Archive for July, 2010

Mike Steketee nails it

July 31st, 2010 36 comments

This account of how Labor choked on climate change seems likely to be the definitive one.

Categories: Environment, Oz Politics Tags:

Weekend reflections

July 30th, 2010 163 comments

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. Civilised discussion and no coarse language please.

Categories: Regular Features Tags:

Splitting the progressive vote

July 29th, 2010 20 comments

Whenever the topic of voting for the Greens comes up, the question arises of whether this involves “splitting the progressive vote” or “wasting your vote”. In large measure, this suggests results from confusing the Australian system with the “first past the post” (plurality of first preference) system that prevails in the US and Britain. In all Australian voting systems it is possible to vote Green with a second preference for Labor. Obviously, if you don’t do this (by preferencing the Lib/Nats or by exhausting your ballot where this is an option) the result will be to reduce the chances of a Labor candidate being elected. But are there any other cases where this is a risk?

For single-member constituencies, the most common case is where the Greens are sure to run third. In this case, their preferences are distributed, and a Green vote with a Labor second preference is functionally equivalent to a Labor first preference, although the views they express are different. In the rare cases where Labor is sure to run third, the opposite is true. The only interesting case is where the order in which Greens and Labor are going to finish is unsure. In this case, the outcome that gives the best combined Labor-Green chance is that the candidate with tighter preference flows should finish third. That way, there is less leakage of preferences to the conservatives. In practice, I don’t think this is a big deal, but to the extent it is at all relevant, it usually suggests that progressives should vote Green. But there is a problem with this, in that, if people really acted on this analysis, there would be a reward to the party whose voters were more likely to split their preferences.

Broadly speaking, the same analysis applies in the Senate. Most of the time, the total number of Green and Labor Senators elected will be the same regardless of how preferences are arranged between them. Given the complexities of the system, especially with voting both above and below the line, anything can happen, but since these complexities are almost impossible to predict in advance, they can’t really influence a decision on how to vote.

Categories: Oz Politics Tags:

Race to the bottom

July 29th, 2010 84 comments

I restarted the blog so I could comment on the election, but I’ve found it too depressing to do much. The major parties are engaged in a race to the bottom in every respect, announcing silly focus-group-driven policies and appealing to the worst instincts of the electorate. The mass media have encouraged this, obsessing over trivial scandals and personality issues and disregarding our real economic and social problems. The only serious hope for progress on policy is the Greens but they remain marginalised. I’ll try to offer some discussion of the Greens policies on various issues but at this point, I think, there is little reason to follow the main campaign.

Categories: Oz Politics Tags:

Monday Message Board

July 26th, 2010 67 comments

It’s time again, at long last, for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

Categories: Regular Features Tags:

Who has gained from the inequality boom? — Crooked Timber

July 26th, 2010 50 comments

A question that comes up at CT quite a bit is: who has benefited from the massive increase in US income inequality over recent decades. I finally got around to chasing down Congressional Budget Office data (derived from tax records for the period 1979 to 2005), and the answer, in short is:

  • The top 1 per cent roughly doubled their share of both pre-tax income (9 per cent to 18 percent) and after-tax income (7.5 per cent to 15 per cent)
  • The rest of the top 10 per cent slightly increased their share (from about 20 to about 22 per cent)
  • The next 10 per cent held their share (about 15 percent)
  • The remaining 80 per cent of households saw their share drop (from 58 per cent to 48 per cent of post-tax income, with the biggest drops coming at the bottom. The bottom 40 per cent of households now get a smaller share of post tax income (14 per cent, down from 19) than the top 1 per cent.

    A couple of observations on this.

First, to answer the question “who gained from the inequality boom” we need a counterfactual. If, as is commonly claimed, pro-rich policies raised the average rate of growth of income, people in the top 20 per cent of the income distribution were better off, since they had a constant share of a bigger cake. The effects are ambiguous for everyone else, and, on any plausible numbers, everyone below the median is worse off than they would have been with moderately slower, but equitably distributed growth. On the other hand, if pro-rich policies contributed to the slowdown in economic growth for the period since the 1970s, compared to the postwar boom, then the only net beneficiaries are those in the top 1 per cent of the income distribution.

