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Parallel universe collapsing?

May 22nd, 2012 47 comments

Over the last few months, a string of seemingly solid pillars of the rightwing ideological establishment have crashed, or at least wobbled. The typical case has been one of over-reach followed by public exposure and then a rush of sponsors and other supporters for the exit. Examples include

* Rush Limbaugh’s attack on Sandra Fluke and subsequent abandonment by sponsors

* The failed attempt by rightwing operatives at the Komen Foundation to blacklist Planned Parenthood

* The exposure of ALEC’s responsibility for the “stand your ground” laws that played a critical role in the Trayvon Martin case

* Most recently, the  Heartland Institute has seen sponsors bail and its entire Washington team (mostly focused on insurance issues) decamp, promising that their new operation will have nothing to do with climate “scepticism”

In addition to this, but arguably sui generis are

* the attempt (which looks like succeeding) by the Koch Brothers to take control of Cato, easily the most credible thinktank on the right of politics

* the denunciation of the Republican party by Norman Ornstein, long presented as the intellectually respectable face of the American Enterprise Institute

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Productivity and the Productivity Commission (updated)

May 17th, 2012 66 comments

For well over a decade, I’ve been debating the claim made by the Productivity Commission that Australia experienced a productivity surge in the 1990s. My claim has been that the apparent high rate of productivity growth in the mid-1990s was the result of measurement error, most importantly the failure to take account of the increase in the pace and intensity of work that was apparent to everyone (except PC economists) at that time. This view led me to conclude that the supposed productivity gains would dissipate as more normal labor market conditions returned, which was exactly what happened.

In most of these debates, one of my chief antagonists was Dean Parham, who worked for the PC at the time, and is now a Guest Researcher there. Today I heard that Parham had written a new paper on the weak productivity growth of the 2000s. So, I was keen to see what response he would have to my latest work and to my arguments about work intensity. The answer, quite literally is “Nothing”. I have, it appears become an un-person at the PC. Parham doesn’t cite any of my work and, more importantly, fails to mention work intensity at all.

Update The original version of the post contained a somewhat snarky suggestion that Parham had been negligent in ignoring my work. He has written to me to say that this is incorrect. The reason he doesn’t mention it is because, in his view, nothing I have written on this topic, at least since 2004, merits a response.

Further update Dean Parham writes that

the reason I did not mention your work or the work intensity thesis in my paper is that I did not consider it central to the focus of the paper (industry contributions) or even to the contextual motivation of the paper.

Since the contextual motivation of the paper is (as the title suggests) the slump in productivity, I can’t see that this differs from my summary. If Parham thinks my work merits a response, he’s welcome to provide that response here or in any other venue that suits him.

I’ve got some urgent commitments over the next few days, so I won’t be able to return to this topic until later. But in the meantime, here are some of the things I’ve written about this in the last few years. Agree or disagree, I think I’ve put forward a serious case that deserves an answer.

http://www.freepatentsonline.com/article/Australian-Bulletin-Labour/147466277.html

http://johnquiggin.com/2011/08/20/no-hard-and-fast-rule-for-/

http://johnquiggin.com/2012/03/13/enough-of-these-zombie-ideas-lets-be-bold/

http://apo.org.au/commentary/surge-we-didnt-have

Housework in Utopia

May 3rd, 2012 27 comments

The immediate reason for this post is the Crooked Timber discussion of my previous post on world meat supplies which morphed into a (mainly First World) arguments about cooking. But my bigger concern is the need for the left to offer a feasible utopian vision as an alternative to the irrationalist tribalism of the right.

My idea of feasible utopia is prosaic compared to some of the utopias that have grabbed attention in the past, but have led either nowhere or into disaster. On the other hand, it’s positively, well, utopian, compared to what’s on offer from Obama and Romney, or their counterparts in other  countries. In essence, it’s an extrapolation of the course we seemed to be on from the end of World War II to the early 1970s, a mixture of social democracy, feminism and environmental sustainability applied to ever broader spheres of activity.

The central element of my idea of utopia is that everyone should be able to live decently, without being forced to spend a lot of time doing crappy jobs. That brings us pretty directly to housework[1], something most of us spend quite a bit of time on, and which involves a fair amount of crappy work, literally and figuratively.

If my conditions for utopia are to be feasible we need two things to be true. First, the total amount of crappy work has to be small enough that the average amount per person is not too large. Second, the work has to be organized so that no one actually has to do a lot more than their share.

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I only read it for the pictures, honestly

May 2nd, 2012 81 comments

The Economist gets some well-deserved derision these days, but it still delivers lots of interesting data, illustrated by graphs that are usually well designed and informative. Via Kenny Easwaran I found this table (published by EconomistDailyChart, but I haven’t yet located the chart) of annual meat consumption per person by country. The data set has plenty of anomalous features, but looks accurate enough for my purposes.

