Archive for June, 2003

New on the website

June 30th, 2003 Comments off

I’ve added a lot of articles from 1991 and 1992. If you want to see what I was up to ten years ago, now’s your chance.

Categories: Metablogging Tags:

Monday Message Board

June 30th, 2003 14 comments

It’s time for the regular Monday Message Board when you have your chance to have your say on any topic whatsoever (as always, civilised discussion and no coarse language, please).

I’d be interested if any readers wanted to say something about where and why they read this blog.

Categories: Regular Features Tags:

Philosophical fictions

June 29th, 2003 Comments off

Brian Weatherson links to a paper he’s written with the title ‘ imaginative resistance”. It’s about the fact that, whereas it’s easy to imagine fictional events, people and so on, or to imagine real people and things having properties different from those they actually have, it’s very hard to imagine things as morally right if we believe them to be morally wrong.

It seems to me that there’s an ambiguity here and that it’s precisely this ambiguity that is being used in the majority of the fictional examples that are presented as arguments against consequentialism (and, in particular, utilitarianism). The way these examples work is that we are asked to imagine a situation in which a given action has good consequences (when we know that, in reality it has bad consequences). Since this kind of factual shift seems like what we normally do in fiction, it’s assumed [falsely, I claim] that we can do this without damaging our capacity to reason intuitively. But now, it’s pointed out, acceptance of consequentialism would imply that the action is good, when our intuition tells us it’s bad. Hence, consequentialism must be wrong.

All of this is telling us more about the limits of intuitive moral reasoning than about the reasonableness or otherwise of consequentialism.

Categories: Philosophy Tags:

Plagiarism or hommage?

June 29th, 2003 1 comment

This Salon review of horror flick 28 Days Later asserts that whereas

. the classic British dystopian sci-fi novels of J.G. Ballard and John Wyndham as influences, and they’re in there, all right …. [but] George A. Romero’s “Living Dead” trilogy, specifically the underrated third entry “Day of the Dead,” is so closely emulated here that parts of “28 Days Later” feel like a shameless rip-off.

In fact, the plot, as described in the review, is a carbon copy of Wyndham’s Day of the Triffids (except with zombies instead of carnivorous walking plants). The film version of this was pretty lame as I recall, but the book was excellent.

My question is, can a film be a shameless ripoff of two completely different sources at the same time? I guess it can be if it takes the plot from one and the cinematography from another. I don’t think I’ll bother going to find out, though.

Categories: Books and culture Tags:


June 29th, 2003 11 comments

On the cover of today’s Sun-Herald magazine is a story about the Crown Prince of Nepal who slayed his entire family. My immediate reaction was that the subeditor was asleep on the job, but then I thought that perhaps the language had been regularised and I hadn’t noticed. A search on the Fairfax site showed a dozen other instances of slayed, and Google produced 25 000.

I looked for the formerly standard slew and came up with another problem. There were over 700 000 hits, but most of those on the front page used the word as a synonym for large number. Along with raft used in this way, this is something I don’t remember until recently. My guess is that it comes from idiomatic American usage, and has been popularised by journalists looking for short and snappy synonyms. Rather than do any work to check this, I’ll wait for my readers to set me straight (isn’t blogging great!). Just to complicate things further, there’s an engineering use as a verb roughly equivalent to slide around which has gone through the usual processes of adjectivalisation and nominalisation so that it’s now a generic part of speech.

After this, I checked on slain which is unambiguous and, as a past participle, more prone to regularization than the past tense slew. I got 750 000 hits there, suggesting that slayed is still a minority usage.

Categories: Dictionary Tags:

What I'm reading

June 29th, 2003 7 comments

Bad Company: The Cult of the CEO by Gideon Haigh. It’s the latest Quarterly Essay and the first to cover an economic policy issue. Until now, the focus has been on the concerns of the cultural Left (environment, foreign policy, Aboriginal issues). QE encourages responses, and I’m going to submit one on managerialism in general. It’s long, so I’ve included it in the extended entry below. Comments from readers would be much appreciated.

I’m also reading Teach yourself Perl in 21 days by Laura Lemay. I’ve made numerous efforts of this kind over the years, with mixed outcomes. My most successful has been with HTML, also using Lemay’s books. I’m hoping that knowledge of Perl will enable me to improve my blog and even perhaps revive the lost comment threads of past incarnations.

