163 thoughts on “Weekend reflections”

  1. Have I gone mad, or is the problem with economics as it is traditionally taught – and as I confess to having taught it to others. Some ideas that underpin conventional microeconomic theory and matter a lot in matters of resource allocation and misallocation seem to reduce to absurdities and fail to provide sensible policy guidance to a knowledge economy or an information society.

    When ‘innovation’ is said to drive socioeconomic progress, it is simply tautological to say that an economy must be open to new ideas. If people learn by doing or through experience or on the job, the status of human capital changes in some way. Thus an economy where innovation occurs is not — by definition — in a state of ‘equilibrium’ with no inherent tendency to change.

    A system open to new learning and able to reappraise its prior learning cannot be said to ‘optimise’, ‘maximise’ or ‘minimise’ in any absolute sense of choosing ‘best’ options. Hindsight allows the possibility of seeing that things might have been decided differently and done better. Decisions remain open to review, and reviews themselves can be subjected to further reviews. In the absence of these possibilities, ideas about ‘learning through experience’, ‘learning by doing’ or ‘learning from mistakes’ make no sense.

  2. Certainly, the standard economic categories don’t fit information well (the closest match is with the theory of pure public goods) so standard economic theories don’t work well in an information economy.

  7. John, without going into a steady state-economy and looking at technology and innovation from a different perspective I find David F. Noble ‘Technology and the Commodification of Higher Education’ very interesting.

  8. According to Mark Bahnisch, Nielsen has it that Abbott has reversed his polling deficit and is now in front.
    A week is definitely a long time in politics.

  9. Paul Walter, the problem with Labor are the strategists who are failing to realise that the Australian public want a price put on carbon today and not tomorrow and are now paying the price for being thick. A phone call from from Julia Gillard to Bob Brown making a ‘pact’ will make a big difference between winnning and losing. Boneheads.

  10. Update, Update, Update, lastest reports indicate the Liberal Party’s climate change strategy may be in tatters as Australia’s peak farm body has informed the Coalition the agricultural sector may not be able to deliver the quantity of greenhouse emissions factored into their equation of a price estimated to be between $8-$10 per tonne of carbon.

  11. Michael of Summer Hill – I think it is a little more complex than you suggest. It is the old adage that throw enough mud and some sticks. Abbott promised us a filthy campaign and is delivering it in spades. There is no room for any policies to be assessed at all in this campaign as Tony Abbott promises us everything including savings, tax cuts, more money for this and that – even though it is clearly impossible to deliver. All he is wanting delivered though is the Prime Ministership which dreadful though it would be for the nation could happen. At this point the climate change policy of the Liberals may be in tatters but people have not engaged with the real issues but are caught up in personalities and whether someone should be a married father with a wife and children to be PM.

    The Liberal Party’s environmental policies were already in tatters because the savings nominated by the party are in their “practical” environmental area.

    Labor need to work out how to manage getting a message out when clearly there is a Murdoch press campaign against them and there isn’t much time to do it.

  12. Jill Rush, you miss the point Labor blew it months ago and are now paying the penalty.

  14. @John S Cook

    In some sense your post is meaningful to me, but not entirely.

    You, like many others, refer to ‘conventional micro-economics’ and ‘traditionally taught’. Could you please give a representative text which contains what you have in mind?

    You write: “Thus an economy where innovation occurs is not — by definition — in a state of ‘equilibrium’ with no inherent tendency to change.” I have some difficulties with this sentence. Even the most ‘conventional’ definition of ‘an equilibrium’ in micro-economics (say the Arrow-Debreu model) would correspond to change being empirically observable over time, and, moreover, some type of innovation and learning is quite consistent with it.

    As for ‘optimisation’, ‘maximisation’, ‘minimisation’ – well it all depends on what you mean by this.

  15. I can’t quite fathom what the ALP are up to regarding a price on carbon. It must be that their private polling says that an ETS or carbon tax is going to cost them votes in marginal seats and that delaying tactics will cost them little.

    I’m running as the LDP (liberal democrat) candidate in the seat of Bennelong. If anybody asks what I think we should do about global warming then it will entail references to Barry Brook. I won’t be championing an ETS or a carbon tax but I do think a modest, revenue neutral carbon tax limited to electricity generators and transport fuels would be tolerable. However if it is a revenue grab (ie not neutral) then people like me will be actively opposed. However even if the ALP wins and the citizens assembly comes up with this recommendation and the senate supports it I won’t regard it as something the ALP had a strong mandate for. If this is what they believe in they are being cowards in not in not announcing it pre election. I hope they lose government.

  16. Thank you , Terje.
    interesting to see that you tacitly do acknowledge the carbon problem, despite some of the past rhetoric. Andit might add toyour consolation that I’m disappointed Labor erred in coming up withthe citizens assembly, it tried to park the issue and post election could be used to delay responsible action for even longer.
    Not that the rest of the world seems to be getting off its collective arse either, altho I understand some Europeans and the Chinese are trying new things out.
    Jill Rush, I agree, its been revolting adhominem politics, but as Michael said, elements including within the government itself, stalled on the suite of reforms they promised in 2007; they’ve also seen too much of people like Tripodi and Fraser at state level.

  17. Fantastic to see the Labour party in shambles. I thought I would never the see the day when Australia would have a man of integrity and principle as a Prime Minister.

    Clearly Labour’s big issue has been the far left. Labour cannot capture the centre with an ETS or carbon tax, but it loses the far left without it.

    Michael of Summer Hill – Australia does not want a carbon tax. It is the elitist academics and intellectuals of the far left that want a carbon tax. You honestly don’t believe that if polling suggested that Australia wanted a carbon tax the labour party wouldn’t offer it as a policy?

  18. @Tony Abbott for PM
    “I thought I would never the see the day when Australia would have a man of integrity and principle as a Prime Minister. ” dream as we all might Bob Brown is in the Senate.

    My concern over the polls is this will feed those people led astray by the “wasted vote” con and lead to a drift back to Labor from the Greens

  20. “It is the elitist academics and intellectuals of the far left that want a carbon tax.”

    Why? Because a blogger by the name of Tony Abbott for PM says so.

  21. No Tony Abbott for PM, the public and business want a price put on carbon ASAP. In a recent Energy Supply Association of Australia survey, they conclude that ‘repeated delays to emissions trading have stalled investment (and) blamed the fall on carbon policy uncertainty and tighter access to credit’.

  22. TerjeP, Labor strategists are going against the grain for the Australian public and business are saying they want ‘certainty’ and a price on carbon now. And for unknown reasons the strategists are ignoring the data. Furthermore, in my last posting I failed to include after fall (investment).

  23. Tony Abbott for PM, according to one intellectual ‘Everyone wants it. Why not just do it? A carbon tax. You know it makes sense’ and if Bob Ellis says so then it must be true.

  24. Here’s an interesting article on cognitive science and political beliefs from the Boston Globe, amusingly subtitled “Researchers discover a surprising threat to democracy: our brains” The article covers some of the cognitive research into the tendency of political views to harden – rather than reverse – in the light of clear contrary evidence. Further:

    And if you harbour the notion — popular on both sides of the aisle — that the solution is more education and a higher level of political sophistication in voters overall, well, that’s a start, but not the solution. A 2006 study by Charles Taber and Milton Lodge at Stony Brook University showed that politically sophisticated thinkers were even less open to new information than less sophisticated types. These people may be factually right about 90 percent of things, but their confidence makes it nearly impossible to correct the 10 percent on which they’re totally wrong. Taber and Lodge found this alarming, because engaged, sophisticated thinkers are “the very folks on whom democratic theory relies most heavily.”

    This fits various political phenomena we can observer here and elsewhere such the en masse failure of libertarians to cope with global warming, and, of course, JQ’s pet zombies.

  25. Interesting comment from Jim Birch, one that’s kept cropping up for me, also, althoughI’d me in mind of Hansonism and denialism as to neoliberalism from white collar types.

  26. Tony Abbott for PM, a recent Galaxy poll of four marginal Queensland seats found support for an emissions trading scheme (ETS) continues to grow. The World Wildlife Fund Australia found 74 per cent of respondents in the seats of Brisbane, Bowman, Petrie and Ryan say they are in favour of an ETS to reduce carbon pollution ASAP.

  27. Tony Abbott for PM, I could go on forever but according to Professor Jordan Louviere, director of the Centre for the Study of Choice at the University of Technology, Sydney, the findings of a two-year emissions trading scheme study found the majority of the 7000 randomly selected people wanted to see carbon trading operating before 2012 and ‘The results clearly showed we do not want to wait for the Americans and the Chinese to act’. In other words the Australian public want a carbon tax and/or ETS ASAP.

  28. @Jim Birch
    Will have a read of that, sometime this weekend. I suspect that people’s views harden when contrary information is revealed incrementally. It takes a well constructed and informative argument that draws on both well known and recent contrary information to shake a person’s sense of certitude in their view of the subject. While that is necessary, if the argument is positioned from an unfamiliar perspective (to the antagonist), that can help “break the ice”. It is difficult to think of examples in the public arena that aren’t linked to politics; however, there are plenty of examples within the sciences and the more ‘arty’ subjects. Philosophy would be the supreme ultimate in this regard; philosophers are still finding new ways of looking at ancient questions, like determinism and free will.

    Then there is the issue of fads…people are quite susceptible to adopting a rigid view on a subject not previously important to them, if they think that the “in crowd” share that view (the in crowd depends on a person’s particularities, of course). Status and membership often play a part, even when we try our best to be objective.

  29. Tony Abbott for PM, you might be interested to know even the Chief Scientist for Australia, Professor Penny D Sackett, is of the opinion that “Delays in the reduction of emissions mean that the amount of CO2 in the atmosphere will continue to increase and continue to compound the greenhouse effect (and) If no action is taken, this will eventually lead us to dangerous climate change”.

  30. Paul – I have acknowledged the prospect of a carbon problem since the early 1990s. I was arguing for an ETS as early as 1994. I went off the idea about a decade latter once I got a better sense of how it would interact with rent seekers and statists. Since then I’ve argued for a carbon tax but around 2008 I decided that this was also possibly a form of folly unless we end the ban on certain alternate energy sources. Perhaps you thought I hadn’t acknowledged the carbon problem but if so you were mistaken. Possibly this stems from the fact that I’ve been open to counter arguments, have been adamant in not teaming up with alarmists, reds and green fascists and because I have articulated criticism of certain climate scientists.

  31. @Michael of Summer Hill
    You say that “business want a price put on carbon ”

    Has corporate capitalism gone on leave? Have the robber barons been put out to pasture?

    Why would the capitalists want a carbon trading scheme unless they could profit from it as a business proposition irrespective of its wider effects? If the capitalists are willing to substitute profit for some other higher objective, social democrats are out of a job. Marxists would lose their religion.

    A price on carbon is a deliberately vague lure that should be scrutinised closely.

    If a price on carbon means carbon emissions trading, some capitalists profit at the expense of others and of consumers. This includes the gas companies profiting from fuel source switching at the expense of coal.

    Nothing is left over to compensate ordinary workers and their families for the higher prices of carbon based products and services. Consumers pay higher prices. The pain in the wallet encourages them to vote against parties in favour of a price on carbon.

    If a price on carbon means a carbon tax, the capitalist may reconsider their positions, and there would be revenue to spare to compensate ordinary consumers for higher prices.

    A revenue neutral carbon tax would reduce opposition among ordinary workers and reduce the social costs of a price on carbon.

  33. @TerjeP
    Terje..I hate to say thism and I wish every man the best in their electioneering prospects…but you acively pushed the climate change denialist view in JQs blog. How can you moderate your porevious views now to any satisfaction or are you the same as the rest of the liberals? (workchoices is dead?..till next time we are in?)
    Honesty Terje. If you dont believe in global warming (or an emmissions trading price) you are better of just being honest rather than yet another dishonest politucian…especially as you are campaigning to be a liberal democrat in Benelong.

  34. No It was slightly ascerbic; new start for the blog after the break should try for better tone
    I was thinking as much of the genuinely enthusiast denialists. Terje has more brains in his little finger than some of them.

  35. Alice – I’m not being dishonest but you are free to judge me how you like. I don’t seek or want your vote if you disagree with my views or the views of my party. I do however want my party to be well know which is why I mention it often.

  36. I’ve got a question about the Whitlam govt (too young to remember it) that has been bugging me and which my reading can’t answer.

    FIrstly, lets take it as read that by 1975 the conservatives/Tv/newspapers really really hated the Whitlam govt, in a way they just didn’t hate/campaign against say Hawke or Keating.

    What exactly what is that he did to inspire such dislike? As far as I can see, he didn’t put up taxes? and I believe had budget surpluses?

    So why the intense media campaign in 75? Was it something to do with US relations or was it worries about mines/nationalizing etc…..or was it concerns about what he might do ?

    I’m aware he’d really annoyed the doctors with Medibank, and the Insurance industry with proposals for a national insurer…..

