Archive for February, 2003

Mankiw replaces Hubbard

February 28th, 2003 Comments off

Glenn Hubbard has resigned as chairman of the White House Council of Economic Advisers to be replaced by Greg Mankiw. Mankiw was a somewhat surprising (until this news) signatory of the recent economists’ statement endorsing the Bush tax cuts, and has written papers taking a relatively relaxed view of government debt (it’s a sign of the times that this is a crucial qualification for a Republican CEA chairman).

I’m a big admirer of Mankiw’s work, which I’ve cited on many occasions, most notably in relation to the ‘equity premium puzzle’. I’m also, in a very distant sense, a co-author: one of my pieces was reproduced in the Australian edition of his bestselling textbook. But I don’t think he’s made a wise decision in taking the CEA job. It’s one thing to reject scaremongering about current levels of government debt (about 50 per cent of GDP in the US). It’s quite another to be pushed into the position of advocating fiscal policies that are already fiscally unsustainability and are only likely to get worse over the next couple of years.

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Boredom alert

February 28th, 2003 Comments off

There’s not much more boring than Federal-State financial relations. However, the issue is important, and not well understood, so I’m going to post about it anyway, picking up one of the most common misconceptions.

Dennis Shanahan writes in today’s Oz

Three years ago the states signed up to a new financial agreement which gave them access to the funds from the GST. The full income stream from the GST won’t be available for all the states until 2007, but the money has begun to go into state coffers and will continue to do so on an increasing basis.

This is what the states wanted, a growth tax, and they got it. Now, as the money starts to roll in, the states are fighting a rearguard action to maintain all the old commonwealth funding buffers and avoid whatever responsibility they can.

Wrong, wrong wrong! The states have yet to see one extra cent from the GST. They’re still operating under a guarantee that they would no worse under the new tax system than under the agreement it replaced. Even when the GST revenue exceeds the guarantee the states will be no better off, partly because the guarantee was inadequate to meet the needs of growth and partly because any action here can be offset by cuts in specific purpose grants and other transfers.

All of this is important because, in the Australian system it is the Commonwealth that collects all the taxes and the States that provide all the services that matter. This ‘vertical fiscal imbalance’ means that Commonwealth governments have an inbuilt bias towards cutting taxes. The States have an inbuilt bias towards spending money, but since the Commonwealth has the fiscal whip hand, it’s Commonwealth biases that matter. This is one structural reason why both taxes and public spending are too low in Australia, compared to what the public would prefer, what economic analysis would imply is desirable and what other developed countries actually do.

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Such is life

February 27th, 2003 Comments off

I just saw a poster advertising Heath Ledger in the new film of Ned Kelly. Terrible casting – he doesn’t look a bit like me!

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Is the Czar listening ?

February 27th, 2003 Comments off

One of the great legends of Australian journalism concerns a provincial newspaper which began its editorial on the Russian Revolution with the sententious observation “This newspaper has often warned the Czar …”.

A few days ago, I undertook my own exercise in warning the Czar asking

If Bush supports democratic elections in a postwar Iraq, and intends to hold them after dealing with Saddam, why not say so now, unequivocally and publicly, at the same time as proposing his UN resolution ?

Now according to this WashPost report Bush has done pretty much what I suggested, including a commitment to a democratic Palestinian state.

I got this link via Ken Parish who correctly observes that this constitutes a clear rejection of the idea of some form of US-controlled government – my earlier post was responding to an earlier WP report quoting unnamed ‘officials’ as rejecting ‘democratization’. Whether this was kite-flying or misinformation, it’s now been repudiated.

Obviously, Bush’s speech strengthens the case for war, though it’s not, in itself decisive. If war is to be avoided,the Iraqi government must make rapid substantial progress on compliance and disarmament starting with the destruction of the Al Samoud (?) missiles.

While it may be bad news for the unconditional opponents of war, Bush’s long-overdue commitment to democracy is a vindication of those who have resisted a rush to war without a clear statement of the grounds for war and of explicit war aims. It’s a pity it wasn’t made six or twelve months ago, but better late than never.

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Farewell to Haloscan

February 27th, 2003 Comments off

Thanks to c8to for setting me up with a new comments script, which seems to be working. The archived pages should still give access to the Haloscan comments when and if they are back on line.