I’ve previously argued that we can feed the world if we make the right choices. . More precisely, our current food system produces more per person than is needed for adequate nutrition, and can continue do so in future if the right policy choices are made. The key problem is distribution, not production.

But the meat consumption data leads me to a more surprising conclusion.  Using current technology and with no additional diversion of food grain, the world could produce enough meet to give everyone an intake comparable to that of the average person in the Netherlands[fn1].

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Classical economics and recession in many countries (wonkish)

April 27th, 2012 95 comments

Sharp tests of economic theories are rare and hard to find, particularly in macroeconomics. Any examination of particular episodes in economic history necessarily involves counterfactuals, and these provide room for endless dispute. As an obvious example, assessing the impact of the Obama Administration’s 2009 stimulus requires an estimate of how things would have gone without the stimulus, and that is obviously hard to do.

Similarly, arguments about unemployment in the US get bogged down in disputes over whether it is structural or demand-driven and the extent to which policies such as the extension of unemployment benefits to 99 weeks have contributed. 

There is, though, one way in which the current Great Recession/Lesser Depression provides a sharp test of a critical proposition in economics. All forms of classical economics involve, in one form or another, the claim that the causes of unemployment are to be found in labour markets, and not in  macroeconomic variables such as the level of aggregate demand. That’s equally true of the Say’s Law version of classical economics criticized by Keynes, the New Classical macroeconomics of Robert Lucas and the attempts by Real Business Cycle theorists like Kydland and Prescott to explain cyclical fluctuations in terms of labor market shocks.

The crucial problem for all these theories is that labor markets and the associated institutions operate mainly at the national level. Even within the EU, different countries have very different labor markets. So, it is essentially impossible for labor markets in many different countries to move together, except as the result of macroeconomic influences operating at an international level[1]. That means that the occurrence of a sharp and sustained increase in unemployment, taking place in many countries at once, is inconsistent with classical economics.

This point seems trivially obvious, but as far as I can tell hasn’t been made, or at least not clearly. Once it’s conceded, it seems impossible to avoid a view of the world that is basically Keynesian in its analysis of the macroeconomy.  It is possible to hold such a view and reject Keynesian policies on pragmatic grounds, as in Friedman’s critique of ‘fine-tuning’. But the longer and deeper the recession the harder it is to sustain this view.

This seems like a good time to plug the fact that a paperback edition of Zombie Economics will be out soon (May 6) with a brand-new chapter on Austerity, bits of which have been seen here. On 9 May, I’ll be launching an Australian edition, where the added material is a chapter on Economic Rationalism. And a week or two ago, I received some copies of the Italian edition

http://www.stampa.unibocconi.it/articolo.php?ida=9724&idr=6

 

 

 

 

 

 

 

 

 

fn1. Of course, you can cheat and label these macro influences “technology shocks”, then assume them to be internationally correlated. But in the ordinary meaning of technology, there is no plausible way in which economies as disparate as, say, the US and Greece can experience a common technology shock.

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“Future generations” are already here

April 22nd, 2012 36 comments

The Journal of Public Economic Theory has a special issue on Managing Climate Change, to which they are providing free access (hopefully, this link will work). I’m mentioning it partly because I have an article which I think is really important, even though the point it makes is a simple one, and partly because any initiative to make important information more freely available (even a limite special case like this one) deserves some applause.

My paper is a bit wonkish, but the basic point is simple, and, I think provides a knockdown argument against any form of utilitarianism that discounts future utility (including those misleadingly referred to as future generations.

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The coming boom in inherited wealth

April 16th, 2012 30 comments

As everyone who has been paying attention knows, the news on inequality is nearly all bad. Not only has inequality increased dramatically in the US, but intergenerational economic mobility is declining[1]. And, where the US leads, the rest of the world looks likely to follow. The top 1 per cent lost more than most during the crisis of 2008-09 but, as Stephen Rattner reports here (drawing on work by Piketty and Saez), that was just a blip. A stunning 93 percent of the additional income created in the US in 2010, compared to 2009, went to the top 1 per cent, and there’s no reason to think things were much better in 2011 – average real earnings have fallen yet again, and employment growth, though positive, was still modest. Wealth inequality is also high, though it has not increased as much as income inequality.

The one bright spot mentioned by Rattner is that ” those at the top were more likely to earn than inherit their riches”. Since I’m already noticing that point popping up in the places you might expect to see it (can’t find a link right now), let me point out that Rattner’s explanation, that “the rapid growth of new American industries — from technology to financial services — has increased the need for highly educated and skilled workers” is wrong, and that there is every reason to expect a boom in inherited wealth.

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Republican conservatism (rewritten)

March 30th, 2012 30 comments

In the light of comments, mostly at Crooked Timber, I’ve rewritten this completely, trying to be as clear as possible about how I read Mooney and what I think myself.