Read more…

Categories: Books and culture Tags:

Taxing times

June 27th, 2003 6 comments

In the Thursday comments thread “Factory” writes,

One thing I didn’t get about the GST was that it was generally seen as a issue that was owned by the right, but similar tax regimes seem to be the norm in Europe.. hmm..

As I explained here, the reason for this, and for the unpopularity of the GST was that

the Australian advocates of a GST/VAT have tied this change to logically unrelated proposals for a change in the tax mix to give more weight to indirect taxation and for the removal of existing exemptions, notably for food. It is rather as if the advocates of metrication had suggested that the metric system was not worth having unless we also made French the national language and introduced the guillotine.

With the exemption of food, and the associated introduction of the Australian Business Number, the GST has improved the effectiveness of the tax system. The associated income tax cuts made the package as a whole regressive, but not nearly as much so as the previous proposals for a GST (Fightback! and Option C)>

Categories: Economic policy Tags:

Science and magic

June 27th, 2003 10 comments

Jason Soon links to this piece by Nicholas Thompson making the point the Republicans are losing the support of scientists, essentially because they ignore expert scientific opinion whenever it doesn’t give them the answers they want (Jack Strocchi also alerted me to this). This blog is running a few months ahead of the Zeitgeist on this one. Back in March, I observed

it’s striking that there is now almost no academic discipline whose conclusions can be considered acceptable to orthodox Republicans. The other social sciences (sociology, anthropology, political science) are even more suspect than economics. The natural sciences are all implicated in support for evolution against creationism, and for their conclusions about global warming, CFCs and other environmental threats. Even the physicists have mostly been sceptical about Star Wars and its offspring. And of course the humanities are beyond the pale.

Of course the same is true in Australia, most notably with respect to the global warming ‘sceptics’ (more accurately described as credulous believers in the handful of scientific Pollyannas who tell them wha they want to hear) of the Lavoisier Group. And even creationism is now finding a home among the Quadrant group, though people like McGuinness would no doubt take some sort of Straussian line on this that it’s good for ordinary folk to believe in the literal truth of the Bible, even though sophisticates like Paddy are above such nonsense.

Categories: Environment Tags:

Thought for Thursday

June 26th, 2003 6 comments

Jason Soon linked to Alan Woods’ review of Shiller’s The New Financial Order a little while ago, so I thought I’d post mine, published a couple of weeks ago in the Fin. I can’t resist bragging that Shiller said it was the best review of the book he had read. It’s much longer than my usual so I’ve put it in the extended entry below.

Read more…

Categories: Books and culture Tags:

Word for Wednesday: Reform

June 25th, 2003 17 comments

As Raymond Williams points out in his excellent little book Keywords, from which I got the idea for this series, reform originally meant ‘restore the original form’ of something. In particular the Reformation was supposed to sweep away the abuses of the Papacy and restore the church to its original purity. As this example indicates, the worldview associated with this usage was one of decline rather than progress. The best one could hope for was to get back to things as they were in the good old days. This view was dominant in Western thinking from Plato to the 17th century.

From the 18th century onwards, reform underwent something of a reversal, since it now typically implied forming something new. But since the associated worldview was now one of progress, the assumption remained that reform entailed change for the better.

From the 18th century to the 1970s, the term reform was typically used to describe policies favored by the moderate left, in opposition to advocates of revolutionary change on one side and of conservatism and reaction on the other. From the 1970s to the end of the 20th century, though, the direction of policy change was reversed, with the rise of neoliberalism. However, the term reform continued to be used, even when the policies it described consisted of the dismantling of earlier reforms.

As a result, critics of neoliberal policies have frequently resorted to the use of “scare quotes”, as in my recent reference to ‘workplace reform’, or to similar alerts like “so-called”. While the automatic assumption prevails that the term reform applies only to desirable changes, such devices are necessary.

Where it’s feasible though, the best approach is to define reform as “any program of systematic change in policies or institutions” and make it clear that there is no implication of approval or disapproval.

