Archive for July, 2011

Don’t look at the rich?

July 31st, 2011 24 comments

My last post, arguing that the share of US income going to the top 1 per cent of households is now so great that any effective policy must be financed by reducing or more effectively taxing the income of this group produced a range of interesting (and some not so interesting responses). First up, it elicited what appears to be new variants on a couple of standard rightwing talking points. More interesting to me is a response from Matt Yglesias arguing (as I read him) that, even if there is no serious prospect of reversing the shift of income to the top 1 per cent[1], there is still plenty of capacity for progressive political actions based on a broadly neoliberal (US sense) agenda.
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Categories: World Events Tags:

Where the money is

July 27th, 2011 104 comments

Over at Crooked Timber, there’s been an extensive neoliberalism (mainly, though not exclusively, in the US sense of this term, which is broadly akin to “Third Way” Labor”) and political theory. I’ve been largely on the sidelines. That’s mainly because, observing the US political and economic situation, I have a very clear view on what policies could, in principle, sustain a progressive political movement, but (given my distance from the scene and the absence of anything substantial enough to force its attention on the mass media) no real idea about how such a movement might develop. Here’s a post I put up there, slightly edited to remove some points that led to thread derailment.

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Categories: World Events Tags:

Tragedy in Norway

July 25th, 2011 84 comments

As usual on such occasions, I haven’t had much to say about the horrific events in Norway. It’s generally better, in such circumstances, to pause for reflection, and certainly some who rushed to judgement have gone badly wrong in doing so, here as on previous occasions. This is not the time for judgement, but that time will come.

Categories: Life in General, World Events Tags:

Monday Message Board

July 25th, 2011 18 comments

It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

Categories: Economics - General Tags:

Half marathon update

July 22nd, 2011 7 comments

My training for the half-marathon has been badly disrupted by illness, so I really need some encouragement. Click on the link to the left and put some money in to the Queensland Cancer Council. I’m going to a conference now, which is going to disrupt things further, but I’ll commit to putting in 20km on the treadmill while I’m away if you guys can bring the total donations up to $2500 by Sunday.

I’m still going to do my best to beat two hours, but it’s looking quite a bit harder now

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Categories: Life in General Tags:


July 22nd, 2011 18 comments

Got this in my email this morning inviting contributions to a special issue of a journal (I won’t name it)

Dynamic stochastic general equilibrium (DSGE) models have become an established framework of reference in empirical macroeconomics. Because DSGE models combine micro- and macroeconomic theory with formal econometric modeling and inference, they are now widely used in policy analysis and academic discourse to address questions in monetary economics and business cycle research, and to inform policy interventions. The continued success of DSGE models will rest on a sustained ability to meet key challenges and improve upon the main modeling paradigm both in terms of its theoretical foundations and its econometric implementation.

And of course, we can thank DGSE models for predicting that nasty crisis in 2008 and prescribing the policy responses that fixed it so completely. Good think we didn’t have to rely on that old-fashioned Keynesian stuff.

Categories: Economics - General Tags:

Burying the lede

July 19th, 2011 31 comments

That’s US press jargon for putting the key item in a story so far down no-one will read and it certainly applies to this David Carr story about NewsCorp in the US. You have to get down to the bottom of the first page to discover that News settled, very generously, a claim in which it was accused of hacking a competitors systems. That seems to undermine the common assumption (including mine) that the specific pathology of hacking was confined to the UK.

Categories: #NewsCorpFail, Media Tags:

Yet more Monckton

July 18th, 2011 39 comments

The House of Lords has taken ‘unprecedented’ action to stop Lord Monckton claiming that he is a member (his closest approach was receiving zero votes in an election among hereditary peers). That’s typically the opening lie in a Monckton presentation that misrepresents everything from the United Nations to the laws of arithmetic. It’s hard to imagine how many cease and desist letters would be required to stop all the falsehoods, or what would be left of his presentation if they were removed[1].

