John Quiggin

Hello everyone, your friendly Ozblogistan Tyrant here.

Ozblogistan was moved to new servers on Monday night by some subcontractors. The ensuing few days have been a mess because the move was only incompletely successful. In particular, bloggers have been unable to log into the wordpress backend to write posts or moderate comments.

This morning a threw a switch and it appears as though we are slowly coming back online. I’m very sorry for the disruption.

Peter Hartcher is an insightful commentator on political issues, but we are all prone to fallacious reasoning about probability, and this article about Australian views of the US election illustrates quite a few of them. I don’t mean to pick on Hartcher, whose errors here are trivial compared to the practice of deriving strong conclusions from trivial fluctuations in poll numbers, but this is, as they say, a learning opportunity. Hartcher notes that most Australians, like most people everywhere outside the US, would prefer Obama and goes on to say

But Australians’ answers to another poll question on the US election were troubling. Asked which candidate they expect to win, 65 per cent name Obama and only 9 per cent Romney in the poll conducted by UMR Research.

This is not a question about preferences but expectations. And it is far removed from the realities in the US. The contest for the presidency is finely balanced.

The average result of eight leading polls of US voting intentions shows 46.9 per cent of Americans support Obama and 45.5 per cent Romney, according to realclearpolitics.com. That’s a difference of just 1.4 percentage points, which is within the margin of polling error. For statistical purposes, it’s a dead heat.

”Australians could be in for an unpleasant surprise on November 6,” the UMR Research pollster Stephen Mills observes.

Read more: http://www.theage.com.au/opinion/politics/australians-deluded-on-meaning-of-us-election-20120827-24wia.html#ixzz24qESpbzw

There are lots of problems here.
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The satellite data showing Arctic ice at record low levels is pretty striking but, as I mentioned, unlikely to change many minds at this stage. One point that can reasonably be made is that satellites have only been around for thirty years – maybe there was less ice further back in history. There is one sort of evidence that goes back many centuries – the repeated failure to find the fabled Northwest Passage, by voyagers going back at least as far as John Cabot in 1497, and arguably as far back as the Vikings in the 11th century. Roald Amundsen managed it in three years in 1903-06 and the voyage was managed with the aid of icebreakers in the middle of the 20th century. in 1984, a specially designed cruise ship managed the voyage, but now it’s become almost routine. “ In 2011 16 private yachts made their way successfully through the once-dreaded passage. ” Here’s an example of the kind of boat that can now manage, within a season, a voyage that defeated the well-equipped expedition of Sir John Franklin, with the loss of the entire crew.

Of course, in a parallel universe, the feat was accomplished by a Chinese fleet in 1421.

As expected, several measures of Arctic ice cover have hit record lows already, and others are likely to do so soon. What’s unexpected is how early this has happened. Melting usually continues until mid-September, so it seems likely that this year’s minimum will be far below the previous record, set in 2007. Those who prefer observational evidence to models will doubtless be pleased to note that the rate of melting far exceeds that predicted by most models. Predictions of when the Arctic might be entirely ice-free at the summer minimum are being revised sharply.

One prediction that seems safe to make is that few if any “sceptics” will treat this unequivocal evidence of warming as a reason to apply scepticism towards the authorities on whom they rely, all of whom have got this wrong. At most they will temporarily shift their ground from “warming has stopped” to “we don’t know what causes it”. However, I’d be glad to be proved wrong on this, so if you see any examples, please let me know. As previously advised, I don’t plan to engage in polemics on this, so if you want to provide confirming evidence for my prediction, feel free, but don’t expect a response from me.

The Soviet-style one-party “election” for the UQ Union is rolling on, and so far the University has not acted to stop it, though there are some hopeful signs. Here’s an open letter supported by a wide variety of student groups, including many that would normally be regarded as conservative in their orientation. There’s a petition here, which I urge readers to sign.

A new sandpit for long side discussions, idees fixes and so on.

Another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

At what appears to be a tender age, UQ Union President Colin Finke has perfected the art of the non-denial denial. Responding by email to a question from the Brisbane Times about the exclusion of all opposition parties from the Union elections (their names having been registered by Finke’s cronies), Finke stated

“These accusations are completely incorrect,”

“My understanding is that the returning officer [gym manager Alexa Faros-Dowling], an independent officer overseeing the UQ Union elections, has informed students that there are a number of registered parties running in the union elections.