Chris Mooney has a great talent for knowing just when to push the envelope. Back in 2005, when CT held a book event on The Republican War on Science, the idea that Republicans as a group were hostile to science and scientists was somewhere between controversial and unthinkable, as far as mainstream Sensible opinion was concerned. Now, it’s a truth universally recognised – even the professional Repub defense team doesn’t deny it, preferring the (demonstrably false) line that Dems are just as bad.

Now, with The Republican Brain Chris pushes the argument a step further with the question: why are Republicans  the way they are, and what, if anything, can be done about if? 

Before we start, I’ll observe that the set of “conservative Republicans” has changed over time, as have the specific set of policies associated with these terms and the general temperament that goes with this. On the first point, we’ve seen the disappearance of Eisenhower Republicans, the Southern realignment and the rise of the religious right, all of which have increased the concentration of dogmatic authoritarians in the Repub party. On the second, the emergence of environmentalism as a major political line of division is probably the most important development. The fact that Republicans/conservative are increasingly anti-science reflects both of these trends.

It’s also important to observe that Republican/conservative alignment can’t be explained simply in terms of class, geography and education though all these factors play a role. With a few exceptions (notably including blacks and scientists) a substantial portion of nearly every demographic group votes Republican and self-describes as conservative. So, explanations solely based on (for example) class interests, can’t explain voting behavior without a lot of (self?)deception, and that raises the question of why some people are more easily deceived.

Some people may regard themselves as Republican/conservative simply because they have adopted, without thinking too much about it, the political positions that are regarded as normal by their family, social circle and so on. Lots of people simply aren’t interested enough in either politics or science to devote a lot of thought to these issues. Typically, such people will hold a range of views that aren’t particularly consistent either internally or with any standard ideological line.

An obvious inference is that, if people could be given better information they would change their views. But, as Mooney shows, and has become steadily more evident thanks to the Internet, better educated and informed Republicans are more likely to hold crazy views consistently and less likely to change them in response to new information.

That leads to Mooney’s primary conclusion, that Republicans/conservatives don’t simply have different beliefs from liberals/Democrats (or, for that matter, leftists), or even different values. They have (bear in mind that this a statement about population averages) different psychological characteristics, summarised as high authoritarianism and low openness to ideas different from their own.

I find this pretty convincing. It seems to me that there is an authoritarian type of personality which, in the specific circumstances of the US right now, and for non-poor whites, produces a predisposition to Republican voting and “conservative” political attitudes. In particular this type of personality is (more) strongly associated with confirmation bias. That is, not only do they ignore evidence contrary to their initial position, they tend to reinforce their commitment as a result. The creation of an alternate universe in which this bias can be repeatedly amplified (Fox News, rightwing think tanks and so on) both reinforces this kind of thinking and encourages self-selection.

I don’t think there is the symmetry here that some of the commenters are suggesting. Looking at the standard examples of nuclear power and GM foods, it seems to me that, on the whole people on the left have been more open to evidence than in the corresponding cases on the right. In the case of nuclear power, it seemed for a while (say, from the mid-90s until a few years ago) as if the safety problems might be soluble at a reasonable cost in which case an expansion of nuclear power would be preferable to more coal-fired power stations. While the evidence pointed that way, opposition to nuclear power was muted. As it turned out, the problems couldn’t be solved, at least not at a reasonable cost, and Fukushima was the last straw.

In the case of GM foods, the evidence has mostly supported the position that the use of GM technology per se doesn’t create significant health risks, and AFAICT that has been fairly widely accepted on the left (Greenpeace is a notable exception, but I don’t think their position is representative of the left as a whole). That doesn’t rule out opposition to GM on ethical or aesthetic grounds, or opposition to the whole structure of the food industry – the whole point is that you can have preferences and beliefs without assuming that the facts will always be those most convenient to you.

Similar points may be made about “alternative” medicine, particularly opposition to vaccination. It’s primarily, though not exclusively (consider Michelle Bachmann), associated with liberals and leftists in the same way as creationism is primarily, though not exclusively, associated with evangelical conservatives. But, faced with scientific criticism, there hasn’t been anything like the political pushback and doubling down we’ve seen with creationism. The Huffington Post, which was a big outlet for anti-vaxers has started publishing one of their most vigorous critics, Seth Mnookin.

This brings us finally to the question that set off all the fireworks in the original post. To what extent are authoritarian personalities the product of environment, genes or some combination of the two. Again, it’s worth pointing out that, even if there is a genetic role in personality, there’s no such thing as a genetic predisposition to be a conservative/Republican. The content of these terms isn’t fixed, and the implications are very different depending on social circumstances. To take the most obvious case from comments: Republican policies and rhetoric appeal strongly to (US) white tribal/ethnic loyalty. So, US whites who respond well to in-group appeals are likely to vote Republican and call themselves conservatives. US blacks with similar predispositions obviously won’t vote Republican and are unlikely to call themselves conservatives.

