Ross Gittins has a nice piece criticising the government subsidy to private health insurance. My only quarrel is that the piece tends to perpetuate the assumption that an increase in the share of GDP devoted to health is a bad thing. In the long run, the growth of the human services sector, including health and education is an inevitable and desirable structural change. It’s no different in principle from the growth of manufacturing relative to agriculture in the first half of the 20th century and the growth of ‘tertiary’ services like retailing and finance relative to manufacturing in the second.
Update Don Arthur correctly points out that ‘more isn’t always better’. This is true of health care, but also of any area of expenditure, from food to financial services. It doesn’t justify the common practice of treating increases in the share of GDP going to health as being, in itself, a Bad Thing.

The Victorian National Party has joined the push for renationalisation, specifically with respect to the rail freight network sold off when they were part of the Kennett Coalition government.

Advocating a return to government control of the state’s rail freight network, Mr Ryan said obtaining the 45-year lease from private operator Freight Australia would simplify upgrading and maintenance issues.

“Freight Australia are very reluctant to make any further capital investment, because they don’t see themselves as getting an appropriate commercial return,” Mr Ryan said.

“And we need the work to be done.

As I’ve pointed out before, the issue of rate of return is crucial. The difference between the commercial rate of return required under standard financial models and the real rate of interest on government bonds (the ‘equity premium’) is very large, even though economic theory says it should be very small. Hence, the use of the commercial rate for the evaluation of infrastructure investments will lead to suboptimal levels of investment. This fact has been obscured by the atmosphere of optimism that surrounded privatisation, but it is now coming to the fore. In the end, we will face a choice between high costs and inadequate investment.

Of course, the National Party is probably reverting to its historic preference for a zero rate of return, but I’ll be happy to meet them halfway.

An idle moment’s self-googling reveals that I have become embroiled in a dispute between Arnold Kling and the Man Without Qualities regarding Bjorn Lomborg and the Kyoto Protocol. Both of them like Lomborg and dislike Kyoto, but apparently MWQ also dislikes economists, and therefore takes issue with
Kling’s proposition that

Economists agree on many things. We are all for free trade. We are all more persuaded by Bjorn Lomborg than by Edward O. Wilson. We all believe that government support for scientific research helps the economy. We all support Lawrence Lessig in his attempt to overturn copyright extension..

MWQ responds, citing this piece by me at length. It begins:

Experienced debaters rarely commit themselves to an unambiguously false statement. So I was surprised to read Bjorn Lomborg’s claim that ‘the results of all major cost-benefit analyses show that doing Kyoto or something even grander is simply a bad investment for the world’. There are plenty of examples to prove him wrong.

I go on to list large numbers of economists who support Kyoto, and point out that Lomborg (like Kling) presents the views of Kyoto critic William Nordhaus as if they represent the consensus of the profession. As as has been clearly shown in Australia, at least 30 per cent of the profession actively supports Kyoto, while a promised statement of economists opposed to Kyoto never appeared, apparently because the number of credible signatures was so embarrassingly small. As far as I can determine the balance of opinion is not that much different in the US. Of course, the majority is not always right, but Lomborg has no qualifications to make judgements on this point, and his claim that ‘all major cost-benefit analyses’ support him is simply untrue.

Interestingly, MWQ agrees with me that Lomborg is not telling the truth here, but nonetheless describes me as a ‘vicious critic’ for saying so (to be fair, his view of me was formed by reading my good friends at The New Australian). Kling is similarly unfriendly, saying

He says that economists do not all support Bjorn Lomborg, citing one John Quiggin from Australia. Well, I take back the word ‘all’ and say instead ‘all economists for whom I have respect,’ or somesuch.

I’m not too fussed – these guys are equally critical of Paul Krugman, and Kling doesn’t like Daniel Kahneman all that much. In any case, both seem to agree that my insignificance is inherent in the fact that I’m an Australian.

With this out of the way, I want to restate my point about Lomborg. He presents a reasonable facade and his book has all the academic trimmings of footnotes etc. But on any issue where I have professional knowledge, I know he’s presenting a selective and distorted picture, citing the scientists who support his view and ignoring or misrepresenting the rest. The experts in most of the other fields he’s covered say the same thing. Not only were the reviews of his book in the top journals like Science and Nature just as damning as those in the Scientific American, but they consistently made the same point – this is advocacy masquerading as an impartial survey of the evidence.

