Some good news! I’ve just been awarded an Australian Laureate Fellowship to work on uncertainty and financial crises. That means five more years of funding. I’ve been stringing various ARC Fellowships, Federation Fellowships and so on together since the mid-1990s, and there’s always an anxious wait when one is about to run out, and the new ones have not been announced – there’s no guarantee, or even presumption, that winning one means you will get another, and there’s plenty of competition, so it’s a matter of starting from scratch every time. The really nice time, starting now, is the last few months of the old grant, when I get to wrap things up and contemplate the start of something new. I’m very grateful to the Australian government for supporting me in my research over all these years.
While working on a piece about a possible bailout for the Spanish government, I discovered a couple of things that were news to me
* The Economics Minister in the (pro-austerity) Spanish government is a former executive of Lehman Brothers
* Axel Weber, formerly the ultra-hawkish head of the Bundesbank went straight from that job to the chairmanship of UBS, of which the NYT recently wrote “The bank’s recidivism seems rivaled only by its ability to escape prosecution”
Comment seems superfluous to me, but I hope readers will prove me wrong on this.
After nearly 10 years, military trials at the Guantanamo Bay Detention Camp have produced a total of six convictions. One of those was David Hicks, who agreed to a plea bargain under which he would be sent back to Australia to serve out his sentence. On his release, he wrote a book about his experiences. Under “proceeds of crime” laws, the earnings from books about a criminal career are liable to confiscation, and the Australian government accordingly froze the proceeds and took action to have them forfeited.
The news today is that the Director of Public Prosecutions has abandoned the actions and paid Hicks’ legal costs. Although no rationale was given, the general presumption is that the US conviction would not stand up in an Australian court, either because (as Hicks alleged) Hicks’ guilty plea was extracted by torture, or because the whole system failed to meet basic standards of due process.
Most simple of all is the fact that, unlike the usual case of plea bargaining (which is problematic enough), the options aren’t pleading guilty or going to trial. Rather those who plead guilty get a definite (and usually relatively short) sentence on top of their detention, while those who do not are held indefinitely without trial. All of this is relevant now that the Obama Administration is trying to “normalise” the plea bargaining process, by getting those who have pleaded guilty to testify against others accused of more serious crimes. Evidence extracted under this kind of duress is obviously worthless.
None of this proves that Hicks was innocent, either morally or legally. But that’s an inherent problem in a corrupted legal process. Since the trials are rigged in such a way that they can never produce an acquittal (those who might be acquitted are simply kept in detention without charge), a conviction doesn’t prove anything. Morally, Hicks’ eagerness to go to war in any cause that would take him (he applied to join the Australian Army after returning from Kosovo) is pretty repugnant, but those who gave us Gitmo and the Iraq War are in no position to throw stones.
fn1. The only other Australian detainee, Mamdouh Habib, was threatened with similar action, but this did not proceed. He eventually received a substantial (but secret) settlement in return for dropping claims against the Australian government for its alleged involvement in his torture.
fn2. This is a problem even in the standard plea-bargaining system and has given rise to something called the Alford plea, apparently used by Hicks. The accused pleads guilty for legal purposes, while maintaining their innocence of the alleged crime.
Monday Message Board a day late. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.
That was the somewhat grandiose theme of the Australian Conference of Economists held in Melbourne last week. I was invited to give a keynote presentation and got this as the default topic. It seemed like a challenge and I gave it a go – here’s my presentation (4.8Mb PDF). For those who would just like to cut to the chase, my penultimate slide gives the main story
CRISIS, COMPLACENCY,AND RELEVANCE
* The global economic crisis should have produced a crisis in economic theory
* Instead, business as usual
* A path to inevitable irrelevance
I’m using the Dropbox public folder for this. I’d be interested to hear from readers if there are any problems, and also if it went smoothly.
I haven’t been active in the debate between Crooked Timber members and various others (Bleeding Heart Libertarians, Matt Yglesias, Tyler Cowen) so far. Broadly speaking the claim on the BHL side has been that if only some minimal conditions (existence of a universal basic income, for example) were met, all employment contracts could be assumed mutually beneficial and there would be no need for governments to regulate their terms, for example to prevent sexual exploitation.