As numerous correspondents have told me, I need to bite the bullet and move to MT. Soon, I promise!

Update 27/2 20:15 AET As was inevitable, I guess, the new script is having some teething problems. I ran into a bunch of errors when I tried to use a public Windows machine to read the blog. Thanks to c8to again, I’ve fixed some problems, and the counter now seems to be working (at last on Safari and IE Mac). I’d very much appreciate feedback on what’s working and what isn’t.

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The next step in reality TV

February 27th, 2003 Comments off

Live-in game shows (often called ‘reality TV’ for no reason I can fathom) are all the rage and it seems we’re in for more. The Survivor sub-genre is harmless fun – Gladiators set in exotic locations – but the boom seems to be in variants on the ‘mating game’.

The aim appears to be to make each show more creepily disgusting than the lost, but the obvious routes of simple depravity (Chains of Love) and grossout (Fear Factor) don’t seem to work. The most successful theme (Who wants to Marry a Millionaire etc) seems to be to get as close as possible to inducing the contestants to prostitute themselves without crossing the line into reality (where, of course, this can be arranged for much less money and with less loss of self-respect on both sides than in the TV version). And we now have nasty versions of Candid Camera, as in Joe Millionaire.

So here’s my suggested ‘ultimate reality TV’, at least as far as the ‘mating game’ sub-genre goes. The show is sold to participants as a ripoff of The Bachelor etc, with a number of participants seeking to be the last one left to receive an offer of marriage. The trick is that after the game is complete, the Bachelor or Bachelorette is told that, to win the prize, they have to make the offer to the first person they rejected. [The Bachelors/Bachelorettes would be screened to ensure that they would be the type to accept the offer]. The episodes are then shown in reverse, starting with the one in which the trick (but not the identity of the bride/groom) is revealed, and working backwards, with each episode introducing a more unappealing candidate than the last, and the final episode revealing the lucky bride/groom for the first time. With luck, this would be literally the ultimate in games of this kind.

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No comment!

February 26th, 2003 Comments off

Haloscan is down up down again! So I’m pushing ahead with my attempts to implement a replacement.

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The sinews of war

February 26th, 2003 Comments off

This Washington Post report on the cost of war confirms the rough estimate I made three months ago – William Nordhaus came out with a detailed study yielding a similar number not long after.

The other interesting number is the $2.1 billion the Pentagon says it has spent so far. This demolishes the claim that we must have war now because of the logistical demands of mobilisation. If the US decided to wait six months it could clearly do so at very little extra cost. Given the chance of securing additional allies, and the avoidance of more desperate bargains like that just made with Turkey, the US would probably save money.

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Alston and the inquiry

February 26th, 2003 Comments off

Looking at the state of telecommunications policy in Australia, you might imagine that Communications Minister Richard Alston is spending all his time in front of that nice plasma screen Telstra loaned him to improve his insight into telecommunications policy. But in fact he spends a lot of time writing to the papers to blast all who disagree with him. The Australian Computer Society has been a regular recipient, as this Register report shows.

And he responded vigorously to my piece in the Fin last week claiming that I do not have a ‘skerrick of evidence’ for my suggestion that the suppression of the inquiry into Telstra’s structure was a response to pressure from Telstra, concerned that the evidence would be unfavourable to its commercial interests and share price. When the government first moved to curtail the inquiry, on December 19 2002, the chair of the inquiry Christopher Pyne, said it ‘would be damaging for Telstra if it dragged on too long’. Among other reports on the reaction of Telstra and its shareholders, the AFR (Government cuts short Telstra break-up inquiry, 20/12/02 ) noted “it is believed the company’s fury about the inquiry is understood by the government.” [I’ll try to provide links for this post soon.]

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February 26th, 2003 Comments off

Anyone who followed the economic policy debate in the late 1980s, will remember the phrase “elaborately transformed manufactures”. One of the claims about microeconomic reform was that it would lead to the development of a strong manufacturing export sector to replace the import-competing sector that was contracting rapidly as a result of reductions in tariff protection.

