Month: February 2005

You can’t keep a good lie down

John Quiggin24 Comments

The long-discredited Oregon petition against global warming seems to be getting another run – presumably it is circulating somewhere in the wilder reaches of the blogosphere. Miranda Devine gave it a run in yesterday’s SMH, in a piece loaded with errors and inventions.

Her basic complaint is that efforts like the Oregon petition, Lomborg’s Copenhagen Consensus and so on, are unfairly attacked by greenies. Leaving aside the fact that these dishonest stunts deserved to be attacked, Devine is the last person who has any right to complain about excessive vitriol in debate. She can dish it out, but she can’t take it, apparently.

(Re)defining low interest rates

John Quiggin56 Comments

I was watching Costello discussing the likely increase in interest rates on the news last night and he said something “Whenever you have a single digit in front of your interest rate, it’s low”. I couldn’t see a reference to this in the papers today, and I wonder if any readers can locate a transcript or similar.

This is all relative of course. My first home loan was at 9.5 per cent and that was considered outrageously high. For those who experienced the economic management of Howard and Keating in the 1980s, such a rate came to seem amazingly low. But with the levels of indebtedness prevailing now, I’d have thought 9.5 per cent would be ruinous for many.

Monday Message Board

John Quiggin46 Comments

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Regular reader Nicholas Gruen has suggested that we discuss the possibilities of a single party holding government nationally and in all states and territories. I’ve taken the liberty of posting some of his message as a discussion starter.

Civilised discussion and no coarse language, please.

Iraqi election futures

John Quiggin9 Comments

In the weekend edition of the Fin (reproduced here), Justin Wolfers writes about a betting market on the Iraqi election turnout, run by the Irish betting exchange Tradesports. The bet turned on whether turnout would exceed 8 million and was roughly even money before voting began. The price of the contract rose sharply on early reports of turnouts over 70 per cent, then fell back again when to around even money when it became clear these reports had little basis. The final official turnout was about 8.4 million.

Attentive readers will recall that something very similar happened in the US election when early exit polls favored Kerry. Modifying an old aphorism to say that “two striking observations constitute a stylised fact”, I think we can now say pretty safely that political betting markets display the wisdom of crowds who read blogs.
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EMH&SS Part II

John Quiggin8 Comments

After a longer break than I’d planned, I’m back for the second and final instalment of my series on the efficient markets hypothesis and its implications for Social Security reform and other issues. The first instalment is here.

Last time, I pointed out that, under the strong assumptions needed for the efficient markets hypothesis to hold, the diversion of social security funds to personal accounts makes no difference at all, since everyone can already choose their optimal portfolio, borrowing if necessary to finance equity investments. A more realistic version with borrowing constraints or high borrowing costs implies that either private accounts or diversification of the holdings of the Social Security Fund can be beneficial, and also that a range of other government interventions will be beneficial. (See also Matt Yglesias

In this post I want to look at the case I think is actually relevant, namely, where the efficient markets hypothesis is violated in so many ways as to be a poor guide to economic policy of any kind.
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Hayek and Pinochet: One more time

John Quiggin35 Comments

Thanks to Bruce Littleboy for pointing me to this complete translation of Hayek’s 1981 interview with the (pro-Pinochet Chilean) newspaper El Mercurio in which he stated

Personally I prefer a liberal dictator to democratic
government lacking liberalism.

As the interview makes clear, Hayek supports the Pinochet dictatorship, on the assumption (correct in the end) that it would eventually give way to a more liberal regime. Of course, many supporters of dictators make this assumption and all dictatorships, like all governments, pass away sooner or later.

Plenty of people have made worse political mistakes than backing Pinochet, most obviously those sections of the left who supported Stalin, Mao and their lesser accomplices. Still, the fact that both the Mont Pelerin society and leaders of the free-market right like Thatcher and Reagan gave their enthusiastic support to this mass murderer should be remembered when they, and their followers, try to claim the moral high ground as against the moderate left.

My latest piece on the Fin

John Quiggin24 Comments

is a response to the push to cut the top marginal tax rate. As well as criticising a variety of spurious arguments on the topic I make the point, in line with Reserve Bank Governor Ian Macfarlane (and even Peter Saunders of the CIS) that the real problems in our tax system are high effective marginal tax rates for low-income earners and the incentives to speculate in real estate rather than invest in the production of tradeables, incentives that contribute to our massive trade and current account deficits.

Wading back into the Big Muddy

John Quiggin185 Comments

Just as US soldiers and National Guards who’ve completed their tours in Iraq are being conscripted by stop-loss orders, recalls and the like, then sent back for a second round, Australia has received new orders. The New Europeans (Spain, Poland, Netherlands and so on) are all pulling out, and its up to us to fill the gap.

Of course, there’s no mention of the US in Howard’s announcement. Supposedly, this is a response to personal requests from the British and Japanese Prime Ministers. Older readers will recall that exactly the same farce was played out with our commitment of troops to Vietnam. Anyone who believes the government’s line might reflect on what kind of response Blair and Koizumi would get if they requested from Howard something the Bush Administration didn’t like, such as ratification of Kyoto.

There’s no strategy here, just hanging on and hoping things will change for the better. There’s no sign so far that the presence of 150 000 troops has done any good. The insurgency/resistance/terrorists are far more numerous now than they were a year ago. They gain legitimacy when they attack foreign occupiers, and lose it when they attack fellow-Iraqis. I hope that the new Iraqi government, when it emerges, will maintain its campaign commitment (watered down at the last minute) to demand a schedule for withdrawal, but if it doesn’t, Australia and Britain should be pushing the US to set one.

Tthe decision raises some other big issues for Australia that don’t seem to have been considered. In particular, there’s the possibility of war with Iran. Have we received assurances either that there won’t be any US military action against Iran or that, if there is, Iraq won’t be used as a base? To ask this question is to answer it.