But, as I said previously, the real point here relates to the Australian political right, who have embraced Monckton with universal (if sometimes feigned) enthusiasm. And not just Monckton, but a long string of conpsiracy theorists, charlatans and cranks, who keep on repeating the same lies despite being repeatedly refuted (Ian Plimer on volcanoes can stand in for a multitude of examples).

As I said previously, it’s hard to tell who is most blameworthy here. Is it the’crazy uncles’ represented by people like Nick Minchin and encompassing the majority of conservative supporters, who actually believe this stuff, the weathervanes like Tony Abbott who will happily say 2+2 = 4,5 or 73 according to what their listeners want to hear, or supposedly serious conservatives/liberals who know it’s nonsense but keep their mouths shut.

In the short term, and aided by some spectacular own goals on the Labor side, this intellectual catastrophe hasn’t had any political costs for the right. But that won’t be true forever. And for any intelligent person of conservative inclinations, the knowledge that political activity on their preferred side requires (at a minimum) tacit acquiescence in this kind of thing must be pretty appalling.

fn1. Indeed, bearing in mind Mary McCarthy’s famous remark about Lillian Hellman, it’s hard to imagine that even prepositions and conjunctions would remain.

Categories: Environment, Oz Politics Tags:

Don’t look at the bank behind the curtain

July 17th, 2011 19 comments

The political impregnability of Rupert Murdoch and NewsCorp has always been one of those facts about the world that seemed regrettable but eternal. By contrast, the ability of the banks to emerge from their near-destruction of the world economy richer and more politically powerful than ever before certainly took me by surprise when it happened (partly motivating my change in title from “Dead Ideas” to “Zombie Economics”). John Emerson pointed out the other day that the head of risk management at Lehman Brothers, arguably the most egregious individual failure among the thousands of examples, was just appointed to a senior position at the World Bank.

But now it seems there is just a chance that the curtain might be swept away from even these wizards. The emerging theme in commentary is the corrupt culture of impunity represented by the press hacking scandal, MP expenses and the banks (here’s UK Labour leader Ed Miliband pulling them all together).

If Labor could tie the Conservative-Liberal austerity package to the protection of the systemically corrupt banking system, they would have the chance to put Nu Labour behind them (I noticed Blair has already credited Brown with killing the brand). Instead of putting all the burden on the public at large, they could force those who benefited from the bubble to pay for the cleanup. The two main groups are the creditors who lent irresponsibly, counting on a bailout and should now take a long-overdue haircut and high-income earners who benefited, either directly or indirectly, from the huge inflation in financial sector income.

I know it seems hopelessly naive to think the banks could ever be brought to heel. But they were, for decades after the Depression. And as impregnable as they look today, Newscorp looked just as impregnable three weeks ago, as did the CPSU and the apartheid regime in South Africa thirty years ago.

Of course this spring moment won’t last long. But perhaps there is enough momentum that it won’t be exhausted by Murdoch alone.
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Categories: Economic policy Tags:

Greenpeace, an enemy of science

July 15th, 2011 139 comments

Tim Lambert comments on Greenpeace sabotage of a CSIRO experiment on GM crops. Sadly, Greenpeace has become an openly anti-science organisation.

I agree with everything Tim says, but I’d add something more on the politics of this action. This kind of criminal vandalism, in the “right” cause, appeals to the juvenile instincts that nearly all of us retain to some extent, but it has repeatedly proved disastrous for the left, and the environmental movement. It’s worth comparing this kind of action to civil disobedience protests, where people put themselves on the line and openly invite arrest. If these guys had any desire to promote genuine debate they would turn themselves in and defend their actions in open court.

Given the embrace of anti-science and anti-rational views by the political right, it is important that the left and the environmental movement should dissociate themselves entirely from this kind of action. It will be a long time before Greenpeace can regain my support, if they ever do.

Categories: Environment, Science Tags:

Why do economists support carbon prices?

