Archive for November, 2007

Arbitrage lost

November 12th, 2007 10 comments

I’ve mentioned before that the fact that most bookies have Labor odds-on to win, while the Liberals are favoured in about half the individual seat markets (they were ahead in a majority until recently) seemed to create arbitrage opportunities. A nice piece by Tim Colebatch resolves the apparent paradox to my satisfaction at any rate.

The paradox is explained by the fact that of the 29 seats in which the odds are closest, the bookies have the Coalition as favourite in 23 and Labor in just six. The law of probabilities suggests that if Labor gets anything like the vote being recorded in the polls, it will win a lot more than six of those seats.

The only blemish in this explanation is that there’s no need to refer to the Labor vote in the polls. Given 29 seats that are nearly even-money, it’s reasonable to expect Labor to pick up at least 10, just on the basis of the betting odds.

Going to the more general question of prediction, 2007 has been a win for the polls in their contest with pundits and punters as to who provides the best prediction of election outcomes. Labor jumped to a winning lead in the polls as soon as Rudd replaced Beazley and has held that lead, with only marginal erosion ever since. The pundits and the betting markets have gradually come into line, but it’s hard to believe that they would have done so in the absence of the information provided by the polls.

Of course, it’s still possible that Howard will come back, as he has done in the past, but that will just prove all predictions wrong.

Categories: Oz Politics Tags:

Monday message board

November 12th, 2007 19 comments

It’s time, once again for the Monday Message Board. As usual, civilised discussion and absolutely no coarse language, please.

Categories: Regular Features Tags:

The greatest of crimes (reposted from 2004)

November 11th, 2007 23 comments

Another Remembrance (or Armistice) Day and we are still at war. I posted this in 2004, and have nothing to add or change

November 11 marks the armistice that was supposed to bring an end to the Great War in 1918. In fact, it was little more than a temporary and partial truce in a war that has continued, in one form or another, until the present. Hitler’s War and the various Cold War conflicts were direct continuations of the first Great War, and we are even now dealing with the consequences of the Balfour Declaration and the Sykes-Picot agreement.

The Great War was at the root of most of the catastrophes that befell the human race in the 20th century. Communism, Nazism and various forms of virulent nationalism all derived their justification from the ten million dead of 1914-18. Even the apparently hopeful projects that emerged from the war, from the League of Nations to the creation of new states like Yugoslavia and Czechoslovakia ended in failure or worse. And along with war, conquest and famine came the pestilence of the Spanish Flu, which killed many more millions[1].

And yet this catastrophe was brought about under the leadership of politicians remarkable for their ordinariness. Nothing about Lloyd George, Clemenceau, Bethmann Holllweg or the other leaders on both sides marks them out for the company of Attila or Tamerlane or Stalin. How could men like these continue grinding their populations through years of pointless slaughter, and what led people to follow them? In retrospect, it is surely clear that both sides would have been better if peace had been made on the basis of any of the proposals put up in 1917 on the general basis of of “no annexations or indemnities”. The same was true, in reality, at any time from the outbreak of war in 1914 until the final collapse of the Central Powers, and even then the terms of 1917 would have been better for all than those of Versailles.We should think about this every time we are called to war with sweet-sounding slogans.

War is among the greatest of crimes. It may be the lesser evil on rare occasions, but it is always a crime. On Remembrance Day and always, this is what we should remember.

fn1. It’s not clear whether the War exacerbated the pandemic, for example through massive movements of people and widespread privation. But it seems right to consider them together when we remember the War.

Categories: Life in General Tags:

Poor Americans?

November 10th, 2007 83 comments

As I mentioned a few days ago, using current market exchange rates, Australia now has a higher income per person than the US. Matthew Turner observed the UK passing the US a few months ago and estimated several years ago that the critical value for the Eurozone is around $1.46, which was reached in the last couple of days. I haven’t checked on the GDP comparison, but the yen and franc are also rising

Of course, it would be silly to use these numbers to support a claim that Americans are, on average, worse off than people in other developed countries. The Purchasing Power Parity indexes produced by the International Comparisons Project of the World Bank provide a much better (though far from exact) basis for comparisons of this kind. But, for the many advocates of free markets who’ve used the economic performance of the US as the basis for their case, there’s a big rhetorical problem here. You can, I suppose, argue along the lines “The market values the output of the average American less than that of the average European (or Australian) but analyses prepared by international bureaucrats show that Americans are actually better off, and therefore we should prefer the market to the state”, but it’s not a position I’d want to defend.

Read more…

Categories: Economics - General Tags:

Policy speech ?

