush administration always does much worse than you anticipate, no matter how low your expectations are

The others are the quality of his team and the fact that he will restore proper processes.

The reason Brad doesn’t display more enthusiasm is that Kerry hasn’t given much ground for it. He has a plan to cut the deficit in half, but then, so does Bush[1].

I’d like to offer an argument based on political business cycles to suggest that Kerry has to do better than Bush.
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From what I’ve seen, lie-detectors are little more than a 20th century version of methods known to witch-doctors since time immemorial. If the subject believes the witch-doctor has the power to detect lies, they will give themselves away with cues that can be picked up by an alert human or mechanical observer. So when Mike Scrafton volunteered to take a polygraph test to show that he was telling the truth and the PM was lying, I didn’t put too much weight on the results. (As a way of keeping the story alive, and dramatizing it for a big TV audience, it was great, though). I wasn’t too surprised when Howard dismissed it as a gimmick.

But following a letter in yesterday’s Fin, I’ve discovered that the Howard government actually takes lie detectors very seriously, and has been trying them out in ASIO .This is being done, at least in part,at the behest of the US

On June 25 [2002], the Foreign Minister, Alexander Downer, signed a new, legally binding, pact with the US to protect classified information. Although no details were spelled out in the pact, the US wants Australian officials who have access to highly classified US intelligence material to be subjected to the same polygraph tests that routinely apply to American officials.

Whatever the merits of integrated defence in general, in this case I think we’d be better off hiring some witch-doctors.

I’ve been a bit slack about updating the website where I keep all my articles, working papers and so on. One reason is that I’ve been working on a new site for the research group I’ve been setting up as part of my Federation Fellowship (design and organisation suggestions most welcome).

In any case, I’ve just put up about six months’ worth of opinion pieces from the Fin, which you can read here Feel free to comment!

As the pointless bloodbath in Najaf drags on, Ayatollah Sistani has finally returned from hospital treatment in London, and looks likely to be the only person to come out of this disaster with any credit[1]. His march on Najaf will, it seems likely, allow Sadr and the American-Allawi forces to reach the kind of face-saving compromise that has been the only possible outcome all along, apart from the disastrous option of an assault on the shrine and the martyrdom of Sadr.

Update #1 27/8 I’ve come across a useful piece by a former Senior Adviser to the Coalition Provisional Authority, Larry Diamond, linked, with some interesting comments by Gary Farber Gives an account of the Coalition’s dealings with Sadr and other militias (minor snipe: Diamond uses “prevaricating” when he means “vacillating” to describe this).

Update #2 27/8 Like most people not actually on the scene who seek to be well-informed about Iraq, I’m indebted to Juan Cole for his informed comment and information on the situation. He’s just put up a post assessing the winners and losers from the Najaf situation which matches, almost point for point, what I posted yesterday. Of course, it carries a lot more weight coming from him than from me.
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Late last year, the debate over climate change was stirred up when an environmental economist, Ross McKitrick and a mining executive, AndrewSteven McIntyre, published a piece claiming to refute climatological research crucial to the claim that the last few decades have seen unparalleled global warming (the ‘hockey-stick‘ paper of Mann, Bradley and Hughes). According to McKitrick and McIntyre, the work of Mann et al was riddled with errors, The paper was loudly publicised by the American Enterprise Institute (home of John Lott) and, as you would expect, Flack Central Station. Mann et al produced an immediate rebuttal, and despite many promises of a rejoinder, McKitrick and McIntyre have never responded on the substantive issues[1].

This would be par for the course, except that McKitrick somehow managed to attract the attention of Tim Lambert, famous for his demolition of Lott’s shonky research, which purported to show that guns reduce crime. The result: McKitrick’s work is even shoddier than Lott’s.

