One year on

Today marks the end of my first year of blogging. Although I didn’t note it at the time, I started on the winter solstice, which in Canberra means something. The year has seen a lot of changes for me, most of them positive. I’ve moved from Canberra, where I lived most of my life from 1970 onwards, to Brisbane, and, correspondingly from ANU, my alma mater, to the University of Queensland. I’ve finished up an ARC Research Fellowship and managed to land the best job available in Australian academia, a Federation Fellowship. I’ve become a father-in-law, and am looking forward, in due course, to becoming a grandfather. All of these transitions have involved some breaking of old and familiar ties and the beginning of new adventures

In blogging terms, a year is still long enough to go from newbie to old hand. I’ve moved from the training wheels of Blogger to the Mac-like elegance of Movable Type, and have established myself in a fairly satisfactory corner of Ozplogistan (this term based on ‘plog’ for ‘political weblog’, was coined by Bright Cold Matt in a comments thread, and popularised by Ken Parish. Matt gives more etymological details in the comments thread for this post). I was going to list the people who play a central role in this virtual universe, but I realised I was sure to omit someone, and you all know who you are anyway.

I was also going to do a “state of Ozplogistan” assessment, but I see my blogtwin, Tim Dunlop, has already written one. I’ll just make two observations. The first is that, after a period of explosive growth, blogging seems to have entered what economists call the “mature phase” (this refers to industry structure, not to the content of posts!), with roughly equal numbers of entries and exits. Among those most missed, I’ll nominate Don Arthur, whom I keep on the blogroll in the forlorn hope that he’ll finish his thesis and resume blogging. My other observation is that the political makeup of Ozplogistan now resembles that of Oz, whereas, when I started, the echo effect of American-inspired warblogging was still a dominant factor.

My big problem, coincidentally mentioned by Homer Paxton in one of today’s comments is “How in heaven’s name do you combine Uni work, blogging, family time, reading etal.” I’m still trying to figure that one out. If I find the answer I’ll tell you. If I join the legion of departed bloggers, you’ll know I haven’t managed to crack it.

Finally, thanks to all who have linked to my posts, commented in my comment boxes, or just read and enjoyed the blog. A particular thankyou to Rob Corr, who provided hosting for the new site.

KM on GW

I trawled through my hard drive, trying to find something I wrote last year about the IPCC and Ian Castles’ criticism of it. However, Keneth Miles (link malfunctioning for reasons I can’t figure out, use the one in the blogroll) has made most of the points I was going to, and has lots more, including the disappointing news that Castles has joined the Lavoisier Group, an organisation based on the idea that, if we all close our eyes and wish hard enough, the whole problem of global warming will magically disappear.

New on the website

I’m in the middle of updating the journal articles on the website. The site is now pretty much update for current publications, and I plan to go back to those from 1992 and earlier as soon as I get time. This is a good time for anybody who has suggestions to make them. I do pay attention, even if, either because of disagreement or inertia, I don’t implement them all.

To complicate matters further, I’m switching to a new computer setup at home, using a Powerbook G4 as my primary computer. This is a job which has not got simpler over time, or with new and improved versions of Mac OS. I didn’t get an exact count, but I appear to have about 80 000 files, which is, I suppose consistent with creating 10/day over 20 years of use, and then doubling that with application and system files. Most need to be transferred from the old computer to the new one, but there are some that shouldn’t be (for example, computer-specific preferences, so it’s a messy business. Add to that some touchy hardware (notably my Telstra cable modem) and there’s several hours of downtime involved. But it all seems to be up and running now, and is definitely an improvement, as the Powerbook supports a second (external )monitor, which is a big aid to productivity.

The English disease

One of the striking features of world trade is the fact that nearly all the English-speaking countries run big current account deficits. The United States, formerly a big net exporter, has been in deficit for twenty years or so. The deficit has now reached 5 per cent of GDP despite a continuing recession/slow recovery. The UK has mostly run deficits for the past twenty years or so, though it still has strongly positive net investment income, reflecting its century or more as the main source of world investment. Australia and New Zealand are consistent deficit countries. Although they occasionally reach balance on the goods and services account, they are large net debtors, and therefore have consistent deficits on the income account. The only exception (and a relatively recent one) is Canada. Conversely of course, the rest of the developed world, that is, in essence, the EU and Japan run fairly consistent surpluses.

