Yet more zombies — Crooked Timber

John Quiggin19 Comments

After finishing Zombie Economics, and confident that it would soar to the top of the best-seller lists, I had the idea of a franchise-style list of sequels – Vampire Econ (on the financial sector), Cyborg Econ (the market and the mixed economy) and so on. Now, though, I’m thinking I could spend a lifetime on the zombie ideas that dominate the political right.

One of the most tenacious has been the DDT myth, that the writings of Rachel Carson led to a global ban on the use of DDT[1], bringing to an end a program that was on the verge of eradicating malaria[2], and causing the death of millions[3]. I thought that Tim Lambert and I had finally administered the coup de grace with this piece in Prospect a while back, after which some of the leading promoters of the myth (such as [[Roger Bate]] and his [[Africa Fighting Malaria]] group) appeared to have given up and moved on to other projects.

But zombies are hard to kill, especially for such reliable sources of misinformation as Britain’s Channel Four. C4 has just run a documentary by Stewart Brand, entitled What the Green Movement Got Wrong in which the DDT myth was repeated in its full glory. Amusingly, Brand made the plea ‘I want to see an environment movement that can admit when it’s wrong’. When challenged by George Monbiot on his glaring errors of fact, Brand exhibited the familiar pattern of weasel words and blame-shifting, followed by silence.

Meanwhile, two of the AFM crew, Richard Tren and Donald Roberts have published a pro-DDT book. The Reuters report on the book says that it comes Six years after the insect killer DDT was globally outlawed on grounds of environmental damage. This is confusing to say the least, given that claims about the dire effects of the supposed ban were around long before this and that the same groups were celebrating the supposed reversal of the ban by WHO in 2006. Actually, both the Stockholm Convention which came into effect in 2004 and the “new” WHO position were little more than different spins on the long-standing consensus that DDT should be banned in agricultural use but retained in anti-malarial use until it can be replaced by cost-effective alternatives. The Reuters report notes that “Tren is a “free market lobbyist who has previously criticised tobacco control”.
Update The original version of this post referred to Richard Tren as a “tobacco lobbyist”. This claim was false. I withdraw it and apologise to Mr Tren.

fn1. DDT has never been banned in anti-malarial use
fn2. The attempt to eradicate malaria through DDT failed because of the development of resistance, long before environmentalist concerns about DDT
fn3. The DDT ban myth was largely popularised by the tobacco industry, seeking to pressure WHO out of anti-smoking campaigns in poor industry. Those pushing the myths are the active agents or unwitting dupes of an industry that has indeed killed millions

via crookedtimber.org

An even more durable zombie than the efficient markets hypothesis

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QE2 — Crooked Timber

John Quiggin9 Comments

The US Federal Reserve has announced its long-awaited renewal of quantitative easing (cutely labelled QE2). It’s $600 billion of new money to buy US Treasury notes with an average duration of five years, along with recycling of some money from the mortgage bailouts, also into T-note purchases. That sounds like a lot, but the reaction from Brad DeLong (endorsed by Paul Krugman) has been a big yawn. With the five-year bond rate at just over 1 per cent, the amount the private sector would demand to hold these bonds (that is, the annual interest payment) is about $7 billion, which is rounding error in the context of the current crisis.

I had been thinking that the Fed might take the much riskier (and politically trickier) step of buying corporate bonds. That would seem more likely to promote investment, but would obviously involve a good deal of winner-picking, with the associated potential for (real or perceived) corruption.

But what is really needed here is fiscal stimulus focused on job creation, combined with a long-term plan for fiscal consolidation (that is, higher taxes and/or lower expenditure). Instead, what the US appears likely to get is a permanent tax cut for the rich, partly offset by lots of job-destroying nickel-and-dime cuts in current expenditure. Many of these cuts will prove to be counterproductive or unsustainable in the long run.

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Framing and farming

John Quiggin19 Comments

My column in last week’s Fin was about the communication and policy failures surrounding the release of the draft plan for the Murray Darling Basin. I still hope that a solution can be salvaged, but the release was a fiasco.

No one will be forced out

Accidents of timing sometimes work out in interesting ways. Early this year, the Risk and Sustainable Management Group at the University of Queensland, which I lead, planned a workshop to review the draft plan for the management of the Murray-Darling Basin, then due for release in July. The rather optimistic title was ‘Water policy in the Murray-Darling Basin: Have we finally got it right?’ and the idea was to allow leading economists and scientists, with the hindsight of a few months, to review the plan and its reception.

Instead, because of delays to the election, the workshop was held only a couple of weeks after the release of the ‘Guide to the Draft Plan’, copies of which were still smouldering on the steps of community halls around the Basin. In this context, the sub-title ‘Have we finally got it right’ took on a tone of sardonic irony.

Surprisingly, though, the consensus of the workshop was that, in substantive terms, the draft plan did mostly get it right. Many of the problems we have seen are the result of poor communication and an excessive bureaucratic reliance on the provisions of the 2007 Water Act, under which the report was required. Others could be addressed with sensible government policy responses to the problems inevitable in dealing with the consequences of decades of largely failed policies.

The big communication problem was the media framing of the plan in terms of ‘cuts’ to water entitlements and allocations, resulting in a string of news stories of farmers saying their businesses would be ruined by cuts of the magnitude envisaged in the plan. The presentation of the draft plan by the Murray Darling Basin Authority did little to challenge this framing. As a result, the Gillard government was left to play catch-up, protesting that it had already committed itself to ensure that water would be acquired only through voluntary participation in purchases or water-saving investments.

