Month: August 2014

Three cheers for Stephen Parker

John Quiggin35 Comments

The last time I heard news of Stephen Parker, Vice-Chancellor of the University of Canberra, he was standing up to the Oz and its editor Chris Mitchell who had threatened to sue journalist and UC academic Julie Posetti for accurately reporting remarks made by a former Oz journalist in a public conference. That episode is worth remembering any time anyone suggests that the Oz is a newspaper (in the traditional sense of the term), let alone an advocate for free speech. It is, as I’ve said many times, a dysfunctional blog that is, for some reason, printed on broadsheet paper.

In this instance, Parker was doing exactly what you would expect of a university leader: defending an academic doing her job from outside interference. Sadly, in Australia these days, that can’t be taken for granted. The rise of managerialism has thrown up a number of VCs (or now, in the US mode, Presidents) who would instinctively side with Chris Mitchell in such a dispute.

That kind of outright betrayal of university values is still not the norm. On the other hand, given the financial pressure under which all universities have been operating for years, it is unsurprising that most VCs have been keen to support proposals for “deregulation” of fees, even though, as is inevitable with this government, they are poorly thought out and certain to be inequitable in practice. The lead, as I mentioned, has been taken by Ian Young of ANU. Others have their doubts, I think, but have kept quiet.

I’m happy to say that Parker has been the first to break ranks on this issue, writing in The Age that

An earlier generation of vice-chancellors would have stood up for students. I say, reject the whole set of proposals, on their behalf, and then let’s talk.

I hope his bravery leads others to follow.

Reagan and the Great Man in History

John Quiggin23 Comments

The latest controversy in the US about Rick Perlstein’s new book is an opportunity to post a couple of thoughts I’ve had for a long while.

First, the outsize Republican idolatry of Reagan is explained in part by the fact that there’s no one else in their history of whom they can really approve. The Bushes are a bad memory for most, Ford was a non-entity and Nixon was Nixon. Eisenhower looks pretty good on most historical rankings, but he’s anathema to movement conservatives: Eisenhower Republicans were what are now called RINOs. Going back a century, and skipping some failures/nonentities, Theodore Roosevelt is problematic for related but different reasons. Going right back to the beginning,and skipping more nonentities and disappointments, some Repubs still try to claim the mantle of the “party of Lincoln” but that doesn’t pass the laugh test. As many others have observed, the “party of Jefferson Davis” is closer to the mark. So, they have little choice but to present Reagan as the savior of the nation.

Something of the opposite problem is found on the left. I haven’t read Perlstein yet, but a lot of the discussion is based on an implicit or explicit assumption that the shift to the right in the US since the 1970s can be explained by the successful organizing efforts of movement conservatism, culminating in Reagan’s 1980 election victory. That’s an explanation with a lot of contingency attached. Suppose, for example, that the attempted rescue of the Iranian embassy hostages in April 1980 had been a success. That, along with some fortuitous good economic news, might have been enough to propel Carter to victory. By 1984, Reagan would have been too old to run as a challenger, and Bush senior would probably have been nominated.

I don’t think, however, that this would have had a huge effect on economic-political developments in the US. Other English-speaking countries, with very different political histories followed much the same route, ending up, by the late 1990s, with a hard-line rightwing conservative party driving policy debate and a “Third Way” centre-left alternative trying to smooth off some of the rough edges. The election of Carter, a conservative by the standards of the times, was a step towards that outcome.

I don’t want to overstate the determinism here. Individuals matter, and national circumstances differ. Still, I think we are talking about variations on a common theme, driven by global economic events, rather than a US-specific story beginning with Reagan’s 1964 address in support of Goldwater.

Team Australia

John Quiggin84 Comments

George Brandis’ spectacular live meltdown over metadata retention has distracted attention from the abandonment of the government’s plans to repeal Section 18C of the Racial Discrimination Act, prohibiting the kind of racial abuse dished out by the likes of Andrew Bolt and Fredrick Toben. Abbott’s rationale is that a purist attitude to freedom of (racially divisive) speech is something we can’t afford, given the need to unite against terrorism.

