I just decided to save my archives for posterity and observed yet again that Blogger had made a mess of them. Some aren’t linked at all and other links go to the wrong date. Still they’re all there and I’ve now got copies safely filed on my hard disk.

This brings me to a more general problem, the increasingly common practice of shifting material to archives a week or so after publication and breaking the initial link. I’m sure there are good reasons for this, but it’s really bad for blogging and, to my mind, violates the basic idea of the Web.

Haloscan is recording comments, but not updating the comment counter. A pity as there’s lots of good stuff in the comment threads – sometimes more than in the original post.

Tim Blair can’t be accused of Steynwalling (this useful term is due to the other Tim), at least on this occasion. After running a standard speeder’s rant about “revenue-raising” in Thursday’s Oz, he very graciously linked to the Letters page, where he was, IMHO, comprehensively demolished.

Anyone who is inclined to take Blair’s claims seriously (as usual with pro-speeding rants, he doesn’t provide any evidence or any real argument) might care to compare road death statistics for Australia (and particularly Victoria, his target on this occasion) with those of the US, where road safety laws are enforced much less vigorously. I’ll try and provide a link to these sometime soon.

Followers of the debate over competitive tendering and contracting in Australia will know that, while contracts do not always deliver economic benefits, they can be very effective in screening the operations of government from public scrutiny. The use of commercial confidentiality to prevent scruninty of dubious or corrupt financial dealings and failures in government services was perfected by the Burke Labor government in WA and the Kennett Liberal* government in Victoria.

Some of the worst abuses have occurred when state power is delegated to private enterprises, as in prisons and detention centres. The biggest dangers arise when governments hire mercenary forces to do jobs that could not be done by the regular army. As this piece from the NYT on
America’s For-Profit Secret Army shows, this is already happening, and seems certain to go further under the Bush doctrine. What mercenary forces lack in cost-effectiveness** they more than make up for in deniability.

There are a couple of interesting sidelights. Opponents of the International Criminal Court might want to ponder the fact that these mercenaries can commit war crimes with impunity. The article refers to the case, reported at the time but still not well-known of two employees of Dyncorp (one of the leading US mercenary companies) who ran a sex-slave operation in Bosnia. They weren’t subject to US military justice or to prosecution in US, just sacked and sent home. In principle they could have been prosecuted in Bosnia where the crimes were committed, but the minimal likelihood of this is the reason why the ICC was established in the first place. It’s not clear whether the bilateral treaties the US is trying to negotiate to avoid the ICC would protect future war criminals of this kind (the crimes in this case predate the ICC).

A final tidbit is that, although the mercenary forces in the former Yugoslavia were under effective US control, they were paid for by the Saudis.

* For non-Australian readers, Liberal =neoliberal/conservative. The Kennett government was neoliberal rather than conservative.

** History is replete with examples of mercenary forces being defeated by poorly armed and trained, but well-motivated, citizen armies. According to the NYT article, claims of cost savings in recent contracts have not been proved.

The award of the Nobel Peace Prize to Jimmy Carter has stirred predictable reactions.As usual, I’ll give my bald statement of views first, then follow up with a justification if I can muster time and energy. Carter was, with the exception of FDR and maybe Eisenhower, the best US President of the 20th century. To the extent that US foreign policy has any moral credibility today, it’s due to his actions in office and subsequently. He’s an excellent choice for the Prize.

The fact that Lucent is cutting 10000 more jobs and now looks unlikely to survive 2003 in one piece might seem like another boring business story. Motient, Scient, Viant and many faux-Latin bubble-era companies are already dead, or as good as, so the significance of one more casualty is not immediately obvious.
But Lucent is more than an over-indebted telecom gearmaker. At its core is, or was, the heart of American technological leadership for the second half of the 20th century, the fabled Bell Labs. Amazingly, this commercial research organisation earned at least six Nobel prizes, not to mention giving the world Unix and running its own highly-rated economics journal. After the breakup of AT&T and the spinoff of the absurdly-named Lucent, the labs survived but were pushed towards a short-term commercial focus. Now it seems doubtful that anything will survive.
Meanwhile, the symbol of American technological leadership for the first half of the 20th century, Ford Motor company, is also in trouble. Once again, the core problem is the triumph of financial engineering over physical engineering. Ford’s problems stem from its finance arm, which holds billions of dollars in dubious car loans.
Even General Electric, which is still highly profitable despite some recent disillusionment, is now basically a finance company. The great achievement of Jack Welch, until recently the archetypal ‘hero as CEO’ was to combine the cash-cow of GE finance with a PE ratio appropriate to GE’s history as a technological innovator. The gloss has come off, and the question of whether GE would be better off broken into pieces is already being asked.
Done right, financial engineering is a valuable tool for reducing risk, but even more boring than civil engineering. What we have seen for the last two decades is better described as financial alchemy. promising gold and delivering dross.