Categories: Dictionary Tags:

A snippet on foreign debt

June 25th, 2003 4 comments

Following financial deregulation and the floating of the dollar, both the current account deficit and net foreign obligations (debt and equity) grew rapidly, reaching about 5 per cent of GDP and 50 per cent of GDP respectively by 1990. Since then the current account deficit has fluctuated and net foreign obligations have risen slowly to around 54 per cent of GDP, the great majority of which is debt. By contrast, in 1980, two-thirds of foreign obligations were equity (Parliamentary Library Research Paper No. 3, 2002รถ03, Australia’s Foreign Debt).

It is straightforward to compute that if nominal GDP is growing at 6 per cent per year and if nominal foreign debt grows by an amount equal to the current account deficit, debt will remain stable at 50 per cent of GDP if the current account deficit is equal to 3 per cent (=0.50*0.06) of GDP. Since Australia’s current account deficit has generally been greater than this, it seems likely that debt will grow over time.

Categories: Economic policy Tags:

Coffee and literature (reposted)

June 25th, 2003 4 comments

The Harry Potter debate reminded my of Jonathan Franzen’s refusal to have his book The Corrections listed on Oprah’s Book Club. I thought I’d posted on this before and dug out this one from just before I left Canberra, which turned out to be mainly about coffee.

The house is all packed up except for the items we absolutely need for tonight and tomorrow – beds, a toaster and the Krups espresso machine. With a long trip ahead, a good cup of coffee will be even more vital than usual.

So I was fascinated to read this piece on a new image for “Mr. Coffee”, one of those 1970-vintage automatic coffee machines. In a nod to my favorite computer, they suggest calling it iCoffee, although there is no planned connection to the Internet.

This raises a couple of points. First, the problem is not the name but the mechanism. Given America’s status as the world’s leading consumer society, it’s startling that so few people there understand something as vital to civilisation as good coffee.

Second, as with anything about coffee in the US, the article can’t avoid mentioning Starbucks. The question I have is about the appropriate metaphor. Is Starbucks to coffee as Oprah Winfrey is to literature, a potential bridge from instant to the real thing. Or is Starbucks to coffee as Microsoft is to software, a ‘good enough’ monopolist that kills the competition and closes off the chance of anthing better?

Categories: Books and culture Tags:


June 24th, 2003 2 comments

Gianna has joined the move to MT, but has bypassed mentalspace in favour of rival blog empire ubersportingpundit (when Alston gets his reforms through the Senate will we have to merge?). Still no photo, though.

Meanwhile, a couple of blogs/plogs I’ve somehow missed are Mortigi Tempo and dolebludger.

I’ll fix my blogroll soon. Meanwhile this is a good time to remind everyone who hasn’t already done so to update their bookmarks and links to point to my new site.

Categories: Metablogging Tags:

Potshots at Potter

June 24th, 2003 13 comments

Jason Soon links to killjoy Jenny Bristow who says

For all the original artificial hype of Potter’s literary qualities, it is self-evident that their readability, not their quality, is what made them popular with children. Yet while Enid Blyton was actively resisted by school libraries in the past, on the grounds that it might distract from the better quality stuff, Rowling’s equivalent has all but formed the basis of English exams.

Even when I was a kid I thought the librarian jihad against Enid Blyton was pretty stupid. I read heaps of her trashy Famous Five books when I was in primary school (she wasn’t banned in our library). It didn’t do me any harm or distract me from better stuff – as I recall I read the Penguin translation of the Odyssey in the same years, for example. (Jason’s account of his own reading habits suggests a similar range, from absolute trash like Agatha Christie to the classics).

But at least the librarians of my youth had the excuse that a censorious attitude was part of the culture. In fact, such were the many grounds of censorship, I was never quite clear whether the ban on Noddy was because
(a) Blyton wrote trash;
(b) The portrayal of the golliwogs was considered racist; or
(c) The relationship between Noddy and Big Ears was considered ambiguous
I thought we’d grown out of that kind of thing these days. But apparently, according to Bristow, the demise of the Blyton ban shows that ‘Our expectations of children have plummeted’. I’ll bet she reads romance novels on the sly.

