Author: John Quiggin

Smokescreen (updated)

John Quiggin13 Comments

Brsbane has had its second CBD lockdown in a week with another false alarm prompted by the fear that outlaw bikies will launch a terrorist bombing campaign against the forces of law and order. We’re already on the verge of a constitutional crisis as Newman intervenes directly in court cases, claiming a mandate from the masses, and running smear campaigns against judges who defy him.

What is going on here? The actual threat to society represented by bikie gangs (a few public brawls[1] and some low-level drug dealing and protection rackets) isn’t remotely commensurate with this response.

I suspect that the answer is to be found in the fight between Newman and Tony Fitzgerald and, in particular, Newman’s suggestion that bikie crime is worse than the corruption exposed by the Fitzgerald inquiry. Of course, that corruption didn’t involve bikies, or any kind of outlaw gang – it was run from the top, by senior National Party ministers, and the corrupt police they promoted. Its exposure left the conservative parties in the wilderness for nearly 20 years.

Clearly, Newman and the LNP have forgotten none of this. Almost their first act on taking office was to nobble the Crime and Misconduct Commission that arose from the Fitzgerald report. Pretty clearly, Newman and Seeney don’t intend their government to share the fate of Bjelke-Petersen and Hinze. Equally clearly, they intend to reward themselves and their mates as liberally as possible at the public expense. For a government that’s only half way through its first term they’ve already accumulated a track record of nepotism and cronyism that would be impressive after a decade or more in office. It’s obvious that, sooner or later, something big will blow up with the CMC, criminal charges and so on. That is, of course, unless the CMC can be neutralised and the judiciary reduced the position of tame compliance we saw in the Joh era.

A politician who preaches law and order is almost certainly picking your pockets as he does so. That certainly looks to be the case in Queensland.

Update The evening after this was posted, there were calls for the Acting head of the CMC, Ken Levy, to resign because he had written an opinion piece endorsing the Newman government’s policy. It turns out that he’s a former director-general of the Department of Justice forced out by Labor because of the fiasco over the disgraceful prosecution of Pauline Hanson. That led me to the discovery that Newman’s review of the CMC was conducted by Ian Callinan, who has ethical issues of his own. Readers can judge whether Levy’s leadership is such as to inspire their confidence.End update

fn1. The most serious case was when where a fight in a shopping centre resulted in a bystander receiving gunshot wounds. But that didn’t require new laws. One participant was convicted of affray, while the other (the alleged shooter) is in jail awaiting trial.

Hand it back

John Quiggin103 Comments

The Sydney Morning Herald interviewed 35 economists and found 30 of them favored carbon price (tax, ETS or some mixture) over Direct Action. It quotes Chris Caton as saying “Any economist who didn’t opt for emissions trading “should hand his degree back”, says Chris Caton.

I’d take that a step further.

Anyone with a natural science degree in any field will find plenty of examples of denialist lies on everything from basic physics to bushfires. More generally, denialists have attacked the entire scientific enterprise with absurd conspiracy theories. No-one who endorses these attacks, explicitly or tacitly, deserves to call themselves a scientist.

Similarly, anyone with a degree that includes even minimal exposure to statistics should understand that denialists were misusing the concept of statistical significance when they claimed, a few years back there had been no significant warming since 1995. Subsequent hacks have had to move the goalposts forward to 1997. And that’s just one example of the cherrypicking dishonesty rife on the denialist side of the debate. So, anyone who claims to be a sceptic and hasn’t distanced themselves from claims like these should send back their math/stat degree.

Then there are those with university degrees, but without the training in science, maths or economics to assess the key issues independently. Anyone with a university education ought to be able to recognise the limits of their own expertise, and to be able to distinguish between bogus sources of information and the products of genuine peer-reviewed research. If they prefer the kind of nonsense circulated on denialist websites to the conclusions of scientific research, they should hand in their degrees and instead obtain one of the many qualifications available, for a modest fee and no work, on internet sites like those listed here.

Colin Clark Memorial lecture: National Accounting and the Digital Economy – the Case of the National Broadband Network,

John Quiggin13 Comments

I’ll be presenting the Colin Clark Memorial lecture on 14 November.

