John Quiggin

A while ago, the Chicago-based Heartland Institute, a conservative/libertarian/denialist thinktank, got into a lot of trouble by putting up billboards with pictures of people like the Unabomber who, Heartland claimed, were climate change believers. A lot of corporate sponsorships got pulled, and Heartland’s insurance research group broke away en masse to form a new, non-denialist group, the R Street Institute.

The Institute of Public Affairs is Australia’s Heartland. Not only does it share the same positions (anti-science on tobacco, climate change and the environment, pro-corporate hackery and so on) there are close organizational ties. The IPA promotes Heartland events like its annual climate change denial conference (a bit more on this over the fold), and IPA Fellows such as Bob Carter have joint affiliations with Heartland.

And, lately, the IPA has run into its own version of the billboard scandal. Not long ago, IPA fellow Aaron Lane (former president of the Victorian young Libs) whose IPA output consisted mostly of low-grade attacks on unions and workers, was a Liberal party candidate in the Victorian state election. Lane was dumped, and lost his IPA gig, when he was found to have posted a string of homophobic and sexist tweets. A much bigger blow was the sacking of longtime Director of the IPA Deregulation Unit Alan Moran, over a string of tweets, of which the most damaging was one saying “Is there ever anything but evil coming from Islam”.

Quite a few interesting points arise here.
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The website of the Group of Eight long-established universities has a section devoted to “Leaders Statements” supporting the Abbott government’s university reform[1] program. It’s a pretty depressing read. Not only are our leaders going in a direction that almost no-one in the sector wants to follow, but the quality of their arguments is depressingly mediocre. It’s a sad reflection on the university sector if this group is the best we can come up with to lead us.

First, there’s executive director Michael Gallagher (a longtime education bureaucrat rather than a former academic). His boilerplate advocacy of microeconomic reform reads as if he hasn’t had a new idea in 20 years. Most notably, he’s still beating the drum for the discredited for-profit model of the University of Phoenix. After giving the most glancing acknowledgement of the scandals that have exposed Phoenix as a machine for ripping off federal grants, he says

The important policy point is not about individual providers but about the directions of change that pioneering providers indicate for the future through their successes and failures. The thing about the US enterprise culture, unlike Australia’s, is a willingness to accept learning from failure as a step to success.

I thought we’d got over this “succeeding by failing” stuff back at the time of the dotcom bubble.

Then we have Warren Bebbington of the University of Adelaide who asserts

in a competitive environment, some fees will go up and some down. Students will have a range of choice they have never had before

Seriously? If Bebbington really believes this, I have a perpetual motion machine to sell him. His Go8 colleague, Ian Young was much more honest when he said that the Go8 institutions will not only raise fees across the board but will use the resulting financial freedom to cut intakes and offer smaller classes. That is, students will face both higher prices and less choice.

But the prize for embarrassment must surely go to the University of Western Australia whose Vice-Chancellor, Paul Johnson, asserts

“Government does not decide what businesses can charge for a loaf of bread, a litre of milk or any other product or service. Why should universities be any different?”

Apparently Professor Johnson has never heard of the Economic Regulatory Authority of Western Australia which, like its counterparts at state and federal level regulates the prices of a wide range of products and services, for a wide range of very good reasons. This is a level of argument which would be lame even for a random rightwing blogger.

Unfortunately, there is nothing new in this. Back in the 1990s, Alan Gilbert of Melbourne was pushing the Phoenix model and asserting that traditional academics were “handloom weavers” doomed to extinction. Among his many achievements was the $50-100 million or so wasted on U21Global, Melbourne University Private and similar initiatives. Before his unfortunate brush with plagiarism, David Robinson touted Monash as “the world’s first global university”, launching a series of overseas campuses that rapidly turned into money pits. At CQU, Lauchlan Chipman pioneered the use of universities as devices to rort Australia’s immigration system, with expensive central city campuses devoted entirely to overseas students majoring in Permanent Residency, while the domestic students in Rockhampton got nothing. The same advisors who pushed these disasters, along with likeminded successors, are driving education policy today.

fn1. I’ve given up using scare quotes around “reform”. Reform is just change of form, and there’s no reason to expect it will be beneficial.

That’s the unsurprising outcome of the Abbott government’s review of the Renewable Energy Target, undertaken by climate denialists associated with the fossil fuel industry. It’s hard to see why they bothered with the formality of holding an inquiry.