Categories: Books and culture Tags:

Enemy combatants

June 24th, 2003 3 comments

Via Brad de Long I recently saw this post from Jim Henley on the failure of Appeal Courts to impose significant constraints on the US government’s policy of secret detention of terrorist suspects. Henley says

For those of you reading these words I have one request:


What has the appeals court authorized?

Secret detentions.

Please say those words aloud. “Secret detentions.” Now use them in a sentence:

The US government engages in the practice of secret detentions.

The US government has broadly asserted its right to engage in the practice of secret detentions.

A federal appeals court has affirmed that the US government may engage in secret detentions.

The biggest single step in this regard is the creation of the category of “enemy combatants” applied both to people taken prisoner in Afghanistan and elsewhere (for example Pakistan), allegedly in the course of the war aagainst terror. More significantly the category has been applied to Jose Padilla, a US citizen arrested in the United States allegedly after returning from a meeting with Al Qaeda.

Until recently, I haven’t been too alarmed about all this. It seemed likely that as with most wartime excesses, the Administration would moderate its claimed powers, and, if not, that the courts would constrain them. In particular, I thought that the actions in the Padilla case would ultimately be declared illegal and that the Administration would be happy enough having had a couple of years to operate outside the normal limits.

But this optimistic view looks increasingly untenable.
Read more…

Categories: World Events Tags:

FTA vs Kyoto

June 24th, 2003 6 comments

I’m planning on putting the following argument in a piece on the proposed Free Trade Agreement with the United States. Can anyone confirm or refute my understanding of the implications of the FTA?

Under the Bush Administration the United States has, to an ever-increasing extent, rejected the whole idea of multilateralism on the basis that it fails to recognise the special position of the United States. In place of multilateral negotiations in which the United States is, at most, first among equals, the Administration has pursued bilateral agreements on a wide range of issues. The most notable case is that of the International Criminal Court, where the United States has pursued bilateral agreeements exempting Americans from prosecution.

Inevitably these agreements involve an element of ?pattern bargaining?. The United States proposes the same set of terms to each of its negotiating partners, generally on a ?take it or leave it? basis. While adjustments may be made in particular cases, the end result is inevitably that the terms of such agreements are those set by the more powerful party.

The most important multilateral agreement to be boycotted by the United States is the Kyoto protocol on climate change. It is noteworthy that the most prominent advocate of the FTA, Alan Oxley of AUSTA, is also a leading critic of Kyoto, and bases his arguments against Australian participation primarily on the argumentthat Australian industries will lose competitiveness against non-signatory countries such as the United States.

It is easy to foresee the possibility of the Kyoto agreement coming into conflict with an FTA. For example, an effective emission credit trading system will require some form of taxation of carbon dioxide emissions embodied in imports from nonsignatory countries. Applied by Australia to imports from the United States, this would, on the face of it, conflict with the requirements of the FTA.

Categories: Environment Tags:


June 23rd, 2003 5 comments

A classic poser that first arose in debates over creation vs evolution is the notion of ‘apparent age’. The idea is that, if God created the earth, He would necessarily have done so in a way that gave it an apparent natural history. For example, even though Adam had never been born, he would, on this account have been given a navel. As (I think) Bertrand Russell observed, once we start on this, there’s no way we can stop. Perhaps the universe was created 10 minutes ago, containing us, our memories and an apparent history going back to the Big Bang.

Anyway, a couple of commentators on my first anniversary post noted that they imagined I’d been blogging for years. I had exactly the same perception when I started, with respect to people who’d only been going for a few months or even weeks. Obviously if there are any cues that distinguish newbies from old hands, they are too subtle to be picked by someone who is, by definition, a newbie themselves. More generally, the social conventions of the blogosphere are such that newcomers are absorbed very rapidly, cross-linked, added to blogrolls, and, before you know it, seem like part of the furniture.

Perhaps this will change. Blogging in the US seems much more dominated by ‘first movers’, though there’s still room at the top for high-quality entrants like Kieran Healy and Kevin Drum at Calpundit .

Categories: Metablogging Tags:

Academic relativism

June 23rd, 2003 10 comments

Just when we thought Windschuttle had been blogged to death, the issue has been taken up on the other side of the Pacific. First, Erin O’Connor posted a long piece derived from an uncritically pro-Windschuttle source, taking at face value his claims to be a critic, rather than a practioner, of cultural relativism. Then Henry Farrell at Gallowglass responded with some of the many critical links including mine, and O’Connor posted an update (Thanks to Ehud Rostoker for the alert).