Update 27/8 I’ve had some run-ins with John Brignell of Number Watch, who generally takes a contrarian line on global warming and other environmental issues. So I emailed him pointing out this absurdity to see what would happen. I’m pleased and impressed to say he checked the numbers and posted a link almost immediately (scroll to bottom of page).
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In my previous post on US trade, I argued that if the current account deficit is to be stabilised at a sustainable level, the balance of trade on goods and services must return to surplus in the next decade or so. In this post, I’m going to ruIe out a soft option and argue that, while a smooth market-driven adjustment is not inconceivable, it’s unlikely.
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I was checking my MT Activity logs, and was stunned to see how much comment spam I’m blocking with MT Blacklist. This got me thinking about spam in general, and led me to this article in the Kansas City Star which details the activity of a spammer selling various kinds of insurance. The money quote (literally) is

Completed forms, in turn, are sold to agents of legitimate companies, such as IndyMac Bank, ADT Security and MEGA Life and Health Insurance. The agents say they pay $3 to $7 for each referral. (emphasis added)

I can’t see anything legitimate about a company that employs criminal methods in its business, while pretending to be at arms length from the whole thing. It seems pretty clear that the way to make this kind of spam uneconomical is to make the employers of spammers liable for civil action. While I think estimates of $2000/employee, mentioned in the story, are over the top, the economic damage done by spammers is immense – more than enough to put firms like those mentioned[1] out of business if they were forced to bear their share of the bill.

Of course, this wouldn’t work so well against the purveyors of generic viagra, penis enlargement and so on, where the businesses are just as fly-by-night as the spammers. But every little helps.

UpdateCoincidentally, the NYT reports that dozens of spammers have been charged with a variety of offences

fn1. I’ve emailed one of them (IndyMac Bank) to see if they have a response to the KC Star story. If I get one, I’ll report it.

In response to previous posts on asylum seekers, various commenters have suggested that there is no alternative to our current brutal policies, including the detention of children. A striking feature of these comments is that they treat the problem as if it is utterly new and unprecedented. In fact, we have lots of experience in dealing with people subject to judicial processes (such as criminal trials) and also with unauthorised residents such as visa overstayers.

Looking first at what should be done when someone arrives in Australia without authorisation, and claims political asylum, I’d suggest the obvious model is that of bail for people accused of criminal trials. That is, asylum seekers should be allowed to remain at liberty unless it can be shown, on the balance of probabilities, that they are likely to abscond or that they represent a danger to the community/

The comments seem to take the view that this is unacceptable because, inevitably, some people will abscond. But they don’t, I assume, take the same view in relation to criminal offences. At this moment, there are thousands of people at large in Australia who have outstanding warrants for offences ranging from speeding to crimes of violence. These people represent a much greater threat to the community than do illegal immigrants. But no-one suggests that everyone charged with an offence should be locked up until they have been tried.

And even within the category of illegal immigrants, there are tens of thousands who have jumped the queue the easy way, by overstaying a tourist or student visa. Most, though not all, of these turn up in the end, but quite a few manage to squeeze into one of the legal categories, for example by marriage.

If you read the discussion of this issue from supporters of the government, the general impression is that even the slightest breach in our immigration policy would be a national catastrophe, and that to avoid such a catastrophe we are justified in the kind of extreme measures we have seen, things that would normally be rejected outright in a democratic society. This is simply untrue, as should be obvious when you consider comparable issues like bail or proceeding by summons for (alleged) criminals.

This is only part of the issue, the other part being our general policy on refugees, which I will discuss in a later post.

As the blog seems to have some new readers, I thought it a good time to point out yet again that if you’re in Brisbane or the Gold Coast, and want to study karate in a rigorous traditional style, you can’t do better than Seiyushin. Kancho Nagayama was the winner in the 1988 All Japan National OpenWeight Tournament, and is a great teacher. The group is friendly, and open to a wide range of ages and skill levels (roughly 5 to 50 at present), and welcoming to both men and women. Dojos are in St Lucia, Toowong and Southport.

Peter Costello has obliquely answered the question I asked last week, in relation to the government’s brutal mistreatment of refugees in general and children in particular. He now looks forward to the end of child detention, which obviously presupposes the end of Howard’s Prime Ministership and the repudiation of his signature policy. As Tim Dunlop points out, this is a major (though unacknowledged) shift in Costello’s position. Whatever the motivation, it is welcome.

While I’m on the topic I’d like to express, yet again, my disgust at those who have endlessly parsed government lies about “children overboard” seeking to make them true by arguing that actions “morally equivalent” to throwing children overboard took place on occasions other than the one to which the lies refer. These people should never be allowed to forget that the policy these lies were used to defend is one of locking innocent children behind razor wire, in desert camps and remote islands, under inhuman conditions deliberately designed to discourage others. I can think of plenty of things to which this is morally equivalent, and they are all shameful.

