Month: February 2004

What I've been reading

John Quiggin18 Comments

Valdis Krebs presents this map of purchasing habits for political books, using the techniques of cluster analysis. leftright Krebs’ main point is that the books divide readers into two sharply separate clusters, color-coded on the assumption that one group of readers are Democrats and the other are Republicans. The diagram also coincides with the standard left-right coding.

I have a couple of observations on this. The first is the trivial one that this color-coding is the exact opposite of the one that would naturally be used in Australia or the UK (back in my days as a folksinger, one of my more successful pieces (this is a highly relative term( was about a Labour leader who “went in [to office] Red and came out Blue”. Without wanting to load too much on to arbitrary signifiers, this does seem to me to support my view that there’s a bigger gulf between liberals and the radical left in the US than elsewhere. Even if the mainstream left party in other countries does not adopt the red banner of Marxism there’s sufficient continuity along the political spectrum to make it’s adoption by the right unlikely.

The second thing that’s striking is that, on the left-right orientation, I come out as a moderate. I’ve read nearly all the blue books that are within one or two links of the red zone, and none of those on the far left of the diagram. On the right, I’ve read only Letters to a Young Conservative .

Looking again at the titles of the books I’ve read, while there’s a vaguely leftish slant to them, one could scarcely call either Clash of Civilisations or Elusive Quest for Growth supportive of the left. The striking thing is that these are mostly the serious books, while those on either side are mostly lightweight polemics (I’m inferring this from the reviews I’ve read of some of them and the titles of the others). But it would appear from the cluster analysis that those who read leftwing partisan diatribes also tend to read serious books (and vice versa) while those who read rightwing partisan diatribes don’t read anything else.

In terms of the debate that’s been going on for some time about the relative intellectual capacity of the left and the right, the cluster analysis seems to imply that the left is doing a lot more to enhance its intellectual capacity than is the right.

(Hat tip to Alex Tabarrok at Marginal Revolution)

Self-defeating interest groups

John Quiggin7 Comments

This piece by Michael Shmith is mainly about smoking. But one passage resonated with me

Growing up in a smoking household was a rite of passage similar to the dreaded ceremony of school milk. Just as I remain convinced a generation of baby boomers are repulsed by milk because of the warm quarter-pints we were forced to consume at morning recess, I believe childhood exposure to secondary smoking often served as a subliminal early warning system

I think, though I don’t know, that compulsory school milk was the product of lobbying by the dairy industry. If so, there can have been few more counterproductive pieces of interest group politics. Like Shmith, and for the same reason, I never touch the stuff.

Beautiful one night, …

John Quiggin2 Comments

This has been just about the perfect Brisbane Saturday night for me. The temperature is a balmy 20 or so, with the gentlest of breezes. We caught the CityCat downriver to Southbank and cheered the Bullets to a one-point win over minor premiers the Sydney Kings, the winning margin coming from a three-point shot on the final buzzer by Ben Walker. The game made no difference to finals placings, but that doesn’t worry me at all. Then back upriver and home. It doesn’t get much better.

Blood libel

John Quiggin23 Comments

The notion that Jews are collectively responsible for the death of Christ may seem too silly for words, but it is obviously still taken seriously enough to require refutation, not surprisingly in view of the immense human suffering it has caused. My question is, has anyone ever suggested that Italians are collectively responsible?

To answer the obvious quibble, the term “Roman” referred, at the time in question, to any (free) inhabitant of Italy (Roman citizenship was extended to the whole of Italy in 89BC), and Pontius Pilate himself was of Samnite rather than specifically Roman origin.

I know from experience that irony is too dangerous for use in blogs. So, at the risk of boring 95 per cent of readers, let me be absolutely clear on my own position. I don’t think anyone now living can properly be blamed or praised for the actions of putative ancestors 2000 years ago. I also don’t believe we have, or are ever likely to obtain, sufficient evidence to attribute responsibility for the death of Jesus to any person or group.

Gentlemen don't read other gentlemen's mail

John Quiggin23 Comments

The news that British spies bugged the office of Kofi Annan during the Iraq debate has a number of implications. First, for me, this is the point at which Tony Blair should go. The whole idea of going to the UN for authority to invade Iraq was his, not Bush’s, and now it’s clear that it was corrupt from the beginning. I won’t argue this in detail – no doubt a lot of people already thought he should go, and others still won’t be convinced.

The main point I want to make is that it’s time for Britain to get out of the spy game. More than any other democratic country, Britain is addicted to spies and their natural counterpart, Official Secrets. From Burgess and McLean to the present day, the spies have been a constant cause of embarrassment and worse. On the other hand, there’s no evidence that they’ve ever found out anything that was both useful and sufficiently reliable to act on (in this context, I’m excluding wartime codebreaking, which is always useful since, at a minimum, it disrupts enemy communications).

This isn’t a matter of bad luck, or even incompetence. Standard game-theoretic reasoning shows that, outside the zero-sum case of war, there’s unlikely to be a net benefit from actions like bugging offices. The problem is simple. If I bug your office and you don’t suspect me, I can gain potentially valuable information that you don’t want me to have. But if you suspect me, and I don’t suspect that you suspect, you can use my bugs to mislead me. As with all game theoretic reasoning, you can iterate this as many times as you like, but the end result is that the net value of information derived from bugging is zero. On the other hand, the costs of the activity are substantial. In an environment where bugging is routine, everyone learns to communicate in various forms of code, and decoding is costly and prone to error.

He’s often been dismissed as hopelessly naive, but US Secretary of State Henry Stimson was right when he shut down the State Department’s cryptanalytic office saying “Gentlemen don’t read each other’s mail.”
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Free Bloomsday!

John Quiggin8 Comments

If you want to see what’s wrong with copyright and the concept of intellectual property, it’s hard to go past the obstacles being put up by James Joyce’s grandson Stephen to recitations of Ulysses on the 100th anniversary of Bloomsday (June 16 2004) in Dublin. Thanks to the extension of copyright to 70 years beyond the author’s death by the European Union in 1995, Joyce has absolute control over his grandfather’s work until 2011. It’s hard to imagine any moral sense in which Ulysses belongs more to an obstreporous descendant of the author than to the city that inspired it.

The issues are completely obscured by the use of the term ‘intellectual property’ which makes it appear that ideas belong to an owner in the same way that a car or a block of land does. This term, enshrined in mountains of legislation and treaties deserves about the same amount of respect as the contrary slogan ‘information wants to be free’ (if anything less so, since the latter is a half-truth, while the former is a falsehood)

In economic terms, the idea of copyright is to balance the interests of the public in the free dissemination of what is, once it is produced, a naturally public good (and therefore ‘wants to be free’), with the need to encourage authors to create works in the first place. The example of Ulysses shows how far we have got the balance wrong. Does anyone seriously believe that Joyce was motivated, even in the slightest, by the prospect of enriching a grandchild who hadn’t even been born at the time. (Of course, he would have needed extraordinary foresight to predict the successive extensions of copyright that would make this possible).

Even taking a forward-looking view, what kind of benefit do authors today get from the sale of copyrights extending up to a century after their death. For a publisher evaluating commercial investments of this kind, a 10 per cent discount rate would be on the low side, but this would be enough to ensure that royalties received 70 years in the future would be discounted by a factor of 1000. From the social viewpoint, on the other hand, the future costs of restricted access to copyrighted works should be discounted at a much lower rate, perhaps 3 per cent, which would imply that costs incurred 70 years in the future should be discounted by a factor of around 8.

All of this is particularly relevant to Australians, as we are one of the few countries still enjoying the benefits of the ‘life + 50 years’ rule, and have therefore been of particular value to public-domain exercises like the Gutenberg project.. Our government has just signed a so-called Free Trade Agreement with the United States. It does little or nothing to free trade, but a lot to protect monopoly rights, including an extension of copyright to life +70 years. Fortunately this needs legislation, which may be rejected. Given that the Irish have signed away their public domain rights, and we are still clinging to ours, the Bloomsday centenary would be an appropriate occasion for celebrating them.

Guest post from Brett McLean

John Quiggin15 Comments

I’ve received a guest post from Brett McLean which includes reference to a topic that’s been mentioned several times in comments, – the possibility that world oil output has peaked or will shortly do so. I plan to have my say on this before too long.

h3. Brett’s post.

The Treasurer, Peter Costello has repackaged and relaunched his Intergenerational Report in the last few days.   The essence of Costello‚s case is that the demographic changes caused by reducing fertility will have profound economic implications as the baby boomer crest moves into retirement, and in 40 years the proportion of the population over 65 to be double that of today at 25%, thus putting an intolerable burden on Government spending programs in Health and Disability and Pensions.    