There’s a lot of other interesting stuff on O’Connor’s blog, Critical Mass. In the same post, there’s a link to Eugene Volokh, who links to and slams this (nearly six months old) press release from Gun Control Australia attacking the University of Adelaide for “supporting” pro-gun academic John Whitley. As Volokh points out

the group is essentially trying to pressure a university to shut up a faculty member who is making law reform proposals with which it disagrees.

(Obligatory Voltaire (mis)quote and allusion to JS Mill On Liberty here). I haven’t heard anything about this and Whitley is still at Adelaide and still involved in the debate. Still, statements of the kind made by Gun Control Australia have a chilling effect on debate and are always to be deplored.

Back at Critical Mass, O’Connor gives a personal account of how she came to be so down on academic relativism, after spending eight years becoming a “resident Body Critic” (every top English department must have one, she informs us). Great reading.

Finally, a little quibble. I know the spelling of my name is not obvious from its pronunciation, and I always take care to spell it out when I’m talking to someone. But how can people get it so consistently wrong when they’re taking it from a printed source? O’Connor has it right in one sentence and wrong in the very next one, and she’s not alone in this.

Categories: Metablogging Tags:

Monday Message Board

June 23rd, 2003 22 comments

It’s time for the regular Monday Message Board when you have your chance to have your say on any topic whatsoever (as always, civilised discussion and no coarse language, please).

Although I begged off this job in my birthday message, I’ll probably end up doing a “state of the blogosphere” piece before too long, so any suggestions/opinions/predictions of imminent collapse will be of particular interest to me. But, as always, anything goes!

Update I wasn’t sure if there would be much interest in the new GG. But judging from the Message Board there’s heaps, including Rob Corr’s brush with fame.

Categories: Regular Features Tags:

What I'm reading

June 22nd, 2003 Comments off

Drawn from life by Stella Bowen, kindly lent to me by reader and fellow-economist, Nick Gruen. Bowen was an Adelaide-born painter who, like most artistically inclined Australians before the election of the Whitlam government in 1972, left for Europe at the first opportunity and never returned. She took up with the American writer Ford Madox Ford and sacrificed her career to what she perceived to be his greater talent. I haven’t read any of Ford’s books, and I guess we can’t know what Bowen would have produced given a free run, so I’m not going to make a call on this for the moment.

Inevitably, I’m also reading Harry Potter and the Order of the Phoenix. My son Daniel devoured it on the afternoon of its release and now I have to read it as well if I’m to remain au courant with the younger members of the literary world. As always, JK Rowling does an excellent job, and its a pleasant read, with the trend to ever-longer volumes seemingly having levelled out after The Goblet of Fire.

Categories: Regular Features Tags:

One year on

June 21st, 2003 9 comments

Today marks the end of my first year of blogging. Although I didn’t note it at the time, I started on the winter solstice, which in Canberra means something. The year has seen a lot of changes for me, most of them positive. I’ve moved from Canberra, where I lived most of my life from 1970 onwards, to Brisbane, and, correspondingly from ANU, my alma mater, to the University of Queensland. I’ve finished up an ARC Research Fellowship and managed to land the best job available in Australian academia, a Federation Fellowship. I’ve become a father-in-law, and am looking forward, in due course, to becoming a grandfather. All of these transitions have involved some breaking of old and familiar ties and the beginning of new adventures

In blogging terms, a year is still long enough to go from newbie to old hand. I’ve moved from the training wheels of Blogger to the Mac-like elegance of Movable Type, and have established myself in a fairly satisfactory corner of Ozplogistan (this term based on ‘plog’ for ‘political weblog’, was coined by Bright Cold Matt in a comments thread, and popularised by Ken Parish. Matt gives more etymological details in the comments thread for this post). I was going to list the people who play a central role in this virtual universe, but I realised I was sure to omit someone, and you all know who you are anyway.