November 9th, 2007 18 comments

Does anyone know if this election is going to include an election policy speech in the traditional sense from Rudd or Howard (or has there been one that I missed?). In every election I can recall, the party leaders made a speech setting out their major policy commitments. With two weeks to go and the big money spent long ago, I’m wondering if this tradition has been abandoned.

Categories: Oz Politics Tags:

Just so

November 9th, 2007 10 comments

What happens when an Evolutionary Psychology study comes up with a finding that’s the exact opposite of what the researchers obviously expected? Daniel Davies at CT reports.

Where’s Popper (or Lakatos) when you need them?

Categories: Science Tags:

Latham does Seinfeld

November 9th, 2007 27 comments

Mark Latham has a piece in the Review section of today’s Fin, excoriating the policy convergence that has characterized the election campaign, and Australian politics more generally. The catchphrase that’s caught media attention is “a Seinfeld election, a show about nothing”.

I generally agree, though I’ll note that, to complete the case, Latham needs to do a bit of convergence of his own, arguing that the election doesn’t matter as regards climate change because the big powers will decide everything. I disagree. Howard’s status as Bush’s most reliable ally makes this one of the rare occasions when what Australia decides will make a difference.

Categories: Oz Politics Tags:

More incoming mail

November 8th, 2007 2 comments

Again, I’ve only got time to copy and paste, so I’ll leave it to my readers to provide civilised discussion
Read more…

Categories: Economic policy, Oz Politics Tags:

Incoming mail on IR

November 8th, 2007 26 comments

In my morning mailbox, this piece from Chris White, offered as a guest post. I’ve only got time to copy and paste, so I’ll leave it to readers to discuss.

I should mention in advance that my rules regarding civil discussion apply especially to guest posts. Feel free to agree or disagree, but people who are rude to my guests will be asked to leave.

Read more…

Categories: Economic policy, Oz Politics Tags:

LP attacked by spammers

November 7th, 2007 1 comment

Mark Bahnisch of Larvatus Prodeo writes:

Hi folks

We’ve had major problems over the last few days with a spam attack of
unprecedented size, which has rendered LP almost unusable due to
constant database errors. We’ll be upgrading and moving to a new host
over the weekend (at which point we’ll disappear altogether for a few

Basically, the increased traffic we’ve had since the election began
(up by about a third on normal) has made us a more attractive target
to spammers.

In the meantime, we’ve found turning comments off keeps the site
working as the spammers posting comments is the cause of too many
database connections open at once – hence the outages. We’ve picked
the new host for greater reliability as well as more bandwidth.

In the meantime, we’ve set up a backup blog – LP in Exile – where
we’ll be crossposting and where comments can be posted:

We’re also appealing for donations to assist with costs involved in the move:

Categories: Metablogging Tags:

International comparisons

November 6th, 2007 31 comments

Not that long ago, international comparisons of income levels and so on were always done using market exchange rates. If this were still the standard practice, there would be some surprising news to report. On an exchange rate basis, Australia has a higher GDP per person than does the US (I’d guess the same would be true of more relevant measures like national income per person, though the gap would be a bit smaller because of our greater indebtedness).

Currently US GDP per person is around $US 44000. Australia’s is about $A51 300, which at a market exchange rate of 0.93 converts to about $US47700.

Before we break out the champagne, I’ll point out that these exchange rate comparisons aren’t really useful – this is obvious given that the $US/$a rate was heading for $0.50 not long ago, and is now headng for parity . Standard practice these days is to use a “Purchasing Power Parity” measure, based on the estimated relative cost of a standard bundle of goods and services. The estimated $UA/$A rate is around 0.70 which leaves us a fair way behind the US.

Although PPP estimates are better than those based on market exchange rates, they shouldn’t be treated as exact. They are statistical estimates, with a large margin of error, and the underlying economic theory (revealed preference) implies that even with perfect data, there is always a range of possible values for index numbers like this. Typical international comparisons should be taken to have a margin of error of 10 to 20 per cent.

In passing, a useful tip for students of the economy. If you want a round number estimate of the magnitude of any economic variable, you can approximate GDP as $1 trillion, population as 20 million, and income per person as $50 000. These will be accurate to within 10 per cent for another year or two.

Update In comments, Matthew Turner reminds me that he’s been making this point for years. I think I came up with it independently, but he was certainly first. Interestingly, Matthew calculates that the critical value for the euro/$ exchange rate, at which euro GDP per person exceeds US is $1.46. Yesterday, it hit 1.457.

Categories: Economics - General Tags:

Monday message board

November 5th, 2007 31 comments

It’s time, once again for the Monday Message Board. As usual, civilised discussion and absolutely no coarse language, please.

Categories: Regular Features Tags:

Will Labor change it all? Should they?