As I observed a little while ago, it’s easy for a non-expert to check Lomborg’s form on one critical point. Lomborg claims to have got started by attempting and failing to refute the work of Julian Simon. Why, then, doesn’t he report that Simon was completely wrong on a wide range of environmental issues, notably including atmospheric lead pollution and the depletion of the ozone layer.

Coming back to the substance of the debate over the costs of global warming. I’ve studied and written on this topic at length, addressing a range of complex modelling issues. As I’ve noted, even anti-Kyoto modellers like Warwick McKibbin produces estimates of the costs of ratifying Kyoto far below those favored by Lomborg, let alone the economic catastrophes implied by much anti-Kyoto rhetoric. MWQ clearly wouldn’t know an economic model if he fell over one, but he still knows what answer should come out.

Kling is even more interesting. In general he’s a techno-optimist, supporter of free markets and a believer in the flexibility of technology, as opposed to the fixed-proportions model adopted by many environmentalists. But as I point out,

The Intergovernmental Panel on Climate Change cites a range of model estimates of the costs of implementing Kyoto using market mechanisms. They show that, with a global system of emission rights trading, the cost of implementing Kyoto would range from 0.1 per cent to 0.2 per cent of GDP.

Lomborg dismisses global emissions trading as politically infeasible because it would involve the redistribution of billions of dollars to developing countries (page 305). But then he turns around and attacks alternative ways of implementing Kyoto by suggesting that the billions required could be better spent – by redistributing them to developing countries.

Apart from the inherent contradiction in Lomborg’s argument, the crucial point here is that he rejects market mechanisms on political grounds, the kind of thing Kling would scorn if it came from an environmentalist. Moreover, Lomborg’s larger-scale argument for doing nothing about global warming rests on pessimism about the capacity to substitute away from fossil fuels and about the prospects for technological improvement that would reduce the cost of cutting emissions. Again, this is the exact opposite of the kind of argument Kling would normally favor.

One of the big problems in science is that non-results are rarely reported. I was interested to read this report of a study by the US General Accounting Office which found that claims of superior performance by for-profit schools could neither be supported nor rejected on the basis of existing studies.

While the companies publish year-to-year comparisons of standardized test scores to indicate that students in schools they manage are making academic gains, they do not present data on comparable students who are not in their programs,” the report said. It also faulted the studies for not testing students both before and after the private company’s takeover, and for not controlling for demographic variations among groups of students.

The one exception was a report on an Edison school in Florida, which met the standard for scientific rigor, but showed “no difference between students in the company’s program and other students,” the report said.

I picked up an ad for the Mitsubishi Verada in a magazine a while ago, and I couldn’t resist mentioning it. It suggests the car might be perfect for an afternoon drive past the houses of:

(a) Your old economics teacher who said you’d amount to nothing
(b) Your first boss (ditto)
(c) Your ex-wife who left you for someone with better prospects

In other words, if you’re an embittered loser who’s willing to pay more than you can afford in order to impress people you don’t like and who’ve probably forgotten you even exist, buy this car.

Remembrance Day* always raises lots of complex thoughts about history. As the anniversary of the Armistice that halted the Great War in 1918, it’s a time for reflection on many things. I was attending the meetings of the Academy of the Social Sciences in Australia and we halted for a minute’s silence, a custom that has fallen into disuse, but which it would be valuable to revive.

It’s also the anniversary of the dismissal of the Whitlam government and the issue has been raised again by John Faulkner’s interview with Gough, of which I’ve only seen part so far. Ken Parish and
Don Arthur, among others have blogged on this. Ken shares my misty-eyed enthusiasm (though we both agree, contrary to Gough, that HECS was a good idea).

Don is less keen. He says, ‘Whitlam’s enduring popularity is testament to the fondness many Australians have for martyrdom and failure.’ But the part of the Whitlam story that gets me excited is the two-man government and the marvelous first term, when it seemed that we had the chance of a bright future. And although the government failed in the end, much of what was done in this first term has endured. In particular, Whitlam’s expansion of school education spending laid the groundwork for the huge expansion in school completion rates in the 1980s and in university participation in the 1990s. The abolition of university fees at a time when relatively few kids went on to university was premature, but the overall policy was right, and far more economically rational (a term that was probably coined by Whitlam) than those of his successors. Equal pay for women is another enduring legacy.