To take another example from Mooney’s book, authoritarian attitudes in the US are typically associated with support for free-market/pro-business economic policies and virulent hostility to “socialism”. By contrast, in the former Soviet Bloc, the same attitudes are associated with support for the old order and positive feelings about “socialism” (I’m using the scare quotes to indicate that, in both cases, the term is something of a blank canvas, onto which all sorts of things can be projected). And indeed, in this context, the term “conservative” is commonly applied to hardline members of the surviving Communist parties.

Following up on a comment, this way of looking at things has a lot of similarities with Corey Robin, and The Reactionary Mind. The difference between Robin’s choice of Mind and Mooney’s choice of Brain is significant. As I argued when I looked at his book, I think Robin doesn’t take enough account of personality/temperament. While most soi-disant “conservatives” are authoritarian reactionaries, there is a genuinely conservative temperament which will tend to align with political conservatism in periods when the general tendency of politics is towards the left.

So, does the genetic part of the story matter. As (I think) Andrew Gelman has observed, in this context and many others, it’s just code for things we can’t change. As long as authoritarian personalities are stable over the adult lifetime of those concerned, it doesn’t matter much whether they are determined by genes, by toilet training (as in the caricature version of Freudian psychology I learned in my youth) or by some much more complex process. That said, I think the evidence that heredity (and therefore genes) plays at least some role in the determination of personality is pretty convincing.

The political implication, which has drawn some flak in the comments, but which I think is correct is that there is no point in political engagement with authoritarian conservatives. In a political environment where they are concentrated in one party,politics is going to be a matter the only strategy open to liberals is to outnumber and outvote them by peeling off as many peripheral groups (for example, those who deviate from the approved cultural identity in some way) as possible. Obviously, that’s an unpalatable conclusion in all sorts of ways, but I think it’s a valid one.

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Austerity and academia

March 28th, 2012 179 comments

Austerity is hitting lots of people, across pretty much all social classes, except for the top 1 per cent, who are rapidly recouping their losses in the GFC and will soon be pulling even further away from the 99. Just at the moment, academics seem to be in the crosshairs, from Washington to Sydney and beyond. Here’s a post on the subject from my friend and former colleague Rohan Pitchford. To forestall a possible line of criticism, let me observe now that, while academics have it better than plenty of others under attack from austerity policies, anyone who plays on this kind of division is a tool of the 1 per cent, and will be treated as such by me.

Sackings Hit Economics School Hard (Guest post from Rohan Pitchford)

I was surprised and dismayed to hear that that several of my former colleagues at the School of Economics at the University of Sydney have been told to leave their jobs by July. A remarkable aspect is that the sackings happened by edict, several layers of administration above the School level. How is it possible for such a removed group to know the details of people’s work life, their roles and the reasons behind their roles without any form of consultation? (ANU also faces budget cuts, but is taking the enlightened bottom-up approach.)

I know all of those concerned personally, and the group includes both talented researchers, teachers and administrators. They were apparently selected using retrospective publication criteria. We all know that most people experience a ‘bare patch’ in their publications during the life course, whether it be because of a new child, a death in the family, illness (admin duties!) etc. Knowing the people involved, the criteria seem to me unfair and random.

Perhaps the most astounding fact in all of this is that Sydney Economics has been perennially understaffed– as a Professor there, I estimated that they were some 10 academics short of what is required to deliver requisite courses: The average class size is 110, I conjecture larger than any other department. There are not enough staff to cover all the classes taught, let alone to reduce class sizes to educationally appropriate levels. Sydney typically has had to hire part-timers to fill the gap. The department generates some 20 million dollars per year in revenue from its teaching program. I cannot imagine that this will do anything but hurt this important revenue base.

A big question is this: Are the sackings due to productivity, or are they in response to an administration that has grossly over-spent on buildings? I have heard rumours of expenditure of 100m on a new medical centre, and 360m on a new obesity centre preceded these sackings.

Solutions? I discuss a possible way forward for Australia here:

In touch with the Zeitgeist?

March 25th, 2012 26 comments

At around 35k into the cycle leg of today’s Mooloolaba triathlon, with a strong headwind[1] and the seat feeling very hard, I was wondering “why am I doing this”. At the time, the question was more like “why did I get out of bed this morning”, but there’s also a question as to why a middle-aged academic like myself is doing something like this at all.

My own causal account is pretty simple. I gave up my old sport, karate, for a variety of reasons, then started “boot camp” style training (minus silly uniforms and other pseudo-military stuff). to keep fit. As a consequence, I found that, whereas the distance I could comfortably run had been measured in 100s of metres, it was now measured in kilometers. But I still wasn’t particularly fast and my reasoning (captured by a T-shirt I saw today) was, “why suck at one sport when you can suck at three”. And indeed, so it has turned out, but I still enjoy it and keep trying.

So, that’s the purposive agent account. But (while I was not consciously aware of this at the time) triathlons are booming and not just in Australia. So, it seems, there is some general zeitgeist which I (and thousands of others) have somehow been driven by. This is not a unique occurrence

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No Ordinary Deal

March 21st, 2012 13 comments

Max Weber once described politics as the slow boring of hard boards, and this is an apt description of the continuing efforts of the advocates of a globalised capitalism to grind down all the obstacles that might be posed by democratic government.

