Short and sharp ?

John Quiggin151 Comments

Writing in the Oz, Alan Moran begins a case for wage cuts as a response to recession with the claim

Until the 1930s, recessions tended to be short and sharp, and financial ruin was largely confined to the speculators whose exuberance had diverted capital into ventures where it was less than productive.

Much the same assumption appears to underlie the thinking of those who propose a return to the macroeconomic policies of the 19th century, such as the gold standard. Economic statistics for this period aren’t exactly comparable to those available today, but, such as they are, they don’t support the claim. In the US, for example, the longest-ever recession, according to the National Bureau of Economic Research was that of the 1870s (following the Panic of 1873, which in turn followed the US shift from bimetallism to a gold standard). As the NBER data shows, 19th century recessions commonly lasted for more than a year.

In Australia, the long and deep depression of the 1890s, and the substantial wage cuts imposed during that depression (with employers getting the full backing of governments) were a major factor in the formation of the Labor Party and the shift to a parliamentary, as opposed to a purely industrial strategy, for the labour movement.

Are sockpuppeteers criminals?

John Quiggin10 Comments

The Lori Drew case, in which a US woman set up a Myspace account under the name “Josh Evans” to torment a teenage girl who had fallen out with Drew’s daughter, and drove her victim to suicide, has some legal implications of interest to bloggers. Drew was ultimately sentenced to jail, not for her cruel prank and its fatal consequences, but for “unauthorized access to a computer system” by virtue of the false name under which the account was created. On the face of it, the same offence is committed (at least under US law) every time a commenter on a blog or noticeboard uses a sockpuppet to evade bans or blocks, or to post under multiple identities in violation of contractual terms.

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Science vs the Right: state of play

John Quiggin143 Comments

I stopped arguing with self-described “skeptics” on the topic of global warming some time ago, and I don’t intend to start again. I am however interested both in trying to promote sensible policy outcomes and in considering the broader political and cultural implications of the debate. For this purpose, there is no need to argue about hockey sticks, global warming on Mars or any of the other talking points that chew up so much time on the Internets (for anyone who is actually in doubt on any of these points, this is a useful resources

I’ll start with some facts that are, if not indisputable, at least sufficiently clear that I don’t intend to engage in dispute about them
(i) All major scientific organisations in the world[1] endorse, in broad terms, the analysis of the Intergovernmental Panel on Climate Change which states that the world is getting warmer and that, with high (> 90 per cent) probability, this warming is predominantly due to human action
(ii) Most prominent politicians[2], thinktanks, activists, commentators and bloggers on the political right in Australia, the US and Canada (along with a large section in the UK) reject, or express doubts about, this analysis. The uniformity of views is particularly notable among conservative thinktanks.

The dispute between mainstream science and the political right has now been going on for at least fifteen years, and has already had some profound impacts. At the beginning of this period, the right could plausibly present itself as the pro-science side of the “Science Wars” in which the enemies were the massed forces of leftwing postmodernism (a powerful force, given their near-total control over departments of English literature), sociologists of science and the wilder fringes of the environmental movement. However, this was always a storm in a teacup, ignored by the vast majority of scientists.

By contrast, the current war is being fought for high stakes, with the end result either a disastrous defeat for the institutions of mainstream science or the intellectual discrediting of the entire political right. There has been no significant convergence between the two sides. On the contrary, even as confidence in the mainstream scientific consensus was solidified be the released of the IPPP Fourth Assessment Report in 2007, the rightwing opponents of science were buoyed by the La Nina event of early 2008, which produced a sharp, but temporary drop in temperatures, particularly in the Pacific. Comparisons with the El Nino peak of 1998 enabled them to announce that global warming had stopped, a point which was amplified in vast numbers of opinion pieces, blog posts and public statements, though not, to my knowledge, defended by any peer-reviewed statistical analysis.

Even such an obvious fact as the melting of Arctic ice, confirmed in the most direct fashion possible by the announcement of regular shipping routes around the Pole, with associated territorial claims, has been the subject of endless quibbles (attempts to restate these quibbles in comments will be deleted).

Furthermore, unlike the endless culture war disputes where the debating tactics of the right have been developed, there is a fact of the matter regarding anthropogenic global warming, which will sooner or latter become undeniable. Either global warming will continue, finally confirming the mainstream scientific viewpoint, or it will not.

Given the accumulation of scientific evidence, the odds are pretty strongly in favour of the first outcome. Scientific conclusions supported by a diverse range of independent theory and evidence sometimes turn out to be wrong, but you wouldn’t want to bet on it. Even more rarely, non-scientists with an axe to grind turn out to be right where scientists are wrong, but you really wouldn’t want to bet on that.