Some early figures on manufacturing exports looked promising until it was discovered that the statistical definition of “manufactures” included things like meat and flour. So attention was focused on “elaborately transformed manufactures (ETMs)”. Despite the impressive name, this does not refer solely to high-tech products. In fact, virtually anything that you would naturally think of as a manufactured product would qualify. The Australian Bureau of Statistics gives as its examples “clothing, motor vehicles, machinery, paint ”

Throughout the late 1980s, the growth rate of ETM exports was impressive – as much as 30 per cent in some years. But, as the catchphrase of the day had it “albeit from a low base”. Since ETM exports had been virtually zero in the 1970s, the total value of exports was still small even after several years of rapid growth. But the assumption was that growth would continue and offset the loss of jobs in the import-competing sector.

ETMs were a favorite of the Hawke-Keating government and I hadn’t heard much about them since 1996, but I didn’t know whether this reflected the change of government or the lack of any real news. Checking the data, which you can find in a PDF file here, the answer is the latter. ETM exports grew to between 20 and 25 per cent of total exports of goods (a bit under 20 per cent of exports including services) in 1993-94 and have remained around the same level ever since. The biggest single item is exports of cars, which are effectively subsidised through schemes in which exports can be used to offset concessional imports of parts.

Exports of $25 billion to $30 billion* are not to be sneezed at, and without them the contraction of manufacturing employment would have been even more rapid. Nevertheless, optimistic rhetoric about the growth of a strong ETM sector forming the core of an export-oriented economy has not been converted into reality.

*Since the figure above is gross, the net contribution to GDP will be smaller (by the value of inputs) as will the net contribution to the current account (by the value of imported inputs).

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Sauce for the goose

February 26th, 2003 Comments off

In today’s Oz Janet Albrechtsen attacks taxpayer-funded groups who support Australian intervention to secure independence for West Papua. Coincidentally or otherwise, there’s an almost identical piece in the Fin from Don D’Cruz of the Institute for Public Affairs. But what’s really striking about Albrechtsen’s piece is this observation

Maybe they miss the irony. They argue regime change in Iraq, a country enslaved by an oppressive dictator, will inflame hatred across the Muslim world, especially Indonesia. Yet their support for regime change in West Papua threatens to do exactly that. They demand we be sensitive to Indonesian concerns over Iraq yet they advocate a destruction of Indonesia’s sovereignty over West Papua.

I know irony isn’t Janet’s strong point, but I’m sure at least some readers will recognise the irony in an accusation of hypocrisy that works just as well in reverse. The arguments on regime change regarding West Papua are very similar to those on Iraq. If we choose to disregard both the principles of international law and the likelihood of adverse long-term consequences, and make optimistic military assumptions it’s possible to make a very strong case for an Australian invasion to throw the Indonesians out and institute a democratic government. Assuming that an invasion of Iraq succeeds, and that it is undertaken despite the opposition of the UNSC, considerations of international law will cease to be relevant, and arguments based on prudential concerns and military caution will be discredited to a significant extent. So why doesn’t Albrechtsen, along with other supporters of unilateral war, favour the liberation of West Papua?

Update Both Bargarz and Scott Wickstein have responded, suggesting I’ve mistakenly assumed they are opposed to the liberation of West Papua. Both give information on the evils of Indonesian rule and the dubious processes that led to its international recognition. I agree with all of this, as with the moral case against Saddam Hussein – as I said, “it’s possible to make a very strong case for an Australian invasion to throw the Indonesians out and institute a democratic government”.

But when I asked about support for “the liberation of West Papua”, I meant it literally. I’m asking why supporters of war with Iraq don’t advocate an effort by the Australian government, backed by the threat of military force, to secure independence for West Papua. As I read Scott and Bargarz, they back off at this point, for precisely the same kinds of reasons as millions of people who have nothing but contempt for Saddam Hussein back off from the idea of a war to overthrow him.

To offer my substantive views on West Papua and Aceh, I believe the best hope lies in a combination of some form of regional autonomy and the removal of the corrupt military elements that controlled both areas under Suharto and continue to have far too much power today. Good progress is being made in Aceh, and this is the most promising path for West Papua also.

Finally, I will pre-emptively withdraw the suggestion of inconsistency in relation to anyone who supports war with both Iraq and Indonesia.

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Wiranto indicted!

February 25th, 2003 Comments off

According to UPI

U.N. prosecutors in Timor-Leste have indicted a former Indonesian defense minister for his alleged role in violence in which some 1,000 people died after the region voted to break from Indonesia.