Most at CT have been dismissive of these claims, but I’d like to explore the question a bit further. Is the objection that the necessary conditions aren’t likely to be met in practice, or that the employment relationship is inherently unbalanced, simply by virtue of the fact that one party gets to boss the other around.
Suppose that the following conditions were met
* Full employment, so that the cost to a worker of finding a new job is no greater than the cost to an employer of hiring a replacement
* A minimum wage adequate to allow a decent living standard without requiring acceptance of degrading working conditions
* A universal basic income sufficient to ensure that, even without working no-one need be poor
* A default employment contract, incorporating prohibitions on sexual harassment, rights to regular breaks and so on, unless these are explicitly contracted out
Would we then feel that legislative restrictions on employment contracts were needed, and, if so, which and why? Or, is the question badly posed in some way
Back around 1970, the Labor Party was unelectable because its biggest branches, in NSW and Victoria, were controlled by factional machines of the right and left respectively, who were still refighting the battles of the 1950s Split. The eventual response was Federal intervention to restructure both branches. The intervention was more successful in Victoria than in NSW, but overall the results were good enough to produce a revitalised Labor party. The election of the Whitlam government was one result, as was the strength of the early Hawke ministries, almost any member of which would outperform the great majority of both frontbenches today.
I doubt that an intervention would produce a similar result in NSW today, but the situation is now so dire that it could scarcely make matters worse. It’s hard to imagine a political party with less justification for its continued existence than NSW Labor. It sold out its stated principles with repeated attempts to privatise the electricity industry, then made a botch of the job anyway> It has made itself look stupid with repeated changes of leaders (the only one who tried any resistance to the machine was Nathan Rees, and he was promptly squashed). Its members are enmeshed in every kind of corruption, financial, ethical and sexual, above and beyond the routine corruption of political processes that turned the word “rort” from Sussex Street slang into an Australian byword for sharp practice. Electorally, it’s a disaster area, having gone down to the worst defeat in its modern history, under the sock-puppet leadership of Kristina Keneally. Even though the NSW Libs are, as they always have been, appallingly bad, the O’Farrell government is riding high.
And now, these geniuses have decided that it’s smart politics to make war on the party that’s keeping Federal Labor in office, and with which they will need to deal for the indefinite future if they ever want to pass legislation through the Parliament. Looking at this appalling crew, I can only quote Oliver Cromwell “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go.”
Update My friends at the Oz take a keen interest in all my thoughts, so I wasn’t too surprised to see this post linked in their “Cut and Paste” section. However, the headline All the Climate Change Authority member would like now is to get rid of the NSW Right seemed both unwieldy and obtuse, in a fish-meets-bicycle kind of way. Why should my (widely shared and longstanding) views on the NSW Labor Right machine be of any more interest by virtue of my membership of the Climate Change Authority? And why should my enthusiasm about the election of the Rudd government (also linked by Cut and Paste) be relevant to either?
The answer, I would imagine, is this post by Sinclair Davidson at Catallaxy who (in a quite strange misreading) took the imprecation “In the name of God, go” to be directed, not at the Sussex Street machine repeatedly criticised in the post, but at the Federal Labor government. Terje Peterson tried to set him straight in comments (thanks, Terje), but I had to spell the point out before he added a correction on Sunday evening, which made the entire post rather pointless. By that time, I imagine, the cutter and paster had already set the story up and gone home, leaving the unfortunate sub-editor to do a salvage job with the headline (not the first time!).
I was at the Australian Conference of Economists earlier in the week, and had a chat with Roger Jones, who has occasionally commented here. I asked him about his estimates of the impact of emissions mitigation policies in Australia, and was able to confirm that our estimates, although reached in very different ways, are in quite close agreement. Roger is cited here and here, estimating that a 5 per cent reduction in Australia’s emissions would result in a reduction in equilibrium global temperature of 0.0034 degrees. In a blog comment, I made the estimate that a 25 per cent reduction, relative to business as usual (the official target of the carbon price policy and also of the Opposition’s ‘direct action’ alternative) would result in a reduction in equilibrium global temperature of 0.02 degrees.