The dominance of global capital has been greatly enhanced by trade agreements such as those establishing the World Trade Organization. But, over time, the WTO has been less and less able to avoid public scrutiny and popular resistance. Moreover, it has an unfortunate tendency to stick to the rules even when US business doesn’t like the outcome. So, we’ve seen a steady shift to bilateral deals, in which the US can dictate the terms.

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Alesina, Ardagna, Austerity, Australia

March 19th, 2012 13 comments

A while ago I published a blog post, and later a Fin article, pointing out that the influential Alesina and Ardagna article, Tales of Fiscal Adjustment, that coined the term “expansionary austerity” was riddled with factual and analytical errors in its discussion of Australia. That piece has elicited a string of lengthy replies from the Catallaxy/CIS team, notable for the absence of any substantive content. Sinclair Davidson produced a mammoth post with multiple updates, entirely devoted to refuting a parenthetical snark on my part that the paper wasn’t peer reviewed. Now there’s another one from Steve Kates, who wants to quibble about the chronological relationship between Jean-Baptiste Say and the Mills, father and son.

So, an open challenge. In my original post, I give seven quotes from the Alesina and Ardagna article, all of which I say are wrong or at least misleading. Does anyone want to defend any of these? Special bonus points for anyone who can defend the opening sentence of their Australian section, which reads “In 1985, a single-party left-wing government took office and launched a stabilization plan to correct the internal and external imbalances (the current account deficit was 4.13% of GDP and the total deficit/GDP ratio was above 3% in 1984). ” (emphasis added).

UpdateKates has added a lengthy update to his post, without, AFAICT, defending the erroneous claims in A & A

KBU

March 16th, 2012 12 comments

After long delays[1], GMU has come down with a self-contradictory whitewash on the plagiarism case against climate delusionist Edward Wegman.  One committee conceded plagiarism on a paper that had already been retracted by the journal in question, and recommended a reprimand, while another cleared Wegman of all charges, against the judgement of every external expert who’s looked at the case, and in the face of copious evidence of direct cut-and-paste copying.

With this and the Cato takeover, I think those both on the left and parts of the right who have presented views extremely critical of the “Kochtopus” network can rest their case. Any institution that relies on Koch Brothers money, whether it presents itself as a university, a thinktank or a grassroots organization, has to be regarded as a propaganda outfit.

That’s true, even if, as in the case of Cato and GMU, some genuine and valuable research is produced. The use of genuine material as a cover for industry propaganda is now a well established technique – the most famous blogospheric example was that of Tech Central Station.

For people working at Koch-controlled organizations who value a capacity to undertake independent research and to maintain a credible claim to independence, this is a big problem. Not everyone is in a position to write a presignation letter like that of Julian Sanchez, but the alternative of staying on is not particularly attractive either.

 

fn1. Which I will claim as an excuse for posting this several weeks after the event

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Mrs Beeton, the Voltaire of caffeine

March 7th, 2012 31 comments

Sighted at Port Arthur, Tasmania, this quote from Mrs. Beeton’s Book of Household Management, by Isabella Beeton (emphasis added):

-It is true, says Liebig, that thousands have lived without a knowledge of tea and coffee; and daily experience teaches us that, under certain circumstances, they may be dispensed with without disadvantage to the merely animal functions; but it is an error, certainly, to conclude from this that they may be altogether dispensed with in reference to their effects; and it is a question whether, if we had no tea and no coffee, the popular instinct would not seek for and discover the means of replacing them. Science, which accuses us of so much in these respects, will have, in the first place, to ascertain whether it depends on sensual and sinful inclinations merely, that every people of the globe have appropriated some such means of acting on the nervous life, from the shore of the Pacific, where the Indian retires from life for days in order to enjoy the bliss of intoxication with koko, to the Arctic regions, where Kamtschatdales and Koriakes prepare an intoxicating beverage from a poisonous mushroom. We think it, on the contrary, highly probable, not to say certain, that the instinct of man, feeling certain blanks, certain wants of the intensified life of our times, which cannot be satisfied or filled up by mere quantity, has discovered, in these products of vegetable life the true means of giving to his food the desired and necessary quality.

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Doublethink doubleplusungood

March 3rd, 2012 62 comments

The news that Republican members of the Wyoming Legislature wanted the state to investigate buying an aircraft carrier[1] as insurance against a possible collapse of the US seems as good an occasion as any to signify the final descent of the party into irredeemable loopiness. Add to that the revival of birtherism, the inability to deal with Rush Limbaugh, and the absence of any coherent economic policy except tax cuts for the rich and you have a party that has seriously lost touch with reality.