It now looks possible that the Climate Change Authority, of which I’m a member, will survive long enough to conduct a further review. The Authority is answerable to the Parliament, not the government, which makes for interesting times when the two are directly opposed, as at present.

I can certainly see some ways in which the RET could be improved, but I won’t canvass them here so as not to commit myself in advance. I’ll observe however, that the Abbott government itself has removed the strongest argument against the RET, namely, that it duplicates the effect of a carbon price (there were valid counterarguments, which I’ve discussed elsewhere, but it was still an important issue)

Like others, I’m mystified by the “ice bucket challenge” in which, as I understand it, people agree to have a bucket of ice water dumped over their heads, rather than giving money to charity. This is reminiscent of the famous Piranha Brothers’ “Other Operation”, in which they threatened not to beat their victims up if they did not pay them the so-called “protection money”.

Still, it seems as if there is some interest in variants on the standard fundraising challenge in which you pay money to charity to encourage friends, bloggers, C-list celebrities to do difficult, painful or humiliating things. It’s struck me that my upcoming participation in the Sunshine Coast 70.3 Triathlon provides a nice twist on the ice bucket challenge.
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I wrote not long ago about the zombie idea that the US ban on agricultural use of DDT, enacted in 1972, somehow caused millions of people elsewhere in the world (where DDT remains available for anti-malaria programs) to die of malaria. A thorough refutation is now available to anyone who cares to look at Wikipedia, but the notion remains lurking in the Republican hindbrain.

So, with the recent outbreak of Ebola fever (transmitted between humans by direct contact and bodily fluids), the free-association process that passes for thought in Republican circles went straight from “sick people in Africa” to “DDT”. Ron Paul was onto the case early, with stupid remarks that were distilled into even purer stupidity in a press release put out by his organization. Next up, Diana Furchgott-Roth, of the Manhattan Institute.
And here’s the American Council on Smoking and Health.
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As well as my Courier-Mail piece on privatisation published yesterday, I had this one, at the Guardian on the obsolescence of the late 19th and 20th century idea of the Press (or the media) as an institution with special rights and responsibilities.

After a long break, it’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

A few days ago, the Courier-Mail ran an editorial supporting privatisation. They were kind enough to run a reply from me, which I’ve reproduced over the fold. The headline picked up the point at the end about the choice between higher taxes and reduced services, which is relevant more general

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… persuade them to stop being rightwingers[1]

I have a piece in Inside Story arguing that the various efforts to “frame” the evidence on climate change, and the policy implications, in a way that will appeal to those on the political right are all doomed. Whether or not it was historically inevitable, anti-science denialism is now a core component of rightwing tribal identity in both Australia and the US. The only hope for sustained progress on climate policy is a combination of demography and defection that will create a pro-science majority.

With my characteristic optimism, I extract a bright side from all of this. This has three components
(a) The intellectual collapse of the right has already proved politically costly, and these costs will increase over time
(b) The cost of climate stabilization has turned out to be so low that even a delay of 5-10 years won’t render it unmanageable.
(c) The benefits in terms of the possibility of implementing progressive policies such as redistribution away from the 1 per cent will more than offset the extra costs of the delay in dealing with climate change.

I expect lots of commenters here will disagree with one or more of these, so feel free to have your say. Please avoid personal attacks (or me or each other), suggestions that only a stupid person would advance the position you want to criticise and so on.

fn1. Or, in the case of young people, not to start.

Now that renewable energy sources like solar and PV are cheaper than new coal-fired power stations in most jurisdictions (anywhere with either favorable conditions or a reasonable carbon price), the big remaining question is that of supply variability/intermittency. As I’ve argued before, this problem is greatly overstated by critics of renewables who assume that the constant 24/7 supply characteristic of coal is the ideal. In fact, this constant supply produces a mismatch with variable demand and current pricing structures are set up to deal with this. A system dominated by renewables would have different kinds of mismatch and require different pricing structures.

That said, for a system dominated by solar PV, meeting demand in the late afternoon and evening will clearly depend on a capacity to store energy in some form or another. There are lots of options, but it makes sense to look first at relatively mature technologies like lithium and lead-acid batteries. Renewable News is reporting a project in Vermont, which integrates solar PV and storage.