I was also going to do a “state of Ozplogistan” assessment, but I see my blogtwin, Tim Dunlop, has already written one. I’ll just make two observations. The first is that, after a period of explosive growth, blogging seems to have entered what economists call the “mature phase” (this refers to industry structure, not to the content of posts!), with roughly equal numbers of entries and exits. Among those most missed, I’ll nominate Don Arthur, whom I keep on the blogroll in the forlorn hope that he’ll finish his thesis and resume blogging. My other observation is that the political makeup of Ozplogistan now resembles that of Oz, whereas, when I started, the echo effect of American-inspired warblogging was still a dominant factor.

My big problem, coincidentally mentioned by Homer Paxton in one of today’s comments is “How in heaven’s name do you combine Uni work, blogging, family time, reading etal.” I’m still trying to figure that one out. If I find the answer I’ll tell you. If I join the legion of departed bloggers, you’ll know I haven’t managed to crack it.

Finally, thanks to all who have linked to my posts, commented in my comment boxes, or just read and enjoyed the blog. A particular thankyou to Rob Corr, who provided hosting for the new site.

Categories: Metablogging Tags:

KM on GW

June 20th, 2003 2 comments

I trawled through my hard drive, trying to find something I wrote last year about the IPCC and Ian Castles’ criticism of it. However, Keneth Miles (link malfunctioning for reasons I can’t figure out, use the one in the blogroll) has made most of the points I was going to, and has lots more, including the disappointing news that Castles has joined the Lavoisier Group, an organisation based on the idea that, if we all close our eyes and wish hard enough, the whole problem of global warming will magically disappear.

Categories: Environment Tags:

New on the website

June 20th, 2003 1 comment

I’m in the middle of updating the journal articles on the website. The site is now pretty much update for current publications, and I plan to go back to those from 1992 and earlier as soon as I get time. This is a good time for anybody who has suggestions to make them. I do pay attention, even if, either because of disagreement or inertia, I don’t implement them all.

To complicate matters further, I’m switching to a new computer setup at home, using a Powerbook G4 as my primary computer. This is a job which has not got simpler over time, or with new and improved versions of Mac OS. I didn’t get an exact count, but I appear to have about 80 000 files, which is, I suppose consistent with creating 10/day over 20 years of use, and then doubling that with application and system files. Most need to be transferred from the old computer to the new one, but there are some that shouldn’t be (for example, computer-specific preferences, so it’s a messy business. Add to that some touchy hardware (notably my Telstra cable modem) and there’s several hours of downtime involved. But it all seems to be up and running now, and is definitely an improvement, as the Powerbook supports a second (external )monitor, which is a big aid to productivity.

Categories: Metablogging Tags:

The English disease

June 19th, 2003 18 comments

One of the striking features of world trade is the fact that nearly all the English-speaking countries run big current account deficits. The United States, formerly a big net exporter, has been in deficit for twenty years or so. The deficit has now reached 5 per cent of GDP despite a continuing recession/slow recovery. The UK has mostly run deficits for the past twenty years or so, though it still has strongly positive net investment income, reflecting its century or more as the main source of world investment. Australia and New Zealand are consistent deficit countries. Although they occasionally reach balance on the goods and services account, they are large net debtors, and therefore have consistent deficits on the income account. The only exception (and a relatively recent one) is Canada. Conversely of course, the rest of the developed world, that is, in essence, the EU and Japan run fairly consistent surpluses.

Why is this? I’m not attracted to cultural explanations for a couple of reasons. First, both the UK and US were, for a very long time, the major surplus countries. Second, if you go back only 25 years, the “English disease” referred to rampant union demands, class conflict and rigidities that hampered productivity. At least in the sphere of popular factoid, all these disabilities are now presented as characterising the EU and Japan rather than the English-speakers.

Of course, the change in stereotypes about laziness etc reflects the greater impact of neoliberal policy reforms in the English-speaking countries. So my question is: does neoliberalism cause current account deficits? And if so, is this a good thing reflecting the greater attractiveness of investment in these countries (the ‘consenting adults’ view, put forward prominently, though in a slightly different context by John Pitchford). Or is it a bad thing, reflecting debts incurred because of excessive borrowing by households and debts pumped up in speculative investment booms. Readers won’t be surprised to learn that I hold the latter view.

