More blog panic

The mainstream media panic about blogs reaches new heights with a piece by Daniel Lyons in Forbes (free registration required). Thanks to David Heidelberg for the alert.

The title Attack of the blogs is about the most level-headed sentence in the whole piece. The author’s main concern is “attack blogs” that have the temerity to criticise corporations. Bloggers are variously described as “online haters”, “evil” and “an online lynch mob spouting liberty but spewing lies, libel and invective”. He suggests using the Digital Millennium Copyright Act (which requires hosts to take down copyrighted material used without permission) as a way of silencing critics.

Interestingly, Lyons suggests that “50% to 60% of attacks are sponsored by competitors”, which rather suggests that the appropriate target of his ire should be the corporate sector rather than the blogosphere.

There’s a lengthy critique at Americablog.
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The purchasing power parity hypothesis in Europe

One of the big issues in the debate over the euro is whether Europe is an optimal currency area, that is, whether prices in Europe move sufficiently closely together to make a common monetary policy a reasonable idea. Looking at the issue when the move to the euro was agreed most observers would have said that Europe wasn’t an optimal currency area. A plausible counterargument is that monetary union will produce the kind of economic integration required. A quick scan of the web didn’t turn up much[1], so I thought I’d do a quick and rough check of my own, so I World Economic Outlook Database, which gives, among lots of other useful things, estimates of purchasing-power-parity adjusted exchange rates for all the countries in the data set. Since the calculations are based on the EU-centric international comparisons project, comparisons of relative price levels between EU countries should be pretty good.

So I looked at the log variance of the $US PPP exchange rate for the euro-12 countries from 1995 to 2005 and here’s what I got


The log variance is a measure of the extent to which real price levels differ and, as the chart shows it has declined smoothly since the beginnings of the move to the euro.

Another interesting feature of the data is the average PPP exchange rate is around $US1.16 to the euro, very close to the rate that actually prevails.

fn1. I found one study by Robert Hill of UNSW, but it only went up to 2000 and covered the whole EU not just the eurozone. Hill found some convergence in price levels, but not as strong as this, but a surprising divergence in relative prices. It would be interesting to check on this.

Darfur again

Until fairly recently, it seemed as if the worst of the tragedy of Darfur was over. The Sudanese government appeared set to rein in the terrorist Janjaweed militia, the rebels seemed willing to negotiate and the international community seemed finally to be taking some action.

But in the last few months, things have gone from bad to worse and ethnic cleansing on a large scale has resumed. There are lots of reports at Passion of the Present

No-one comes out of this with much credit. It’s no surprise, of course, that the Chinese Communists have pursued their standard line of non-interference in the internal affairs of brutal dictatorships. But the position of the democracies is just as bad. The Bush Administration started out with a firm line, arguing that the actions of the Sudanese government and its proxies constituted genocide. But now it’s backed off and is actually siding with Sudan in the Security Council. In part, this is for the creditable reason that Bush wants the separate peace deal that ended the long-running civil war in southern Sudan to hold, and is therefore treating the government gingerly. But Bush is also siding with Sudan in trying to undermine the International Criminal Court.

If Bush has been bad, the Europeans have been even worse. This is a situation very like Bosnia and Kosovo, or Rwanda, the kind of thing the new EU was not going to let happen again. What’s needed here is an effective peacekeeping force. The African Union has supplied some troops but without robust rules of engagement and backup (including both military components like air and logistic support and technical expertise of various kinds) they have proved ineffectual. This is a chance for Europe to show that it can achieve more, at much lower cost, through effective peacekeeping, than can Bush’s militarism. So far, the chance is being blown.

It is a disgrace that the kind of slow-meaning ethnic cleansing we are seeing in Darfur can be allowed to continue, month after month, and year after year, without any real action being taken.

Military history in Tasmania

I’ve enjoyed being in Hobart for the first time in more than 20 years. I walked over to Battery Point yesterday morning and enjoyed the historical marker, which said in part

“During the Crimean War panic, a third battery was constructed. Following tradition, it was poorly sited and constructed, and inadequately equipped … More was spent on uniforms and prizes for the volunteer artillery company than on maintaining the guns”

Down south

Hobart-based readers are invited to hear my Giblin lecture on the topic “The Information Revolution and the Post-Economic Society”. It’s mainly a look at the role of non-economic motives in Internet-based innovations, including open source software, blogs and wikis. At the University of Tasmania, 5:30 pm this evening.

Just to confuse matters, there are two Giblin lectures, both in honour of the same Giblin. The other used to be presented at ANZAAS meetings, and has now migrated to the Economic Society. But, looking at his Wikipedia bio he did more than enough for two; and the entry omits his role in the Premiers Plan and his work on the export multipler.

Bernanke appointed US Fed Chairman

Ben Bernanke has been appointed to replace Alan Greenspan, who’s been Chairman of the US Federal Reserve for just about as long as I can remember (the Volcker squeeze was in the early 80s, so he hasn’t been there forever, but it often seems that way).

Bernanke was the obvious candidate, but there was always the possibility that Bush would decide to mend fences with the base by appointing some obscure[1] supply-sider a la Harriet Miers.

Bernanke’s appointment suggests a general bias towards an expansionary monetary policy for the US, and therefore continued low short-term interest rates for Australia. He was prominent in saying that the Fed would not tolerate deflation, and could print money if necessary. More recently, he’s taken a very relaxed view of the US current account deficit, seeing it as the inevitable counterpart to a ‘global savings glut’. I agree with him on the first point but not on the second; there’s a significant risk that the wheels will fall off the entire policy, leading to a rapid depreciation of the dollar and an uncontrolled increase in interest rates, both of which would flow through to Australia.

Market movements were consistent with this analysis (stock prices went up, the dollar fell and the 10-year bond rate rose), but weren’t very big, suggesting that no-one is expecting really big changes.

fn1. This is a redundancy, as there are no prominent supply-siders in the US economics profession. That is, not in the sense of supply-side popularised by Jude Wanniski and Arthur Laffers, although Mundell shares the supply-side liking for a gold standard. Almost all economists are supply-siders in the sense that they think attention should be paid to the supply side of the economy as well as the demand side.