The 2.5-MW Stafford Hill solar project is being developed in conjunction with Dynapower and GroSolar and includes 4 MW of battery storage, both lithium ion and lead acid, to integrate the solar generation into the local grid, and to provide resilient power in case of a grid outage.

The project cost is stated at $10 million, or $4m/Mw of generation capacity.

Assuming this number is correct, let’s make some simplifying assumptions to get a rough idea of the cost of electricity and the workability of storage. If we cost capital and depreciation at 10 per cent, assume 1600 hours of full output per year and, ignoring operating costs, the cost of electricity is 25c/KwH. There would presumably be some distribution costs, given the need to connect to the grid. Still, given that Vermont consumers are currently paying 18c/Kwh, this doesn’t look too bad. A carbon tax at $75/tonne would make up the difference.

How would the storage work? I’m starting from scratch here, so I’ll be interested in suggestions and corrections. I assume that the storage is ample to deal with short-term (minute to minute or hour to hour) fluctuations, which are more of a problem for wind.

How about on a daily basis? It seems to me that the critical thing to look at is the point in the afternoon/evening at which consumption exceeds generation (As I mentioned, prices matter a lot here). This is the point at which we would like the batteries to be fully charged. The output assumption suggests an average of about 12 MWh generated per day. If we simplify by assuming that the cutoff time is 6pm and that output drops to zero after that, the system requires that 8MWh be used during the day and 4MWh at night. That wouldn’t match current demand patterns, but if you added in some grid connected power (say, from wind, which tends to blow more at night) and shifted the pricing peak to match the demand peak, it would probably be feasible.

As regards seasonal variability, this would be a problem in Vermont, where (I assume) the seasonal demand peak is in winter. But in places like Queensland, with a strong summer peak, a system with lots of solar power should do a good job in this respect.

What remains is the possibility of a long run of cloudy days, during which solar panels produce 50 per cent or less of their rated output. Dealing with such periods will require a combination of pricing (such periods can be predicted in advance, so it’s just a matter of passing the price signals on to consumers), load-shedding for industrial customers and dispatchable reserve sources (hydro being the most appealing candidate, given that potential energy can be stored for long periods, and turned on and off as needed).

To sum up, we aren’t quite at the point where PV+storage is a complete solution, but we’re not far off.

Thanks to Joe Hockey’s masterful salesmanship, the idea of restoring indexation of fuel exercise, let alone imposing a carbon price, is dead for the foreseeable future. This is one case where, despite my economistic prejudice in favor of price-based measures, I think regulation is the way to go. Australia is one of the few developed countries that does not impose fuel efficiency standards on motor vehicles. Now that the Obama Administration has greatly tightened US standards, we are set to have the most petrol-guzzling car fleet in the entire world.

The Climate Change Authority, of which I’m a board member, recently looked into the issue and concluded that, over the lifetime of a vehicle, fuel efficiency standards matching those of the US would save motorists thousands of dollars. Unfortunately, it’s difficult to factor this saving into the initial sale price, given that it may not be reflected in resale values. Still, this would be one of the easiest and cheapest ways of reducing CO2 emissions.

In the long run, given the demonstrated feasibility of electric vehicles, it should be possible to decarbonize most motor transport at a very modest cost. Once the infrastructure was set up properly, this would also solve a large part of the timing problem created by the fact that peak solar supply is in the middle of the day, when household demand is low, but when millions of cars are parked, and could be recharged.

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

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Over at Crooked Timber, Chris Bertram has just put up the 10000th post. Checking my own stats, I’ve put up over 5000 posts, and the site has had more than 150 000 comments (not counting spam). Go over to CT and say Hi!

I’m a bit late joining the pile-on to Joe Hockey for his silly claim that poor people won’t be hit by fuel excise because they don’t drive (or not as much). Obviously, that’s true of just about every tax you can think of: poor people, earn less, spend less and therefore pay less tax. The big question, as the Australia Institute and others have pointed out, is how much people pay as a proportion of income. Food and fuel represent a larger than average share of spending for low-income households, so taxes on these items are more regressive than broad-based consumption taxes like the GST which in turn are regressive compared to income tax.

But there’s a more fundamental problem with the ABS Household Expenditure survey data cited by Hockey to defend his claim. In the tables he used, the ABS sorts households by income, with no adjustment for the number of people in the household (the ABS also provides “equivalised” figures, which adjust for household size). To quote the ABS

This difference in expenditure is partly a consequence of household size: households in the lowest quintile contain on average 1.5 persons, compared to 3.4 persons in households in the highest quintile. Lone person households make up 63% of households in the lowest quintile.