Of course, 1975 is an important part of the legend. Without it, Whitlam would have dragged his way to an election in 1976 and 1977 and been comprehensively crushed under the weight of economic failure and the scandals created by the absurd behavior of Cairns and Connor. The big problem with heroes is that they get old and tarnished like all of us. An early death is a major qualification for hero status. Whitlam’s political martyrdom is the next best thing, allowing his supporters to excuse the kinds of sins and failures that are inevitable in a politician but undesirable in a hero.

Finally, given recent discussion of my beard on my “Monday Message Board”, it would be remiss of me not to mention that Nov 11 is also the anniversary of the execution of Ned Kelly. If you haven’t read Peter Carey’s True History of the Kelly Gang, today would be a good day to start.

*For US readers, this is our name for Veterans Day

As I and others have observed, the comments on this blog are often more interesting than the posts. Taking this to its logical conclusion, I’ve decided to put up a content-free post on which people can make whatever comments they choose. The ground rules are:
(i) no coarse language
(ii) civilised discussion only
This blog is on a one-week cycle, so I’ll review the experiment at the end of the week.

A little while ago, I observed that

Opponents of political correctness are quick to claim oppression whenever they are subject to verbal criticism. ‘Racist’ is the absolute taboo term for these reverse-PC types

As if to illustrate this point, Tim Dunlop quotes academic Katharine Betts, saying:

I define racism as the belief that cultural characteristics are biologically determined, that they cannot be changed, and that groups sharing these characteristics can be ranked in a hierarchy of inferiority and superiority. This belief is wrong and it has been used to excuse terrible acts. The word ‘racism’ describes some of the greatest evils we have seen. When it is used loosely as a catchall term of abuse, we trivialize something which should be taken very seriously. For example are ethnic preferences in choice of marriage partners racism, or just personal preference? It’s fashionable now to call racism as I’ve defined it ‘old racism’ and to say that today we must struggle against ‘new racism’. But this ‘new racism’ seems to involve nothing more than preferring to mix with people like yourself. Such behaviour may sometimes be cliquey and unfriendly but it’s a long way from slavery and mass murder.

This quote appears to come from an interview with the Institute for Public Affairs, which is available as a PDF file, here.

Betts’ definition of racism fits Nazi Germany and the Confederate South in the United States, a point underlined by her emphasis on slavery and mass murder. But it excludes apartheid, the ‘Jim Crow’ era in the South and the White Australia policy, at least as far their official theory is concerned. Advocates of all three policies rejected claims of racism, drawing precisely the distinction made by Betts. These policies focused not on the superiority of one race over another, but on the desirability of keeping races separate. (It was, of course, merely coincidental that most of the desirable real estate ended up on the ‘white’ side of the lines of separation).

Most people would regard apartheid as a racist policy. Nevertheless, use of the term ‘racism’ generally ends up bogging arguments down in violent definitional disputes. Perhaps we should return to the more neutral term used to define the Jim Crow laws, ‘segregationism’. Clearly Betts is endorsing racial segregationism, at least as a legitimate personal preference and, by implication, as a public policy.

Tim Dunlop makes the argument that there is a continuum running from the kind of views defended by Betts to the extreme versions she defines as ‘racism’. I think it’s easier to see a continuum of segregationist views running from ‘preferring to mix with people like yourself’ to apartheid and White Australia. The inclusion of explicit pseudo-scientific theories about racial superiority is an additional element, which as Betts says, can justify the worst outrages associated with the term ‘racism’. But even where it does not amount to racism in the sense defined by Betts, segregationism is based on, and justifies, distrust, dislike and ultimately hatred of anyone outside the self-defined group that practises it.

One more point Since I have previously noted the failure of Australia’s free-market thinktanks to give any voice to classical liberal views on the issue of refugee policy, I’m happy to point out that the Centre for Independent Studies has run an article by William Maley in its journal Policy, attacking current government policy. Link via Jason Soon.

Ursula Le Guin has recently come out with some more Tales from Earthsea. Although I think fantasy as a genre has collapsed into endless boring repetition, and my interest in SF has flagged as well, I’ll always make an exception for anything by Le Guin.

I also went to see Shout!, the musical of the life of Johnny O’Keefe. Jason’s proposal for an all-economist band rang some bells with me after this.

In sporting news, my younger son and I went bowling, as we do fairly regularly, and came close to our PBs with 128 and 177 respectively. This wouldn’t justify a blog report, except for the observation that we are part of the phenomenon of ‘bowling alone’, claimed by Robert Putnam to epitomise the erosion of social capital (‘alone’ isn’t to be taken literally, it means ‘not in a league’). So, if you notice society collapsing around you, blame us.