July 14th, 2011 27 comments

I’ve been a bit slow getting on to this, given the excitement of recent events, but my answer to this question is over the fold

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New sandpit

July 14th, 2011 18 comments

Here’s a new sandpit for (non-nuclear) lengthy side discussion, rants on idees fixes and so on.

Categories: Regular Features Tags:

What can you say?

July 14th, 2011 39 comments

I don’t usually pick on Catallaxy. But I couldn’t resist pointing to this post where Rafe Champion describes Lord Monckton as a “sophisticated commentator”, and the rest of the crew pile in to defend him against the lone commenter pointing out the obvious fact that Monckton is a charlatan, conspiracy theorist, and all around crank. Not by any means the greatest of his follies, but this is someone who claims to be a member of the House of Lords after receiving zero votes(!) in the election for hereditary peers.

Being on the political left hasn’t always been comfortable, but these days I’m really glad I stuck it out. There must be some people remaining on the political right who know how far they have sunk when someone like Monckton can be a leading advocate for their views, but they are all either saying nothing (since speaking up would be politically suicidal), or hypocritically going along with the general applause.

Categories: Oz Politics Tags:

Awards night

July 13th, 2011 13 comments

We academics love nothing better than to give each other awards. The Australian Conference of Economists is being held in Canberra this week, and the big social event was the conference dinner on Monday night, where blogger-economists were (as usual) well represented when the gongs were handed out. The “Best Young Economist” award (it says something about the pace of academic life that “Young” = “under 40”) previously won by econbloggers Joshua Gans and Paul Frijters, went this time to Andrew Leigh, who left ANU last year to become MP for Fraser in the ACT. Academia’s loss will be the nation’s gain if Andrew gets to exert some influence over public policy.

I also scored, being chosen for the Distinguished Fellow Award. Looking at the list of previous recipients, it’s a big honour to join them and I’m very grateful to my colleagues in the profession, especially since I’ve argued pretty vigorously with most of them at one time or another. The economics profession has its problems (as I argued in Zombie Economics, we haven’t been too good at learning the lessons of the Global Financial Crisis), but all things considered, it has been a force for good in Australian public policy debates.

Monday Message Board

July 11th, 2011 27 comments

It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

Categories: Regular Features Tags:

How to create a world-class university

July 11th, 2011 37 comments

The Grattan Institute is advertising a lecture on “How to create a world-class university” by Andrew Hamilton, VC of Oxford and previously Provost at Yale. As the ad says, “Hamilton has been a leader in two universities that are world class by any measure”.

Still, if we take his experience as representative the obvious answer to the question is of how to create a world-class university is “found it in 1700, or preferably earlier”. Hamilton may have some significant achievements, but the creation of a world class university doesn’t appear to be among them.

That’s a snark, but it conceals a serious point. The fact is that (with a handful of marginal exceptions) the leading universities in most developed countries, including the US, UK and Australia, are those that were leading universities in 1900. There is very little evidence to suggest that anything done by a vice-chancellor or provost can achieve more than marginal improvements in the relative ranking of a new university. Conversely (and I won’t name the Australian examples I have in mind) even spectacularly bad management can’t do much to damage a university that has been around for 100 years or more.

That in turn means that common assumptions about the benefits of competition in the university sector are almost entirely wrong. In the absence of effective market mechanisms by which well-run firms prosper and grow while badly-run firms shrink and die, competition is essentially meaningless.

The expansion of competition between Australian universities has led to huge spending on marketing and advertising, and the growth of a large supporting bureaucracy, but it’s done nothing to improve standards.

Categories: Economic policy Tags:

Carbon tax – instant reax

July 10th, 2011 48 comments

The proposed carbon tax is a substantial improvement on the heavily compromised emissions trading scheme agreed between the Rudd government and the Opposition under Malcolm Turnbull. Although there is substantial compensation for emissions-intensive industry it is temporary and based on historic emissions level, so that the incentive to reduce emissions is not compromised. The design of the compensation package for households is also welcome.