“This attack appears to be no more than petty student politicking.”

It will be fascinating to watch Finke’s LNP career.

Australians installed more domestic rooftop solar PV in 2011 than in any other country in the world. Despite sharp cuts in subsidies, that seems likely to continue, and raises the question of how this will effect patterns of electricity demand and in particular the capacity of the electricity system to meet peak demand. I just ran across an interesting infographic prepared by a consulting group called Exigency management which puts the question into sharper focus . Under current conditions, demand peaks around noon, remains high through the afternoon, then has another peak in the early evening, as people come home and turn on airconditioning or heating. Widespread takeup of home solar PV will increase supply at the noon peak and even more in the afternoon, but drop off as evening approaches. The result, in the absence of any other changes, will be a system with a demand trough in mid-afternoon followed by a much sharper evening peak.

(More graphics here)

What can be done about this? The first point to observe is that the demand projection is under current pricing rules. Any sensible system, faced with a demand pattern like this would set peak prices to cover the actual demand peak, not the one that prevailed under a 20th century coal-based system. But, price incentives alone aren’t satisfactory in the absence of some way of storing energy. There’s been lots of discussion of more-or-less exotic solutions, but there’s a much simpler answer.

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Student politics has long been the playground of budding party apparatchiks keen to try out dirty tricks, but the current Union election at hte University of Queensland goes beyond anything I’ve been seen before. I expect that, when these hacks graduate to adult politics, they’ll make the headlines in due course, and not in a good way.

Over the fold a guest post from Daniel Carr, who has the details

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It looks as if 2012 will set a new record low for Arctic ice extent[1]. As a measure of the impact of global warming, this is depressingly clear-cut. There’s no need to go into arguments about trends and variability, or use any kind of modelling – the ice is melting visibly.

Arctic Sea ice extent

Source: National Snow and Ice Data Center.

fn1. Satellite data on ice extent goes back to 1979. There are other measures, arguably more relevant, such as estimates of ice volume, for which the data set is shorter. They tell an even gloomier stories.

A new sandpit for long side discussions, idees fixes and so on.

Until relatively recently, Big Tobacco appeared invincible. Despite the fact that tobacco smoke was full of known carcinogens that would have had a factory shut down if they came out of the smokestack, and ample evidence that exposure to tobacco smoke caused cancer, not to mention the violation of liberty associated with blowing smoke in public places, Big Tobacco effectively resisted even the mildest restrictions on its activities. It was aided by a team of scientists and other “experts” willing to claim that the hazards of smoking were non-existent or overstated (notable names here include Enstrom & Kabat, Gio Batta Gori, Richard Lindzen, Steve Milloy, Fred Seitz and Fred Singer – Google has details).

Virtually all the main rightwing thinktanks in the US and Australia went along with this fraud (AEI, Cato, Centre for Independent Studies, CEI, Heartland and IPA among many others). While they might legitimately have argued part of their case on strict libertarian grounds, that would not have been sufficient to resist restrictions on passive smoking. So, they published attacks on science which any reasonable assessment would have shown to be false. In doing so, of course, they encouraged people to take risks with their own lives and those of others, while happily accepting money from the merchants of death. Whether they were knowingly lying, or merely recklessly indifferent to the truth, this episode should have discredited them forever (it certainly has with me).

But the tide has turned. US litigation in the 1990s exposed a treasure trove of internal documents which eventually led to racketeering convictions for the main tobacco companies. And now the High Court has rejected Big Tobacco’s (legally preposterous) challenge to plain packaging legislation in Australia, made on the supposed basis that it represented a taking of intellectual ‘property’. Not satisfied with one preposterous claim, the tobacco companies are planning another, having bribed the government of Ukraine to make a WTO accusation of trade restraint. Actually, this is a good thing. This case is such an obvious abuse of process, and the litigants so clearly evil, that the WTO will surely not be crazy enough to support their case. In rejecting it, they will probably be forced to set precedents that make future interference with domestic health policy more difficult.

Coming to the policy merits, the current legal status of tobacco is, in my view, a pretty good model for drugs in general – legally available, but with all kinds of promotion prohibited and with an active public health campaign to give accurate information on the associated risks.