Obviously, neither Bolt nor Toben is a member of Team Australia[1]. Each makes it their primary business to stir up hatred, in Toben’s case against Jews and in Bolt’s case against (among many others) the “muslims, jihadists, people from the Middle East” he sees as responsible for Abbot’s backdown. The striking conflation of religion, geographical origin and terrorism is typical of Bolt’s approach.

Horrible as he is, though, Toben is not a serious problem. His Holocaust denialism is universally reviled, and it is a sign of strength, not weakness, in our democracy that he is free to walk the streets. Repealing the constraints imposed on him by 18C would only emphasise this.

Bolt is another story. It is his case that led the government to seek the repeal of 18C, and that motivated George Brandis’ gaffe (that is, a politically inconvenient statement of an actual belief) that people have a right to be bigots. Far from being reviled, Bolt has been embraced and coddled by the government, to the point of having exclusive access to the Prime Minister. He enjoys a well-rewarded position in the Murdoch Press. Even casting the net wider among our so-called libertarians, I’ve can’t recall seeing a harsh word against Bolt. He’s a tribal ally and his bigotry is either endorsed or passed over in silence.

It’s impossible in these circumstances, for the government to be taken seriously when they mouth the (apocryphal) Voltaire line about defending to the death speech with which they disagree. The repeal of 18C was clearly intended as an endorsement of Bolt, and not a statement of bare toleration. That position is now untenable, and it’s too late to switch back to Voltaire.

In summary, those on the right lamenting the continued existence of 18C ought to reflect on the fact that it’s their own overt or tacit endorsement of bigotry that’s brought this about. If they cleaned house, and dissociated themselves from the likes of Bolt, their claims to be supporting free speech might acquire a little more credibility.

fn1. I was going to add Sheikh Hillaly to this list. But based on this report, he seems to have joined the Team.

Trickling down

John Quiggin58 Comments

Among the zombie ideas refuted in my book, Zombie Economics, “trickle down” economics is the one that dare not speak its name. Even those who believe, or are paid to say, that favored treatment for the rich will benefit the poor mostly avoid the term “trickle down”, preferring bromides like “a rising tide lift all boats”.

But that didn’t deter Ian Young, Vice-Chancellor of ANU and head of the Group of 8 Universities (basically, those established first, which have, as elsewhere in the world, gained a permanent high-status position as a result). As I predicted not long ago, he wants to raise fees and reduce the number of students at elite universities, including ANU, allowing them to offer a more personalised education.

Young’s argument is that students excluded from the Go8 will “trickle down” to lower-status universities, giving them a chance to both increase numbers and raise standards. But this suggestion doesn’t stand up to the most cursory examination. Both logic and historical evidence suggests that all or most universities will follow the lead of the Go8. In both the UK and Australia, whenever universities have been given option to increase fees or hold them steady, nearly all have gone for the maximum increase.

Think about this from the position of a university in the tiers immediately below the Go8 in the prestige hierarchy, the 1970-vintage unis like Griffith and Macquarie, and the Universities of Technology. Both groups can fill all the places they have, and both, like all Australian universities are straining at the seams in terms of both physical space and overloaded staff. They could not possibly take in more students with their current finances. It makes perfect sense for them to do the same as the Go8, raise fees a lot, and pass on some of the benefits in the form of smaller classes.

There’s a cumulative effect here. Suppose the Go8 institutions reduce their student intakes by 30 per cent. A few of those will give up on uni altogether, deterred by higher fees, but most will try a second-tier uni, displacing other students who would otherwise have been accepted. On top of that, there will be less places in those uni, say another 30 per cent. So, something like 60 per cent of the students formerly admitted to these unis will be excluded.

At the bottom of the status scale, the hard-pressed regional universities and former CAEs probably won’t be able to raise their fees as much as the Go8. But they will still be in a position to raise fees and entry standards at the same time, and, if they choose, to reduce their numbers as well. This isn’t so much trickle down as a cascade effect.

Of course, if you believe the increasingly silly Business Council of Australia, this is all to the good. Its head, Catherine Livingstone (BA, Macquarie) thinks we need less university students. Her members clearly don’t agree, judging by their hiring patterns. The unemployment rate for university graduates is estimated at 3.3 per cent, about half that for non-graduates. Wages and participation rates are also higher.