Why is this? I’m not attracted to cultural explanations for a couple of reasons. First, both the UK and US were, for a very long time, the major surplus countries. Second, if you go back only 25 years, the “English disease” referred to rampant union demands, class conflict and rigidities that hampered productivity. At least in the sphere of popular factoid, all these disabilities are now presented as characterising the EU and Japan rather than the English-speakers.

Of course, the change in stereotypes about laziness etc reflects the greater impact of neoliberal policy reforms in the English-speaking countries. So my question is: does neoliberalism cause current account deficits? And if so, is this a good thing reflecting the greater attractiveness of investment in these countries (the ‘consenting adults’ view, put forward prominently, though in a slightly different context by John Pitchford). Or is it a bad thing, reflecting debts incurred because of excessive borrowing by households and debts pumped up in speculative investment booms. Readers won’t be surprised to learn that I hold the latter view.

At the moment the’consenting adults’ view is dominant, particularly among supporters of neoliberalism. But looking at the way this group changed their tune after the Asian and Argentine crises, it’s not hard to predict that, in the event that things go sour, they will switch to the latter view very quickly and, as far as they can manage it, retrospectively (search on ‘crony capitalism’ for examples).

Via Jack Strocchi, update billmon at Whiskey Bar has more detail on the US case, including a neat way of presenting the data I haven’t seen before. In recent years, imports have grown by 40 cents for every dollar of GDP growth. I need to think a bit more about this.

A number of commentators have defended the ‘consenting adults’ view and have asked for a ‘market failure’ reason why it isn’t right. The obvious candidate is the moral hazard produced when financial markets are deregulated but the central bank continues to act as a lender of last resort. Exhibit A is Australia in the 1980s, which is when we ran our foreign debt up to its current levels. I don’t suppose anyone is going to claim that the investments of Bond, Skase, Elliott and others were good ones. Most of the debt in this period was borrowed through the Big Four banks. In a regulated system, they would have been stopped. In a fully deregulated system they would have failed. As it was they were rescued (Westpac being the most notable case). The story of state-regulated institutions (building societies and State Banks) is more complex, but basically the same. I put this argument forward in a piece in 1992, Partial financial deregulation and the current account?, Economic Papers 11(1), 53?56, which I notice is not up on my website. Another job waiting to be done!

Working hours – the worm turns

Ross Gittins latest column says

the great epidemic of overwork is subsiding. Of late, we’re working less, not more. And, in any case, the latest research suggests the whole story’s been a bit overdone.

The first point is, I think correct. Gittins quotes ABS data to show that average working hours for full-time employees increased from 42 to 45 hours a week between 1982 and 1994, levelled out, and have declined slightly over the past two years.

This seems pretty much consistent with the anecdotal evidence. Concern about increasing working hours started in the early 1990s and was widespread by the mid-1990s. There was a clear cultural shift around this time – people who willingly worked very long hours, who had typically been presented in very positive terms in the 1980s were presented much more negatively. A particular turning point was the publication of an email sent out at 10pm by a partner in a law firm complaining that no-one else was working. He was held up to universal ridicule. And increasingly, people decided the game wasn’t worth the candle and pulled out of full-time work altogether. Clive Hamilton’s “downshifters” are part of this response. So the decline in working hours is basically an illustration of Stein’ Law “If a trend is unsustainable, it won’t be sustained” I’ve been pointing out the unsustainability of the push to longer worker hours and greater work intensity for quite a few years (PDF file), so I’m not surprised to see a turnaround.

On the other hand, I don’t agree with the claim that “the whole story’s a bit overdone”. It’s important to observe that the rise in fulltime working hours was a reversal of a trend that had continued for more than a century. It was accompanied by a substantial increase in job stress and job insecurity, and these things were needed to induce workers to put in longer hours. Gittins makes the point that a lot of unpaid overtime was “compensated” by salary packages, but the shift towards such packages in the 1980s was precisely one of the devices used to extract more work effort, along with the conversion of employees into supposedly self-employed “contractors”.

Gittins also quotes data on the relatively small proportion of employees who said they would rather work less hours for less money, but doesn’t mention the large proportion of those on long hours who said they wanted to work less hours for the same money (12.4 per cent of those working 49-59 hours and 21 per cent of those working 60+ hours). This response “was not a preference option, [but] interviewers recorded this response when it was given. ” You might say this is simple wishful thinking, but very few people working part-time or standard full-time hours gave this spontaneous response. I’d interpret it as the response of people who feel that they’ve been pressured into working excessive hours for no extra compensation.