I got an article accepted in a journal today and, if my count is correct[1], it is number 150 for me. Since my first article was published in 1979, that’s an average rate of six a year, with a slowly increasing trend. It’s not a startling rate of output, given that I’ve held research-only jobs for most of those 25 years. Still, by the time you take acccount of rejections, resubmissions and so on, there’s a fair bit of work involved, and not that many people keep up the pace indefinitely.

Because I’ve been active for quite a while, and because my work doesn’t exactly fit the mainstream mould in either policy content or analytical style[2], I’ve accumulated a lot of rejection letters, more than anyone else I know of, in fact. My records aren’t good enough for a complete tally, but I’ve certainly had several hundred rejections – I once got three on one day. Some papers have been rejected half a dozen times or more before finding a home. This isn’t quite as bad as it sounds. Most high-grade journals in economics have rejection rates of 90 per cent or more, which implies the average paper must be rejected pretty often.

On a happier note, I’ve covered a lot of different topics and used a range of different approaches to economics, more than most of my colleagues. For example, I’m pretty sure I’m the only person who’s published in both the Journal of Mathematical Economics and the (institutionalist) Journal of Economic Issues

fn1. I publish a fair bit of policy stuff, and there’s sometimes a bit of doubt as to whether the resulting paper counts as “refereed”. I usually err on the side of caution, but there are always marginal cases.

fn2. A lot of the time, it’s not so much that I’m challenging mainstream orthodoxy in a broad sense as that I don’t like the established way of doing this in some particular subfield, such as principal-agent theory.

You might have hoped, with the end of the Cold War and all, that we could have an Olympic games free of global politics[1] Not as far as the Oz is concerned, running this turgid piece of triumphalism from Daniel Henninger of the Wall Street Journal. I doubt that many of the athletes he attempts to exploit would go along with him.

The Iraqis in particular have made vigorous protests over attempts by George Bush to score political points from their presence. Here’s what their coach has had to say

My problem is not with the American people. They are with what America has done – destroyed everything … The American army has killed so many people in Iraq. What is freedom when I go to the stadium and there are shootings on the road?

It’s not clear whether Henninger is arrogantly disregarding their protests or whether he wrote the piece earlier and the Oz has failed to keep up with the news.

fn1. Of course, as the troubles of several Australian teams have shown, there’s no way of getting away from the internal politics of sport.

I found this story of globalisation and soft power at charlotte street, via bertramonline. As bertram says, you can’t make this kind of thing up.

I had a look at a closely-related phenomenon (Americans seeking a Starbucks overseas and imagining all the locals go there) in this piece

Rafe Champion alerted me to this piece by John Stone on the politicisation of the public service, and the role of retired public servants. Stone makes some valid points, but since he refers to his own dealings with government, I think it’s reasonable to point out that Stone himself is responsible for the first big breach in one of the most important conventions that used to prevail in Australia; namely that retired public servants and politicians should retire fully, or at least not take jobs that involve a potential conflict of interest with their previous positions. Stone had barely retired as Secretary of the Treasury when he started attacking the government vigorously in newspaper columns, and not long after that he was elected to the Senate for the National Party (as I recall, double-dipping his public service pension in the process). Since then, we’ve seen a steady erosion of the notion of the public service as a lifetime career, and of political office as the final stage in a career, preferably one marked by achievements outside politics.

A stint in politics or the public service is now seen as a routine stepping-stone to a more lucrative career in business, particularly highly-regulated businesses or lobbying and PR firms, where the contacts and inside knowledge acquired in the public sector represent a valuable asset. Given that people are starting with that expectation, it’s bound to affect their dealings with the business sector. Everyone they meet there is a potential future employer. And, of course, as the transition approaches, the temptation to do some more explicit mutual backscratching becomes stronger. The disgraceful behavior of former Health Minister Michael Wooldridge[1] before his departure for the private sector is one of the more egregious examples.

fn1. As noted here, Wooldridge approved a $5 million grant to the Royal College of GPs for a building to help co-locate several doctors’ groups. That same organisation subsequently employed him as a consultant.

Service was interrrupted for a few hours just now, but for a fairly pleasing reason. My bandwidth limit of 2GB/month, which was ample when the blog started, has been exceeded, as a result of higher readership, so the server automatically cut me off. I now have a 10GB limit which should last a fair while.

It’s Monday again, and time for the Monday Message Board. Post your comments on any topic (civilised discussion and no coarse language, please). I’d be interested in general reactions to the Olympics – too much sport or not enough?