    I’m genuinely not being partisan about this, genuinely curious why the conservatives really really disliked this govt.

    Interested in people’s feedback.

  37. Sorry and I”m posting my Whitlam question here because I find I get very detailed/interesting answers on this board in response to previous questions…..

  39. Henry, Whitlam was streets ahead of the Opposition when it came to reforms but the ‘Gair Affair’ was his downfall.

  40. @Jim Rose
    p.s. Whitlam lost office because he went back to the Lodge to eat a steak for lunch rather than go back to the parliament at high speed to tell his senators not to pass the supply bills, and for the house to vote to withdraw these bills from consideration by the senate. Either step would have denied supply to Fraser and stopped the funding of an election.

    There is more to being a great parliamentarian than being a truly great speaker.

    whitlam had not prepared for Kerr at all. A politician should assume other politicians to be devious and unpredictable

    p.p.s. Whitlam’s own senate leadership should have been at least a little suspicious of why the Libs wanted to pass the Bills suddenly and played for time to get in touch with who they thought was still PM.

  43. Ok, but what I’m getting at is the intense dislike for the Whitlam govt and the intense campaign in the 75 election against it, far more than other govts. What was the reason consevatives/media etc were so against it, more so than Hawke Keating etc…..

  44. There’s never been a federal election in modern Australian history where the result has not been predicted by the polls 3 to 6 months beforehand. This time it’s different? It’s unlikely.

    Of course there’s plenty of vested interest in beating up the importance (and closeness) of the campaign and lots of money to be made, troops to be rallied, hyperbole to be shouted far and wide.

  45. Henry the Whitlam government was associated with change economically, socially and culturally. A lot of people who complain about the Whitlam government’s economic irresponsibility really hate more the social and cultural changes it represented. Check out wikipedia for the list of what they actually did. I think you could argue Whitlam took Australia into the modern era after 25 years of very conservative and Anglo centric Liberal rule. If you look back fondly at white picket fence morality you probably feel Whitlam drove a truck through your fence

  46. Michael of Summer Hill – I understood your point exactly. I just don’t agree. I think that people in some vague way were dissatisfied about giving up on climate change policy by Labor but it is other factors at play now because the voters were not committed to the scheme. They will make up their minds now on other factors – including the mud that has been thrown although her defence of the ex AFP officer was spirited and sound today. However the constant snide and nasty comments will mean that there are those who think that where there’s smoke there’s fire.

  47. Jill Rush, you are correct in saying there are other factors damaging Labor but maybe not all is lost for the Reuters Poll Trend still have Labor winning by a slender margin.

  48. @Jim Rose

    Whitlam lost office because he went back to the Lodge to eat a steak for lunch rather than go back to the parliament at high speed to tell his senators not to pass the supply bills, and for the house to vote to withdraw these bills from consideration by the senate. Either step would have denied supply to Fraser and stopped the funding of an election.

    Here’s something you’ve said that I can agree with. He also could have got the speaker (Scholes) to refuse to sign it. He and Hawke could, as the AMWSU were threatening, have backed a general strike against the coup. There would have been very widespread support.

  49. I have a question to all who are knowledgeable in politics and policy formation.

    Why are financial market regulation and incentive compatibility problems with performance schemes (bonuses, options,…) not major topics in the current election campaign?

  50. @Ernestine Gross
    The reason is Australian law did not mandate banks to lend to people with little or no capacity to repay. There is no government induced banking crisis to solve with large amounts of taxpayers money.

    U.S. federal law did mandate banks to lend to people with little or no capacity to repay and two government guaranteed and regulated companies underwrote the losses of the lending banks.

    The financial reform bill passed by congress says almost nothing about Freddie Mac or Fannie Mae. In 2008 they held over half of all mortgages, and almost all the subprimes. Freddie and Fannie deserve a considerable share of the blame for the crisis.

    There are no Australian counterpart state owned enterprises to Freddie Mac or Fannie Mae needing a bail-out.

    There were no incentive compatibility problems.

    Bank mangers took more risks safe in the expectation of being too big to fail, so they exploited this pool of taxpayer supplied rents in the interest of shareholders.

    Bank principals will structure the incentives of their managerial agents to gamble more if someone else picks up any losses from bad bets. welcome to the dark side of individual versus group rationality.

    A recent example is Greece – none of the Greek government bond holders lost a euro or had to miss receiving a payment. Their gamble paid off in full.

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