To help poor people, give them money

John Quiggin87 Comments

The Oz (no link) is touting a campaign by Andrew Forrest to introduce an Australian version of the US “food stamps” system, replacing cash payments with a card that can only be used to buy an approved list of items. This is yet another step in the abandonment of economic rationalism by the political right. I’d be surprised if Forrest could get the support of any economist for this (though the recent performances of the IPA crew give me some pause). Free market advocates, following Milton Friedman, have long sought the replacement of in-kind benefits with cash. To those on the left, even where enthusiasm for markets is more qualified, the conclusion is reinforced by the obvious class warfare involved here. At best, someone like Forrest can be seen as a paternalist, hoping to protect the poor from themselves. But it’s obvious that the Murdoch press, and its target audience, want to punish the poor, not protect them.

As it happens, my slowly-progressing book has a section on just this issue, presenting the standard arguments of Friedman and others as part of the case for why markets work so well (when they do)

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Job search, yet again

John Quiggin64 Comments

I got lots of very helpful responses to my recent post on the search theory of unemployment, here and at Crooked Timber. But it has occurred to me that I haven’t seen any answer to one crucial question: How many offers do unemployed workers receive and decline before taking a new job, or leaving the labour market? This is crucial, both in simple versions of search theory and in more sophisticated directed search and matching models. If workers don’t get any offers, it doesn’t matter what their reservation wage is, or what their judgement of the state of the market. Casual observation and my very limited experience, combined with my understanding of the unemployment benefit rules, is that very few unemployed workers receive and decline job offers, except perhaps for temporary work where the loss of benefits outweighs potential earnings. Presumably someone must have studied this, but my Google skills aren’t up to finding anything useful.

And, on a morbidly humorous note, it’s a sad day for the LNP when efforts to bash dole bludgers actually cost them support. But that seems to be the case with the latest plans, both expanded work for the dole and the requirement for 40 job applications a month. I’ll leave it to Andrew Leigh to take out the trash on work for the dole (BTW, his new book, The Economics of Almost Everything is out now).

The 40 applications requirement has already been the subject of some amusing calculations. I want to take a slightly different tack. Suppose (to make the math simple) that the average job vacancy lasts a month. There are roughly five unemployed workers for every vacancy, so meeting the target will require an average of 200 applications per vacancy. The government will be checking for spam, so lets suppose that all (or a substantial proportion) of the applicants take some time to talk about how they would be a good fit with the employer and so on. Dealing with all these applications would be a mammoth task. One option would be to pick a short list at random. But, there’s a simpler option. In addition to the 200 required applications from unemployed people, most job vacancies will attract applications from people in jobs. A few of them may be looking for an outside offer to improve their bargaining position with their current employer (this is a big deal for academics), but most can be assumed to be serious about taking the job and in the judgement that they have a reasonable chance of getting it. So, the obvious strategy is to discard all the applications except for those from people who already have jobs. What if there aren’t any of these? Given that formal applications are going to be uninformative, employers may pick interviewees at random or may resort to the informal networks through which many jobs are filled already.

Trying to relate this back to theory, the effect of a requirement like this is to negate the benefits of improved matching that ought to arise from Internet search. By providing strong incentives to provide a convincing appearance of looking for jobs for which workers are actually poorly suited, the policy harms both employers and unemployed workers who would be well suited to a given job.

Update I found the following quote widely reproduced on the web

On average, 1,000 individuals will see a job post, 200 will begin the application process, 100 will complete the application,

75 of those 100 resumes will be screened out by the Applicant Tracking System (ATS) software the company uses,

25 resumes will be seen by the hiring manager, 4 to 6 will be invited for an interview, 1 to 3 of them will be invited back for final interview, 1 will be offered that job and 80 percent of those receiving an offer will accept it.

Data courtesy of Talent Function Group LLC

Visiting the TFG website, I couldn’t find any obvious source. The numbers sound plausible to me, and obviously to those who have cited them. But, if the final number (80 per cent acceptance) is correct, then it seems as if the search theory of unemployment is utterly baseless. Assuming independence, the proportion of searchers who reject even three offers must be minuscule (less than 1 per cent).