Month: April 2004

A snippet on economic modelling

John Quiggin16 Comments

Economic analysis of policy proposals may be based either on first principles or on economic modelling. The proposed FTA is too complex to be analysed simply in terms of first principles. Nevertheless, a great deal of insight can be obtained from simple parametric models of various aspects of the proposal.

As compared to a large-scale simulation model, this approach has the advantage of clarifying the processes leading to estimates of costs and benefits. A large-scale model offers greater precision and the capacity to model policy outcomes for particular regions and industries. However, where there is a large divergence in estimates of aggregate outcomes between simple and elaborate models, this divergence is rarely a consequence of greater precision in the elaborate model. More frequently, the divergence is the result of differences between the economic assumptions used to ‘close’ (that is, derive an equilibrium for) the elaborate model and the economic assumptions used in the simple model. Hence, there should be no automatic preference for the results of more elaborate models. What matters is the validity of the core assumptions.

Newsflash: sex invented in 1985

John Quiggin17 Comments

This piece in the Age by Michael Scammell manages to hit nearly all my hot buttons at once. It includes generation-game garbage, postmodernist apologias for the advertising industry, support for exploitation of workers, and heaps of all-round stupidity. The background to the story, it appears, is that a clothing store called Westco required its female staff to wear T-shirts carrying a lame double entendre. One worker refused, and the Victorian Minister for Women’s Affairs, Mary Delahunty protested, with the result that the company abandoned the promotion. Scammell attempts to set Ms Delahunty straight on the subject of postmodernist irony.

The headline (not picked by the author, but a direct lift from the article) is Sex sells. Gen X knows this. MPs don’t. I know every generation is supposed to imagine that it invented sex, but not even the most self-indulgent of baby boomers would have the chutzpah to claim this insight as their own. Vance Packard was making hay with this kind of thing back in the 50s, and it was tired old stuff even then. In fact, the basic point predates the wheel. Hasn’t Scammell heard the phrase “the oldest profession”?

Then he claims that the slogan on the T-shirt “stop pretending you don’t want me” represents ” a dollop of knowing post-modernist irony”. If this is post-modernist irony, I’ll stick with the modernist version, or better still that of the classics like Dr Johnson.

But for all-round stupidity you can’t beat Scammell’s observation that it must be all right because ‘Westco reports a significant public demand for the T-shirt despite its seemingly offensive message”. Can’t he see that there’s a big difference between wearing a provocative T-shirt to advertise your own wares to members of the opposite (or perhaps your own) gender, and being made to wear one to flog the wares of your employer, who is doubtless offering little more than the minimum wage for the privilege. Obviously the Westco worker who refused to wear the shirt and made a fuss about it could do so. (In a non sequitur that’s typical of the piece, Scammell asserts that since this worker was willing to stand up for herself, there can’t have been a problem in the first place).

Scammell goes on about “grid girls” at the Grand Prix, and near-naked models at fashion shows, but these workers know what they are offering from the start and (at least in the case of successful models) are paid accordingly. If he wants to work out what’s going on here, Scammell would be well advised to go back to school and learn some old-fashioned class analysis instead of the 1990s postmodernism he apparently thinks is still hip.

Worst case scenarios 3: Climate change

John Quiggin20 Comments

The big threat to the worlds environment as a whole is global warming. The best-bet projections prepared by the International Panel on Climate Change suggest that, in the absence of substantial action to mitigate global warming, global temperatures would probably increase by about 1 degree C between now and 2050 and by a further 1 degree C between 2050 and 2100.
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The interregnum

John Quiggin4 Comments

I just attended an interesting seminar at the UQ Law School on the interim Iraqi constitution, a topic that’s been discussed at length by Alan at Southerly Buster, and more briefly by Ken Parish . I learned some interesting things. For example, the Kurds are supposed to be descended from the Biblical Medes [1].
However, there was no discussion of the topic that really interested me.

This is the interregnum between the ‘handover’ of power to an Iraqi interim government, due on June 30, and elections due by January 2005. There is then supposed to be a further interim stage before the adoption of a final constitution, but my problems start well before that.

To begin with, I don’t even know for sure who gets to pick the interim government in the first place. My understanding, supported by things like this article in Time had been that Bremer controlled this, but in discussion with the seminar speaker, Suri Ratnapala, he suggested (or at least I understood him to suggest) that the current Governing Council could make this decision. And since the legal status of the occupation depends on UN Security Council resolutions, it’s at least arguable that the UNSC has the right to nominate the new government. To add to my confusion, I thought I saw a report saying the US was going back to the UNSC to seek a new resolution, but I now can’t find it. Even the excellent Juan Cole doesn’t fully clarify the situation for me.

The next problem relates to the claim that UNSC Resolution 1511 permits US forces to maintain military control of Iraq. It seems clear that this interpretation will prevail from June 30, regardless of its legality. But it’s hard to believe that it can survive the advent of an elected Iraqi government, presumably dominated by the supporters of Ayatollah Sistani. And even with a US-nominated government, there’s every possibility of trouble. It’s hard to believe, for example, that US forces can go on arbitrarily arresting people and detaining them with no right of appeal to Iraqi courts, at least not without discrediting the supposedly sovereign interim government.

At the bottom of all this is my belief that the Bush Administration will never allow large numbers of US troops to be under the authority of anyone else. If this belief is right, I can’t see how a handover can be anything other than a mess whenever it takes place.

fn1. it’s easy enough to Google this once you know to look, but I’d never thought about it.

Worst case scenarios 2 – The economy

John Quiggin11 Comments

For the next few years, the worst-case scenarios for the world and Australian economies involve a combination of rapidly rising interest rates and rapidly declining prices for assets, particularly in housing and construction. Such an increase in interest rates could begin in the United States, if investors (particularly Asian central banks) lost faith in the capacity of the US Government to bring its burgeoning deficits under control and in the capacity of the US Federal Reserve (that is, Alan Greenspan) to keep inflation rates low. A market-driven increase in US interest rates would rapidly spread to other countries with low savings rates and high current account deficits, notably including Australia.
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CAN-SPAM

John Quiggin2 Comments

Among the offerings in today’s special edition of TidBITS, the long-running online Macintosh magazine, I found this item particularly appealing.

Canned Spam Can Can Spam with CAN-SPAM — Hormel is expected to announce today their campaign to can spam using their canned Spam with the aid of the CAN-SPAM legislation. Starting today, Hormel will print the phone number, email addresses, and other information about unsolicited email senders on cans of Spam along the lines of the “Have you seen me?” photographs published on milk cartons. Canned Spam buyers who help to can spam by canning spammers can receive cans of Spam as a reward.

Other important news includes a report that the US Department of Homeland Security is responding to the threat of Windows-specific cyberterrorism, most notably through Trojans such as Phatbot by standardising on Macs.

Worst case scenarios 1: Security

John Quiggin13 Comments

As a result of my Citation Laureate award and the associated write-up in the local paper, I’ve been asked to give some thought to worst-case scenarios for a range of issues, some global and some specific to Brisbane. What I’ve written so far is very rough, so I’d appreciate comments, useful links and so on. My first scenario deals with security and is, in a sense, optimistic. The plausible worst case scenario now isn’t nearly as bad as the one I grew up with – a thermonuclear war between Russia and the West
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