This makes a big difference to the figures quoted by Hockey, that top-quintile households spend $53 a week on fuel, and bottom quintile households only $16.

Comparing expenditure per person, the top quintile spends $16 per person and the bottom quintile $11 – a very small difference. Of course, the income figures need adjusting also, but here the difference remains huge. Income per person in the top quintile is about 5 times that in the bottom. And Hockey’s argument would look even worse if the ABS sorted households by income.

This is the kind of mistake that’s easy enough for an individual politician to make, but Hockey has the entire resources of the Treasury at his disposal. If he’d asked them before making his bizarre claim, I’m sure Treasury officials would have warned him off. As it is, they have had to provide him with the statistics most favorable to his claim and watch him get shot down.

Still, it was good enough to fool Andrew Bolt.

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The NY Times is running a debate on whether (home) 3-D printers are the Next Big Thing. My guess is not, partly for reasons advanced in the debate (making plastic shapes is limited, handling other materials is messy and dangerous) and partly from the observation that home 2-D printers have proved pretty much transitory. I suppose most people have one or two sitting around, but I only use mine when someone makes a mistake: typically sending me a non-editable PDF that needs to be printed out, filled in, signed and scanned. This happens rarely enough that I usually need to download a new driver, which is a real pain (honestly, after 30 years, we still need drivers!?). My guess is that if 3D printing becomes a Big Thing, it will be on the basis of same-day delivery from a special-purpose facility to which we send our customised product requests.

But what really interested me was a sceptical piece premised on bagging out the paperless office as a precursor of 3D printing hype. The line was that it was first predicted in the 1970s, but that US businesses are using more paper now than they did then. This struck me as probably true but misleading for two reasons
(i) the population has grown, as has the proportion of workers who deal with text in one form or another
(ii) the two point comparison conceals a rise and fall.

Point (i) is obvious. A quick check reveals that (ii) is also correct. Paper consumption peaked in the late 1990s and has fallen sharply since 2005. Consumption per person is the lowest on record (going back to 1965). I’m pleased with this because back in 2007, I noted that the much-mocked “paperless office” was become a reality, and predicted that the trend would accelerate (reprinted over the fold)>

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The Abbott government has reached the stage where it can’t take a trick, even with things that ought to be surefire winners for a conservative government. We saw this not long ago with the attack on dole bludgers. And it’s emerged again with the attempt to cover the retreat on Section 18C with new anti-terror measures (or, in the government’s telling the dumping of 18C to secure support for the anti-terror measures).

After the Brandis fiasco, the government wheeled out the chiefs of ASIO and the AFP to explain that there was nothing to worry about: police were already storing and searching our metadata on a massive scale (300 000 requests last year) and just wanted to ensure this continued.

Unfortunately, the environment has changed since the revelations made by Edward Snowden and others on the extensive (and, in aspiration, total) surveillance of communications by the US NSA. It seems likely that the end result of this will be a rolling back of the extreme surveillance powers grabbed by the authorities over the last decade.

And, while I’m at it, can we stop talking as if we are facing a massive existential crisis because of the threat of terrorism. For most of the 20th century we were threatened with invasion or nuclear annihilation, and we managed to maintain our liberties. We should do the same this time.

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

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

The reaction of the Institute of Public Affairs to the Abbott governments backdown on the race-hate proviions Section 18C has been, by its own admission, intemperate (“white hot anger” is the description they used; I think I also saw “ice-cold rage”.

By contrast, the IPA has been much more ambivalent on freedom of speech. I noted a while ago, this piece suggesting that environmentalists who questioned the viability of the coal industry could be prosecuted either under securities legislation or as an illegal secondary boycott. This view isn’t unanimous however. Following some Twitter discussion (must get Storify working properly for things like this) Chris Berg pointed to a piece he’d written arguing against such a use of secondary boycott legislation (and against such legislation in general).