General Wiranto, along with one civilian and six senior military officials, has been charged with crimes against humanity, including murder, deportation and persecution of people who supported the East Timor independence movement.

After winning independence in 1999, people in the region renamed their country Timor-Leste.

I assume “Timor-Leste” is just Portuguese for East Timor. Apart from this oddity, the report (which I found first on Google News) seems clear-cut. I had no idea that such serious charges were even being contemplated. This ought to have significant implications for the current crisis in Iraq, and for our relations with Indonesia, but I’ll leave them to others to work out, at least until tomorrow.

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The decline of the US dollar

February 25th, 2003 Comments off

While the fact that the $A is now worth 60 US cents is newsworthy,this report, like most others, has the analysis the wrong way around. It starts by talking about the Australian economy and only later gets on to the real story, the depreciation of the $US against all major currencies. The same problem arises in discussions about the price of oil, gold etc – much of the price rise we have seen simply reflects the fact that the price is standardly expressed in terms of US dollars.

The US dollar was massively overvalued for most of the 1990s, causing great harm to the traded goods sector, particularly manufacturing. Manufacturing employment fell steadily during the last years of the boom, crashed during the recession and has continued to decline during the subsequent recovery. A striking manifestation of overvaluation is the fact that the US now spends twice as much on manufacturing imports as it earns for manufacturing exports (the disparity is probably greater for Australia, but we’ve never been a significant exporter of manufactures, unlike the US).

As I argue here, a depreciation of the US dollar is both inevitable and desirable. That doesn’t mean it will be painless, though. In particular, it raises the question of why anyone outside the US would want to hold US bonds, particularly with the 10-year bond rate below 4 per cent. Given a likely further depreciation of 15 per cent against the euro, and maybe more, this seems silly.

In part of course, the explanation may be the magical power of a dominant currency, reflected in the fact that for most commentators the $US/$A exchange rate is the exchange rate, even though the US is not our most important trading partner. When and if this spell is broken, long-term interest rates in the US are likely to rise to levels that reflect the underlying economic realities of chronic deficits on all accounts rather than the supposed ‘safe haven’ appeal of a reserve currency.

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The moral asymmetry of war and peace

February 25th, 2003 Comments off

Alan Wood in today’s Oz has a piece that begins by mentioning a TV interview in which Costello showed himself totally unaware of Iraq’s population etc. He goes on to say

I doubt that any of Costello’s cabinet colleagues could have answered the question, or Martin until somebody looked it up for him. I would certainly like a dollar for all the anti-war marchers who couldn’t answer it.*

There’s an assumption of symmetry here which does not stand up to scrutiny. I don’t need to know the population of Kazakhstan, its political history, or even whether I’ve spelt it correctly, to know that I don’t support a war with that country. The fact that Australians in general, including Costello and Martin, know very little about Iraq is a good reason why we should not be fighting a war there.

The assumption that arguments for and against war should be assessed more or less symmetrically underlies a lot of blog discussion and is fundamentally unsound. Both international law and the experience of history provide a strong presumption against war, and in favor of seeking an early peace if war breaks out. Most wars turn out badly for all countries that choose to engage in them, and even in the case of defensive wars, most decisions to forgo the chance of a compromise peace based on the status quo ante have proved mistaken (Korea and Iran-Iraq are recent examples).

In these circumstances, the onus should be on the advocates of war to prove their case, as against the best available alternative which, in this case is the continuation of inspections.

As far as I can see the strongest case for war is that the current state of mobilisation is too costly to maintain, exactly the argument of the Austro-Hungarian empire when it launched its ‘war against terrorism’ in 1914.

* Wood doesn’t give a margin of error, so I’m not sure if he would have my dollar. The population estimate he gives is 24 million.

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After the war, part 2

February 25th, 2003 Comments off

Addressing Iraqi Americans, Wolfowitz has stated that the US will introduce a democratic government in Iraq. There’s a report here. In relation to the Post article cited in an earlier post, Wolfowitz is reported as saying “Don’t believe everything you read in the papers” (this is in the AFR report in today’s print edition, but I don’t have a web source). In a comments thread below, Jack Strocchi has pointed to a similar report from January of a meeting Bush held with Iraqi exiles in which he promised democracy. Unfortunately, most wars in history have been preceded by the making of incompatible promises to a variety of potential supporters, and this looks like no exception.

