The day after

Like everyone else, I expected a Labor victory in the election. I expected good things from that, and I see lots of bad consequences from the actual outcome.

Still, my personal disappointment is muted by the fact that I found the campaign so utterly depressing. The shift to positivity I noted a couple of weeks ago only lasted for a day. I saw the positive ad I wrote about only once. By election day, like the majority of the Australian public, I just wanted it to be over.

The lesson I draw from this election, and from Clinton’s failure in 2016, is that negative campaigning doesn’t work for the left. It hardens the resolve of the other side, and obscures the fact that most people agree with you on the issues.

But that’s not the lesson that the political class, (for whom the two sides are always interchangeable) and especially the hardheads who ran the campaign, will learn. They will conclude that the small target strategy has been vindicated once again.

Economics in Two Lessons, reviewed

The first proper[1] review of Economics in Two Lessons has appeared, in Inside Story. It’s by Richard Holden[2] and really gets the point of the book.

The final paras:

Chapters twelve to sixteen deal with what policymakers should do, and here Quiggin’s passion is evident. Moreover, what comes through perhaps more than anything is a sense of balance. There’s what we might want to do and then there’s what the immutable laws of economics — so neatly laid down in the preceding chapters — will let us do. Whether it’s the distribution of income, full employment, or protecting the environment, constraints exist.

But those constraints offer guidance. Quiggin notes, for instance, that “the best way to help poor people, at home and abroad, is to give them money to spend as they see fit, rather than tying assistance to particular goods and services. In other words, it is better to fix the inequitable allocation of property rights in the first place than to fix the resulting market outcome.” Whatever the topic, the framework disciplines and sharpens the policy thinking.

There is little doubt that Quiggin’s Economics in Two Lessons will be an instant classic and feature on university reading lists around the world. It should also be compulsory reading for policymakers and public commentators, who all too often lack a framework for thinking clearly about the costs and benefits of markets. The good news is that Quiggin has one — and he’s happy to share.

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Coming events

I’ve got quite a few events coming up in the next couple of weeks.

* On 13 and 14 May, I’m running a workshop at the University of Queensland on Epistemic & Personal Transformation:
Dealing with the Unknowable and Unimaginable
. Details here.

* On Thursday 16 May, I’ll be at ANU for the official Australian launch of Economics in Two Lessons.  Details are here. If campaigning permits, Andrew Leigh will say a few words about the book. There will be a launch at Avid Reader in Brisbane in late June (date tbd), and in Sydney and Melbourne a bit later

* On Wednesday 22 May, I’ll be delivering the Keith Hancock lecture for the Academy of the Social Sciences in Australia, at the University of Queensland. Topic is The Future of Work. Details here.

* I’m doing a number of radio interviews related to Economics in Two Lessons. I talked to Radio SER in Sydney yesterday. On Saturday 18 May, at 7:45 am, I’ll talk to Geraldine Doogue on Saturday extra, then on Wednesday 15 May to Steve Austin on ABC Radio Brisbane Drive.

Trade wars: Easy to win?

The trade war between the US (or rather the Trump Administration) and China (or rather Xi Jinping) is heating up again. The standard view seems to be that, because of the massive imbalance in merchandise trade between the two countries, Trump has the advantage. China could retaliate by dumping US bonds, but this is seen as a weapon too dangerous to use.

I don’t think this exhausts the options. As we’ve seen in Australia, the Chinese government can do all sorts of things to retaliate against nationals of a country that has offended them. That might, however, be an option confined to bit players like Australia.

If I were advising Xi on retaliation against Trump, I’d suggest looking at services where the balance is strongly in favor of the US. An obvious starting point would be tourism. A travel advisory, suggesting that the US is a dangerous place for Chinese tourists to visit, and implying that such visitors might face adverse consequences on their return would be an obvious choice. It would cause instant economic pain, be easily reversible and could be justified by pointing to the example of the US embargo on Cuba.

A more hopeful, and probably more likely, outcome is that China will play for time until 2020, when Trump will come under pressure in US farm states, or until 2021 when (more likely than not) he will be gone altogether.

Trade wars aren’t, as Trump suggests, easy to win. But they are nowhere near as destructive as real wars. We should be more concerned about the hawks in the foreign policy establishment, spoiling for a fight over the South China Sea, than about tariffs on TVs and soybeans.