One of the long-running disputes in the theory of education is whether students are actually acquiring knowledge and skills that will be useful to them and society, both in earning an income and in life generally (among economists this has the unlovely name of human capital theory) or whether the primary purpose is to sort out the most able young people and direct them into the best jobs (screening). I’m a strong advocate of the human capital view, but there have always been some troubling counterexamples, such as the supposed preference of the British Civil Service for employing people with a classical (Latin and Greek) education. While doing some work in the general field, I came across the fact that this actually ceased to be true nearly 100 years ago. I couldn’t use this in the piece I was working on, so I decided to post it here.

There are instances where the ‘screening’ model appears appropriate. At one time, for example, aspirants to enter the British Civil Service were well advised to take a degree in classics from Oxford or Cambridge, since this course was seen as a test of general intellect. This was a long time ago, however. From the 1920s onwards, the most preferred general education for aspiring civil servants has been the PPE (politics, philosophy and economics) degree, particularly that offered at Oxford. No fewer than six members of the current UK Cabinet, along with many senior civil servants and journalists, hold Oxford PPEs. The shift from classics to PPE is a clear indication that the actual content of education is more significant than the screening effect.

There are some big problems with such a political monoculture. But that’s a topic for another post.

Another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

With the announcement of the Romney-Ryan ticket, I decided to repost this piece on the most striking (to me) aspect of Ryan’s plans, namely the exemption of those currently over 55 (or maybe those who were over 55 in 2010 or 2011, when the plan was first announced. If everything goes to plan for the Repubs, Ryan would be the presumptive candidate after Romney’s second term in 2020. Coincidentally or not, that’s just about the point when the exemption runs out. People retiring after that will have spent a decade or more paying taxes to support benefits for those grandfathered in, but won’t be eligible themselves.
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The Labor Party has released a report on the Queensland election debacle. As far as it goes, it’s quite sensible, dismissing silly chatter about the election strategy and other trivia. The main causes of the disaster are identified as
* Too long in office
* Problems in the health system, particularly the payroll fiasco
* The asset sales

The first two of these can be dealt with pretty quickly. Obviously governments can’t last for ever, but reaching your fifth term is the kind of problem you want. As regards the health bungles, I’m reminded of the PM’s observation in The Dish. It’s accurate, but unhelpful to say that bungles like this are to be avoided if possible.

Finally, there’s the asset sales. The committee, probably wisely, avoids judgement on the merits of the issue, but concludes correctly that the decision to announce the asset sales, shortly after the successful conclusion of an election campaign based on a commitment to public investment was a disaster from which the Bligh government never recovered. The Committee also observes that the government’s defeat was made even worse by the hostile reaction from the party base, including unions. I’m not part of the Labor party base, but I certainly made strong public criticisms of the government’s case for asset sales. Given the scale of the resulting defeat, and the appalling policy decisions being made by the Newman government, it’s worth reassessing that course of action.

As an economist, I try to call the issues as I see them, rather than calculating the political consequences. So, I would certainly have expressed the same views on the bogus case advanced by Andrew Fraseer and the Treasury, even if I thought the result would be to reduce the government’s chances of re-election. But, in other capacities, as a blogger for example, I took a political stance against the government. Was this justified?

At this point, we need to push the analysis a bit further. The announcement of the asset sales was a political disaster for the government (as well as being bad policy in most respects), but it could have been recouped if, at any time in 2009 or 2010, Bligh had changed course and admitted that the policy had not attracted the necessary public support. Under these circumstances, her post-flood surge in popularity might well have been sustained. So, those who attacked the government in this period were in fact throwing a lifeline that, if grasped, could have saved it, or at least, allowed for a respectable showing and a strong basis for attacking the LNP. But that didn’t happen, and there was no way to unsay the valid criticisms that had been made of the government. So, the end result was to turn what would have been a thrashing in any case into a wipeout. Still, I can’t see that there was any reasonable alternative. At least now, there is some basis for a critique of the LNP, which there would not have been if I and others had given the Bligh government a free pass.

Hello all, your friendly Ozblogistan Tyrant here.

This weekend I will be performing one of the biggest changes made to Ozblogistan in several years.