At the moment the’consenting adults’ view is dominant, particularly among supporters of neoliberalism. But looking at the way this group changed their tune after the Asian and Argentine crises, it’s not hard to predict that, in the event that things go sour, they will switch to the latter view very quickly and, as far as they can manage it, retrospectively (search on ‘crony capitalism’ for examples).

Via Jack Strocchi, update billmon at Whiskey Bar has more detail on the US case, including a neat way of presenting the data I haven’t seen before. In recent years, imports have grown by 40 cents for every dollar of GDP growth. I need to think a bit more about this.

A number of commentators have defended the ‘consenting adults’ view and have asked for a ‘market failure’ reason why it isn’t right. The obvious candidate is the moral hazard produced when financial markets are deregulated but the central bank continues to act as a lender of last resort. Exhibit A is Australia in the 1980s, which is when we ran our foreign debt up to its current levels. I don’t suppose anyone is going to claim that the investments of Bond, Skase, Elliott and others were good ones. Most of the debt in this period was borrowed through the Big Four banks. In a regulated system, they would have been stopped. In a fully deregulated system they would have failed. As it was they were rescued (Westpac being the most notable case). The story of state-regulated institutions (building societies and State Banks) is more complex, but basically the same. I put this argument forward in a piece in 1992, Partial financial deregulation and the current account?, Economic Papers 11(1), 53?56, which I notice is not up on my website. Another job waiting to be done!

Categories: Economics - General Tags:

Working hours – the worm turns

June 18th, 2003 27 comments

Ross Gittins latest column says

the great epidemic of overwork is subsiding. Of late, we’re working less, not more. And, in any case, the latest research suggests the whole story’s been a bit overdone.

The first point is, I think correct. Gittins quotes ABS data to show that average working hours for full-time employees increased from 42 to 45 hours a week between 1982 and 1994, levelled out, and have declined slightly over the past two years.

This seems pretty much consistent with the anecdotal evidence. Concern about increasing working hours started in the early 1990s and was widespread by the mid-1990s. There was a clear cultural shift around this time – people who willingly worked very long hours, who had typically been presented in very positive terms in the 1980s were presented much more negatively. A particular turning point was the publication of an email sent out at 10pm by a partner in a law firm complaining that no-one else was working. He was held up to universal ridicule. And increasingly, people decided the game wasn’t worth the candle and pulled out of full-time work altogether. Clive Hamilton’s “downshifters” are part of this response. So the decline in working hours is basically an illustration of Stein’ Law “If a trend is unsustainable, it won’t be sustained” I’ve been pointing out the unsustainability of the push to longer worker hours and greater work intensity for quite a few years (PDF file), so I’m not surprised to see a turnaround.

On the other hand, I don’t agree with the claim that “the whole story’s a bit overdone”. It’s important to observe that the rise in fulltime working hours was a reversal of a trend that had continued for more than a century. It was accompanied by a substantial increase in job stress and job insecurity, and these things were needed to induce workers to put in longer hours. Gittins makes the point that a lot of unpaid overtime was “compensated” by salary packages, but the shift towards such packages in the 1980s was precisely one of the devices used to extract more work effort, along with the conversion of employees into supposedly self-employed “contractors”.

Gittins also quotes data on the relatively small proportion of employees who said they would rather work less hours for less money, but doesn’t mention the large proportion of those on long hours who said they wanted to work less hours for the same money (12.4 per cent of those working 49-59 hours and 21 per cent of those working 60+ hours). This response “was not a preference option, [but] interviewers recorded this response when it was given. ” You might say this is simple wishful thinking, but very few people working part-time or standard full-time hours gave this spontaneous response. I’d interpret it as the response of people who feel that they’ve been pressured into working excessive hours for no extra compensation.

Categories: Economics - General Tags:

Beazley beaten!

June 17th, 2003 11 comments

Of the many commentators in both print and blog media who’ve written their views, I think the most accurate were, Margo Kingston and Ross Gittins. My main views:

First, the poll-driven choice of Beazley as the anti-Crean candidate turned the ballot into a referendum on the ‘small target strategy’ run by Beazley (advised by Swan and Smith) in 2001. My waning hopes for the Federal ALP have been strengthened slightly by the fact that Beazley was so thoroughly beaten.

Second, having positioned himself as the ‘policy’ candidate, Crean now has to actually deliver on this. In particular, , he has to decide whether he’s for lower taxes or higher services. At present, as Ross Gittins points out, Labor is the ‘denial of opportunity cost’ party. Of course, this is true to some extent of all opposition parties.
Given the absence of any serious policy initiatives from Labor for the past seven years, and the sporadic attention of the government to anything more than triumphalism and wedge politics, a serious policy program could make a big impact.

Third, and assuming he meets the policy test, Crean’s position has been strengthened by this episode. He called Beazley’s bluff, faced him down and beat him decisively, and, in the process, acquired some sort of identity. I don’t know whether this will be reflected in the polls, but it should be.

Categories: Oz Politics Tags:

A snippet on foreign currency loans

June 17th, 2003 13 comments

I’m always thinking about new things to do with the blog. Some ideas, like the Monday Message Board, have been successful, others haven’t worked quite so well. What I’m doing here is posting a couple of paras I was going to put into an opinion piece, but which I’ve had to cut for space reasons. I hope the blog will provide a way of implementing an idea I’ve had for many years and never fully realised, that of a text database of thoughts on various topics, useful quotes and so on, that I can dip into as needed in my work. Of course, even though a lot of the material won’t be of general interest, I still welcome comments – in fact, comments on esoteric topics are often more useful to me than debate on current issues. I’d also welcome thoughts about the merits or otherwise of this idea and proposals for other uses of the blogging medium.

The idea of offering loans denominated in Swiss francs, pushed vigorously by the major banks received a rapturous receptionin the mid-1980s . What could be more natural as a consequence of financial deregulation than that Australian borrowers should gain the benefits of low interest rates prevailing overseas. No-one bothered to do the elementary risk analysis that would have shown this to be a fundamentally unsound idea, and even in retrospect, its failure was widely seen as the result of bad luck.

In reality, the product was equivalent to the combination of an ordinary Australian-currency loan with an unhedged bet on the foreign exchange market. The interest rate differential between franc-denominated and dollar-denominated loans reflected a market expectation that the dollar would depreciate. Borrowers were invited to bet that the market was wrong. Such a bet made no sense for the vast majority of borrowers and in fact the depreciation was even greater than the market forecast.

Despite the obvious impropriety of advising financially unsophisticated customers to take on gratuitous risks, the banks were generally successful in enforcing their contracts, except where their initial incompetence was compounded by subsequent wrongdoing, such as the suppression of evidence. Judges and the legal system more generally proved incapable of coming to grips with the basic issues.

Categories: Economics - General, Metablogging Tags:

Another counterexample to consequentialism

June 16th, 2003 7 comments

Jason Soon alerted me to this obituary for Sir Bernard Williams in which he is said to have refuted utilitarianism, or rather consequentialism, with arguments such as the following

Williams pointed out, a very quick way to stop people from parking on double yellow lines in London would be to threaten to shoot anyone that did. If only a couple of people were shot for this, it could be justified on a simple Utilitarian model, since it would promote happiness for the majority of Londoners.

I guess one shouldn’t try to refute an obituary, but it’s better for an intellectual to be criticised than ignored, so I will respond with the observation that I hope this wasn’t really one of Williams’ strongest criticisms of utilitarianism. Does anyone really think such a policy would actually work in the way claimed?
Read more…

Categories: Philosophy Tags:

Monday Message Board

June 16th, 2003 6 comments

It’s time for your comments on all topics. As always, civilised discussion and no coarse language please.

I’d be interested on views about the way forward (if any) for Federal Labor.

Categories: Regular Features Tags:

Getting and spending

June 16th, 2003 1 comment

Via Jeremy Osner a nice post by Mark Kleiman with a critique of the Protestant Work Ethic.
Tom Runnacles has more. In particular, I agree with his view that the growth in American and Australian (standard fulltime) working hours over the past twenty years has more to do with labour market (de/re)regulation than with ingrained cultural preferences. After all, who would have believed in the 1970s, that the British would be criticising the Germans for laziness. And although the cultural stereotypes haven’t caught up, Americans now work harder and longer than Japanese or Koreans.

Categories: Economics - General Tags: