I was on Lateline Business last week, with a couple of sentences out of a 10-minute interview on the possible privatisation of Medibank Private. Here it is for your enjoyment

Medibank.mov

Over the fold is my piece in today’s Fin
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I’ve spent a fair while talking and thinking about the Peak Oil Hypothesis, and a couple of thoughts have struck me. Looking at the data, graphed below, the big increases in oil prices in the last five years or so seem to have done nothing to call forth additional supply. And for the last couple of years, output has actually declined. In that sense, it looks as if those pundits who claim that oil output has passed its historical maximum may be able claim vindication.

On the other hand, the term “peak” tends to imply a steep ascent, followed by an equally steep descent. Looked at on a time scale of several centuries this will be about right. But, year to year, the pattern is better described as a plateau with a slight downward slope.

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Conservative: As an antonym to ‘progressive’, the term ‘conservative’ is affected by many of the same confusions.

First, a conservative may be one who, like Burke, believes that that social change should be gradual and organic, rather than rapid, top-down and rationalistic.

Second, a conservative may emphasise obligations to society and community rather than, or as a counterbalance to individual rights . Since societies and communities tend to change more slowly than individuals, this is broadly consistent with the first definition. Closely related to this group are conservationists, who seek to conserve the natural environment often at the expense of short-term benefits to individuals.

Third, a conservative may defend more specific traditional institutions such as monarchy or private property.

Fourth, the term ‘conservative’ is used as the official name of some right-of-centre political parties and as a general descriptive term for right-of-centre politics

Given a historicist belief that history inevitably flows in a given direction, defined as ‘progressive’, a conservative is one who seeks to halt or slow down that flow. Assuming further that the trend of history is towards the political left, all these definitions fit together pretty well. Even in this case, a conservative of type 3 must gradually adjust to lost ground. A contemporary supporter of absolute or even limited monarchy in Australia and the UK would not be a conservative but a reactionary.

As with ‘progressives’, though the big problems emerge when the trend of history changes. Consider, for example, the role of trade unions. As long as trade unions were growing in power, conservatives of all types could join in resisting this trend. But now that unions are in decline, there is a sharp conflict between different types of conservatives.

On any abstract definition of conservatism, it’s clear that conservatives should support trade unions. They are traditional institutions dating back to the 19th century and beyond, they endorse conservative values of community solidarity and they are under attack primarily because they are seen as an obstacle to radical change. And of course this attack is being led by Conservatives in the sense of definition 4 and, to a lesser extent, definition 3.

However, whereas the problems with the term ‘progressive’ are, in my view, so severe as to render it useless as a description of political views, this is not true of ‘conservative’. The absence of any monotone linear trend does not invalidate conservatism in the sense of the first definition. Rather it strengthens it. If the policy trends of this decade may be reversed next decade, then in makes sense to move slowly and to distrust impressive-looking theoretical blueprints.

Having witnessed a massive reversal of policy trends in my own lifetime, and having been on the losing side for most of the past few decades, I am now a conservative in the sense of definition 1. I hope that, should the tide of policy debate turn in favour of social democracy once more, social democrats will avoid the hubris that characterized the Left before the 1970s and the Right thereafter, and will favor slow and careful change based on broad social support.

Update Coincidentally, Stephen Barton at Online Opinion has a piece headlined “Conservatism is not evil, stupid nor ignorant – it’s just misunderstood. ” Since he starts by quoting a member of Margaret Thatcher’s radical free-market government, he clearly does not refer to conservatism in the sense of definitions 1 and 2, despite the obligatory nods to Burke and Oakeshott. Rather he lists a number of conservative politicians and activists and asserts that, contrary to popular opinion, they aren’t “evil, stupid nor ignorant’, characteristics he instead attributes to people on the other side like Clinton, Whitlam and Keating.

Back in the Triassic Era of blogging, I ran for a while a weekly feature called Word for Wednesday, loosely modelled on Raymond Williams Keywords. I thought I’d repost one entry in response to this interesting debate starting with Henry Farrell at Crooked Timber

Progressive Definition 1: In its political sense, progressive means ‘on the side of progress’. This incorporates a factual assumption that history is moving in some definite direction, and a political program aimed at accelerating that motion and overcoming obstacles to it. Antonyms are ‘conservative’ and ‘reactionary’.