Unfortunately, Andrew Bolt did not observe the reason for the difference, and suggested that we disagreed by a factor of five. For the second time, a comment I sent correcting the mistake was lost in moderation. I was inclined to give up at this point, but given that Bolt did admit an error in his own estimate that I had pointed out to John Humphreys, I thought it would be worth one last try.
Policy disagreements are inevitable, but it would be helpful if we could avoid unnecessary disputes over arithmetic. I’m always happy to check for, and if necessary correct, errors in my calculations. If Bolt and others could do likewise, we would have a better chance of making progress in public debate, or at least of avoiding regress.
Update I appear to have misinterpeted my conversation with Roger, though I need to check on a number of issues before making a final assessment. So, I’m going to withdraw my claim that Bolt and John Humphreys in error on this point, and discuss the estimates with Roger in more detail. I’ll report back when this is complete.
Further update Unsurprisingly, Andrew Bolt has enjoyed a bit of a gloat on the subject, and some of his fans have joined in. So, it’s worth reminding everyone that he was out by a factor of 100 in his own calculations, presenting the impact of one year’s emissions reductions as if it was the total effect over the next 100 years.
Salon today reprints an article from Alternet by Jill Richardson, defending local food against an attack by Pierre Desroches and Hiroku Shimizu, who are associated with the Mercatus Center at George Mason University and whose work is based, she says, on neoliberal economics. Richardson runs with a fairly standard critique of neoclassical economics, starting with the standard joke about the chemist, physicist and economist stranded on a desert island.
What’s interesting about this debate is that in intellectual terms both parties are on the opposite side to the the one they imagine.
It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.
A new sandpit for long side discussions, idees fixes and so on.
It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.
The intellectual trend away from the political right in the US has been going on for some time, reversing the trend in the opposite direction that dominated the 1970s and 1980s. But this NPR interview with Richard Posner who says
there’s been a real deterioration in conservative thinking. And that has to lead people to re-examine and modify their thinking
is probably the most notable single example so far, for several reasons.
Opening paras of my latest at The National Interest
As the euro zone stumbles towards a seemingly inevitable collapse, it is easy to blame the politicians involved or the whole idea of a common currency. The outcomes of the latest top-level meeting, including a pledge to create a single euro-zone banking supervisor and a relaxation in conditions for lending to Spain, are welcome enough but seem, yet again, to be too little, too late to save the common currency.
In reality, the real problem is not with the euro but with the institution set up to manage it, the European Central Bank. The idea behind its creation—a central bank completely independent from government control—is detached from economic reality.
The ECB’s disconnectedness was evident in the decisions by President Jean-Claude Trichet to raise interest rates twice during the course of 2011, at a time when the danger of complete collapse was already evident. Although these decisions were subsequently reversed, they killed any chance that Europe would grow its way out of the debt crisis.
In my previous post, I noted that, while Andrew Bolt had correctly calculated the impact of the carbon tax for the year 2020, he hadn’t completed the analysis by evaluating the impact over the relevant policy timeframe. While I was working on this, Bolt produced another post, linking to this piece by John Humphreys, which suggested errors in my original analysis. I submitted comments to both sites. John noted the error in Bolt’s analysis, but advises me that he is not going to publish comments, and hasn’t yet corrected his own post. I assume he’ll get around to this soon.
I submitted the following to Bolt’s blog
John Humphreys has updated his post to note “John Quiggin has pointed out that there is also a significant problem with the Bolt estimate, since it only calculates the benefit from reduced emissions for one year (2020) instead of adding up the cumulative reductions over multiple years. Good point. This means the Bolt methodology just got a while lot more complicated since it now requires an expected future emissions time series and an expected future emissions time series counter-factual. That task is too big for me at the moment, but [b]it’s fair to say that such a number is going to be quite a bit higher than Bolt’s original estimate[/b].”
(emphasis added) I give a corrected estimate here
Sadly, the comment didn’t make it through moderation, presumably due to an error, so I’m publishing it here.