I am moving the site from its current home to a new one.

The new service is a company specialising in WordPress hosting. They will be taking responsibility for all the scut-work of making the site go.

Once the move is finalised, I expect that Ozblogistan will be snappier than it is now. I also won’t have to worry about fixing security problems, doing backups, finding out why plugin X has stopped working, working out why the site has suddenly died and so on. These will now be responsibilities I can delegate to the providers.

This has been in the works for some time. While I was a student I could afford the time it takes to keep Ozblogistan working relatively smoothly. As a professional I no longer have that time. So it makes sense to hire other professionals to do it for me.

The security problem we had a few weeks ago (and which is still causing false positives) was the straw that broke the camel’s back.

Moving providers is never pretty. Things are going to break this weekend. And various things will probably appear broken into the new week. It’s all for the good. Ozblogistan will shine out ever brighter.

Update Saturday 2:17PM WST: Failure. I will probably have to try again on Monday night. I’ve re-enabled comments.

In the light of the latest news of large-scale fraud in the for-profit vocational education sector, I thought I would repost this from CT (in turn a repost of an article in Campus Review, that’s no longer on the website).

I also found a response by Andrew Norton

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We were talking at CT not long ago about universal basic income policy, and there were a variety of opinions about the desirability, political sustainability and implications of such a policy. But, before arguing about those issues, it’s useful to consider whether a basic income is feasible at all and, if so, what kinds of tax policies, and adjustments to other welfare policies, would be required to support it. I’ve considered the relatively easy case of a guaranteed minimum income, rather than a universal basic income paid to everyone, as advocated by Philippe von Parijs and others.

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Having just given a relatively optimistic view of US policy on climate change, I’ve seen a string of signals that the Obama Administration is set to sell out on this vital issue, presumably on the advice of the same political experts who persuaded him to ignore the unemployment problem for most of his first term in office. The bad news

* An Obama ad attacking Romney for saying (correctly) in 2003, that dirty coal-fired power plants kill people.

* Partial approval of the Keystone pipeline

and, worst of all, the apparent abandonment of the 2 degree target announced by U.S. Special Envoy for Climate Change Todd Stern

The radio is deplorable, but not significant in the greater scheme of things. Whatever the ad might say, the EPA regulations introduced under Obama are closing down lots of the worst coal-fired power stations. As regards the other two points, the best we can say is that nothing is locked in yet. Still, it’s more depressing stuff from someone who once promised Hope.

According to standard economic theory, the least distorting of all taxes is a land tax. This point can be pushed too far – for example, most land is improved to some extent, and that may be capitalized into land values. Nevertheless, given the financial difficulties of state governments, their failure to make use of this revenue source is an indictment, especially since they impose much more distortionary taxes on transactions involving land, such as transfer duties. All states exempt owner-occupied homes and primary producers from land tax, while taxing land sales and purchases across the board. The effect is to benefit existing landowners (except owners of rental housing) at the expense of new home-buyers and tenants.

It appears to be beyond the realm of political possibility to change this, but a government facing a supposed financial crisis, and looking for luxury items to cut, could start with land tax exemptions. As you might expect, Queensland has both a high threshold ($600 000) and a low rate (1 per cent increasing gradually).

None of the usual justifications for Queensland’s low tax effort apply here. Land tax exemptions do nothing to attract business to Queensland. They are a straightforward handout to landowners, mostly wealthy households with investment properties.

Unsurprisingly, this handout attracts zero critical attention from the Commission of Audit which states “Queensland has historically maintained a competitive taxation environment compared to other states.” This is entirely wrong as it applies to land tax. Since land is immobile, there is nothing competitive about low rates of land tax.

A new sandpit for long side discussions, idees fixes and so on.