My question on this is simple. If Bush supports democratic elections in a postwar Iraq, and intends to hold them after dealing with Saddam, why not say so now, unequivocally and publicly, at the same time as proposing his UN resolution ?

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The other side of double jeopardy

February 24th, 2003 Comments off

There’s recently been some debate, notably on Ken Parish’s blog, about proposals to modify the principle of double jeopardy, under which a person cannot be tried twice for the same crime, even if new evidence emerges after an original acquittal. The other side of this coin is that, in the absence of some procedural flaw, a conviction cannot be overturned even if new evidence proves that the person convicted was innocent. This is particularly problematic in the US where the death penalty is involved. The NYT reports this exchange between a judge and prosecutor

Judge Stith, of the Missouri Supreme Court, was getting exasperated. “Are you suggesting,” she asked the prosecutor, that “even if we find Mr. Amrine is actually innocent, he should be executed?”
Frank A. Jung, an assistant state attorney general, replied, “That’s correct, your honor.”

I haven’t thought through all the consequences but it seems to me that, at least in the case of murder, the public interest in finality of criminal proceedings is outweighed by the need to have justice done. One possible solution would be to have some independent body that could evaluate claims from either prosecutors or those convicted of murders that cases should be reopened in the light of new evidence.

Questions of legal costs are also important. In the case of a second prosecution, costs should automatically be borne by the prosecution, regardless of the outcome of the case. This would provide a check on the abuse of process potentially involved in retrying someone who has previously been acquitted.

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Just what we need

February 24th, 2003 Comments off

Coming right at this time, I can’t imagine news much worse than a new Israeli coalition combining Sharon with the main settlerist party.

Update For any supporters of war who doubt that an invasion of Iraq would embolden Sharon in his pursuit of Greater Israel, with all its disastrous consequences for both Israel and the world, it’s worth reading the anticipatory triumphalism of the leading US spokesman for Likud, William Safire or you can read a news report here.

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Monday Message Board

February 24th, 2003 Comments off

Comments seem to be working again, except that the counter is a bit slow to update. So it’s time for the regular Monday free-for-all, where you get to comment on whatever takes your fancy.

Suggested discussion starter: What issues are being overlooked in the obsessive focus on Iraq (OK, I plead guilty!)? Are clever politicians managing to sneak stuff through under the radar? As always, please keep the discussion clean and civilised.

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After the war

February 23rd, 2003 Comments off

Assuming there is to be a war in Iraq, it is, as the Administration is fond of saying, a matter of weeks not months. So the lack of any clear statement of what is to happen afterwards is more troubling than ever.

I’ll start with a basic question of legality. Let’s suppose that there is a second UNSC resolution on Iraqi weapons* and a group of UN members led by the US acts to enforce it, destroying Saddam’s weapons and overthrowing him in the process. At that point, as far as I can see, any legal basis for a continued US armed presence ceases. The US could simply withdraw (the option that the Pentagon would prefer, I’m sure). Alternatively, the UNSC could pass a new resolution establishing some sort of UN mandate.

But, as far as I can see, neither course of action is being contemplated. The option that seems to be uppermost in Bush’s mind, that of installing a US-controlled government, would convert an enforcement action based on a UN mandate to a war of aggression – explicitly forbidden under the UN charter.** I’m not an international lawyer, but it seems to me that an action of this kind would wipe out any claim to legality for the original intervention.

I had a look at the precedents of Germany and Japan after WWII. In both cases, the occupation government was nominally one established by the Allies (who were also, in some sense, the UN). In Germany this was also the reality on the ground, while in Japan the government was effectively controlled by the Americans. The most recent war, in Afghanistan, wasn’t problematic at all in this sense. No-one recognised the Taliban, and the new government was established under the auspices of the UN. Similarly in Kosovo, although NATO intervened without an explicit UN resolution to stop attacks on civilians, the subsequent occupation was UN-authorised.

* Actually, this isn’t critical. The same arguments apply if the invasion is justified by reference to 1441 and past resolutions. A real difference would arise only if the US explicitly repudiated the UNSC.

* *This was the line taken by the US government in relation to the Vietnamese invasion of Cambodia, which was justified both as self-defence and by the horrific nature of the Pol Pot regime. In fact, the US government took an even harder line since it continued to recognise Pol Pot rather than taking the more defensible position that neither Pol Pot nor Hun Sen represented a legal government.