As I observed a couple of years ago during the epistemic closure memetime, reality-denial mechanisms have some major political benefits, particularly in mobilising resistance against policy innovations, and tribal solidarity against outsiders of all kinds. But it seems clear at this point that the costs I mentioned then are now bigger than the benefits for the Repubs.

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Non-response on austerity

February 20th, 2012 36 comments

Robert Carling and Stephen Kirchner have a letter in today’s Fin, responding to my piece last week, which restated points I’ve made on the blog (for completeness, it’s over the fold). The letter is notable for not responding to any of my criticisms of Alesina, and for backing away from his previously unimpeachable authority.

John Quiggin’s criticism of us (“Tales of austerity ring hollow”, Opinion, February 16) warrants a response. We referred to Alberto Alesina’s work not because it is the only or last word on this topic, but because it is an example of a much larger literature in support of fiscal austerity (or less pejoratively, “fiscal consolidation”).

It is incorrect to suggest that the case for consolidation “rests largely on the work of Alberto Alesina”. We could also have cited a lot of other empirical as well as theoretical work, as indeed does Alesina himself.

A full examination of the International Monetary Fund and Organisation for Economic Co-operation and Development literature over the years reveals a more nuanced view than Quiggin suggests (not that the IMF or the OECD are the final arbiters anyway). We recognise nuances that we could not canvass in a 600-word article.

One is that the arguments about fiscal consolidation have to be tweaked depending on country circumstances and the credibility of the policymakers. Greece, for example, will suffer from fiscal consolidation, but that is partly the fault of the exchange rate straitjacket they are in.

But, in general, we stand by our basic proposition that fiscal consolidation is essential to the economic rehabilitation of countries with large budget deficits and unsustainable public debt burdens.

The only point worth noting is that the “pejorative” term “fiscal austerity” isn’t mine, it’s from the title of Alesina and Ardagna’s 1998 paper “Tales of fiscal consolidation: can austerity be expansionary”. If austerity is now a pejorative it’s because people know what it means, while “fiscal consolidation” remains a vaguely defined euphemism. Readers with a long memory may recall the US Repubs and Cato dumping “social security privatisation” in favor of “social security choice”

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Further adventures on Intrade

February 11th, 2012 38 comments

As I mentioned last time I wrote about my adventures on Intrade, I’m sceptical of the claim, a special case of the (semi-strong version of the) Efficient Markets Hypothesis, that the odds in betting markets provide the best estimate of the probability of political outcomes. I managed to double my small stake betting on Newt Gingrich, and might have made more if I had not overestimated the efficiency with which the Republican electorate processes information. I sold on the news of his work for Fannie Mae, and thereby missed the peak of the market when he won South Carolina.

Having made my point and learned a bit about the practical operation of markets, I meant to cash out my winnings, but that turned out to be a complicated process, and I couldn’t resist another flutter. Rick Santorum was trading at 100-1, and while I didn’t think much of his chances, those are pretty good odds in a four-horse race, especially one with no particularly attractive candidates.

He’s now 17.9 per cent (nearly 4-1 in the old language, if I recall it correctly), so I’ve now made a pretty substantial gain. There’s a bit of a cognitive consistency problem here – I didn’t really mean to make money backing Santorum, so now I need some suggestions as to an appropriate use for the money, one which would offset any damage done by backing him when he was down where he belonged. Orientation can be US, Australian or global.

 

 

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Social democracy and equal opportunity

January 29th, 2012 43 comments

 

My critique of Tyler Cowen’s post arguing the unimportance of social mobility has started off, or maybe merged into, of those old-fashioned blog firestorms we used to have back in the day, now also reticulated through Twitter – a few links here, here and here. But rather than criticise Cowen further, I thought I would try to work through the bigger issues involved from a social democratic perspective[1].  In particular, as discussed in comments here, should social democrats favor policies to enhance social mobility, or does mobility between generations make inequality even worse, for example by justifying what appears as meritocracy?

 

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How (not) to defend entrenched inequality

January 25th, 2012 46 comments

The endless EU vs US debate rolls on, but now with an odd twist. Although the objective facts about economic inequality, immobility and so on are far worse in the US than the EU, the political situation seems more promising. (I’m not talking primarily about electoral politics but about the nature of public debate.)

In the EU, the right has succeeded in taking a crisis caused primarily by banks (including the central bank, and bank regulators) and blaming it on government profligacy, which is then being used to push through yet more of the neoliberal policies that caused the crisis. And, as we’ve just seen, formerly social democratic parties like New Labour in the UK, are pushing the same line.

By contrast the success of Occupy Wall Street have changed the US debate, in ways that I think will be hard to reverse. Once the Overton window shifted enough to allow inequality and social immobility to be mentioned, the weight of evidence has been overwhelming.

This post by Tyler Cowen is an indication of how far things have moved. Cowen feels the need, not merely to dispute some aspects of the data on inequality and social mobility in the US, but to make the case that a unequal society with a static social structure isn’t so bad after all.
Update Cowen offers a non-response response here. Apparently, disliking arguments for inherited inequality, such as his point 3 (because of habit formation, social mobility reduces welfare) is a “Turing test” for reflexive leftism.

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Cars

January 17th, 2012 59 comments

Last week I got an urgent request from the Fin for a quick-turnaround piece on the latest plan to save the car industry. I got it done within a few hours, and planned to post it here. Alas, I was as slow in doing this as I had been fast in writing the original piece (over the fold)

In the meantime, Sinclair Davidson at Catallaxy took exception to my observation that the mining industry’s nearly-free access to minerals under both private and public land was a bigger subsidy than anything the motor vehicle industry got. In support of the miners, he quoted Mitch Hooke of the Mining Council as saying

He said the proposed new tax would hit the mining industry with such a sledgehammer that it would destroy value, deter investment, reduce growth, and affect every mum and dad who has shares of equity or provides goods.

Of course, if you deleted “tax” and put in “tariff cut”, that’s exactly the same as what the representative of every industry demanding continued tariffs or subsidies has said.

What’s striking about this is the tribalism involved. As I demonstrate in the article, as far as economic efficiency is concerned, the effects of current levels of assistance to the car industry are third-order. Yet the political/cultural right denounces the car industry, while defending rent-seekers like Hooke.

This is part of a more general phenomenon on the right that I will post more on later. It’s taken for granted on the cultural right that some technologies and industries (nuclear power, oil, finance) are good and others (wind energy, electric cars, Hollywood) are evil – essentially a mirror image of what they think we on the left think. For people who are supposed to believe in the free market, this is a big problem.

Argument stuck in second gear

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My bet with Bryan Caplan – update

January 17th, 2012 15 comments

 

Back in 2009, I made a bet with Bryan Caplan that the average unemployment rate in the EU-15 over the following 10 years would be no more than 1.5 percentage points above that in the US. Before talking about the bet itself, I’d like to note that while we disagree about a lot of things, Bryan and I both take a strong stand against war, with a limited exception for self-defence. As Bryan says here, that takes a lot of sting out of the possibility of a losing bet for either of us – agreement on war and peace is more important than disagreement about labor markets in my view. 

Now, on to the bet.

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Truth, truthiness and balance

January 13th, 2012 18 comments

Arthur Brisbane, Public Opinion editor for the NY Times, has copped a well deserved shellacking for a column in which he asked whether reporters should act as ‘truth vigilantes’ in relation to statements made by public figures.

Having observed the silliness of asking whether newspapers should (aspire to) tell the truth, the obvious question is: How should they telll it. Here are a some suggestions

1. Its unreasonable to expect reporters to take the burden from scratch in refuting zombie lies. Newspapers, including the NYT, should include a set of factual conclusions, regularly updated, in their style manuals. The most relevant current example is that of global warming. As with the current account deficit (routinely glossed as ‘the broadest measure of the balance of payments’) the NYT should formulate a standard set of words, such as “a conclusion endorsed by every major scientific organization in the world’) to be used whenever the views of Repubs on the issue are mentioned. Similarly, any reference to claims about ‘Climategate’ should include the words ‘a conspiracy theory refuted by a number of inquiries in the US and UK’. Rinse and repeat wrt evolution, the Ryan budget plan etc

 

2. If the approach suggested above, it will rapidly become apparent that Republicans lie all of the time about everything, whereas Democrats only lie some of the time about some things. A serious paper of record would acknowledge this, noting the partial exceptions like Jon Huntsman. That is, if the NYT were reallly serious about truth, it would gloss every statement by a Repub as (X, a member of the Republican Party claimed Y. Extensive studies by the NYT have shown that most statements by members of the Republican party are false. In this case …)

 

3. This is a sad state of affairs, just as its sad that Americans won’t have a chance to vote for a serious  Presidential candidate who opposes indefinite detention of innocent people. But that is the situation and organizations like the NYT have limited choices – they can either publish lies or be ‘truth vigilantes’.

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Unions: outdated or needed more than ever?

January 13th, 2012 17 comments

Writing in today’s Fin[1], Paul Gollan argues that unions are outmoded and that workers would be better off bargaining directly with their employers. Since it’s paywalled, I’ll quote the passage to which I want to respond

Recent examples of industrial conflicts involving the use of the good faith bargaining provisions demonstrate the difficulty of trying to establish workplace engagement in advancing business and employee objectives under the current Fair Work Act. The recent industrial disputes at Qantas, Cochlear, on the waterfront and at Rio Tinto’s Bell Bay aluminium plant and BHP Billiton’s Queensland coalmines, have reinforced this impression, not only for big business but also for many Australians.

Given the seriousness of these disputes, unions and the Gillard Labor government will need to re-examine their position on workplace reform. Importantly, it seems that unions have failed to understand the difference between unions servicing their members and the broader concept of unionism.

Unionism encapsulated a common ethos of solidarity around a cause that all members could understand and relate to under a working-class banner. While years ago unions were enmeshed in this working-class culture, this is not the case in many workplaces today. They are now seen by workers as some distant, third-party organisation external from the workplace.

There may well be examples where Gollan’s claims are true, but I find it pretty hard to swallow the ones he cites. Does he really think that the employees of firms that haved locked their workers out, like Qantas, Rio Tinto and Patricks, or that have repeatedly ignored pro-union votes like Cochlear, are desperate to negotiate one-to-one with their bosses? Clearly, these firms want to get rid of unions for precisely the same reasons as the workers want to keep them, because they are an obstacle to measures that would raise profits at the expense of the workers.

I find the spurious concern for workers expressed in pieces like this even more annoying than the openly pro-boss position of, say, the Institute of Public Affairs.

fn1. One of the consequences of the separation between editorial and market functions that is part of the newspaper ethos is that, even though I’ve been a contributor to the Fin for nearly 20 years, I’ve never been given access to their online version. I had a fairly good deal for the print version, so I was never willing to pay the exorbitant price they asked. But my deal has run out, and the Fin’s prices have been cut, so now, I can at least copy and paste for fair comment purposes.

Categories: Economics - General Tags:

Land of (unequal) opportunity

January 6th, 2012 19 comments

A little late to the game, the NY Times has quite a good piece by Jason DeParle on the well-established finding that the US is not only the most unequal of developed societies but is also at the bottom of the scale for social mobility.

I’ve been arguing since the Triassic era of blogging that this isn’t a coincidence – a society with highly unequal outcomes can’t sustain equality of opportunity, but until this year (in fact, until the emergence of the Occupy movement) I didn’t see any evidence that the facts were sinking in, even among the majority liberals. Now it’s as if a dam has broken. Some thoughts, cautionary and otherwise over the fold.

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Conservatives and reactionaries

January 1st, 2012 45 comments

Corey Robin’s new book The Reactionary Mind has attracted plenty of attention both favorable and otherwise. I don’t want to offer a full-scale review, but to respond to the central thesis. As I read Robin, his central claim is that the current situation in which people who call themselves “conservative” are in fact radical reactionaries is not an aberration, but the norm, and that this has been the case ever since the first self-conscioulsy conservative thinker, Edmund Burke.

I’d put this more broadly – conservatism (and, it’s opposites, progressivism radicalism) are, in essence ideas about process, but the most people active in politics are more concerned about pursuing particular goals than about the way they get there.

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Blogging the Zombies: Expansionary Austerity – Further Reading

December 28th, 2011 8 comments

Thanks to everyone who has made comments on the drafts of the new chapter of Zombie Economics, on Expansionary Austerity, for the forthcoming paperback edition.  I’m now editing in response, and adding a section on Further Reading. I’d welcome any suggestions for this chapter, as well as any useful references that weren’t in the hardback edition.

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Blogging the Zombies: Expansionary Austerity – After the Zombies

December 23rd, 2011 19 comments

This is the final draft section of the new chapter of my Zombie Economics book, on Expansionary Austerity. 

As before comments are welcome. That includes everything from typos and suggestions for better phrasing to substantive critiques of the argument.  If I can get organized, I will try to post the edited version of the entire chapter and invite another round of comments.

As an aside, I just got an email link to the Journal of Economic Literature (behind a login screen), which contains Stephen Williamson’s review of my book, including his claims that both the Efficient Markets Hypothesis and DSGE macro are devoid of any implications. I bet that if I had submitted an article to any publication of the American Economic Association making such claims, it would have been shot down in flames by the referees. But, now it’s been published – anyone keen on a radical critique of mainstream economics can now cite the JEL to the effect that the whole enterprise (at least as applied to finance and macroeconomics) is irrelevant to reality.

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Cognitive dissonance and detention without trial

December 23rd, 2011 22 comments

 

Now that Obama has signalled that he will sign the National Defense Authorization Act, US citizens have no legal rights that can’t be over-ridden by miltary or presidential fiat. Anyone accused of being a terrorist linked to Al Qaeda can be arrested, shipped overseas and held indefinitely without trial, or alternatively tried by military commissions.[1] And, if arrest isn’t feasible or convenient then (at least outside the US), they can be hunted down and assassinated, with or without warning.

On the face of it, that makes the US a scary place to live. But, as a matter of everyday reality, most Americans aren’t scared at all.[2] Should they be? 

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Blogging the Zombies: Expansionary Austerity – Reanimation

December 20th, 2011 36 comments
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Zombie Economics: The movie

December 19th, 2011 2 comments

My plans for a full-length movie extravaganza based on my hit book Zombie Economics have gone nowhere. But, now, thanks to the wonders of Xtranormal, reader Paula D’Itallo has produced her own movie version, Zombie Mourning: Exploring the Lives of Dead Economic Theory. Watch and enjoy, as zombie financial theorists explore the risks and opportunities created by an apocalyptic zombie bubble.

 

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