This doesn’t seem to be the sort of thing that usually goes on blogs, but given the diversity of my readers, at least some might be interested. As a consequence of my Federation Fellowship and the associated funding, I’ll be advertising a number of scholarships, fellowships and other jobs. The first ad is in todays Oz Higher Ed supplement and is also online here.

There’s a well-known factoid that “Of the world’s 100 biggest economies, 51 are multinational corporations”. As most economists know, this is a dodgy one, because it’s based on a comparison of total sales of corporations with GDP (a value added measure). In World Economics (not online as far as I can tell), de Grauwe and Camerman how done the more reasonable comparison of GDP and the value added by corporations. Only37 corporations make it into the top 100 and only two (Walmart at 44 and Exxon at 48) into the top 50.

This is correct in principle, but I was a bit surprised at how low the value of value added to sales came out (around 25 per cent for big companies like GM) and it struck me that there is one significant qualification to make to these results. A lot of multinational companies have large numbers of ‘tied’ subcontractors. Purchases from these tied subcontractors appear in the sales measure but not in value-added. For most of the purposes for which comparisons with GDP are appropriate, tied subcontractors should be included. If contracting out has increased substantially over the past twenty years, then the second conclusion of de Grauwe and Camerman, that the share of the biggest multinationals in world GDP hasn’t changed much in that time, might also need revision.

I drew Schumpeter in the office sweep. Hmmph!

Paddy McGuinness offers a well-reasoned and balanced response to Max Corden’s call for higher immigration. With very minor exceptions, the article is free of the omnidirectional vitriol I’ve come to associate with McGuinness’ work, and there’s even a modest hint of idealism in the conclusion. Reading this piece reminds me of why I admired him so much back in the 1970s. It would be good to see more like this from him.

I’m more favorable to migration than McGuinness, though not as much so as Corden. My main argument is a liberal/libertarian one namely that, if people want to come here, and the effects on the welfare of those of us who are already here are small and ambiguous, then we should let them come. For those with a more narrowly-defined welfare function, I’ll add the observation that most intending immigrants have family members and friends here in Australia who want them to come, and that refusing them entry therefore reduces Australian welfare.

Update Carrying on my recent display of fallibility, I omitted the link, which is here. I’ve now included it where it should go

An alert reader (Grant) has pointed out that, in a post a couple of weeks ago, I used a figure of $20 million for the cost of saving lives, for which I didn’t give a basis. I can’t exactly reconstruct my error now, but I think I must have used BTRE estimates of aggregate cost in billions. Regardless, the estimate is certainly higher than it should be. In the preceding post, I present and defend an estimate in the range $5 million to $10 million.

Obviously, it’s embarrassing to get things wrong, but I regard blogging as somewhere between conversation with friends/colleagues and the circulation of draft papers. That is, it’s a chance to test out your arguments and detect errors before committing them to print in, say, a newspaper or refereed journal article. In this case, correcting the error doesn’t fundamentally change the argument in the post concerned, though what looked like an overwhelming case is now more like a strong balance of probabilities. In any case, it’s more important to get things right in the end, than to maintain a pretence of always being right.

The debate about speeding inevitably raises the question of whether it is possible to put an economic (more specifically, monetary) value on lives lost in road crashes (the term ‘accident‘ is a misnomer). A more appropriate way of putting the question is to ask whether there is a monetary cost that is ‘reasonable’ to spend for a given expected reduction in the number of road fatalities. This way of putting the question gets us away from impossible questions of the form “How much is Joe Smith’s life worth”.

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Back in early April, I observed that the Iraq campaign was a war of absences. Some of the mysteries posed by those absences have now been resolved. For example, everyone now knows that the Weapons of Mass Destruction did not exist.* But the big remaining mystery is Saddam. It seems pretty clear that he got away from Baghdad safely, and likely that he’s still alive.

On thinking about it, I have the feeling that Saddam is, in a sense, the key to the entire situation. On the one hand, suppose Saddam is caught or (more likely) killed. Whether or not this led to a reduction in terror/resistance attacks, the pressure for a quick American withdrawal would, I think, quickly become irresistible. For most of the Americans who still support the war, this would, I think, count as “Mission Accomplished”, whatever happened in Iraq afterwards.

On the other hand, as long as Saddam is at large, and the security situation remains anything like it is at present, a US withdrawal will be seen as “cutting and running”, and will therefore be resisted with great vigour.

* I leave aside those speakers of parallel universe English in whose dialect this proposition has some entirely different meaning to that prevailing on my planet.

It’s time yet again for the Monday Message Board. Your comments on any topic are welcome (civilised discussion and no coarse language, please).

My starter question for this week: Has anyone got any good ideas for Iraq?

A short history of the world by Geoffrey Blainey. I bought this for my son, on the view that a good narrative history would provide a framework within which to fit the detailed study of short periods that’s typical of school history courses these days. It’s certainly a good read. Blainey’s geographical determinism provides an idiosyncratic flavor without being overwhelming.

I’m also reading Interest and Prices by Michael Woodford, which I got as an unsolicited gift from Princeton University Press. It’s the first attempt I’ve seen at a theory of monetary policy in which interest rates are the variable of interest and the money supply is excluded from consideration. On the face of things, this is much closer to the world we live in than the standard approach. I’m hoping this will help to explain the paradox (at least for anyone who thinks the quantity theory of money ought to work in the long run) of persistently high growth in most monetary aggregates combined with persistently low inflation.

I went to see the Namatjira exhibition at the Queensland Art Gallery, having seen it previously in Canberra. In the light of recent discussion on the blog, I was struck by the fact that Namatjira was a close contemporary of Jackson Pollock and, like him, was killed by alcohol, though in a radically different cultural context.

Each in a sense, represents the end of a line. Whereas Pollock represented the last gasp of modernism in art, Namatjira can be seen as the last great representative of the European tradition of landscape painting. By contrast with Pollock’s programmatic formal innovations in drip paintings like Blue Poles, Namatjira’s innovations came from the interaction between traditional concerns (light, colour and shadow) and a previously unpainted landscape.

Also on show at the Gallery is art of the Cape York Peninsula, including both traditional cultural products and consciously created art works.

The bad news is that Russia has not, as the government previously indicated, ratified the Kyoto protocol and and seems unlikely to do so, although Putin still appears willing to be bought by a sufficiently attractive offer. The combination of Bush and Putin is enough to block the treaty. (The Howard government is the only other remaining holdout, but Australia is too small to tip the balance either way).

The good news is the 55-43 vote on the McCain-Lieberman bill restricting CO2 emissions. Although the bill was defeated, this was scarcely surprising given the opposition of the Administration and the Republican majority. It seems likely, given this starting point, that a pro-Kyoto Administration could secure ratification. In particular, the 97-0 vote on the Byrd-Hagel resolution opposing Kyoto has now been consigned to history.

Meanwhile, nothing much is being done about global warming. Russia’s failure to ratify Kyoto gives those who claim to support action, but oppose the detailed provisions of Kyoto, their chance to do something. In particular, it will be interesting to see whether there is any action on the McKibbin-Wilcoxen proposal. I’m not optimistic. As far as I can see, the vast majority of those who claim to support “something, but not Kyoto” actually want “business as usual”. Still, I’m agnostic about the differences between McKibbin-Wilcoxen and the Kyoto proposal and will be happy to support whichever seems most likely to get up.