Colin Clark’s greatest contribution to economics was his pioneering role in the construction of national accounts. In the industrial economy of the 20th century, the central problem in the national accounting was the need to avoid double counting, by measuring only the value added at each stage of production. This problem is closely related to that of benefit-cost analysis for public projects. In the 21st century digital economy, value is primarily derived from the flow of information rather than physical inputs and outputs. This creates new problems for national accounting, and for benefit-cost analysis. One example of these problems is the question of how to evaluate alternative proposals for the National Broadband Network.

The talk is bundled with a lunch at Customs House, which (from past experience) will be very pleasant, but fairly expensive, so this event is mostly going to appeal to people whose employers can pay. For those who aren’t in this category, or who aren’t in Brisbane, I’ll post a link to the slides after the event.

The macro foundations of micro (crossposted at Crooked Timber)

John Quiggin57 Comments

Twitter alerted me to an amusing exchange between Chris Auld, posting a list of “18 signs you’re reading bad criticism of economics and Unlearning Economics, responding with 18 Signs Economists Haven’t the Foggiest. UL suggests that Stephen Williamson manages an impressive 9 out of 18 in his review of Zombie Economics (my response here with more from Noah Smith.

Scoring myself against Chris Auld’s list, I’d say I’m in the clear. But quite a few commenters on Zombie Economics have made complaints along the lines of his point 1, that I focus too much on macroeconomics (and finance). The implication is that, even if macro is totally wrong, only a minority of economists do it, and microeconomists are in the clear.

This defense doesn’t work, at least not in general.

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Abbott's Sister Souljah non-moment

John Quiggin40 Comments

As I said in my last post, Tony Abbott has set himself the tightrope-walking task of maintaining his government’s official endorsement of mainstream climate change, while keeping his denialist base happy. Having made a mess of this with his bushfire comments, he had a chance to rectify the situation when he gave an interview to denialist and conspiracy theorist Andrew Bolt. Newscorp ran in under the headline “Andrew Bolt tackles the PM on the big issues”, but Bolt was playing touch, not tackle.

The interview was a sycophantic exercise in mutual admiration, with all the tough questions you might expect from, say, Anne Summers interviewing Julia Gillard or Kevin Rudd interviewing himself. But such interviews present smart politicians with the chance to play against type, by disagreeing with the interviewer on an issue dear to the base, but politically problematic for a would-be statesman. Presented with a soft lob question about the bushfires, Abbott could have taken the chance to define his own position as the “sensible centre”, by repudiating both Bolt’s denialism and the “alarmism” of those stressing the link between bushfires and climate. Bill Clinton famously did this when he denounced radical rap artist Sister Souljah, signalling the shift to the right undertaken by the Democratic Leadership Council of which he was part.

Instead, Abbott chose to dig himself deeper, extending his denialism on bushfires and further claiming that the observation of record high temperatures is not evidence of climate change. I mentioned in my last post that he would have a problem in formulating a response to the likelihood that 2013 will turn out to be the warmest year in the Australian observational record. He’s chosen his answer now, one that is unlikely to carry much credibility except with those already committed to denialism.

His summary of climate science, previously reported as “crap” has been replaced by “hogwash”, perhaps in deference to the sensitivities of Greg Hunt, who took strong exception to being confronted with the previous term by a BBC interviewer. I won’t link to Bolt, but the relevant passages are quoted over the fold.

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Falling off the tightrope

John Quiggin56 Comments

Having gained office on the basis of three-word slogans, the Abbott government has the problem that it now needs to answer questions in complete sentences. As a result, Abbott has immediately faced some tricky tests, and failed most of them. “Stop the Boats”, for example, ran into the problem that it assumed the Indonesians could be strong-armed into doing our government’s bidding. Unsurprisingly, that proved false, though the inevitable backdown was managed reasonably smoothly.

The trickiest balancing act, though, is on climate change. The government needs to balance its base, the vocal elements of which are almost uniformly denialist[1], with the risks of adverse consequences to Australia if we repudiate our commitments on the issue, and the risks to its own credibility of being openly anti-science.

After only seven weeks in office, both PM Tony Abbott and Environment Minister Greg Hunt, have fallen off the tightrope, rejecting the clearly established (and intuitively obvious) IPCC findings on bushfire risk in Australia [AR4 (2007) , WGII , Chapter 11, Executive Summary]

“The climate of the 21st century is virtually certain to be warmer, with changes in extreme events. Heatwaves and fires are virtually certain to increase in intensity and frequency (high confidence).”