Beazley beaten!

Of the many commentators in both print and blog media who’ve written their views, I think the most accurate were, Margo Kingston and Ross Gittins. My main views:

First, the poll-driven choice of Beazley as the anti-Crean candidate turned the ballot into a referendum on the ‘small target strategy’ run by Beazley (advised by Swan and Smith) in 2001. My waning hopes for the Federal ALP have been strengthened slightly by the fact that Beazley was so thoroughly beaten.

Second, having positioned himself as the ‘policy’ candidate, Crean now has to actually deliver on this. In particular, , he has to decide whether he’s for lower taxes or higher services. At present, as Ross Gittins points out, Labor is the ‘denial of opportunity cost’ party. Of course, this is true to some extent of all opposition parties.
Given the absence of any serious policy initiatives from Labor for the past seven years, and the sporadic attention of the government to anything more than triumphalism and wedge politics, a serious policy program could make a big impact.

Third, and assuming he meets the policy test, Crean’s position has been strengthened by this episode. He called Beazley’s bluff, faced him down and beat him decisively, and, in the process, acquired some sort of identity. I don’t know whether this will be reflected in the polls, but it should be.

A snippet on foreign currency loans

I’m always thinking about new things to do with the blog. Some ideas, like the Monday Message Board, have been successful, others haven’t worked quite so well. What I’m doing here is posting a couple of paras I was going to put into an opinion piece, but which I’ve had to cut for space reasons. I hope the blog will provide a way of implementing an idea I’ve had for many years and never fully realised, that of a text database of thoughts on various topics, useful quotes and so on, that I can dip into as needed in my work. Of course, even though a lot of the material won’t be of general interest, I still welcome comments – in fact, comments on esoteric topics are often more useful to me than debate on current issues. I’d also welcome thoughts about the merits or otherwise of this idea and proposals for other uses of the blogging medium.

The idea of offering loans denominated in Swiss francs, pushed vigorously by the major banks received a rapturous receptionin the mid-1980s . What could be more natural as a consequence of financial deregulation than that Australian borrowers should gain the benefits of low interest rates prevailing overseas. No-one bothered to do the elementary risk analysis that would have shown this to be a fundamentally unsound idea, and even in retrospect, its failure was widely seen as the result of bad luck.

In reality, the product was equivalent to the combination of an ordinary Australian-currency loan with an unhedged bet on the foreign exchange market. The interest rate differential between franc-denominated and dollar-denominated loans reflected a market expectation that the dollar would depreciate. Borrowers were invited to bet that the market was wrong. Such a bet made no sense for the vast majority of borrowers and in fact the depreciation was even greater than the market forecast.

Despite the obvious impropriety of advising financially unsophisticated customers to take on gratuitous risks, the banks were generally successful in enforcing their contracts, except where their initial incompetence was compounded by subsequent wrongdoing, such as the suppression of evidence. Judges and the legal system more generally proved incapable of coming to grips with the basic issues.

Another counterexample to consequentialism

Jason Soon alerted me to this obituary for Sir Bernard Williams in which he is said to have refuted utilitarianism, or rather consequentialism, with arguments such as the following

Williams pointed out, a very quick way to stop people from parking on double yellow lines in London would be to threaten to shoot anyone that did. If only a couple of people were shot for this, it could be justified on a simple Utilitarian model, since it would promote happiness for the majority of Londoners.

I guess one shouldn’t try to refute an obituary, but it’s better for an intellectual to be criticised than ignored, so I will respond with the observation that I hope this wasn’t really one of Williams’ strongest criticisms of utilitarianism. Does anyone really think such a policy would actually work in the way claimed?
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Getting and spending

Via Jeremy Osner a nice post by Mark Kleiman with a critique of the Protestant Work Ethic.
Tom Runnacles has more. In particular, I agree with his view that the growth in American and Australian (standard fulltime) working hours over the past twenty years has more to do with labour market (de/re)regulation than with ingrained cultural preferences. After all, who would have believed in the 1970s, that the British would be criticising the Germans for laziness. And although the cultural stereotypes haven’t caught up, Americans now work harder and longer than Japanese or Koreans.