Update Several commentators suggest that the proposed US controlled government is an interim step towards a democratic Iraq. In fact, according to the Washington Post, democracy has been explicitly ruled out (Blair refused to commit to democracy a week ago, and presumably this is why)

officials emphasized that they would not expect to “democratize” Iraq along the lines of the U.S. governing system. Instead, they speak of a “representative Iraqi government.”

There’s also no mention of the word “interim” or of “elections” or of anything that implies a specific finite timeframe. Obviously the US doesn’t plan to occupy Iraq permanently, but the implied position is one of indefinite occupation until the position of a pro-US government is secure, regardless of whether it has any democratic legitimacy.

The report also indicates that the Iraqi opposition (for all its faults, the only democratic force on offer) has been told to forget about any ideas it might have for a provisional government followed by democratic elections. A reaction from Kanan Makiya of the Iraqi National Congress, with a reference to those Iraqis who might serve in a US-controlled administration as ‘quislings’, is here.

I should emphasise that this is all attributed either to unnamed ‘officials’ or to experts outside the Administration, and could be misinformation of some kind. With an invasion apparently no more than a few weeks away, we have no official policy and, in particular, no explanation of how the enforcement of UN resolutions can legitimately be turned into a war of conquest.

Further update An error on my part – the article does indeed refer to the rule of a civilian administrator as “interim”. However, the rejection of “democratization” is clear-cut.

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What I'm reading

February 23rd, 2003 Comments off

The Green Flag by Robert Kee, is a three volume history of Ireland, from the Norman invasion led by Strongbow to the end of the Civil War. Excellent background for anyone wanting to understand the current situation in Northern Ireland.

In reading this, it struck me that, although I have significant Scottish ancestry, I don’t have any real clue about Scottish history prior to Mary Queen of Scots. I know a bunch of jumbled up names and stories – Sir Patrick Spens and the Maid of Norway, MacBeth and Duncan, John Knox and Darnley, Bruce, Balliol and Wallace, but no real idea of how they all fit together. I’m not even quite sure which ones are real and which fictional.

Arguably, this doesn’t matter. I’m not greatly interested in history of the ‘kings and battles’ kind, and the developments that really affected the world of today, such as the rise of Parliament, took place in England. And my family links are to the Highlanders of the Isles, who were largely unaffected by what went on in Edinburgh and London at this time. Still, it would be good to fill in some of the gaps in my knowledge.

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Frida Kahlo

February 22nd, 2003 Comments off

In responding to a post by Uncle of ABCWatch, a while ago I accepted the premise of the post, namely that Frida Kahlo was a committed Stalinist. In fact, she and her husband Diego Rivera sheltered the exiled Trotsky and Kahlo had a brief affair with him. As this brief summary suggests, it’s a tangled story and I don’t want to claim that Kahlo was a saint, but it’s important to get basic facts straight.

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February 22nd, 2003 Comments off

Am I just paying more attention to the news or are there even more disasters than usual? Two nightclub disasters in the US, the train fire in Korea and plane crashes in Iran and Pakistan among others. Then there’s the continuing pandemic of HIV/AIDS, particularly in Africa and of course all the everyday tragedy of routine death that never makes the news.

As Me No No pointed out in a comments thread recently, it’s impossible to feel equal empathy for everybody. Instinctively, I feel a lot more empathy for Korean commuters than for Iranian ‘elite troops’, but obviously they all had families and loved ones. I don’t really have a point in all this, but I suppose it’s better to pay attention to such things than to adopt the natural response of ignoring them.

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A crucial test on inspections

February 22nd, 2003 Comments off

As just reported in the NYT United Nations weapons inspectors said today that they would order Iraq to destroy hundreds of ballistic missiles and rocket engines that were found to be in violation of the cease-fire agreement Iraq signed at the end of the Persian Gulf war in 1991.

It’s clear that a refusal would lead directly to war, very probably with the backing of the UNSC. And, since such a refusal would be clear evidence that Saddam is irrationally devoted to his weapons, it would lead me to drop my opposition to war.