The government has avoided the temptation to pretend that everyone will be better off, and has taken the reasonable position that high income households do not need to be compensated for the introduction of necessary reforms. This has permitted the very welcome measure of raising the income tax threshold and thereby taking more than a million low-income workers out of the income tax system.

While the primary focus of the package is, correctly, on the imposition of a price on carbon emissions, there are a range of supporting measures designed to encourage energy efficiency and innovation. On the whole, these seem more carefully designed than the measures introduced under previous governments.

Categories: Economic policy, Environment Tags:

The revolt against Murdochracy

July 10th, 2011 69 comments

Continuing on the theme of #newscorpfail, the ever-expanding scandal surrounding hacking, bribery, perjury and obstruction of justice by News Corporation in England has already brought about the closure of the venerable (at least in years) News of the World newspaper, but looks likely to go much further, with significant implications for the Murdoch press in Australia.

The scandal over hacking and other criminal behavior has now become an all-out revolt of UK politicians against Murdoch’s immense political power , which has had successive Prime Ministers dancing attendance on him, and rushing to confer lucrative favors on his News Corporation. Those, like Labour leader Ed Miliband, who are relative cleanskins, are making the running, while PM David Cameron, very close to the most corrupt elements of News, is scrambling to cover himself.

The hacking and bribery scandals appear (as far as we know) to be confined to the UK, but the greater scandal of Murdoch’s corruption of the political process and misuse of press power is even worse in Australia. The Australian and other Murdoch publications filled with lies and politically slanted reporting aimed at furthering both Murdoch’s political agenda and his commercial interests. Whereas there is still lively competition in the British Press, Murdoch has a print monopoly in major cities like Brisbane.

It seems likely that News International will be refused permission for its impending takeover of BSkyB on the grounds that it is not “fit and proper” for such a role. That would have important implications for Australia.

Regardless of how the current scandal plays out, we need to remember that while the productions of News Corporation be papers, what they print is certainly not news.

Categories: #NewsCorpFail, #Ozfail, Media Tags:

Response to Greg Sheridan

July 10th, 2011 21 comments

Greg Sheridan was upset about my piece in the Fin, attacking his claim that the effects of Australian action on climate change will “will have an impact on the global environment so tiny it will be unmeasurable.” I’ll respond to the details of his objections over the fold, but let’s first tackle the substantive question. Australia is currently responsible for a about 2 per cent of global emissions. Under business as usual projections, our emissions were expected to grow by 20 to 30 per cent between 2000 and 2020. If we achieve the target of 5 per cent below 2000 emission, that implies a reduction of 25 per cent relative to business as usual, 0.5 per cent of global emissions. That’s about 1 per cent of what is needed if the world is to cut total emissions by 50 per cent over the next couple of decades, as is necessary in a stabilisation scenario.

That’s a small step that is not going to solve the problem, but neither is it “so tiny as to be immeasurable”. In fact, it’s pretty typical of Australia’s weight in international affairs – small relative to the big players like the US and China, but large relative to our share of world population. As a comparison, Australia currently has about 1500 troops in Afghanistan, out of a total (ISAF and Afghan army) force of over 150 000. Would Sheridan want to argue that, since our troops are less than 1 per cent of the total, their effects are so immeasurably small that we might as well do nothing[1]. Well, no. It appears that Australia is immeasurably tiny only when we are doing things US Republicans don’t like.