Second, the picture would probably change a bit if benefits (particularly employment-related health benefits) were taken into account. My guess is that this would probably improve the outcome for the top quintile (since this group mostly held on to benefits which increased faster than wages) and worsen it for those below the median (who have lost access to benefits over time).

Finally, it’s striking that, on the CBO figures, the tax system is almost exactly proportional: that is, it has no net redistributive effect at all. The top 1 per cent have a somewhat smaller share of post-tax income than of (measured) pre-tax income, but that almost certainly reflects their capacity to hide income from the tax system.

Posted via email from John’s posterous

Categories: Economics - General Tags:

Votes for clunkers

July 25th, 2010 19 comments

Julia Gillard has announced an Australian version of the cash for clunkers program of the Obama Administration. Reader Ben Elliston writes

read an article some months ago by Jeffrey Sachs evaluating a
similar policy from the Obama administration:

It turns out that the Gillard proposal is even worse than Obama’s.
Sachs calculated the greenhouse gas abatement value of Obama’s scheme
at US$140 per metric tonne. Gillard’s policy will reduce emissions by
1 million tonnes at a cost of $394 million dollars ($394/tonne).

My only observation is that Ben’s estimate is taken directly from the government’s press release, which is almost certainly overoptimistic. For comparison, at about $25/tonne, brown-coal electricity generation becomes uneconomic compared to gas and black coal. At $100/tonne, just about all the alternatives (including wind, nuclear, CCS, and solar) look pretty good. Cash for clunkers is, as Sachs concludes, a clunker of a policy.

And just in case anyone has forgotten, Abbott’s anti-policies are even more focused on this kind of nonsense/

Cover design for the living dead

July 23rd, 2010 6 comments

The choice of cover design for a book is always a tricky process, at least for authors like me who are more comfortable with text than images. A while back Eszter at CT dealt with the problem by crowdsourcing the cover for her book Research Confidential.

I got lots of input from readers here on the text and title of Zombie Economics, but I left the cover design to the professionals, and I’m glad I did. Here’s the cover, based on a horror comic and here,at the Princeton University Press blog, is a discussion of how it came about.

There was one anxious moment when we discovered that the design included a reference to a chapter (on central bank independence) that I’d deleted at a late stage in the process. But the designer came up with a clever tweak that changed the reference (to refer to financial markets) without affecting the impact of the design.

This is the first book I’ve done since I took up blogging (I use to say blogs kill books, but this book grew out of the blog) and the process has left me with renewed respect for the range of skills that are involved in turning an idea and a rough draft into a book.

Posted via email from John’s posterous

Categories: Economics - General Tags:

Non-policy or anti-policy

July 23rd, 2010 36 comments

My column in yesterday’s Fin (over the fold) advocating agreement between Labor and the Greens on a short-term carbon price was rendered obsolete almost immediately by Julia Gillard’s speech (as it happened, I was in the building next door when she gave it).

Gillard’s non-policy represents a failure of leadership. The best that can be said for it is that the delay generated by this process is only supposed to last for 12 months, and that 150 randomly selected Australians could scarcely do a worse job on this vital issues than our political leaders have done.

But, as is so often the case, Abbott is even worse, offering an anti-policy that would represent an obstacle to any real action. I’m feeling happy about my decision to vote for the Greens. With rather less enthusiasm than before, I’ll still give Labor my second preference.

Read more…

Categories: Environment, Oz Politics Tags:

Live on video!

July 23rd, 2010 Comments off

After the usual hassles, UQ School of Economics finally has its own videoconference facility, an IP-based Tandberg system, which should (fingers crossed) be interoperable with other standards-based systems. I just did my first conference, and it worked very well. Unfortunately, we are still waiting for an upgrade that will let me run a presentation at the same time as appearing on video. But I’m confident of ultimate success, so I’m now announcing that I’m available to give seminars and talks on a wide range of topics to anyone (subject to time and timezone constraints!) who would like to organise a videoconference. Email me j.quiggin at if you are interested.