But, precisely because of this analysis, I anticipate that the demand will be accepted, though doubtless with very bad grace and after attempts to wiggle out of doing anything (offering to handicap the missiles perhaps) have failed. Once this happens, it will be very hard for the “coalition of the willing” to argue that inspections are useless. The case for taking another six months will be that much stronger. Even if inspections ultimately run up against clear non-compliance, Saddam will have been weakened by the loss of the rockets, and by the necessity to keep weapons so carefully concealed that they will not be readily available to him in the event of a war (one story has them on ships in the Indian Ocean!)

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The CIS rejects economics

February 22nd, 2003 Comments off

One of the odd features of the free-market thinktanks in Australia is their insistence that standard economic theory does not apply to education. The Institute of Public Affairs spent several years running the line that class sizes are irrelevant to educational outcomes. Now Jennifer Buckingham at the CIS has picked up the ball, taking almost the identical line.

The basis for the argument is the fact that it’s extremely difficult to detect effects of class sizes in statistical studies. This is not exactly surprising. It’s very hard to measure anything here. Ideally, we would like to be able to measure how ‘educated’ students are when they start a school year, how ‘educated’ they are when they finish and then take the difference as the contribution of the school. The best available measure, in most cases, is that provided by US standardised tests, which are notoriously unsatisfactory, being designed for cheap mass administration rather than careful assessment. Then there are the many other factors like teacher quality, some of which are even harder to measure.

American economist Rick Hanushek has tried to overcome these problems by collecting lots of studies and counting the results. He comes up with no effect, and is pretty strongly committed to the view that this reflects reality. But experts in meta-analysis have pointed out that Hanushek’s method of ‘counting studies’ is amateurish and unsatisfactory, and have proposed alternative methods that do find positive results.

As with lots of controversies involving statistics, the end result is inconclusive, and most people will go on believing whatever seems most reasonable to them. (Disputes over guns and crime provide a pretty good parallel.) With that warning in mind, you can read my summary of the evidence here.

For an economist, the answer is straightforward. Other things equal, more inputs mean more outputs. This is true, even in the presence of ‘distortions’, such as overstaffing or union restrictions on technology. Hence, unless education is a special activity not governed by the normal laws of production economics, we would expect to see an inverse correlation between class sizes and outcomes.

But wait, there’s more. The CIS (or at least, Jennifer Buckingham) is discarding consumer sovereignty as well. Thanks to the existence of private schools, we have market evidence (in the absence of tight zoning, we get similar evidence from the preferences of parents when they choose between state schools). If small sizes are valueless, we’d expect parents to prefer private schools to spend their money on other things, such as computers or study tours. But in fact there is very little difference between the proportions of resources allocated to teaching staff and other resources for private and public schools. The more money the school has, the lower the class sizes.

To rationalise this practice you have to assume that parents (all former students themselves, of course) not only have mistaken beliefs when they initially choose to send kids to schools with low class sizes, but are incapable of telling whether the education their kids are getting is good or bad once it’s underway. If this weren’t true, schools could gradually shift resources from teaching staff to other uses, and parents would see the benefits and keep their kids in school.

Of course, once you accept this, the whole case for any sort of choice (individual or collective) goes out the window. If as Buckingham explicitly asserts, teachers, parents and governments are all fundamentally mistaken about what makes for good education, the only reasonable policy option is to appoint people like Buckingham and Hanushek to make our choices for us.

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Not a good start

February 21st, 2003 Comments off

Google’s takeover of Blogger has been followed by the disappearance of large numbers of Blogspot sites – I think this may affect everyone who hasn’t paid for the premium package. I hope this is not a taste of things to come!

According to Pyra, those affected should try republishing their blogs.

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Mirabile dictu!

February 21st, 2003 Comments off

A sensible and elegantly written piece on national stereotyping, with particular reference to current US stereotypes about the French and Germans in, of all places, the Wall Street Journal.

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Dead-trees, bloggers and Lotts

February 21st, 2003 Comments off

Bloggers have done most of the spadework in exposing the curious misrepresentations of John Lott/Mary Rosh. But the dead-tree media have their strengths, notably including a reach that puts even Instapundit to shame. As I pointed out a few weeks ago, stories on Lott have been appearing in major US newspapers with circulations in the millions, recently including Chicago, where he supposedly conducted his survey. By now the story ought to have reached the attention of dozens of respondents to the putative survey, not to mention the student volunteers who supposedly conducted it. Yet the only person to come forward as a participant has been a pro-gun activist with a record of sharp practice to match that of Mary Rosh.