Ken Parish points out that my assessment of a vintage week in the blogosphere, omitted this very funny piece from Professor Bunyip on multiculturalism and polygamy.
As an aside, my support for liberalism does not extend to the point where people are expected to approve of (as opposed to tolerating) the religious beliefs of others. To modify the US maxim, “You go to your church, and I’ll go to the footy” seems like a pretty good basis for getting along, but I reserve the right to say “There is no god, and no-one is his/her/its prophet”.

The Professor doesn’t do so well with this attack on Ken Davidson for plagiarism. He writes:

A little later, Davidson’s thoughts are stolen from him in advance by Chomskyite William Blum.

DAVIDSON: The US will not even contemplate applying these rules to itself. In 1997, the US Senate passed the Chemical Weapons Convention Implementation Act. Section 307 stipulates that “The President may deny a request to inspect any facility in the United States in cases where the President determines that the inspection may pose a threat to the national security interest of the United States”.

BLUM: Iraq may well wonder at the high (double) standard set by Washington. Less than a year ago [1997], the U.S. Senate passed an act to implement the “Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction” (Short title: Chemical Weapons Convention)… Section 307, stipulates that “the President may deny a request to inspect any facility in the United States in cases where the President determines that the inspection may pose a threat to the national security interests of the United States.”

DAVIDSON: Section 303 of the act stipulates that “any objection by the President to an individual serving as an inspector . . . shall not be reviewable in any court”.

BLUM: Section 303 further states that “Any objection by the President to an individual serving as an inspector … shall not be reviewable in any court.”

As far as I can see, the only words in common are the name and text of the relevant act, and one occurrence of “stipulate”. Of course, the point that the US has been hypocritical in basing a case for war on the need to eliminate weapons of mass destruction while undermining international conventions to the same effect has been made before, including by me. And quite likely, Davidson got the text of the act from Blum either by Googling for it or from general reading. But this is just standard journalistic research.

In a blog, where space is free, it’s nice to have asides saying “thanks to X for this link”, and “Y,Z and many others have already written on this”. The same is true in spades in an academic article where the person you fail to mention will probably be the one who referees your article. But I can assure my fellow-professor that any opinion editor worth their salt would ruthlessly excise any such niceties from an Op-Ed piece with a 750-word limit.

Finally, I thought I would be the first to point out that “Stanley Gudgeon” is the son of the hero in Lennie Lower’s classic (1930) Australian comic novel, “Here’s Luck”, but Google has saved me from an accusation of plagiarising Tim Blair, who made the same observation months ago. I haven’t read Lower for years, but I’ll always remember his observation that “Chatswood is one of those places that are a stone’s throw from some other place”. Once again, Google leads to a longer extract. This leads me on to a yet further diversion, the suggestion, linked by Tim Dunlop that Google might start charging (though at this stage only for ‘extras’ like the news service). Heaven forfend! Anyway, I meant to make the point that for those interested in guessing at the Professor’s true identity, this choice of pseudonym might provide a clue.

As I mentioned, one of several reasons I was happy about Daniel Kahneman’s Nobel Prize was that he works in the same subfield of economics as me. I’m even happier now because I got a mention in the advance citation. Only a little one and only in a footnote, but it’s my brush with fame! Footnote 11 says:

“Cumulative prospect theory combines prospect theory with a cumulative approach developed by Quiggin (1982), Schmeidler (1989) and Luce and Fishburn (1991).”

You can read the while thing here (PDF download required)

Michael Kinsley shares my view about the confusion of US policy on Iraq.

“Ambiguity has its place in dealings among nations, and so does a bit of studied irrationality. Sending mixed signals and leaving the enemy uncertain what you might do next are valid tactics. But the cloud of confusion that surrounds Bush’s Iraq policy is not tactical. It’s the real thing.”

I’ve been blogging on for a while about the dangers (low probability, but some really nasty possible outcomes) posed by derivatives markets, but I’ve never felt entirely satisfied with the explanations I’ve given. Jim Jubak at MSN Money gives an excellent beginners guide.
I’d observe though that it’s not as reassuring as you might think that 85 per cent of derivatives represent interest hedges, which are relatively safe. The other 15 per cent still accounts for around $8 trillion, and JP Morgans alone has about half of this.