Categories: General Tags:

Support John Abraham

July 20th, 2010 68 comments
Potty peer Christopher Monckton has stepped up his campaign to shut down John Abraham’s debunking of one of his talks last year, by asking supporters to flood Abraham’s university with emails demanding it start a disciplinary inquiry.

I can only endorse this comment on Monckton and the lunacy of a world in which someone like this is taken seriously.

Posted via email from John’s posterous

Update I thought Posterous would include the link automagically but apparently not. Here’s Garth Renowden’s site where you can support Abraham and/or bag Monckton.

Categories: Economics - General, Environment Tags:

Economists and climate change

July 19th, 2010 102 comments

Ross Gittins repeats the criticism he, Ken Henry and Martin Parkinson, have put forward previously, that economists were either missing in action or actively unhelpful in the climate change debate. I disagree – I think academic economists as a group look a lot better on this issue than do economic columnists, and (on the limited available evidence) at least as good as public servants.

Read more…

Categories: Economics - General Tags:

The case for the Greens

July 18th, 2010 112 comments

As I said last time, I’ll be advocating a vote for the Greens. Unlike some commenters here, I plan to give my second preference to Labor[1]. To justify my second preference first, I regard the Liberals under Abbott as utterly unfit for government. Abbott has behaved as an unprincipled opportunist throughout his period as opposition leader, denouncing “great big new taxes”, then proposing taxes of his own with no regard for consistency or good public policy. In office, I expect he would discover that he had a mandate for the hardline rightwing policies he has always favored.

Coming to the choice between Labor and the Greens, this isn’t the first time I have given a first preference to the Greens, but it’s the first in some years. The main substantive issues that concern me are economic management and climate change, but these issues (and particularly climate change) can’t be separate from questions about process and principle. The government has done a good job on economic management, while the opposition has been consistent only in error. On the other hand, the government has made a terrible mess of climate change policy, almost entirely because of its reluctance to deal with the Greens and to confront the opposition and the lobby groups that back them. In the long run, the only way they will be able to govern effectively is through co-operation with the Greens, and the sooner they are forced to realise this the better.

It’s obvious at this point that the CPRS proposed last year is dead, and that a new ETS will have to be developed, hopefully when we have seen some more progress in other countries. For that reason, I think a carbon tax, with few exemptions and a tight cap on compensation to emitters is the best way to go. The Greens idea of a two-year interim carbon tax would be a good starting point for discussion and there is still time for Labor to announce in-principle support for a deal of this kind.

On other issues such as asylum seekers, the government’s position is carefully ambiguous, while the opposition is as close to overt racism[2] as it has ever been. A big vote for the Greens would force the government back towards a decent position.

Then there is the machine politics that led, first to Rudd being forced to dump the CPRS, and then being sacked when this decision had such disastrous consequences. Without excusing Rudd for some earlier failures on the issue, this alone would be enough to deprive Labor of my first preference in the presence of any decent alternative.

It seems reasonable to hope that the Greens will get enough votes to hold the balance of power in the Senate from July 2011. It seems unlikely, except by a fluke that they could do the same in the House of Representatives. But the loss of even two or three inner-city seats would put Labor on notice that its core support can’t be taken for granted.

I’m even marginally hopeful as regards the seat of Ryan, where I live. The incumbent Liberal, Michael Johnson, has been disendorsed over corruption allegations, but claims to be the victim of factional smears and is running hard against the official LNP candidate. The Greens have done well in the past, and might benefit from a flow of preferences.

fn1. This assumes that there is no preference deal made that would lead me to think otherwise. For example, if Labor were to preference Steve Fielding or the like again, I would consider exhausting my Senate ballot in a way that gave a preference to neither major party (to see how, read here.

fn2. The one genuine example of “political correctness” in Australian politics is the one that prevents us from using the word “racist” to describe racism, but there’s no doubt that’s what it is.