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Categories: Environment Tags:

Bad news from the Northern hemisphere

July 9th, 2011 12 comments

Another really bad employment report from the US Bureau of Labor Statistics. Employment has been essentially static for the last couple of months, and most of the ground gained in 2010 has been lost. Unsurprisingly, public sector job cuts are leading the way downwards, as the stimulus fades into memory and austerity proceeds at the state and local level. In this context, it’s hard to know what outcome of the current negotiations over the debt limit would be worse: unconditional surrender to Republican demands for yet more spending cuts, or a failure to pass any legislation, with consequences that remain unclear[1].It’s hard to see US unemployment falling substantially any time soon. The decline in the participation rate (it’s fallen by about 3 percentage points of the population, equal to about 5 per cent of the labor force) means that the standard measure seriously understates the severity of the problem. If employment growth were to resume, lots of people would re-enter the labor market, so that unemployment would not decline fast.

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Categories: Economics - General Tags:

Reasons to be cheerful, Part 3: Energy efficiency

July 8th, 2011 53 comments

There are plenty of reasons to be gloomy about the prospects of stabilising the global climate, but there are also some promising developments, so I’ve started a series on this topic. Part 1 on peak gasoline herePart 2 on solar PV here

This post is about energy efficiency, which is often neglected, but is likely to be the biggest single source of emissions reductions over the next few decades. I’m going to define efficiency fairly narrowly, to refer to technologies that deliver essentially the same services using less energy than those they replace: so, for example, I’m including more efficient airconditioners, but not “smart” systems that cut off when demand is high.

The shorter version is

1. With existing technologies or straightforward extensions, it’s possible to double energy efficiency (reduce energy use per unit of energy services by 50 per cent) at relatively low cost and with marginal changes in performance.
2. With rising carbon prices over time, it’s likely that further improvements can be made in many areas

3. Concerns about possible rebound effects (aka the Jevons paradox) are misplaced

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Categories: Economics - General Tags:

Truth gets in the way

July 7th, 2011 62 comments

That’s the title of my column in today’s Fin

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Categories: Economic policy, Environment Tags:

Monday Message Board

July 4th, 2011 8 comments

It’s time again for the Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

Categories: Regular Features Tags:

Weekend reflection

July 1st, 2011 18 comments

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. In keeping with my attempts to open up the comments to new contributors , I’d like to redirect discussion, and restatements of previous arguments, as opposed to substantive new contributions, to the sandpit(s). In particular, please post nothing related to nuclear energy. As always, civilised discussion and no coarse language please.

Categories: Regular Features Tags:

New sandpit

July 1st, 2011 6 comments

Here’s a new sandpit for (non-nuclear) lengthy side discussion, rants on idees fixes and so on.

Categories: Regular Features Tags:

A quick post for a long break

July 1st, 2011 25 comments

When my wife sent me the link, this ABC story was headlined Treasury head says Australians must work harder. It’s now been changed to “Australians must increase productivity: Treasury head”, which sounds a bit more reasonable, but I think is still a somewhat problematic.

I’ll try to discuss this in detail later, but for now I just want to push a point I’ve been making for a long time, which came up in comments recently. If governments want a simple reform that would improve our economic performance (though maybe not the standard measures of that performance), one of the best things they could do is legislate for six weeks annual leave as a standard employment condition. We have parental leave for parents of new babies, but there’s an equally big problem for parents of school age children trying to deal with the mismatch between school holidays (six weeks over summer, as well as term breaks) and the measly four weeks they are allowed, unchanged since the Whitlam government. And the rest of us could do with more of a break as well.

An extra week’s leave is like a 2 per cent wage increase. If annual leave were increased in a couple of stages to six weeks a year, it would only be necessary to find productivity increases or other offsets of 2 per cent, and, as Martin Parkinson implies, that shouldn’t be too hard.

Categories: Economics - General Tags:

Marxism without revolution: Capital

July 1st, 2011 52 comments

I’ve been writing series of posts examining the question – what is left of Marxism, as a way to understand the world, and as a way to change it, once it is accepted that capitalism is not going to be overthrown by a working class revolution. The first was about class and the second about crisis. Now for the final instalment: capital.

By the way, the first post got translated into Spanish, here. It’s one of the things that I still find stunning about the Internet that things like this can happen.
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