November 5th, 2007 26 comments

A “gaffe” in Australian politics normally consists of speaking the truth when it is politically inconvenient. So, are Peter Garrett’s remarks that Labor would “change it all” after the election a “gaffe” in this sense, as suggested by the reporter in question, a joke, as Garrett said, or something in between.

My view is “something in between”. That is, there is no secret plan to junk Labor’s promises, but a lot of people wish there was.

In most elections, parties make promises, to secure electoral support, that they would rather not keep, either because they regard them as bad public policy or because they reward interest groups that are not seen as actually deserving such rewards. This election has seen plenty of that from both sides, with the biggest single example being Labor’s decision to match Howard’s tax cuts. Most Labor supporters would regard this as a bad promise in several ways. First, large advance commitments of this kind are bad macroeconomic policies. Second, it would be better to allocate more money to services like health and education. Finally, the tax cuts mostly reward the upper income groups that are the natural constituency of the Liberals.

Following the last two changes of Federal government, the incoming party fabricated a crisis and junked their inconvenient (“non-core”) promises. Much though I dislike a lot of the (com)promises Rudd has made, I hope Labor does not do the same. Democratic processes are more important then getting the best policy outcome in the short term.

Over the fold is an excerpt from a Fin article I wrote in September, suggesting that, despite the “me-too” nature of the campaign, the outcome will make a difference. I think the analysis is still right, except that the ferocity of the government’s anti-union campaign has shifted the ground a bit. If the government gets back in, even with a narrow majority, they will clearly feel justified in pushing through their maximal anti-union agenda. Conversely, the unions now know they have to stick with Rudd come what may, and he has an obvious interest in demonstrating his supremacy. So I suspect he’ll give them nothing more than the minimal changes that have been promised.
Read more…

Categories: Oz Politics Tags:

Weekend reflections

November 3rd, 2007 48 comments

Weekend Reflections is on again. Please comment on any topic of interest (civilised discussion and no coarse language, please). Feel free to put in contributions more lengthy than for the Monday Message Board or standard comments.

Categories: Regular Features Tags:

The cohort effect

November 1st, 2007 74 comments

Lots of commentators have been surprised by the magnitude of the swing against the government in the opinion polls. Given that the economy is going well, and that on most issues divisions between the parties are not all that sharp, why should people change their votes? There are a number of potential reasons, including the increased salience of climate change and the fact that Rudd is a more attractive leader than any of his recent predecessors.

But one fact that doesn’t get so much attention is that much of the swing to Labor is coming from changes in the population of voters, rather than in changes of mind among voters. It’s well known that the Liberals have more support among older voters, and that Labor gets strong support from young voters and recent immigrants. But no-one seems to have drawn the obvious implication. If no-one changes their mind between elections, Labor gets an automatic increase in support as young people and migrants are enfranchised, while Liberal voters are more likely to pass away through old age (I’m not sure about Australians who move overseas and stop voting as a result).

How big is this swing? My rough guess is that we’ve added a million new voters since the last election and lost around half a million. If we assume two-thirds of the new voters go for Labor, and two-thirds of the departed supported the Liberals, that leaves the Liberal vote unchanged, but adds half a million votes for Labor, equal to a bit over 4 per cent of the total number of voters. Since the number of voters has increased, that should be reflected in, roughly, an increase of 2 percentage points in Labor’s share of the 2PP vote, and a decrease of 2 percentage points in the Liberals.

Read more…

Categories: Oz Politics Tags:

Half a metaphor

November 1st, 2007 17 comments

I’m writing a piece (in the form of a debate with Jason Potts) on the Internet and non-market innovation (open source, blogs, wikis and Web 2.0 more generally) and the editors asked us to say something about digital literacy. I’ve never paid much attention to this metaphor, maybe because of excessive exposure to its predecessor, computer literacy.

It strikes me though, that discussion of digital literacy focuses almost entirely on reading (how to navigate the Web, find reliable information and so on). The things I’m talking about are forms of writing.

Thinking about the rise of text literacy, the distinction tends to be blurred a bit, because most (not all) people who learn to read also learn to write. Still, there’s plenty of discussion of the importance of writing to groups (women, working people) traditionally excluded from written culture.

So, I’m surprised at the neglect of this point in relation to digital literacy, especially because the Internet has done so much to break down the asymmetry between a small group of writers and a large group of readers that characterises most communications media. Having said this, I’m sure this point has been made many times before, and I invite readers to write in with good references.

As an aside, “computer literacy” programs in the late 70s and early 80s had, if anything, the opposite problem. Lots of emphasis on how to code in BASIC and very little appreciation of the potential for computers as tools for general use.

Categories: General, Metablogging Tags: