Irresponsible bosses

I’m out of the country at the moment, and possibly missing some nuance. On the other hand, I’m old enough to remember the ill-will the unions built up in the 1970s, with snap stoppages designed to inflict maximum disruption on the public and thereby maximise pressure on employers to settle quickly and on the government to broker a solution. The announcement, without warning, of a lockout by Qantas seems to be straight out of the same disastrous playbook. Even if it works, it must surely kill off any political goodwill for Qantas in the future, or at least as long as the current management is in charge. That’s bound to be costly given the importance of political decisions on things like landing rights for airlines, and the favourable treatment Qantas has had in the past (partly a leftover of its days as a national flag carrier).

Can anyone make a case that Joyce’s action makes sense?

Keeping the state out of your bedroom

A standard theme in (propertarian) libertarian thinking is that personal freedom in matters such as choice of sexual partners goes naturally with economic freedom, defined as the lack of state interference with property rights. To summarise this in a slogan, “If you want to keep the state out of your bedroom, you should support keeping it out of your (and others) business as well”.  But this is not only a false equivalence, it’s self-contradictory, as can be seen by example.

Suppose A rents a house from B, who requires, as a condition that no-one in class C (wrong race, religion, or gender) should share the bedroom with A. Suppose that A signs the lease, but decides that this contractual condition is an unreasonable violation of personal freedom, and decides to ignore it. B discovers this, and seeks the assistance (or at least the acquiesence) of the state in evicting A. On a propertarian/contractual view, B is in the right, and is entitle to call in the state into the bedroom in question.

And, this is the fundamental problem. Is it A’s bedroom or C’s? If we understand the phrase in its normal sense, no-one including a landlord, has the right to tell you what to do in your own bedroom. But, from a propertarian viewpoint, C’s ownership rights over the bedroom, derived from and ultimately enforced by, the state, trump all other considerations.

Of course, this example stands in for many others like this one

If you really want personal freedom, you can achieve it only by constraining property rights.

Posted via email from John’s posterous

Expansionary austerity: some shoddy scholarship

I’ve just read ‘Tales of Fiscal Adjustment’ by Alesina and Ardagna, which appears to be the founding text for the idea of expansionary austerity. The level of scholarship, at least as it applies to Australia (which is their first illustration) is exceptionally poor, to the extent that it requires a rescuscitation of the ancient Internet tradition of Fisking. I’m going to quote excerpts from their text (about 50 per cent of the total), and intersperse them with my comments.

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The 6-6-6 plan

Inspired by Michelle Bachmann, I’ve been thinking about what a 6-6-6 response to Herman Cain might look like. Being multiply disqualified from seeking election to the US Presidency, I decided to put in as much work as Cain and his team appear to have done, but no more. Hopefully, the magic of crowdsourcing will turn this into a comprehensive blueprint. So, here are the basic goals, and over the page, some of those devilish details.

The aim of the plan would be
(a) Reverse pro-rich and anti-worker policy changes of the past three decades to reduce, by 6 percentage points, the share of market income going to the top 1 per cent.
(b) Increase, by 6 percentage points of national income, the personal income tax revenue raised from the top 20 per cent of the income distribution
(c) Reallocate, or use more efficiently, current public expenditure equal to 6 per cent of national income

The aim would be to raise post-tax incomes for those in the bottom 80 per cent of the income distribution by around 20 per cent, while making around 10 per cent of national income available for new or better public expenditure.

For reference, US national income is currently around $13 trillion, so 1 per cent is $130 billion.

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Has the US Defense Department killed a million Americans since 2001?

I’ve spent the day at a workshop on benefit-cost analysis where a lot of discussion is on valuing policies that reduce risks to life of various kinds.  US policy, for better or worse, is focused on  the idea of Value of a Statistical Life. Typically a policy that reduces  risks of death will be approved if the cost per life saved is below $5million, and not otherwise.  (There are similar numbers applied to publicly funded health care services, prescription  drugs and so on, usually per year of life saved).

A striking thing I found out is that anti-terrorism policies of the Department of Homeland Security are subject to  the same benefit-cost requirements as EPA  and Transport. But Homeland Security is only one way  the  US  government spends money with the aim of protecting Americans against attacks from terrorists and other enemies. Defense spending is far bigger and not subject to BCA, even though money spent on defense is money that can’t be spent on reducing terrorism risk through DHS or more reliably on reductions in environmental, health and transport risk

The numbers are quite striking. The ‘peacetime’ defense budget is around $500 billion a  year, and the  various wars of choice have cost around $250 billion a  year for  the last decade (very round  numbers here). Allocated to domestic risk reduction, that  money would save 150 000 American lives a year.

So, since 9/11, US defense spending has been chosen in preference to measures that would have saved 1.5 million American lives. That’s not a hypothetical number – it’s 1.5 million  people who are now dead but  who could have been saved. I think its fair to say that those people were killed by the Defense Department, or, more precisely, by the allocation of scarce life-saving resources to that Department.
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MLK and non-violent protest

Yesterday in DC, the Martin Luther King memorial was officially inaugurated. I was lucky enough to be invited to a lunch celebrating the event afterwards, where the speakers were veterans of the civil rights movement Andrew Young, John Dingell, and Harris Wofford. Video here

There were some interesting recollections of Dr King and his struggles, but not surprisingly, much of the discussion focused on the events of today, particularly the Occupy Wall Street movement. One of the speakers made the point that the Tahrir Square occupiers had been inspired by the example and ideas of Martin Luther King.

Now, of course, the circle has been closed with the example of Tahrir inspiring #OWS. There has been more direct inspiration too. When I visited the Washington occupation in McPherson Square to drop off some magazines for their library, I picked up a reproduction of a comic-book format publication of the civil rights movement (cover price, 10 cents!), describing the struggle and particular the careful preparation given to ensure a non-violent response, even in the face of violent provocation.

And that brings me to the question I want to discuss, one that is as relevant today as in the civil rights era.  When is violence justified as a response to manifest and apparently immovable injustice? My answer, with Martin Luther King is: Never, or almost never.[1]

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Tea Party didn’t mind bailing out Wall Street, only Main Street

My Fin column from last week is over the fold. It’s mainly about the Occupy Wall Street protests, but in this post I want to stress a misleading comparison with the Tea Party. It’s often suggested that the Tea Party arose in response to the bailout of Wall Street, and until I checked, I had somewhat accepted this claim, even if it was obvious that the protest served the interest of its supposed targets.
In reality, though, there is no truth at all to this claim. To quote from the article

The first Tea Party protests were held in February 2009, shortly after the inauguration of President Obama, and four months after the Bush Administration bailed out the banks. The event that did most to drive the Tea Party protests was a rant delivered by journalist Rick Santelli from the floor of the Chicago Mercantile Exchange. To the cheers of traders, Santelli denounced bailouts, but not the bailout of the financial sector. His ire was directed against attempts to help struggling homeowners refinance mortgages taken out during the real estate bubble.

I used to see the Tea Party as having had some genuine elements, but co-opted by Wall Street and the Repubs. Now, it’s clear that Repub activists ran the show from day one. Some individual participants may have been sucked in by anti-bailout rhetoric but the organizers were on the side of the 1 per cent all along.

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Money for nothing?

Whenever I write anything about public expenditure and taxation, I’m likely to get someone commenting that Modern Monetary Theory has shown that a government with its own currency does not need taxation to finance public expenditure. I’ve tried a couple of responses to this, but now I think I can explain better why this argument is
(a) wrong in terms of (what I understand to be) the central claims of MMT
(b) regressive in terms of taxation policy
(c) politically pernicious
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