I was, naturally interested in how Freedom Commissioner and former IPA fellow Tim Wilson would respond to proposals to suppress free speech coming from his former organization. However, my Twitter interactions with him were thoroughly unsatisfactory. His initial response to my suggestion that he had been silent was rather snarky

um, go and read the transcript of the last senate estimates I appeared at

I did so, and found only a brief statement that he would be looking at the secondary boycott issue. Pressed, he said the issue would be discussed at the the Free Speech 2014 conference. The day came and I couldn’t find anything relevant in reports of Wilson’s remarks. So, I tweeted again and got the response “Mark Dreyfus just talked about it!”

Indeed Mark Dreyfus (Shadow Attorney General) gave a great speech. But I was still interested in what Wilson had to say on the topic. Alas, my tweet on this went unanswered. Judging by a previous response, Wilson intends to duck the issue.

The last time I heard news of Stephen Parker, Vice-Chancellor of the University of Canberra, he was standing up to the Oz and its editor Chris Mitchell who had threatened to sue journalist and UC academic Julie Posetti for accurately reporting remarks made by a former Oz journalist in a public conference. That episode is worth remembering any time anyone suggests that the Oz is a newspaper (in the traditional sense of the term), let alone an advocate for free speech. It is, as I’ve said many times, a dysfunctional blog that is, for some reason, printed on broadsheet paper.

In this instance, Parker was doing exactly what you would expect of a university leader: defending an academic doing her job from outside interference. Sadly, in Australia these days, that can’t be taken for granted. The rise of managerialism has thrown up a number of VCs (or now, in the US mode, Presidents) who would instinctively side with Chris Mitchell in such a dispute.

That kind of outright betrayal of university values is still not the norm. On the other hand, given the financial pressure under which all universities have been operating for years, it is unsurprising that most VCs have been keen to support proposals for “deregulation” of fees, even though, as is inevitable with this government, they are poorly thought out and certain to be inequitable in practice. The lead, as I mentioned, has been taken by Ian Young of ANU. Others have their doubts, I think, but have kept quiet.

I’m happy to say that Parker has been the first to break ranks on this issue, writing in The Age that

An earlier generation of vice-chancellors would have stood up for students. I say, reject the whole set of proposals, on their behalf, and then let’s talk.

I hope his bravery leads others to follow.

The latest controversy in the US about Rick Perlstein’s new book is an opportunity to post a couple of thoughts I’ve had for a long while.

First, the outsize Republican idolatry of Reagan is explained in part by the fact that there’s no one else in their history of whom they can really approve. The Bushes are a bad memory for most, Ford was a non-entity and Nixon was Nixon. Eisenhower looks pretty good on most historical rankings, but he’s anathema to movement conservatives: Eisenhower Republicans were what are now called RINOs. Going back a century, and skipping some failures/nonentities, Theodore Roosevelt is problematic for related but different reasons. Going right back to the beginning,and skipping more nonentities and disappointments, some Repubs still try to claim the mantle of the “party of Lincoln” but that doesn’t pass the laugh test. As many others have observed, the “party of Jefferson Davis” is closer to the mark. So, they have little choice but to present Reagan as the savior of the nation.

Something of the opposite problem is found on the left. I haven’t read Perlstein yet, but a lot of the discussion is based on an implicit or explicit assumption that the shift to the right in the US since the 1970s can be explained by the successful organizing efforts of movement conservatism, culminating in Reagan’s 1980 election victory. That’s an explanation with a lot of contingency attached. Suppose, for example, that the attempted rescue of the Iranian embassy hostages in April 1980 had been a success. That, along with some fortuitous good economic news, might have been enough to propel Carter to victory. By 1984, Reagan would have been too old to run as a challenger, and Bush senior would probably have been nominated.

I don’t think, however, that this would have had a huge effect on economic-political developments in the US. Other English-speaking countries, with very different political histories followed much the same route, ending up, by the late 1990s, with a hard-line rightwing conservative party driving policy debate and a “Third Way” centre-left alternative trying to smooth off some of the rough edges. The election of Carter, a conservative by the standards of the times, was a step towards that outcome.

I don’t want to overstate the determinism here. Individuals matter, and national circumstances differ. Still, I think we are talking about variations on a common theme, driven by global economic events, rather than a US-specific story beginning with Reagan’s 1964 address in support of Goldwater.

George Brandis’ spectacular live meltdown over metadata retention has distracted attention from the abandonment of the government’s plans to repeal Section 18C of the Racial Discrimination Act, prohibiting the kind of racial abuse dished out by the likes of Andrew Bolt and Fredrick Toben. Abbott’s rationale is that a purist attitude to freedom of (racially divisive) speech is something we can’t afford, given the need to unite against terrorism.

Obviously, neither Bolt nor Toben is a member of Team Australia[1]. Each makes it their primary business to stir up hatred, in Toben’s case against Jews and in Bolt’s case against (among many others) the “muslims, jihadists, people from the Middle East” he sees as responsible for Abbot’s backdown. The striking conflation of religion, geographical origin and terrorism is typical of Bolt’s approach.

Horrible as he is, though, Toben is not a serious problem. His Holocaust denialism is universally reviled, and it is a sign of strength, not weakness, in our democracy that he is free to walk the streets. Repealing the constraints imposed on him by 18C would only emphasise this.

Bolt is another story. It is his case that led the government to seek the repeal of 18C, and that motivated George Brandis’ gaffe (that is, a politically inconvenient statement of an actual belief) that people have a right to be bigots. Far from being reviled, Bolt has been embraced and coddled by the government, to the point of having exclusive access to the Prime Minister. He enjoys a well-rewarded position in the Murdoch Press. Even casting the net wider among our so-called libertarians, I’ve can’t recall seeing a harsh word against Bolt. He’s a tribal ally and his bigotry is either endorsed or passed over in silence.

It’s impossible in these circumstances, for the government to be taken seriously when they mouth the (apocryphal) Voltaire line about defending to the death speech with which they disagree. The repeal of 18C was clearly intended as an endorsement of Bolt, and not a statement of bare toleration. That position is now untenable, and it’s too late to switch back to Voltaire.

In summary, those on the right lamenting the continued existence of 18C ought to reflect on the fact that it’s their own overt or tacit endorsement of bigotry that’s brought this about. If they cleaned house, and dissociated themselves from the likes of Bolt, their claims to be supporting free speech might acquire a little more credibility.

fn1. I was going to add Sheikh Hillaly to this list. But based on this report, he seems to have joined the Team.

It’s a century since Australia entered the maelstrom of the Great War, not by deliberate choice but as an automatic consequence of Britain’s declaration of war on Germany. I had a piece on this tragedy in the International New York Times last week. Quite a bit of editing between my draft and the final version but I was very pleased with how it came out.

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

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Among the zombie ideas refuted in my book, Zombie Economics, “trickle down” economics is the one that dare not speak its name. Even those who believe, or are paid to say, that favored treatment for the rich will benefit the poor mostly avoid the term “trickle down”, preferring bromides like “a rising tide lift all boats”.

But that didn’t deter Ian Young, Vice-Chancellor of ANU and head of the Group of 8 Universities (basically, those established first, which have, as elsewhere in the world, gained a permanent high-status position as a result). As I predicted not long ago, he wants to raise fees and reduce the number of students at elite universities, including ANU, allowing them to offer a more personalised education.

Young’s argument is that students excluded from the Go8 will “trickle down” to lower-status universities, giving them a chance to both increase numbers and raise standards. But this suggestion doesn’t stand up to the most cursory examination. Both logic and historical evidence suggests that all or most universities will follow the lead of the Go8. In both the UK and Australia, whenever universities have been given option to increase fees or hold them steady, nearly all have gone for the maximum increase.

Think about this from the position of a university in the tiers immediately below the Go8 in the prestige hierarchy, the 1970-vintage unis like Griffith and Macquarie, and the Universities of Technology. Both groups can fill all the places they have, and both, like all Australian universities are straining at the seams in terms of both physical space and overloaded staff. They could not possibly take in more students with their current finances. It makes perfect sense for them to do the same as the Go8, raise fees a lot, and pass on some of the benefits in the form of smaller classes.

There’s a cumulative effect here. Suppose the Go8 institutions reduce their student intakes by 30 per cent. A few of those will give up on uni altogether, deterred by higher fees, but most will try a second-tier uni, displacing other students who would otherwise have been accepted. On top of that, there will be less places in those uni, say another 30 per cent. So, something like 60 per cent of the students formerly admitted to these unis will be excluded.

At the bottom of the status scale, the hard-pressed regional universities and former CAEs probably won’t be able to raise their fees as much as the Go8. But they will still be in a position to raise fees and entry standards at the same time, and, if they choose, to reduce their numbers as well. This isn’t so much trickle down as a cascade effect.

