Month: April 2017

Cognitive consistency

John Quiggin25 Comments

One of the few points on which I agreed with Donald Trump during the election campaign was on his statements to the effect that the US should not get involved in Middle Eastern wars. Of course, Trump being Trump, he made the contradictory promise to “have a plan to defeat ISIS within 30 days.” (There some ambiguity as to whether the 30 days was the time taken to produce the plan, or whether he already had the plan and would have ISIS beaten in 30 days. As of day 78, it scarcely matters). But one point that came across reasonably clearly was that Trump wasn’t going to do anything about removing Bashir Assad from power, and was going to increase co-operation with Putin, Assad’s patron.

All that has now gone by the board, but it is unclear what is going to replace it. Following the horrific poison gas attack a few days ago[1], Trump responded in thoroughly Trumpish fashion. His missile attack was big enough to mark a clear, and possibly irreversible, escalation of US involvement, but not big enough to have any military effect. A day after their airbase was attacked, Syrian Air Force planes were flying out of it to launch more strikes against their opponents.

I don’t have a solution to the current mess other than the Irish advice “if I were you, I wouldn’t start from here[2]”. But, at least I now have the cognitive consistency of knowing there is now no policy issue of importance on which I agree with Trump.[3]

fn1. Very probably, though not certainly, undertaken by Assad’s regime. I don’t want to be derailed by this and will delete, with prejudice, any comments seeking to ventilate alternative theories.

fn2. Obvious wrong turnings on the way to where we are start with the Sykes-Picot agreement in 1915 and go all the way to the Iraq war.

fn3. I was happy that he refused to sign TPPA. But it’s now clear he’s pursuing the standard corporate agenda on trade, including ISDS and strong IP.

Gotcha!

John Quiggin40 Comments

Like most people, I don’t like being suckered. But I was well and truly suckered by Aaron Patrick of the Australian Financial Review today. Patrick wrote to me saying he was doing a feature article on penalty rates and I gave him a long interview setting out my position. In particular, I made the point that, if (say) a 10 per cent reduction in wages produced only a 1 per cent increase in hours of work demanded by employers, the average worker would end up doing more work for less money. This is a standard point in the analysis of minimum wages.

As it turned out, I was wasting my breath. All Patrick wanted was the concession that lower wages might produce some increase in employment, thereby justifying the Gotcha! headline ‘Even union economists accept cutting penalty rates creates jobs’.

Given my history with the Fin, I shouldn’t have been surprised, I guess. But my general experience, even since Michael Stutchbury became editor, has been that most AFR journalists are straightforward professionals.

Also, most journalists these days understand that the game has changed with the rise of blogs and social media. Twenty years ago, the only response to a shoddy smear like Patrick’s would be a letter to the editor, which might or might not get published long after the event. Now, I can respond here and on Twitter, Facebook and so on. My readership might not be as big as the measured circulation of the AFR, but, after you deduct all the people who only look at the business pages, it’s not that different.

In any case, Patrick and the Fin are on a hiding to nothing with this one. Most people work for a living, and most have worked out by now that when the bosses talk about flexibility and productivity, they mean “work more for less”.

Margins

John Quiggin14 Comments

We’re all used to the fuss that takes place when the Reserve Bank cuts interest rates and banks don’t follow suit. On the other hand, when rates go up, the increase is almost always passed on rapidly and in full. But does this matter in the long run, or does competition sort things out. In this context, my wife Nancy pointed me to this interesting graph from the Housing Industry Association.

It seems pretty clear here that bank margins have increased steadily over the past ten years. I haven’t checked the data, but at least for mortgage rates, the current numbers look right to me.

China, me old China

John Quiggin22 Comments

One of the reasons I like blogging and opinion writing is that I’m better at thinking up ideas than at the hard work needed to turn them into properly researched journal articles, which is the core business of being an academic. So, it’s great when an idea I’ve floated in a fairly half-baked form in a blog or magazine article gets cited in a real journal article. Even better when it’s a colleague or, in this case, former colleague who cites me.

James Laurenceson, formerly of UQ and now Deputy Director of the Australia-China Relations Institute at UTS, has an article just out in the Australian Journal of International Affairs (paywalled, unfortunately, but well reading if you can get access), on Economics and freedom of navigation in East Asia, which cites a short piece I wrote last year and reproduced here. My key points were
* Contrary to many claims, China has no interest in blocking trade in the South China Sea, since most of it goes to and from China
* For the smaller volume of trade between other countries, the cost of taking a more roundabout route is so small that China could not exert any significant leverage by restricting access to the South China Sea
* There’s nothing special about this case. The whole idea that navies are vitally needed to keep sea lanes open is nonsense

Where I based the first two claims on a bit of Google searching and a couple of academic papers, James has developed the argument in convincing detail, addressing a wide range of possible counterarguments. If I could find someone to do the same thing for my third claim, I’d be very happy.

Generation Trump

John Quiggin19 Comments

For years now, I’ve been railing against the generation game, that is, the practice of labelling people born in some period of 15-20 years or so as a ‘generation’ (Boomers, X, Millennials and so on ) then making various claims about their supposed characteristics. A generation or so ago, I made the point that

most of the time, claims about generations amount to no more than the repetition of unchanging formulas about different age groups ­ the moral degeneration of the young, the rigidity and hypocrisy of the old, and so on

But this, and a stream of similar articles and blogposts have had no impact that I can see. Since I can’t beat the generation gamers, I’ve decided to join them. And, rather than wait for a new generation to leave school and enter the workforce, as is usual, I’ve decided to jump ahead and identify Generation Trump, consisting of those born after Donald Trump announced his candidacy for the US Presidency.

The crucial thing about this generation is that their character is formed entirely in Trump’s image. They are hedonistic, totally self-centred, have a short attention span, are prone to mood swings, and are almost entirely ignorant of the world beyond their own immediate concerns. On the other hand, they can be loving and affectionate, and many are totally family-oriented.

Astute readers will observe that, in a slightly toned down form, this is very similar what is now being said in contemporary depictions of Millennials, and was said about the ‘Slackers’ of Generation X when they were in their late teens and early 20s. That’s great for me, since it means I should be able to pump out marginal variants of the same cliches about Generation Trump until they mature into boring middle-aged adults. That is, of course, unless Trump himself does so first.