Categories: Oz Politics Tags:

Back on air

July 17th, 2010 35 comments

The final proofs of Zombie Economics went off to the typesetter this morning, and you’ve all seen this evening’s news. So, I guess it’s time for me to end my hiatus, and make whatever contribution I can to the marvel of democracy. Not to keep anyone in suspense, I’ll be advocating a vote for the Greens.

Categories: Dead Ideas book, Oz Politics Tags:

The crisis of 2011? — Crooked Timber

July 16th, 2010 5 comments

I’ve been too absorbed by my book projects and by Australian politics (of which more soon) to pay a lot of attention to the forthcoming US elections, but it seems to be widely projected that the Republicans could regain control of the House of Representatives. What surprises me is that no-one has drawn the obvious inference as to what will follow, namely a shutdown of the US government.

It seems obvious to me that a shutdown will happen – the Republicans of today are both more extreme and more disciplined than last time they were in a position to shut down the government, and they did it then. And they hate Obama at least as much now as they hated Clinton in 1995 (maybe not quite as much as they hated him by 2000, but they are getting there faster this time).

The obvious question is how a shutdown will be resolved. It seems to me that it will be a lot harder for Obama to induce the Republicans to back down than it was for Clinton. IIRC, no piece of legislation proposed by Obama has received more than a handful of votes in the House, and (unlike the case with Bob Dole in 1995) no aspiring Republican presidential candidate will have an interest in resolving the problem – the base would be furious. On the other hand, the price Obama would have to pay if he capitulated the Republicans would demand from Obama in a capitulation would be huge, certainly enough to end his presidency at one term. So, I anticipate a lengthy shutdown, and some desperate expedients to keep things running.

As far as I can tell, there is no mechanism for resolving this kind of deadlock – the House can’t be dissolved early as would happen in a parliamentary system. I think the Founders probably envisaged the House as having a “power of the purse” comparable to that of the British Commons. Whether they did or not, I’m sure this argument will be made, probably by people who have argued, until very recently, that the power of the Executive is essentially unlimited.

But, my understanding is limited and I’d be keen to hear what others think about this.
[1] I’ve tried to clarify my point about capitulation, which was poorly expressed the first time.

Posted via email from John’s posterous

Categories: Economics - General Tags:

The crisis of 2011? — Crooked Timber

July 16th, 2010 Comments off

I’m not a big fan of Obama either, but Bob McManus’s ipse dixit about what would happen strikes me as wildly eccentric. But at any rate, it seems to me that in any showdown Obama is bound to win. The Republicans don’t have a party leader, as Obama is the de facto leader of the Democrats. And nobody can get more media attention than the President of the United States. So in terms of “messaging,” Obama easily comes out ahead; he will win any public relations war. Also, keep in mind that Republicans in Congress now take pride in being—- and more importantly, are publicly identified as—- the Party of No (forgive the shopworn phrase). The Republican base sees this as good; Democrats see it as bad; and the rest of public is mostly somewhere in between. But the point is that they are publicly identified as reflexively obstructionist. If a shutdown comes, then, the Republicans will naturally be seen as the cause, rather than Obama.

Those are my two cents, but the only special insight I have is American citizenship, nothing more.

Posted via email from John’s posterous

Categories: Economics - General Tags:

How Obama caused the recession — Crooked Timber

July 10th, 2010 5 comments

The idea that Obama (or rather, the wisdom of crowds in anticipating the election of a socialist-Islamist Obama administration) caused the recession is getting another run, this time from Nobel[1] prizewinner Ed Prescott. I haven’t been able to track down more than a precis of Prescott’s argument, but I assume it’s similar to the version put forward by Casey Mulligan. I had a go at this in my Zombie economics book [2], and here on CT, so, I thought I would link to it here, to give a bit of context to the current flap.

[1] Yes, yes, I know about the Sverige Riksbank. And winners of the economics prize aren’t the only ones to say silly things later on.
[2] Still on track for Halloween, and already taking pre-orders! Join the Facebook group here.

Posted via email from John’s posterous

Categories: Economics - General Tags: