Archive for August, 2003

The Belgium effect

August 17th, 2003 1 comment

Productivity is a somewhat mysterious concept, and I love untangling a good productivity mystery. As Brad de Long has observed in a string of recent posts, US productivity has behaved quite mysteriously in the last few years. The key facts noted by Brad are

  • Labour productivity (output per hour worked) usually falls during recessions/slowdowns
  • Over the last three years, US output per labour hour has risen, at an accelerating rate
  • Over the same period, hours worked have fallen at a rate consistent with a deep recession

Brad’s hypothesis is that the increase in productivity is primarily due to technological progress in information and communications technology, and that the decline in hours worked is caused by the combination of rapidly growing productivity and inadequate demand. I don’t think this analysis can be sustained.

Read more…

Categories: Economics - General Tags:

My sentiments exactly

August 16th, 2003 8 comments

This piece from the Guardian summarises pretty exactly my views on Iraq. By joining an unjustified war on false premises, Blair has undermined the whole principle of humanitarian intervention. What’s left is the idea of the US as a ‘selective policeman’, punishing the crimes of its enemies and ignoring those of its friends or those that simply fall outside the sphere of interest. This idea precluded making war on Saddam Hussein when he was filling mass graves in the 1980s, but allowed for him, and the Iraqi people to be retrospectively punished when he changed sides.

Even the limited constraints on dictatorship posed by the threat of US intervention will disappear if, as seems likely, the nation-building exercises in Afghanistan and Iraq fail for lack of resources. Along with the fact that the US government is on a path to bankruptcy, this will probably produce a swing back to isolationism sometimein the next few years.

Categories: World Events Tags:

Privatising infrastructure investment

August 16th, 2003 13 comments

In an article on privatisation in the Fin a couple of weeks ago, I observed that

it was hoped that private ownership would impose capital market discipline on investment decisions … The public sector has been far from perfect in the planning and implementation of infrastructure investment decisions. But public sector failings pale into insignificance compared with the disastrous bubble and bust when investment decisions in the Internet and telecommunications sectors were entrusted to the wisdom of private capital markets. The energy sector has been little better. Enron was just one example of investment decisions being driven by market manipulation and rent-seeking.

In the case of monopolies the most important single regulatory decisions relate to prices charged to consumers or for third-party access. With privately owned monopolies, there is an inherent conflict here. If the price is set too high, consumers will suffer. If they are too low, investment will be inadequate. As regulator, the government has a conflict of interes. On the one hand, regulation is supposed to set efficient prices. On the other hand, as representatives of consumers, governments have an incentive to fix prices at inefficiently low levels.

Public ownership Îinternalises the externalityâ and balances the incentives facing governments. If prices are set below the socially efficient level, the benefit to consumers is offset by a loss in revenue. The converse is true if prices are set too high.

I’m just wishing I had run this last Thursday, just before the big US blackout, which appears to be due primarily to inadequate/poorly co-ordinated investment in transmission.

Categories: Economic policy Tags:

The Bush miracle ?

August 15th, 2003 7 comments

I got this graph of US productivity growth from Brad de Long Productivity_2003-08-09.gif , and it struck me that it’s only after 2000 that there is any real action here. As Brad says, in a normal postwar recession, we would have expected a decline in productivity growth (and maybe even negative growth) arising from labor hoarding – this was the name given to the propensity of employers to keep workers on through economic downturns. Since most employers now engage in large-scale layoffs even during booms, it’s not surprising that labor hoarding is no longer an issue.

Still, given the triumphalist rhetoric that came out of the US throughout the Clinton administration, the productivity growth for this period was remarkably unimpressive. One possible explanation for the contradiction is that the graph shows changes in output per hour worked whereas most attention in the 1990s was focused on output per worker, which was rising with increasing working hours.

In any case, if productivity growth had declined in 2001 as usual, there would have been no story in this picture. For those who attribute economic outcomes to political leadership, the obvious explanation is that Bush has produced an economic miracle.

I don’t believe in miracles, and I also think there’s a problem with Brad’s analysis in which rapid productivity and slack demand produce rising unemployment. US demand for manufactured goods (which is still the most important single part of nonfarm business product) has risen since 2000, but the increase has been met almost entirely by imports. Hence, US manufacturing output has been roughly constant and hours worked have fallen by about 15 per cent. If US productivity was really rising as fast as the graph suggests, there should have been a fair bit of import displacement, especially since the dollar began depreciating a year ago.

Perhaps there are long lags in the process of adjustment to a depreciation (Australian readers of a certain age will recall the endless wait for the “J-curve”).

But I prefer some combination of the explanations I put forward in my post on productivity. In particular, there’s the problem of factor composition. The present recession is unusual because it has been characterised by massive overinvestment. With output growth weak, capital productivity has fallen.

In these circumstances, the best way to assess the underlying productivity trend is to look at multifactor productivity. Unfortunately the data is only published annually and the most recent estimates, from the Bureau of Labor Statistics are for the change from 2000 to 2001. As would be expected from the discussion above they show a rise in labor productivity and a decline in capital productivity. The net impact was that

From 2000 to 2001, multifactor productivity fell 1.0 percent in both the
private business sector and the private nonfarm business sector

. This was the first fall since 1991. I’d expect some recovery in capital productivity to have taken place since then, since investment has been weak, but it seems unlikely that MFP growth for the period since 2000 has been more than marginally positive.

I think we’ll have to put the Bush miracle in the shed with all the others.

Categories: Economics - General Tags:

Further reading

August 15th, 2003 Comments off

Thanks to everyone who made suggestions, I’ve managed to put together a reasonably good set of further reading for my chapter on the Howard government’s economic policy. Further suggestions are still welcome of course.

Read more…

Categories: Economic policy Tags:


August 15th, 2003 1 comment

Although no-one’s made the point explicitly, Shane Warne must be exhibit A in the case for multiple intelligences

Categories: Life in General Tags:


August 14th, 2003 10 comments

Ken Parish links to my post on the ethanal business (it ought to be a scandal, but it clearly isn’t) and says

I regard the Howard government as possibly the worst Australia has ever seen, certainly since the Second World War.

on account of its corruption and continuous reliance on divisive wedge politics. I’ll leave wedge politics for later and focus on corruption.

On this score, my fear is that the Howard government will turn out to be “average: worse than the last one and better than the next one”.

Read more…

Categories: Oz Politics Tags:

Assassination futures

August 13th, 2003 1 comment

There has been an interesting hypothetical debate over assassination futures, but apparently Thailand has the real thing.

Categories: Economics - General Tags:

Word for Wednesday: productivity

August 13th, 2003 10 comments

In a vague sense, productivity means the ratio of outputs to inputs. Improvements in productivity arise from improvements in technology or new and better ways of organising production. Productivity can also decline if productive effort is diverted to wasteful ends, which may happen for a variety o reasons.

In m yexperience, most of the time, reported short-term changes in productivity are spurious, in a sense I’ll try to make more precise below. In thinking about this, I came up with the following proposed test/definition for an increase in productivity (it would also apply, with modification, to a reduction)

A change in productivity is sustainable if additional inputs of labour, capital etc could be added and would generate additional output at the new, higher level of productivity

The idea of this definition is to rule out as many as possible of the sources of spurious productivity gains, including

  • factor composition biases, such as the gain in average productivity from closing the weakest plants in an industry/economy
  • relative factor intensity biases, such as gains in labour productivity from an increase in the capital-labour ratio
  • factor use intensity biases, such as labor hoarding during recessions and work intensification arising from microeconomic reform

The most famous case of factor composition bias was the Thatcher productivity miracle, achieved primarily through plant colsures. Factor intensity bias is a chronic problem, which has been addressed through the construction of measures of multifactor productivity. Increased work intensity was the main source of the Australian productivity miracle in the 1990s.

(Since miracles are invariably spurious, I’ve avoided putting scare quotes around the term.)

Categories: Dictionary Tags:

FTA redux

August 13th, 2003 4 comments

A few days ago former Liberal hatchetman Michael Baume had an opinion piece (subscription required ?) in the Fin, denouncing ‘scaremongers’ who suggested that the US wanted to scrap the Pharmaceuticals Benefit Scheme as part of the proposed Free Trade Agreement, and quoting a string of official denials.

In today’s Fin, I read that the US is demanding ‘reform’ of the PBS. Anyone who has experienced reform in the last decade will be able to fill in the details.

This kind of dishonesty is par for the course in the pro-FTA camp. Alan Oxley of AUSTA has adopted precisely the same rhetorical slide. As I pointed out in my debate with Wolfgang Kasper onthis topic a few months ago

The Austra submission to the Senate Inquiry into the FTA denies any intention to ‘dismantle’ the scheme, but notes, ominously, that ‘there are features of the scheme that discourage investment by drug companies in Australia. Austa supports measures in the FTA which encourage more investment and job growth in Australia’. It is safe to conclude that the ‘features’ seen as discouraging investment and job growth are the same ones that provide Australians with access to affordable drugs.

What surprises me is not the dishonesty, but the belief that this kind of thing will take people in, when the facts are so easily available.

Categories: Economic policy Tags:


August 13th, 2003 8 comments

Margo Kingston has collected all the facts on the snap decision to impose excise on ethanol imports to the benefit of Australian ethanol producer Manildra.

Howard will undoubtedly get away with this, but until a few years ago, misleading Parliament over a decision involving more than a hundred million dollars, to the benefit of a party crony, would have been exceptionally politically damaging. As late as the 1980s, ministerial careers were ruined over far smaller sins.

Many factors have contributed to this, and standards declined markedly in the later part of the Hawke-Keating government, but undoubtedly public acquiescence in the ‘children overboard’ lies has been a big factor. Once it’s clear that you can lie about a policy issue, be caught, and still get away with it, the temptation to lie about money becomes overwhelming. It’s a safe bet that at least some of those involved in this process will end up with cushy post-political jobs as a result (see Reith, Wooldridge etc).

Update I am obviously hopelessly behind the times. Manildra has already hired Howard’s former chief of staff.

Categories: Oz Politics Tags:

Sceptics in the White House

August 12th, 2003 4 comments

This Salon article has a pretty good roundup of the organisations promoting global warming “scepticism”, including funding sources.

For those more interested in the real science on this topic, I’ve run across an excellent hyperlinked resource entitled The Discovery of Global Warming. While the title makes the author’s viewpoint pretty clear, the treatment is admirably balanced. a very short summary

In the summer of 1988, the hottest on record, scientists’ claims that the Earth’s warming was already detectable focused public concern. But the many scientific uncertainties, and the sheer complexity of climate, made for vehement political debate over what actions, if any, governments should take.

Scientists intensified their research, organizing programs on an international scale. The world’s governments created a panel to give the best possible advice, negotiated among thousands of officials and climate experts. Around the end of the century the panel managed to establish a consensus with only a few dissenters. They announced that although the climate system was so complex that complete certainty would never be reached, it was much more likely than not that our civilization faced severe global warming.

I was particularly interested in the treatment of solar variability, a topic that’s been debated at length in the blogosphere.

The crucial para

The import of the claim that solar variations influenced climate was now reversed. Critics had used the claim to attack regulation of greenhouse gases. But if the planet reacted with such extreme sensitivity to almost imperceptible changes in the radiation arriving from the sun, the planet had to be comparably sensitive to greenhouse gas interference with the radiation once it entered the atmosphere.

All the essays are extensively hyperlinked, and the references are both extensive and wide-ranging.

Categories: Environment Tags:


August 12th, 2003 23 comments

Everybody is pretty much blogged out with Iraq, but I was still a bit surprised that this report on the Iraqi “mobile germ lab” trailers seems to have passed without notice. Given that the official position of the coalition governments, including the Australian government is still that these trailers constitute proof that Iraq had biological weapons, the report that

Engineering experts from the Defense Intelligence Agency have come to believe that the most likely use for two mysterious trailers found in Iraq was to produce hydrogen for weather balloons rather than to make biological weapons

is of interest in itself.

But the report is more interesting because the trailers represent the clearest illustration of the way in which we got into a war where the official pretext was Weapons of Mass Destruction. Unlike, say, the Niger uranium or the dodgy dossier, this process was largely public, or made so by leaks, from day 1.

It’s clear that the Administration honestly thought they had found the smoking gun when the trailers first turned up, then doggedly held to that view as the contrary evidence mounted (the absence of any biological evidence, even on the second truck which had not been cleaned; the insistence of the Iraqi scientists that the truck was used to produce hydrogen; the absence of crucial components etc). In defending its position, the Administration did its best to suppress any alternative view from its own agencies and to prevent outside experts from access to the evidence.

This was the same pattern as we saw in the leadup to the war. A year ago, nearly everyone (including me) assumed that Saddam was hiding weapons, so Bush Blair and Howard felt free to overstate the strength of their evidence, pointing to specific sites and making specific claims which can now be seen to be ill-founded. After Saddam called their bluff and the inspectors went in, the process became more and more dishonest and the pressure directed against sceptics intensified.

In retrospect, it’s clear that the UN Security Council majority was absolutely justified. On the basis of the case presented to them, which solely concerned Weapons of Mass Destruction, there was no justification for halting inspections and going to war.

Of course, there was a better reason for going to war, namely to replace Saddam’s government with a democratic or at least non-totalitarian one. But reliance on the WMD pretext undercut this rationale, since it had to be claimed that war would not go ahead if Saddam complied with the weapons resolutions. Hence, it was not possible to do the things that would be required for a successful war of liberation, such as establishing a provisional government and getting it recognised. Instead, the coalition decided to wing it, on the assumption that victory and the discovery of weapons would legitimate the war.

This assumption now seems to be unravelling. If there has been progress towards a sustainable democratic government in Iraq, it’s not visible in the reports we are getting here.

Categories: World Events Tags:

Taxing and spending

August 11th, 2003 7 comments

Regular commentator Jack Strocchi has sent me several pieces criticising the Howard government for being fiscally lax. The one that comes closest to my assessment, though not on every point, is from John Edwards of HSBC. Key points:

Costello’s biggest reform, by contrast, has been the goods and services tax. It was a substantial political achievement, but as an economic reform it makes very little difference. The same is true of the sale of half of Telstra. He dramatically reduced Commonwealth debt, but since he did so mostly on the proceeds of Telstra the Commonwealth’s net liabilities are not much changed.

Costello deserves credit for formalising the independence of the central bank to pursue an inflation objective … and above all for not making mistakes which threatened growth.

As several readers have commented, my draft section on macro policy didn’t give the government due credit for simply not making big mistakes, and I’ll try to fix this.

Costello is not the evangelical conservative committed to small government and low taxes he purported to be in opposition. He is just another Victorian Liberal, carrying on the tradition of ample spending from ample taxes while pretending to do the opposite.

As I’ve said previously, I’m all for more taxing and spending, provided the priorities are sensible. My problems with the Howard government’s fiscal policies relate to budget balance (we really should have a surplus at this point in the cycle) and poor priorities. The draft section of my chapter follows.

Read more…

Categories: Economic policy Tags:

Request for help, part 2

August 11th, 2003 5 comments

I got some useful suggestions from readers for additional reading for my chapter on the economic policies of the Howard government. But most of the readings I have so far (with the exception of some Reserve Bank conference volumes) are critical of the government from a leftish perspective. Can anyone suggest an accessible source for
(i) an overview of economic performance under the present government (I was hoping to refer to the INDECS State of Play books, but they seem to have ceased in 1995
(ii) a defence of the government’s economic performance in general, or on specific issues
(iii) a critique from a free-market or other right-wing perspective (please, no debate on whether free-market = rightwing, I’m just trying to use commonly understood definitions).

Categories: Books and culture Tags:

Monday Message Board

August 11th, 2003 8 comments

There’s been lots of lively discussion on a range of topics during the week. I’m particularly pleased to see old posts like the one on economic rationalism being opened up to new debate.

Now it’s time for your comments on any topic (civilised discussion and no coarse language, please).

Categories: Regular Features Tags:

What I'm reading

August 10th, 2003 2 comments

The Passions and the Interests by AO Hirschman. Hirschman is always worth reading – his Exit, Voice and Loyalty is a classic. The Passions and the Interests, is a piece of intellectual history describing the development of ideas about rational self-interest and the invisible hand.

I’m also reading Watershed by Ticky Fullerton. She’s an ABC reporter and the book is about Australian water issues, mainly, but not exclusively, the Murray-Darling. She gives a summary of blogger Chris Sheil’s excellent book Water’s Fall, including an appealing adjectival characterisation

Water’s Fall is eloquent and convincing, but should carry a health warning for any investment banker in the CBD. Such people would soon find themselves frothing uncontrollably at the mouth with outrage at a Quigginesque thesis, which blames almost all incompetence on greed and a general bias in favour of the shareholder over the consumer.

I’m not sure if ‘Quigginesque’ is an original coinage (I have the feeling Henry Ergas has used something similar) but I like it anyway.

Categories: Books and culture Tags:

Cultural monarchism

August 9th, 2003 26 comments

I can’t count the number of times I’ve read articles on the theme of Howard’s victory in the culture wars in the last three years. I’d say it must be about as many times as I read similar articles about Joh Bjelke-Petersen in the 1980s, and Keating and Kennett in the 1990s. In each case, almost as soon as they lost office, their supposed cultural dominance evaporated.

The assumption underlying all these articles is something that might be called ‘cultural monarchism’, since it works on the assumption that any elected leader whose political dominance is currently unchallenged must enjoy some sort of occult connection with mass culture, similar to that typically attributed to monarchs.

Bjelke-Petersen’s was perhaps the most substantial example of unchallenged dominance. He was in office for decades, and his government was ruthless in crushing opposition on all fronts, so he did manage to keep Queensland significantly different from the rest of Australia. But after one term of Labor, Bjelke-Petersen’s influence had faded, and by now it’s almost undetectable.

Keating’s supposed dominance was never anything more than a Press Gallery illusion. He was never popular, and won the 1993 election only by default. Far from Keating establishing a dominant orthodoxy issues like multiculturalism and the Republic, support for these causes was damaged by their association with him.

Howard’s supposed dominance is I think equally illusory – in fact, it consists in large measure of the fact that Keating’s illusory dominance has been dispelled. He has had a string of narrow election wins over unimpressive opponents, but his government has never been as popular as the Labor governments at state level.

As regards cultural dominance, the republic issue provides a good test, since its an issue where Howard clearly had a majority against him when he took office. He managed the issue adroitly to ensure the defeat of the referendum, but he’s made essentially no progress in rebuilding support for the status quo – at most he’s held the line. And I’d argue that monarchism has lost more ground in cultural terms under Howard than it did under Labor. Support for the British monarchy has virtually disappeared (although the Queen remains personally popular). The idea that the Governor-General should be an apolitical figurehead, answerable to the PM except in 1975-style emergencies, and exempt from political criticism has also lost ground.

Howard’s current poll majority would disappear if, for example, interest rates rose by a couple of percentage points and house prices fell correspondingly. And if that happens, in all probability, we’ll be reading similar stuff about Crean in a couple of years’ time.

Categories: Oz Politics Tags:

Request for help

August 9th, 2003 5 comments

For an academic, one of the great things about blogging is the help it provides on questions I would otherwise spend a lot of time trying to answer (I hope those readers who act as unpaid research assistants from time to time feel they are getting fair value from my efforts on the blog) .

I’m currently in need of some suggestions. I’ve posted a few excerpts of my chapter on economic policy under Howard (it’s for a book to be edited by Robert Manne), and I need to give some suggestions for further reading, accessible to that elusive character, the general intelligent reader. I’d say the readers of this blog come as close as anyone I’m likely to find in this respect. Any suggestions? Books would probably be preferred, but articles in easily accessible journals would also be OK.

Categories: Economic policy Tags:

Politic religion

August 8th, 2003 10 comments

Writing in Slate, blogger Mark Kleiman demolishes a report from the University of Pennsylvania claiming that faith-based programs reduce recidivism among prisoners. In essence, the report compared ‘graduates’ of the program with a control population, disregarding the larger group who failed to complete the program satisfactorily for various reasons. When the entire program group is compared to the control group they actually had slightly higher rates of recidivism (not a statistically or substantively significant difference though).

This is a striking outcome for a couple of reasons. First, as Kleiman notes,

You don’t have to believe in faith-healing to think that an intensive 16-month program, with post-release follow-up, run by deeply caring people might be the occasion for some inmates to turn their lives around.

Lots of programs of all kinds are strikingly successful when run, in pilot form, by deeply committed people with particular skills but fail when replicated on a larger scale.

In addition, though, you don’t have to believe in God to believe that faith-healing might work. There’s a long tradition, exemplified by Plato, Machiavelli and more recently by Leo Strauss in which religious or pseudo-religious belief is held to be good for the masses regardless of its truth or falsity. (I recollect the phrase “politic religion” in this context, but Google doesn’t show any links that would support this.)

While I would argue that the long-run effects of the kind deception recommended by Plato and Strauss are invariably pernicious, I would not have been surprised to find it effective in the short run. It’s easy to imagine that a promise of eternal salvation would help in supporting a desire to reform, particularly if you take the view that convicted criminals are typically not rational optimizers. So the results are something of a surprise to me.

UpdateThe Blog Geist being what it is, I am now noticing lots of references to the topic of politic/civic/pragmatic religion popping up. I liked this one from Stentor Danielson who argues that the social benefits of Jesus’ teaching do not depend on general belief that he actually existed.

In the comments thread, Mark Kleiman makes the intriguing claim that Plato’s advocacy of the “Noble Lie” was intended satirically. He says

After all, if you were going to tell fairy-tales hoping that they would be believed, you wouldn’t publish a document explaining that they were in fact fairy-tales.

My view is that Plato held an esoteric/exoteric distinction similar to that of Strauss and assumed that anyone literate enough to read his work was on the esoteric side of the divide.

OTOH, Kleiman’s argument points up how bad Plato’s political judgement was – the same is true of Machiavelli and Strauss. If you think lying and cheating in the service of good ends is desirable, the last thing you should do is say so.

Maybe there are some real philosophers reading this who would like to give a better-informed view on these topics.

Categories: Politics (general) Tags:

I expected this, but not so soon

August 8th, 2003 2 comments

Via Keneth Miles (and a string of others, leading back to Bill Maher), this report says that anti-terrorism laws are already being used in ordinary criminal cases, with the theory that “drugs are chemical weapons” being used to indict someone accused of making methamphetamines on a charge of “manufacturing a nuclear or chemical weapon”.

The accused, facing 10 years to life, should count himself lucky. He could have been seized as an enemy combatant, held incommunicado and executed by a military tribunal. Of course, if this had happened, the Administration would not have had to tell anybody about it.

Categories: World Events Tags:

Error bars

August 8th, 2003 4 comments

This report in the Guardian cites leading leftwing thinktank the Institute of Public Policy Research as saying that, according to the latest research at the Hadley Centre for Climate Change, the likely change in temperature by 2100 (under business as usual) will be 8 degrees C, as against ‘consensus’ estimates ranging from 1 to 5 degrees C . The argument is apparently based on claims that CO2 stored in the soil will be released with rising temperatures, producing a positive feedback.

I haven’t followed this up, and it seems surprising that such an obvious mechanism should have been overlooked. So I’m not suggesting that this report should be regarded as reliable. Rather, I want to use this report to illustrate a point I’ve made previously.

A lot of critics of Kyoto argue that, since there’s a lot of uncertainty about the estimates produced by the Intergovernmental Panel and Climate Change and similar bodies, we should ‘wait and see’. These critics tend to pounce on any study that produces an estimate lower than the consensus range to bolster their case.

This neglects the fact that uncertainty goes both ways. There’s a nonzero probability that the rate of warming could be lower than the range suggested by the best available estimates, but it’s equally possible that the rate could be higher. The best available estimates suggest we should do something now (Kyoto) and prepare to do a lot more in the future unless we get a favorable surprise.

In the case of global warming uncertainty actually strengthens the case for action because the damage costs are convex. That is, an increase of 4 degrees will do more than twice as much damage than an increase of 2 degrees and an increase of 8 degrees (the IPPR estimate cited above) would be utterly catastrophic. So, the more uncertainty there is, the stronger the case for action.

When there’s a lot of uncertainty, the important thing is not so much immediate action to reduce emissions as the creation of institutions and mechanisms that will allow large reductions to be made in future. With all its imperfections, the Kyoto agreement is the only process that offers any possibility of progress in this respect.

Categories: Environment Tags:

Don't worry, be happy

August 7th, 2003 20 comments

I’m a worrier. I worry about the economy, global warming, cancer, even about whether life has any meaning. But now, thanks to the guys over at Troppo Armadillo*, most of my worries are over. Reading the ‘always excellentJunk Science site run by Steven Milloy, I’ve learned that

How did I come to get the wrong idea on all these questions? Well, it turns out that the National Academy of Sciences, Environmental Protection Authority, Intergovenmental Panel on Climate Change, NASA and a host of individual scientists are engaged in a vast leftwing conspiracy to alarm and deceive us.

Only a handful of scientists have had the courage to resist this conspiracy. They can be recognised by the fact that they are typically affiliated with right-thinking think tanks like the Cato Institute (where Milloy works) and prefer to publish their work with Fox News (‘we report, you decide’), rather than in corrupt journals like Science and Nature, where ‘referees’ from the scientific establishment censor the truth. Fortunately, their work is now being recognised with generous grants from the tobacco, coal and oil industries.

The good news doesn’t stop there. According to this morning’s email, I am about to receive a substantial commission on a transaction involving Nigerian gold (as long as I can beat ASIC to the punch). And beautiful girls from all over the world are just waiting to meet me.

I’m glad I’ve stopped worrying. Now if I could only cure my addiction to irony …

* More exactly, to Geoff Honnor who provided the link to Milloy’s Junk Science site, and to Ken Parish who linked to the similarly-styled Bizarre Science site.

Boring disclaimer A link to a site doesn’t imply endorsement of everything that appears on that site.

Categories: Science Tags:


August 6th, 2003 11 comments

Josef Joffe’s Bonython lecture, reprinted in full in the SMH represents the United States as Gulliver in Lilliput, a military, economic and cultural hyperpower of unprecedented dominance, but argues

Power exacts responsibility, and responsibility requires the transcendence of narrow self-interest. As long as the United States continues to provide such public goods [global order, a stable world trade system etc], envy and resentment will not escalate into fear and loathing that spawn hostile coalitions.

I don’t think the hyperpower premise stands up to scrutiny. In military terms, it’s certainly true that the US can defeat any likely non-nuclear adversary with ease, but the lesson of Afghanistan and Iraq is that defeating the opposing army is the easy bit. The US military is now stretched to, and arguably beyond, the limit, occupying a country that is, as we have been reminded so often, the size of California. It can’t or won’t muster the additional resources to stabilise Liberia (effectively a former US colony).

In economic terms, war and domestic profligacy have put the US in the classic imperial position – running an empire on borrowed money. It’s hard to put a precise time limit on current US fiscal policies, but it’s most unlikely they can be sustained for another decade.

Finally, there’s the issue of cultural ‘soft power’. I plan a big post on this Real Soon Now, but for the moment I’ll just observe that the most striking cultural trend of the past few years has been ‘reality’ TV. This phenomenon would be the epitome of the dominance of American low culture, if it weren’t for the fact that it was invented by the Japanese and modified for a broader market by the Europeans before reaching the English-speaking world.

Categories: World Events Tags:

A simple one

August 5th, 2003 11 comments

Among the questions raised on the Monday message board is one where the answer is, in the words of Ronald Reagan, simple but not easy. The correct way to deal with stamp duty on house purchases is to scrap and replace revenue by scrapping the land-tax exemption for owner-occupied housing.

The current system discriminates in favor of existing home-owners against homebuyers. But since the interests of existing home-owners represent the most sacred of Australian sacred cows, I can’t see this changing.

Categories: Economic policy Tags:

The housing bubble

August 5th, 2003 15 comments

Apparently, the housing affordability problem has been all the rage while I’ve been away. Coincidentally, I’ve been looking at the housing bubble as part of my study of economic policy under Howard. Your comments on this would be much appreciated. Here it is

More than any previous government, the Howard government has tied its economic and political fortunes to the performance of the housing market. Activity in the housing market boomed in the leadup to the GST, as builders and households sought to complete as much work as possible before GST became payable. This boom was, naturally enough, followed by a slump in the immediate aftermath of the introduction of the GST.

The government responded vigorously and effectively, doubling the grant to first homebuyers that had been introduced to offset the impact of the GST. The fact that this measure was available for a limited period fuelled a rush mentality which persisted even after the grant was reduced to its original level.

The homebuyers grant was followed in late1999 by a cut in capital gains taxes., which are now taxed at half the rate applicable to ordinary income. Although this measure gutted an important reform introduced by the Hawke-Keating government, it received the enthusiastic support of the Labor opposition.
Although this measure was meant to encourage participation in the so-called Înew economyâ represented by the then-booming NASDAQ stock market, it had barely taken effect when the dotcom bubble burst. Instead, it helped to inflate a bubble in investment properties, particularly unit developments marketed to small investors who could exploit the benefits of negative gearing (taking tax deductible losses from a rental property in the expectation of realising a concessionally-taxed capital gain).

Read more…

Categories: Economic policy Tags:

Slow blogging, part VI

August 4th, 2003 Comments off

I’m only just getting around to catching up on what other bloggers have been doing in my absence, and I can report that everyone over at Catallaxy is in top form. My jet lag is such that I’m bound to mix up the contributors to this collective blog, but I’ll go ahead anyway.

I enjoyed Jason Soon’s debunking of ‘sceptics’ on the subjects of global warming and evolution. I must have missed the arrival of Sarah Strasser but she has an excellent account of recent developments in relation to technical devices used to back up ‘global zoning’ schemes of price discrimination. Andrew Norton has some acute cultural comment. You’ve probably all read this already but, if not, go to it.

Categories: Metablogging Tags:

Fannie and Freddie

August 4th, 2003 1 comment

This light-hearted piece by Daniel Akst from the NYT raises a lot of important points about prudential regulation, quangos and related issues.

For those not familiar with the cute nomenclature of US financial markets, Fannie (Mae) was a nickname for the “Federal National Mortgage Association”, but now appears to be its official business name. Freddie (Mac) was the Federal Mortgage Acceptance Corporation, or something like that. Both are stockholder owned corporations, established with a special government charter.

In other words, these are quangos in the original sense of “quasi-non-government organisations”,private business organisations, established with effective government backing, to perform what would normally be regarded as public functions.

Among the many problems with quangos, the one emphasised in this article is the implicit guarantee from governments to bail them out if they get into too much trouble. A very similar system applies to banks under the Australian system of prudential regulation. As I observed here

Most Australians would be even more surprised to discover that there is no public guarantee of bank deposits. Under current policies, the government does not guarantee deposits, but does nothing to dispel the general belief that such deposits are absolutely safe.

As Akst observes, this kind of implicit guarantee is the worst of all possible worlds. Governments should either
(i) withdraw the guarantee;
(ii) charge a commercially-sound fee, as in deposit insurance schemes; or
(iii) take ownership of the enterprise
Akst suggests taking Fannie and Freddie into public ownership, getting their books in order and then privatising them without the implicit guarantee. This is probably the best strategy in this case.

Categories: Economic policy Tags:

Monday Message Board

August 4th, 2003 12 comments

If I can overcome the jet lag that’s causing me to scramble names in my posts, and generally to operate in something of a fog, I’ll be back to normal blogging this week. To start the week off in the traditional fashion, it’s time for Monday Message Board, where you can post your comments on any topic (civilised discussion and no coarse language, please).

Categories: Regular Features Tags:


August 4th, 2003 5 comments

Ken Parish gives a generally approving link to a piece of junk science claiming that bans on DDT inspired by Rachel Carson’s Silent Spring have caused the deaths of millions of third world residents. He also gives a link to a more balanced piece which gives cautious support to limited use of DDT in anti-malaria campaigns in poor countries (the only use that is currently legal, although there is widespread illegal use as an agricultural insecticide). While noting that not all of Carson’s 1962 claims about the dangers of DDT have stood up to subsequent scrutiny, the author dismisses right-wing conspiracy theories like those in the first link, and makes the point that Carson was campaigning against the use of DDT as a broad-spectrum insecticide, not as an anti-malarial. As the author notes

Soaking the biota in DDT like it was bubble bath, standard practice at the time Silent Spring was written, was a bad thing and Carson was right to condemn it.

As this piece makes clear, the main reason for the abandonment of DDT as the core component in anti-malaria campaigns was the growth of resistance, which was of course exacerbated by indiscriminate use. The ban on DDT use in developed countries, to the extent it had any effect, slowed the general rise of resistant species, and therefore increased the effectiveness of DDT in its anti-malarial use.

The main advantage of DDT is that it is cheap and persistent. Persistence is also one of the main disadvantages, along with broad-spectrum effects. For poor countries, and for the specific purpose of anti-malaria campaigns, the benefits arguably outweigh the costs, and this is why DDT continues to be used in these countries.

The question of when the extra cost of alternative pesticides is sufficiently small to justify abandoning DDT, or sufficiently large to justify readopting it in countries that have abandoned it, is an important one that needs careful analysis. The cause of rational debate is not assisted by propaganda pieces like the one Ken cited.

Note This version has been edited in response to points made by Ken in the comments thread.

Categories: Environment Tags: