Leslie Kaufman in the NYT has another piece on welfare reform, beginning with a spin that Mickey Kaus would surely approve of , saying

“During the boom years of the late 1990’s, when the 1996 welfare law was still sending public assistance rolls plummeting nationwide and more recipients were leaving for jobs than anyone had expected, critics of the law had one big warning: wait until the economy sours, the poor will come back.

But despite the economic downturn, it has not happened in New York City, which has the largest number of public assistance cases of any city in the nation. Nor has it happened in many other large urban areas.”

It’s only later in the article that the critics get their say, pointing out that families may be off welfare, but they are turning up at homeless shelters and food pantries in record numbers. No doubt Mickey will see this as a commendable Third Way outcome, with private philanthropy relieving an overburdened state.

Brad DeLong expresses qualified Skepticism Toward the Skeptical Environmentalist I think there’s a much more fundamental problem in Lomborg’s argument about global warming, as I argue here
The Intergovernmental Panel on Climate Change cites a range of model estimates of the costs of implementing Kyoto using market mechanisms. They show that, with a global system of emission rights trading, the cost of implementing Kyoto would range from 0.1 per cent to 0.2 per cent of GDP.

Lomborg [who relies on much higher estimates for non-trading approaches] dismisses global emissions trading as politically infeasible because it would involve the redistribution of billions of dollars to developing countries (page 305 in his book). But then he turns around (page 318) and attacks alternative ways of implementing Kyoto by suggesting that the billions required could be better spent – by redistributing them to developing countries.

To put the cost estimates in context, 0.1 per cent of Australian GDP is about $600 million per year. The economic benefits generated by the Great Barrier Reef alone are more than this, but, like reefs around the world, it is already being affected by bleaching arising from rising water temperatures.

I meant to include this link in my earlier post on trusts and tax avoidance. When the article came out, I copped some flak over my suggestion that trusts were being used to hide assets in divorces. As was pointed out, the Family Court has some power to unwind trusts in divorces. Before reposting, I checked and found a publication entitled Anatomy of Trusts which says:

There are many reasons why family trusts have and may continue to be a popular
vehicle for conducting family businesses and investment strategies including:
(a) The tax effectiveness of the structure;
(b) As a means of protecting and preserving property from:
Ø The claims of creditors in bankruptcy;
Ø Disenfranchised family members in estate disputes;
Ø To a certain extent, estranged spouses in divorce (although as will be seen later, there is a limited scope of effectiveness best summarised by The Honourable Kay J. in his paper “Trusts: Setting One Up in the Light of the Family Court’s Powers”;
“So unfortunately those intent upon maintaining their asset structure after the breakdown of a marriage do have some potent and powerful weapons in their armoury. They must sacrifice real control, however, and must ensure there is no Achilles heel visible such as loan accounts or personal assets and they must be prepared to wear the stigma of bankruptcy in the event of a lump sum order being made against them.”

This piece by Justinian looks at more failed self-regulation by the NSW and Queensland Law Societies. As the article points out, one of the most clearly beneficial aspects of microeconomic reform has been the replacement of self-regulating government providers of infrastructure services (Water Boards, Electricity Boards and so on) with external regulators separate from the provision of services. This is quite distinct from the ‘purchaser-provider split’, a much more problematic concept. This change is even more important in cases where the states legal powers to regulate have been handed over to private interest groups.

An interesting piece by Hal Varian, quotes Marx, but only to refute him

Don Arthur is always worth reading, but his posts are so lengthy, erudite and tightly argued that I seem never to find the time to write up an adequate response.
In this piece he develops a theme on which I’ve written quite a bit, coining the term “Dooguite left” for those on the left who are concerned about the social consequences of theory-driven free-market reform, and can therefore be correctly described as “socially conservative” (The usual recipients of this tag, are better referred to as “sexually conservative”, since they focus almost exclusively on issues of sex and reproduction).
I wrote about this last year in the Fin. A short take:
“Despite the frequency with which the name of Edmund Burke has been invoked recently, the intellectual tradition of conservatism finds no place in the Liberal party. The central Burkean idea, that social change should be gradual and organic, rather than rapid, top-down and rationalistic, is anathema to radical free-market reformers.”
As the subsequent Tampa episode showed, it’s a mistake to be too dewy-eyed about community and so on. The same values that promote solidarity within the community can be used to generate unreasoning hostility to outsiders.

Writing on ‘rank-and-file’ versus parliamentary control of polititial parties, Ken Davidson writes:
“Journalists have a reputation for libertarian tendencies. But this trait is undermined in political journalism by their preference for “strong” leadership and “tough” decisions. ”
I have noticed this phenomenon among libertarians more generally – for example, lots of libertarians admired Thatcher’s style (not just her policies) and quite a few liked Pinochet. On the other hand, the Catallaxy collective seems much more in the classical liberal spirit of, say, John Stuart Mill. Is there an ideological divide here, similar to that on the left between social democratics and Leninists, or is it just different strokes for different folks? Over to you, Jason.

Why am I not surprised by this?

Verbal arguments about statistical issues always get messy. So rather than have another round of words with Ken Parish, I thought I’d copy in the data from Christy’s graphs, and run the stats. I started checking for trends. As expected, the upward trend in the surface data (0.02 degrees per year) is stronger than that in the satellite data (0.005). More importantly, the upward trend in the surface data is statistically significant. That is, we can reject, with high confidence (above 99 per cent) the hypothesis that there is no trend. For the satellite data, we cannot reject either
(a) the hypothesis that there is no trend
(b) the hypothesis that the trend is the same as for the surface data
That is, as I said, it’s impossible to draw strong inferences from short runs of inconclusive data.
I was struck by the similarity in movements between the two series, which seemed to contradict some of what Christy said about the lack of linkage, so I also regressed the satellite data against the surface data. The slope coefficient was 0.76, and was statistically significant. The meaning of the slope coefficient is that, on average, if surface temperature goes up 1 degree, satellite temperatures go up by 0.76 degrees. We cannot reject the hypothesis that the coefficient is 1, that is that the two temperature series move together in the way predicted by standard global warming theory.
Just for fun, I tried out my suggestion of dropping the first five years. The slope coefficient was 0.95, close enough to 1 to verify my claim that just by eyeballing the data you can see that the two series move together from 1985 onwards.
Of course, the statistical analysis I’ve presented here is very crude, and there are lots of better things you can do with more data and fancier time-series techniques. But it confirms my view that the NAS panel got the story pretty much right when they concluded that:
(i) surface temperatures are rising strongly
(ii) there is no conflict between the surface and satellite data.
When I get time, I’ll try to post a more formal version of this.

Replying to Jason Soon, Tim Dunlop puts his finger on one of the more embarrassing secrets of economics. Although we use the term ‘efficiency’ all the time, we don’t really have a consistent and rigorous definition of what it means for an economic policy to improve efficiency. A typical welfare economics textbook will define an economic situation as Pareto-efficient if there is no other situation that would constitute a Pareto-improvement, that is, make some people better off and no-one worse off. This doesn’t just require technical efficiency in production. It’s also necessary that there be no unexploited gains from trade (often called allocative efficiency)
So a Pareto-improvement would be an improvement in efficiency. But policies that naturally produce Pareto-improvements are as scarce as hen’s teeth. So when economists talk about improvements in efficiency, they are usually talking about one of the following possibilities (neither of which is generally defined in a rigorous fashion)
(a) If the gainers from the policies felt like it, they could fully compensate the losers while remaining better off themselves
(b) If the government chose it could tax the gainers, still leaving them better off, and use the proceeds to fully compensate the losers
Cases like (a) are common, but, in the absence of an outbreak of altruism among the beneficiaries of efficiency-oriented policies, don’t tell us much about the impact of policy changes on the welfare of society as a whole. If a policy change makes all 20 million Australians (but one) $100 poorer and James Packer $2.1 billion richer, it’s not helpful to know he could pay us back and keep $100 000 for himself if he chose.
Cases like (b) are more relevant, but the required analysis to show that a policy satisfies this condition is generally difficult and rarely done.