Another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

I’ve let my Monthly subscription lapse (will resubscribe as soon as I get a moment), so I can’t read the latest piece by Robert Manne, only the summary by John van Tiggelen, but the basic argument is simple, and widely shared. Climate change policy in the US has gone nowhere thanks to the intransigent opposition of the Republicans. I have a couple of comments

First, the policy situation isn’t nearly as bad as might be supposed, given the failure of the Waxman-Markey cap-and-trade bill, and the absence of any real push from the Administration. The fact is, that, in the current US situation, achieving coherent outcomes from legislation is just about impossible. Increasingly, the Obama Administration relies on executive and regulatory actions. In the case of climate change, the important ones are fuel economy standards for cars (CAFE), and EPA regulation of CO2 emissions and other pollution from power stations. Obama has pushed through rules requiring a near doubling of fuel efficiency by 2025. The EPA regulations effectively make new coal-fired power stations uneconomic and require the shutdown of many old stations previously exempted from the Clean Air Act. Reliance on executive action has all sorts of problems, and regulation is an inefficient way of reducing emissions. Still, if Obama is re-elected, the US can expect to see continued reductions in emissions over the rest of the decade. It’s important to observe that, even with the current limited policies, US emissions have already peaked and begun to decline. If Obama wins, the EPA and CAFE regulations will be locked in, and there’s the potential to go further, particularly in the context of an agreement with China.

Second, while its unfortunate that climate change has been entangled in the general craziness of the modern Republican party, this process hasn’t been costless for the Repubs. Given the state of the economy, they ought to be looking forward to a whitewash in November. Instead, Romney is expected to lose, and any Repub Congressional majority will be narrow and fragile. That’s not specifically because of climate change, but a result of the entire political approach taken by the Repubs for the last 20 years, of which delusional claims about climate science are just one example. Whereas until the 1990s, there was a steady drift of disillusioned leftists/liberals (both intellectuals and ordinary voters) to the right, the process is now going in reverse.

Among the many cuts introduced by the LNP government (which promised, pre-election to improve services), some of the sharpest are in the area of hospitals. According to this report[1], Royal Brisbane&Womens and Metro North face cuts of $130 million a year between them, with much more to come elsewhere. But, according to the Premier, we are on the verge of the abyss, and everyone must make sacrifices.

Well, not quite everyone. Despite the emergency situation, Campbell Newman has managed to find $110 million to upgrade the racing industry statewide, including more than $30 million for the Gold Coast turf club, to build “a slick new bar and upgraded foyer and lobby entry”. I’m sure that if RBWH had an extra $33 million to spend, they could find a better use for it than a slick new bar and foyer.

(Hat tip @BigBadWolf1950 on Twitter)

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The most important single point in the Queensland Commission of Audit report (not a new one) is that Queensland is attempting to deliver the same services as the other states with a lower “tax effort”. To see what this means, let’s look at payroll tax which is both the biggest and (at least in principle, and with the exception of land tax) the least distorting tax available to state governments. The states were given the right to collect payroll tax back in the 1970s, in the hope that it would provide them with a tax base growing in line with the economy, and free them from dependence on the Commonwealth. It was never going to be enough, but the states made things worse by competing to provide exemptions, higher thresholds and so on, with the result that the tax collects less, and distorts more than it should. Unsurprisingly, Queensland has been the leader in this field. We have a payroll tax threshold of $1.0 million, about twice the level prevailing in other states, and a rate of 4.75 which is the lowest of any state. The LNP has promised a further increase in the threshold to $1.6 million.

The tax currently raises a bit under $4 billion, so raising the rate to 5 per cent would yield around $200 million a year. No one likes paying more tax, and a payroll tax is a tax on jobs[1], so raising the rate isn’t a step that should be taken lightly. Still, it seems clear that any job losses from a higher tax rate would be far less than those now under way. There are currently about 20 000 Queensland firms liable for payroll tax, and the average bill would increase by $10 000 a year. Perhaps some firms might respond by laying off an employee or not filling a vacancy, but surely most would not (and hardly any would lay off more than one. Cutting the threshold to $800 000, still much more generous than other states, would also raise $200 million a year.

If Newman took his hyperbolic rhetoric about a debt crisis seriously, the least he could do is ask his own supporters in medium-sized and big business to share some of the burden of fixing the problem, while still getting a better deal than anywhere else in Australia. Disregarding this rhetoric, we ought to have a serious discussion of whether the benefits of payroll tax concessions are sufficient to justify the lower standard of health, education, police services and so on now being imposed upon us.

fn1. The theory of tax incidence shows that, in equilibrium, a payroll tax is the same as a consumption tax, since both fall, in the end, on labour income. I’ve never been sure how much weight I should place on this result.