Of course, if you believe the increasingly silly Business Council of Australia, this is all to the good. Its head, Catherine Livingstone (BA, Macquarie) thinks we need less university students. Her members clearly don’t agree, judging by their hiring patterns. The unemployment rate for university graduates is estimated at 3.3 per cent, about half that for non-graduates. Wages and participation rates are also higher.

The Oz (no link) is touting a campaign by Andrew Forrest to introduce an Australian version of the US “food stamps” system, replacing cash payments with a card that can only be used to buy an approved list of items. This is yet another step in the abandonment of economic rationalism by the political right. I’d be surprised if Forrest could get the support of any economist for this (though the recent performances of the IPA crew give me some pause). Free market advocates, following Milton Friedman, have long sought the replacement of in-kind benefits with cash. To those on the left, even where enthusiasm for markets is more qualified, the conclusion is reinforced by the obvious class warfare involved here. At best, someone like Forrest can be seen as a paternalist, hoping to protect the poor from themselves. But it’s obvious that the Murdoch press, and its target audience, want to punish the poor, not protect them.

As it happens, my slowly-progressing book has a section on just this issue, presenting the standard arguments of Friedman and others as part of the case for why markets work so well (when they do)

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I got lots of very helpful responses to my recent post on the search theory of unemployment, here and at Crooked Timber. But it has occurred to me that I haven’t seen any answer to one crucial question: How many offers do unemployed workers receive and decline before taking a new job, or leaving the labour market? This is crucial, both in simple versions of search theory and in more sophisticated directed search and matching models. If workers don’t get any offers, it doesn’t matter what their reservation wage is, or what their judgement of the state of the market. Casual observation and my very limited experience, combined with my understanding of the unemployment benefit rules, is that very few unemployed workers receive and decline job offers, except perhaps for temporary work where the loss of benefits outweighs potential earnings. Presumably someone must have studied this, but my Google skills aren’t up to finding anything useful.

And, on a morbidly humorous note, it’s a sad day for the LNP when efforts to bash dole bludgers actually cost them support. But that seems to be the case with the latest plans, both expanded work for the dole and the requirement for 40 job applications a month. I’ll leave it to Andrew Leigh to take out the trash on work for the dole (BTW, his new book, The Economics of Almost Everything is out now).

The 40 applications requirement has already been the subject of some amusing calculations. I want to take a slightly different tack. Suppose (to make the math simple) that the average job vacancy lasts a month. There are roughly five unemployed workers for every vacancy, so meeting the target will require an average of 200 applications per vacancy. The government will be checking for spam, so lets suppose that all (or a substantial proportion) of the applicants take some time to talk about how they would be a good fit with the employer and so on. Dealing with all these applications would be a mammoth task. One option would be to pick a short list at random. But, there’s a simpler option. In addition to the 200 required applications from unemployed people, most job vacancies will attract applications from people in jobs. A few of them may be looking for an outside offer to improve their bargaining position with their current employer (this is a big deal for academics), but most can be assumed to be serious about taking the job and in the judgement that they have a reasonable chance of getting it. So, the obvious strategy is to discard all the applications except for those from people who already have jobs. What if there aren’t any of these? Given that formal applications are going to be uninformative, employers may pick interviewees at random or may resort to the informal networks through which many jobs are filled already.

Trying to relate this back to theory, the effect of a requirement like this is to negate the benefits of improved matching that ought to arise from Internet search. By providing strong incentives to provide a convincing appearance of looking for jobs for which workers are actually poorly suited, the policy harms both employers and unemployed workers who would be well suited to a given job.

Update I found the following quote widely reproduced on the web

On average, 1,000 individuals will see a job post, 200 will begin the application process, 100 will complete the application,

75 of those 100 resumes will be screened out by the Applicant Tracking System (ATS) software the company uses,

25 resumes will be seen by the hiring manager, 4 to 6 will be invited for an interview, 1 to 3 of them will be invited back for final interview, 1 will be offered that job and 80 percent of those receiving an offer will accept it.

Data courtesy of Talent Function Group LLC

Visiting the TFG website, I couldn’t find any obvious source. The numbers sound plausible to me, and obviously to those who have cited them. But, if the final number (80 per cent acceptance) is correct, then it seems as if the search theory of unemployment is utterly baseless. Assuming independence, the proportion of searchers who reject even three offers must be minuscule (less than 1 per cent).