Costello‚s discussion paper released on 25th February lists four choices to address this: raise taxes (to over 40% personal income tax); Cut back government spending; Run large deficits; and its preferred option increase the size of the economy through labour force participation.   Hence, Costello‚s plans to modify superannuation rules and create incentives for people to retire later.  

All these treasury projections are built on a series of economic growth assumptions which ultimately boil down to one single assumption. That productivity will grow at around its 30-year average of 1.75 percent per year, and this is where the Treasurer‚s planning could become seriously unstuck, because coming at us potentially in the same timeframe the world may very well start to run out of cheap oil.  

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In the web of power

John Quiggin1 Comment

I’ve had some pleasant lunches with Peter Spearritt, who heads the Brisbane Institute[1], a local thinktank for which I do occasional odd jobs, such as speaking engagements and commissioned papers.

In all of this I never suspected that Peter was at the centre of Brisbane’s Web of Power. But that’s what Malcom Alexander of Griffith University has concluded, after performing an ‘interlocking directorships’ analysis of the kind popularised by C Wright Mills in The Power Elite. The most connected connectors are those who sit on the board of the Institute.

Among the features of interest are the small size of the elite. On the generous criterion of two board memberships, it contains only 314 people. From my interactions with them[2], it does seem that, within this group, everyone does indeed know everyone else. Brisbane is still that kind of place.

The other notable feature is the dominance of the public sector. Thanks to the ‘global city’ phenomenon, few large private corporations have head offices in Brisbane these days. All the noted by Alexander as being at the core of the affiliation network are in the public sector, with the exception of the Queensland Council of Unions. However, many of the members would also be directors of locally-based corporations.

To generalize this point, if, like me, you’re concerned about the concentration of power in global cities, and the potential for crony capitalism that it creates, this is an additional argument in favour of public ownership.

fn1. For those interested, I’d classify the Institute as non-partisan but mildly left of centre on balance. Its backers are more concerned with promoting Brisbane (and Queensland more generally) as an intellectual and cultural centre than they are about a particular policy agenda. As Australian readers will know, Queensland is in need of such promotion to offset the ‘Deep North’ image built up during decades of government by rural conservatives, and reinforced by the Pauline Hanson outbreak a few years ago.

fn2. I’m on the periphery of the Web,, being on the board of the Queensland Competition Authority which regulates, among other things, prices for infrastructure monopolies.

Four more years?

John Quiggin13 Comments

The announcement that Ralph Nader will again run for the Presidency raises the (almost) unaskable question -are there any circumstances under which we should hope for, promote, or even passively assist, the re-election of George W. Bush as against either of the remaining Democrat contenders? I feel nervous even raising this question, but I think it’s worth a hard and dispassionate look.

Regardless of their political persuasion, most people will agree, at least in retrospect, that it would have been better for their own side (defined either in ideological or in party terms) to have lost some of the elections they won. Most obviously, this was the case for the US Republican Party in 1928. Hoover’s victory, and his inability to cope with the Depression, paved the way for four successive victories for FDR and two generations of Democratic and liberal hegemony, which didn’t finally come to an end until the Reagan revolution in 1980. The same was true on the other side of poltiics in Australia and the UK, where Labour governments were elected just before the Depression, split over measures of retrenchment demanded by the maxims of orthodox finance and sat out the 1930s in Opposition, watching their own former leaders implement the disastrous policies they had rejected, but had been unable to counter.

So, is 2004 one of those occasions? The case that it is rests primarily on arguments about fiscal policy. Bush’s policies have set the United States on a path to national bankruptcy, a fact that is likely to become apparent some time between now and 2008. Assuming that actual or effective bankruptcy (repudiation of debt or deliberate resort to inflation) is unthinkable, this is going to entail some painful decisions for the next President and Congress, almost certainly involving both increases in taxation and cuts in expenditure. On the expenditure side, this will mean a lot more than the obvious targets of corporate welfare and FDW[1]. Either significant cuts in the big entitlement programs (Social Security and Medicare) or deep cuts in everything else the government does will be needed, even with substantial increases in taxes (to see the nasty arithmetic read these CBO projections, and replace the baseline with the more realistic “Policy Alternatives Not Included in CBO’s Baseline”)
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New on the website

John Quiggin3 Comments

I was getting badly behind on my website, so I called in some help from our local (UQ Economics) webmaster Craig Mosely. So far he’s eliminated the backlog of newspaper articles, putting up articles from September 2003 to January 2004. Responsibility for the uninspired webpage design is still mine.

Please visit , read the articles and give me comments, either on the substance of the articles or on the organization and layout of the site.