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Over at Club Troppo, James Farrell summarises the main elements of the economic research agenda on happiness, and some of the standard objections to it. For those who came in late, and probably didn’t imagine economists ever thought about happiness, the crucial finding is that “Cross country data shows pretty consistently that on average happiness increases with income, but at a certain point diminishing returns set in. In the developed world, people are not on average happier than they were in the 1960s.”

The data that supports this consists of surveys that ask people to rate their happiness on a scale, typically from 1 to 10. Within any given society, happiness tends to rise with all the obvious variables: income, health, family relationships and so on. But between societies, or in Western societies like Australia over time, there’s not much difference even though both income and health (life expectancy, for example) have improved pretty steadily for a long time.

I’ve long argued that these questions can’t really tell us anything, and an example given by Don Arthur gives me the chance to put it better than I’ve done before, I hope.

Suppose you wanted to establish whether children’s height increased with age, but you couldn’t measure height directly.
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Following the publication of this piece in the NY Times, I’ve had a string of email exchanges with Hal Varian, cc:ing Brad DeLong in the role of interested onlooker. I was surprised by the NY Times article since it included both a correct statement of the way in which Stern treats discounting and income redistribution (roughly speaking a 1 per cent change in income has the same value whenever it is incurred and whoever receives it) with a lot of statements that were either misleading or downright wrong, implying that the near-zero rate of pure time preference in the Stern Review implied a near-zero discount rate for cash flows.

Since Varian is one of the brightest and most technically careful people in the economics profession, I was unsurprised by the correct statement, but very surprised to see errors I’d already refuted when put forward by Arnold Kling, Bjorn Lomborg, Megan McArdle and others. Email revealed that the main problems arose from editorial attempts to ‘simplify’ things for readers, but we still have a lot of disagreements about the justifiability or otherwise of inherent discounting.

In any case, all this has spurred me on to produce my long-promised review of Stern on discounting, at least in draft form. Read, enjoy and criticise.

Although I haven’t had time to post on the Switkowski report on this blog, Nanni has it covered in a couple of posts over at the RSMG blog, as well as the related topic of carbon trading.

Mark looks at the implications of higher water prices for dairy farmers and concludes that they ‘may not be priced out of the market as some commentators may have thought.

I report some good news for RSMG. We are ranked in the top 20 per cent of economics research institutions in Australia.

Finally, David is starting a discussion paper series. The first and second are on biosecurity and pest management.

Read, enjoy and comment

There’s been a bit of publicity about a recent study of the effects of the Australian gun buyback. The central finding of the authors was that, while gun homicides declined after the buyback this was merely a continuation of a pre-existing trend.

I’m dubious about the whole approach. In the absence of a well-founded explanation for the trend, there’s no reason to treat maintenance of the trend, rather than the level, as the null hypothesis. The rate of gun homicides has clearly fallen (the authors find the same for suicides), so the data supports the policy, contrary to the claims.

And eyeballing the data, I’m doubtful that it’s even sufficient to establish the existence of a declining trend for the period up to and including 1996. It might be argued that the Port Arthur massacre in 1996 should be excluded and that a downward trend would then emerge, but, given that this was the even that precipitated the buyback, this seems like begging the question to me.

In any case, Andrew Leigh has the ultimate knockdown objection. If you look at the confidence intervals, the only way the gun buyback could have been shown to work, on the authors’ tests is if gun homicides fell below zero by 2004. Clearly, even if you buy the declining trend story, a linear trend is just wrong.

Mark Bahnisch has more, though quite a few commenters don’t seem to appreciate how conclusive Leigh’s refutation has been.

Reader Proust points me to this helpful BOM site showing rainfall trends in Australia. You can choose your own region, season and time period.

Here’s the most relevant to consideration of the effects of global warming, the trend since 1970, which demonstrates how much drier the climate has become over the period in which warming has been observed. As various people have pointed out, is was even drier during the famous Federation drought at the beginning of C20, so the role of global warming isn’t conclusively established, but it would certainly seem unwise to bet on a rapid return to the average observed in the historical record