Update: Another go-round on moderation Andrew Bolt has posted again, indicating that the non-publication of my comment was indeed a moderation error, and acknowledging the need to use cumulative effects rather than those for a single year. As he will see when he does this, his sensitivity estimate is consistent with mine.
Unfortunately, Bolt didn’t follow the link I gave, and therefore repeated the already-refuted claim that my estimated was out by a factor of five, relative to that of Roger Jones. As I’d already pointed out here, the error was due to Michael Bachelard, who applied Roger’s sensitivity analysis to an emissions reduction of 5 per cent, when the reduction relative to BAU is 25 per cent. That obviously explains the factor of 5 divergence. I’ve posted a comment to Bolt’s blog pointing this out, but that comment too is awaiting moderation.
fn1. In the meantime, John H. has noted the erroneous estimates by Michael Bachelard, corrected here, and also some estimates by Christopher Monckton, presumably as a reductio ad absurdam
As I mentioned a little while back, I’m going to refrain (or at least try to refrain) from polemics on the subject of climate change in the future. As a first step, I’m happy to say that I’ve found a post by Andrew Bolt which I can recommend. Bolt links to this estimate by Damon Matthews that each tonne of CO2 emitted into the atmosphere changes the equilibrium temperature by 0.000 000 000 0015 degrees, that is 1.5*10^-12 in scientific notation. Noting that the carbon price is expected to reduce emissions by 160 million tonnes per year by 2020, Bolt makes the straightforward calculation that the emissions avoided in the year 2020 will reduce equilibrium temperature by 2.4*10^-4 or 0.00024 degrees.
Bolt stops there, perhaps having run out of time, so I’ll complete the calculation for him. Obviously to compute the impact of the carbon price we need to estimate the effect, not just for the year 2020 but for the entire period the policy is in place. That’s a complicated task, but let’s simplify by supposing that the policy stays in place until 2100 and that the 2020 reduction in emissions is maintained over this period. That gives a reduction in equilibrium temperatures of about 0.02 degrees, which coincidentally or not, is exactly what I estimated using a different method in a recent comments thread.
Of course, as we all know, this is a collective action problem – any one jurisdiction acting alone is not going to achieve much. Fortunately, most countries are doing something, even if they have adopted inefficient approaches like direct regulation in the US. So, let’s calculate what would happen if everyone adopted measures with effects comparable to those of the carbon price.
Australia accounts for about 2 per cent of the global economy, and about 2 per cent of total emissions (the latter depends a lot on which emissions are imputed where, but these estimates are imprecise anyway). So, if Australia’s effort with the carbon price is about average for the world as a whole, and these policies are sustained without change, Bolt’s calculation implies that the reduction in equilibrium temperature would be about 1 degree.
Bolt invites comments on whether such a reduction is worthwhile. Anyone who has looked at the impact of 1 degree of additional warming ought to agree that reducing warming by 1 degree yields a benefit far more than is needed to justify global adoption of policies like the current carbon price policy.
What this calculation shows is that we need to do more. Depending on your projections we need to reduce equilibrium temperatures by 2-4 degrees relative to Business as Usual. That will imply a carbon price at least twice as high as that implemented on Sunday. Comparing this week to last, I think we can probably bear the associated pain.
Bolt also links to this article by Michael Bachelard which states that the carbon price would reduce emissions by 5 per cent, relative to 2000, and gives an estimate by Roger Jones that this would reduce equilibrium temperature by around 0.004 degrees. As I’ve pointed out quite a few times now, the relevant comparison, and the one I’ve used in my calculations is between the carbon price and business as usual. That comparison yields a reduction of 25 per cent, and an impact of 0.02 degrees using Roger’s sensitivity assumptions. So, it looks like agreement all round.
(H/T John Humphreys)
Hello all, your friendly Ozblogistan Tyrant here, abusing my multisite posting powers.
This morning I received two independent reports of trojan warnings being given for two different Ozblogistan websites.
After investigation, I have determined that the server was automatically compromised, presumably by a brand new attack (since we just 2 days ago updated to WordPress 3.4.1), and a trojan inserted into various parts of WordPress.
I have identified and replaced the affected files with clean copies, and you should see no more warnings.
Those who want the gruesome details can learn more.