Was Hazlitt an Austrian economist?

Reviews of Economics in Two Lessons are starting to come in. Here’s one, favorable but not rapturous from Diane Coyle. Another, from David Gordon at the Mises Institute is, not surprisingly, more negative.

The main (though not the only) complaint is that I treat Hazlitt as a One Lesson neoclassical economist. More precisely, in relation to opportunity cost “[Quiggin] applies the concept as it is used in neoclassical economics, but Hazlitt was an Austrian and does not use the concept in this way.” In particular, Gordon complains that I invoke “neoclassical equilibrium” a concept rejected by Austrians.

I have a couple of responses to this.

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How much will it cost to deal with climate change? Not much at all

That’s the headline for my latest piece in Inside Story, along with the short version of my answer. The long answer is that, even with dubious modelling choices and extreme parameter assumptions, Brian Fisher of BAEcon* comes up with estimates of about 2 per cent of GDP, trivial compared to the potential cost.

So, he uses the same presentational trick he’s been using since the first ABARE modelling exercise back in 1996, turning an annual flow into a present value over ten years to make it look bigger.

The truth is that the economic impact of reducing emissions by 45 per cent relative to 2005 levels by 2030 will be so small as to be lost in the noise of statistical revisions and exchange rate effects. By contrast, the costs of doing nothing about climate change are already visible and are only going to get bigger.

Considered in terms of opportunity cost, action to mitigate climate change is a no-brainer, which is why so much intellectual and rhetorical energy has to be used to mount any kind of case against such action.

  • BAEcon is a play on the title of the Bureau of Agricultural Economics, precursor of the Australian Bureau of Agricultural Resource Economics (ABARE) where Brian was Director and I was Chief Research Economist in the 1980s and 1990s. It’s now ABARES having absorbed the Bureau of Rural Sciences.

A half-decent election campaign ?

The first half of the 2019 election campaign was the worst I’ve ever seen, especially relative to the possibility for real debate. Both sides ran continuous attack ads focusing on the opposing leader, playing into the gladiatorial model favoured by the Press Gallery. Labor, in particular, seemed to have forgotten it had any policy offer.

Since Labor’s policy launch, things seem to have improved substantially. The fact that the launch took place at all, rather than being reduced to an end-of-campaign formality (timed to keep public funding flowing as long as possible) was a positive.

After the launch took place, Labor started running two new ads (at least those are the ones I saw), one continuing the attack on Morrison, but the other pushing positive policies and featuring a lot of leading frontbenchers rather than a single leader.

Obviously, the use of a “team” approach, was to some extent a forced move, given Shorten’s lack of popularity, and the switched in message seemed a bit artificial, but it was still an improvement. And, from what I can see, Shorten is doing a lot better in the media now that he is arguing a positive case rather than merely responding to LNP attacks.

The opinion polls have barely moved through the campaign and, taken together, suggest that it will be very hard for the LNP to win a majority, or even a plurality (more than Labor, but not a majority), of seats. The likely outcomes are a narrow Labor majority or a Labor plurality. Given the likely make-up of the crossbench, a plurlaity would almost certainly imply a Labor minority government.

Either outcome would be a good one, particularly in relation to climate policy. As regards Labor’s tax policies, if they can negotiate their way through the Senate, they should be able to do the same with the Reps.

One sentence that says it all

I’ve been generally appalled by the performance of the media in the current election. This article by David Crowe in the Nine/Fairfax papers is the perfect illustration. Asking what is wrong with the current election, Crowe concludes

The fact is that neither leader has inflicted a killer blow against the other.

The idea that an election is a gladiatorial contest between “leaders”, staged for the entertainment of the Press Gallery has never been put more simply and clearly.

The article is entirely in this spirit, referring to a “lack of intensity”, Shorten’s failure to “hammer nails in the coffin” and so on.

The idea that the parties seeking government might have different policies, and that some might be better than others doesn’t even enter Crowe’s thinking. Rather, policies are sources of “messages” which amplify perceived “strengths” or cover up weaknesses.

To be fair, this has been the approach of the parties themselves for most of the past thirty years, running presidential campaigns, while avoiding any policy commitment that might increase their size as a target. That’s what political journalists know how to talk about. But faced with actual policy differences, they are like literature critics trying to review a mathematics article.

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