The discussion of economic impacts was similarly misleading and similarly poorly handled. Model estimates of changes in employment levels were translated as ‘jobs lost’, when in reality they mean nothing of the kind. The most direct impacts will be on the number of irrigation farm operators. Given reliance on voluntary buybacks, the number of operators who will lose their jobs, or be forced off the land, can be precisely estimated at zero. The reduction in employment will primarily take the form of operators choosing to sell their water entitlements to fund either retirement or a shift into other industries.

For most towns and cities in the region, the ‘job loss’ estimates will be similarly notional. Total population in the Basin is growing, and so is employment. A small change up or down in projected employment growth over a decade or so is little more than a modelling artifact.

These purely notional estimates serve to distract attention from the more important results, focusing on the minority of communities in the Basin where a contraction in irrigated agriculture is likely to produce a reduction in total employment or to exacerbate existing adverse trends.

Communication failures are never the whole story. The government should have had, at the ready, a regional development package that would address both unmet needs in regional Australia as a whole and the specific needs of communities in decline, regardless of the cause of this decline.

Instead, policy responses have been narrowly focused on irrigators and irrigation infrastructure. Billions of dollars have been allocated to projects to improve the efficiency of irrigation, despite evidence that very little water is ultimately lost to the system through processes such as leakage and seepage, which mostly return water to rivers and groundwater systems. If even a fraction of this sum were allocated to improvements in social infrastructure, it could generate enough new jobs and social returns to more than offset the adverse impacts of a contraction in irrigated agriculture.

A solution to the environmental, economic and social problems of the Murray Darling Basin is within our reach. A combination of voluntary repurchase of excess water entitlements and investment in social infrastructure could be funded from the $10 billion already on the table for the Water for the Future initiative. Success or failure will tell us a lot about the capacity of the Gillard government to deliver meaningful reform.

Zombies on Econtalk

John Quiggin12 Comments

I’ve done a podcast discussion with Russ Roberts for EconTalk. There’s also a transcript of the highlights, great for people who lack the time/ to listen to a long podcast.

Although we are pretty much at opposite ends of the spectrum as conventionally viewed (Roberts is a George Mason prof and Chicago PhD and EconTalk is published at the EconLib site) we found quite a few areas of agreement, and had a constructive discussion on the points of disagreement.[1] That’s partly because Russ is a good host, but also because, as Matt Yglesias noted in a tweet not so long ago, my critique of ideas like the EMH is very similar to that of Austrian-inclined critics like Amar Bhide[2]. I plan to have more to say about this.

fn1. I also got a review from Arnold Kling on the same site, which began “I agree with some of it, which might be considered a rave review.”
fn2. I’ve retweeted this, but I don’t know how to hyperlink to it

Learning from mistakes, not repeating them

John Quiggin61 Comments

The policy skills of the NSW Labor government were graphically illustrated by Kristina Keneally’s recent announcement that the scheme offering a 60c/kWh feed-in tariff to anyone who installed solar panels on their roof had attracted far more demand than the government had budgeted for, and that the price would therefore be cut back to 20c/kWh (roughly the delivered price of coal-fired electricity). This pattern has been repeated with a string of schemes in Australia and overseas in recent years. The reason is simple, as can be seen from the graph below.

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DIY Tri

John Quiggin5 Comments

The Noosa triathlon was all booked out, but that created an opportunity for innovation with DIY Tri. General idea is to do all three events in the course of the day, but otherwise no rules, no pack drill. I managed 16km run, 800m swim, 30 k cycle. Advantages

* No need to worry about transition – have lunch and do a bit of shopping between legs

* Not nearly as tiring

* Even with long breaks, takes less time than entering the official event (drive to Noosa, register, wait around for hours, do the event, wait to retrieve bike, collapse for a few hours, drive back)

* Guaranteed first place in every category

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Rail asset sale to pay for rail liabilities

John Quiggin6 Comments

The Bligh government has announced that a substantial amount of money (about $200 million) derived from the sale of QR’s highly profitable coal business will be used to upgrade heavily subsidised passenger rail services between Brisbane and Cairns, correctly described by the Transport Minister as a “luxury” service. In this case the rhetoric of the Premier and Treasurer, spurious when applied to the income-generating coal freight service, is absolutely correct – every dollar spent on new tilt trains is a dollar that can’t be spent on schools and hospitals.

Hat-tip: David Adamson

Zero-dimensional chess — Crooked Timber

John Quiggin36 Comments

One reason I’m thinking a fair bit about the long term future is that immediate prospects look grim, particularly in the US.

According to this piece from the NY Times on Obama’s post-election plan

After two years of operating at loggerheads with Republicans, Mr. Obama and his aides are planning a post-election agenda for a very different political climate. They see potential for bipartisan cooperation on reducing the deficit, passing stalled free-trade pacts and revamping the education bill known as No Child Left Behind — work that Arne Duncan, Mr. Obama’s education secretary, says could go a long way toward repairing “the current state of anger and animosity.”

Translation: Mr Obama and his aides plan a series of pre-emptive capitulations, after which the Republicans will demand the repeal of the healthcare act (or maybe abolition of Social Security). When/if that is refused, the Repugs will shut down the government, and this time they will hold their nerve until Obama folds.

BTW, the only thing I knew about Arne Duncan before this was that he was a fair country (ie Australian NBL) basketball player. But reading his bio (corporate-style charter school booster, fan of incentives based on standardised tests etc) along with the fact that he’s in close with Obama is indicative of why things have gone so badly in this administration.

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