These findings were reinforced in an interview with the head of the UN’s climate change negotiations, Christiana Figueres (listen to the audio,as the report may mislead)

Abbott’s response was to accuse Figueres of “talking through her hat”, while Hunt went to Wikipedia to discover that “bushfires in Australia are frequently occurring events during the hotter months of the year”.

This was really an unforced error by both Abbott and Hunt. They could have ducked the issue by resorting to the standard formula that climate predictions are about frequencies, not about individual events. Abbott could even have cited Figueres who was careful to say that “the World Meteorological Organisation has not yet established a direct link between the these fires and climate change.” (emphasis very clear in audio). Hunt scrambled back to the script at the end of his interview, but after the Wikipedia reference, it was far too late.

Given Abbott’s earlier “total crap” statement[2], it’s going to be hard for him to walk back a second time. He now faces two problems. On the one hand, now that he’s outed himself as one of them, the denialist base will be encouraged to demand the scrapping of his Direct Action policy. On the other hand, locking the LNP into denialism is a recipe for long-term disaster, especially with Malcolm Turnbull waiting in the wings.

It’s highly likely that 2013 will turn out to be the hottest calendar year on record for Australia. The frequent occurrence of record highs like this is a predictable consequence of climate change. Abbott had better get his spin doctors working on a form of words to handle the inevitable questions.

fn1. I’ve decided to abandon “delusionist”, my own coinage, in favor of the more standard term “denialist”. I’ll write more on this later.
fn2. In fairness, this statement was presented as a view his audience might hold, rather than as Abbott’s own. But since he’s held every possible view on this topic, and some that seem impossible, fairness can only go so far.

Free riders

John Quiggin47 Comments

It’s widely assumed that small rich countries, like Australia, can choose to do nothing about climate change, without suffering any adverse consequences. Like a dozen or so other countries, we contribute about 2 per cent of total emissions. So, whether we reduce emissions or not won’t (at least directly) have a big impact on the climate change we experience, just as an individual decision to engage in (or refrain from) littering, won’t have much impact on the amount of litter they see.

But this analysis assumes that countries that do make a serious effort won’t impose any sanctions on those that don’t. Until recently, this was a reasonable assumption since the most prominent laggards were China and the US, both of which can do pretty much as they please in international matters. But China and the US are taking their commitments seriously now, and are taking some big steps to reduce emissions. That changes the calculation for a would-be free rider.

The Harper government in Canada is already discovering this. Harper is a (barely concealed) climate denialist, who has attacked climate science, and promoted the work of ‘sceptics’. Having repudiated Canada’s commitments under the Kyoto Protocol on the grounds that it interfered with Canada’s aspirations to be an ‘energy superpower’ Harper imagined he would have no trouble securing agreement for the Keystone Pipeline, which is supposed to carry oil from the hugely destructive Alberta Tar Sands projects to markets in the US.

Canada is in the inner core of US allies, historically distinguished by its devotion to being a global ‘good citizen’. Unsurprisingly, the Canadians had plenty of favors to call in at the US State Department, which duly reported that the project was environmentally benign and should be approved.

But then everything went wrong for Harper.

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A minor life hack (crosspost from Crooked Timber)

John Quiggin3 Comments

I’m currently reading Scarcity by by Sendhil Mullainathan and Eldar Shafir. At this stage, I’m inclined to sympathise with the unnamed colleague who commented “There’s already a science of scarcity. It’s called economics”. So far, it’s mostly straightforward applications of the observation that time and attention are scarce resources, combined with some fairly familiar observations from behavioral econ on how people fail to optimise either the first-order problems of allocating a tight budget or the second order problem of allocating time and attention to the first-order problem (my terms here, not theirs). However, I’m only part way through, and the authors promise to show how their approach differs from the way in which economists would normally think about this kind of problem.

This post is about a specific and well known observation cited by Mullainathan and Shafir. Faced with paying $100 for an item that could be had elsewhere for $50, most people are willing to put in a fair bit of effort (say, driving for an hour) to get the lower price.[^1] On the other hand if the item costs $1050 and could be had for $1000, people with reasonably high incomes mostly pay up, instead of driving to the other store. This is obviously inconsistent with standard opportunity cost.
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