I think we can conclude with a high degree of confidence that no survey was ever undertaken. This raises the question of whether Lott still meets the ethical standards of the American Enterprise Institute, where he is a visiting scholar. A few years ago, he would undoubtedly have been shown the door. But the AEI has gone a long way downhill, and Lott is probably safe for the moment.

Categories: General Tags:

Coffee again

February 21st, 2003 Comments off

In my last post about my American likes and dislikes, I mentioned the resurgence of the coffee wars. Walt Pohl has sprung to the defence of American beer, hamburgers and coffee, saying “The U.S. makes a fine beer, just not Budweiser, Coors, Miller, or any other brand you’ve ever heard of. ” Among the alternatives he mentions, I’m pleased to say I have sampled Anchor Steam, which is pretty good. Similarly, with hamburgers, the place to go is not McDonalds or Wendy’s, but a bar and grill.

On coffee, though, Walt is forced to narrow his defence to his hometown of Seattle, and its ‘thousands of fine coffeeshops’, as opposed to its export product, Starbucks, the only sample of Seattle-style coffee known to the great majority of the coffee-drinking world.

At this point I’ve been meaning to mention an advertising letter I got, suggesting I might want to attend a commercial telecoms conference in London. Normally this kind of stuff goes straight in the circular file, but this one was headed “Wake up and smell the coffee”, and there were enough other references to give you the impression that either the conference or the marketing material I got was specifically aimed at caffeine-addicted telecommunications economists. So, is this a niche large enough for its own conference or has the promise of individually targeted marketing material finally been realised – perhaps other people got a letter with references to real ale instead of coffee.

Update There’s already a lively discussion in the comments thread. At the risk of not delivering, I’ll foreshadow a post in which I plan an explanation of the success of the US in exporting chains like Starbucks and McDonalds based on economic rather than cultural factors. Those interested can try and anticipate my line.

Categories: General Tags:

Bidding for Turkey

February 20th, 2003 Comments off

Like the NYT, I was stunned by reports on negotiations over Turkish support for war with Iraq. Turkey is demanding $US 32 billion in cash, as well as a deal that will put them ahead of the Kurds in the postwar carve-up. The Administration has apparently made a ‘final offer’ of $26 billion and enough concessions to thoroughly alarm the Kurds, although the details are unclear. This seems to have quite a few implications.

First, when I discussed this question a while ago, Steven Den Beste proved with maps and topographical arguments that no sensible military commander would bother with the Northern option. I accepted this at the time, but was obviously premature in doing so.

Second, estimates that the war would cost $50 billion to $100 billion must now be viewed as conservative. If it’s reasonable to payTurkey $26 billion rather than rearrange the plan of attack, the total cost must be immense.

Third, if the Turks are worth $26 billion, what about Kuwait and Qatar? Neither government has yet given official approval to a war as far as I know, and if Turkey pulls out, they’ll acquire a veto power that would make the French green with envy. Kuwait would probably be too scared of Saddam to exercise it, but Qatar might see things differently. And maybe Howard should be asking for an upfront payment in the form of unrestricted access to agricultural markets.

Finally, I’ve seen some reports (no links) that some more excitable elements in the US are suggesting that if the Turks don’t roll over,they’ll be enrolled in the Axis of Weasels, cut off from US aid etc. Those tempted by this idea might remember that the Turks still have an ace up their sleeve. Turkish ground bases may be optional, but Turkish air space is not.

Categories: General Tags:

Quiggin on America

February 20th, 2003 Comments off

I’ve had two Ozploggers accuse me of anti-Americanism today,
and the famous coffee dispute has also revived. So I thought I’d do one of
those self-analysis exercises where you list things you like and don’t like. It
turns out, at least by my accounting, to be a pretty even balance

Things I like about America

Things I don’t like about America

Foreign policy (under Carter & Clinton)

Foreign policy (under Reagan, Bush I, Bush II)



The First Amendment

The Second Amendment

Rock & Roll


Higher education policy

Economic policy

San Francisco


The New York Times

The Washington Times



To tip the balance, I’ll throw in the biggest cliché of the
lot. I like Americans.

Sorry about the dreadful formatting on this post. I plan to learn about HTML tables soon.

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