This raises the question of why the right has been so keen to double down on this issue. Of course, there’s no organised process by which an anti-science viewpoint on climate change and other issues is agreed on as a central orthodoxy from which dissent is prohibited, but you only have to look at the output of the political right in the English speaking countries to see that this outcome has been realised.

There are many explanations, perhaps so many that the outcome was overdetermined – powerful economic interests such as ExxonMobil, the hubris associated with victories in economic policy and in the Cold War, tribal dislike of environmentalists which translated easily to scientists as a group, and the immunisation to unwelcome evidence associated with the construction of the rightwing intellectual apparatus of thinktanks, talk-radio, Fox News, blogs and so on.

The issue is not going to go away, regardless of the short-term success or failure of attempts to reach a global agreement to stabilise the climate. The more clearly the political right is identified with the anti-science side of this debate, the harder it will be to salvage any of its existing institutions.

In a two-party system, even total intellectual incoherence will not prevent a political party from winning office when its opponents fail. But I’m surprised at the extent to which supporters of free markets have been willing to tie their case to an obvious imposture.

fn1. The only partial exception of which I am aware is the American Association of Petroleum Geologists, which takes an equivocal position
fn2. For reasons of political necessity, some rightwing politicians occasionally make statements endorsing mainstream science on global warming. But only a handful (John McCain being the most prominent) give more than a half-hearted assent, and many (Brendan Nelson is an archetypal example) give different positions depending on the audience and the way the political wind is blowing on the day.

Moral arbitrage

John Quiggin33 Comments
.!.

I posted this in response to some discussion at Crooked Timber on the Iraq war, Gaza and so on.

Looking at the discussion, it seems as if nearly everyone is concerned about the (foreseeable) consequences of their actions, but there are a lot of claims that some consequences should be treated differently from others (intended vs unintended, direct vs intermediated by the predictable reactions of others, and so on).

To an economist, what this naturally suggests is the possibility of moral arbitrage.

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The great Windschuttle hoax

John Quiggin137 Comments

The publication by Keith Windschuttle of a hoax article on science has been all over the papers and the blogs. I agree with Tim Lambert (who gives lots of links) that the article sounds reasonable by comparison with the nonsense commonly published on scientific topics by Quadrant.

Just before this, I was thinking about another hoax, namely the repeated promise of a Volume 2 of The Fabrication of Australian History. When Volume 1 came out back in 2002, Windschuttle promised further volumes on an annual schedule, covering Queensland and WA. Since Queensland in particular was the focus of Henry Reynolds’ main work, and since the evidence of numerous massacres seems incontrovertible, this promised volume was central to Windschuttle’s claims of fabrication. The promise was repeated year after year, but no Volume 2 ever appeared, and the “research” supposedly already undertaken has stayed out of sight.

Then in February 2008, Windschuttle published extracts from a Volume 2, promised for publication “later this year”, but now on a totally different topic, that of the Stolen Generation. His target this time was Peter Read, an eminent historian who’s done a lot of practical work reuniting Aboriginal children with their birth families. It’s 2009, the promised volume hasn’t appeared, and there hasn’t been any reference to it on Windschuttle’s site for some time.

The real hoax victims here have been those on the political right, who’ve repeatedly swallowed Windschuttle’s promises to refute well-established facts about Australian history “later this year” and who are now getting their “science” from his discredited magazine.

Refuted economic doctrines #3: The Great Moderation

John Quiggin20 Comments

The “Great Moderation” is a phrase coined by Ben Bernanke in 2004 to describe one particular interpretation of evidence showing that the volatility of output has declined over time in the US and other developed countries (though not, by then, Japan). Bernanke starts by citing the work of Blanchard and Simon, who offer both a different view of the evidence and a different explanation. Blanchard and Simon say that output volatility has been declining since the 1950s (fn: reliable national accounts don’t go back before WWII, but obviously output volatility was very high in the 1920s and 1930s), with an interruption in the 1970s and 1980s. However, they note that the data could also be interpreted as having a single structural break in the mid-1980s, and this is the view of the evidence taken by Bernanke.

A variety of explanations have been put forward for the Great Moderation. To the extent that the Moderation has been seen as more than a run of good luck, it has typically been explained either by a combination of improvements in macroeconomic management associated with central bank independence and reliance on monetary rather than fiscal policy and the benefits of economic liberalism, as in this piece by Gerard Baker

Economists are debating the causes of the Great Moderation enthusiastically and, unusually, they are in broad agreement. Good policy has played a part: central banks have got much better at timing interest rate moves to smoothe out the curves of economic progress. But the really important reason tells us much more about the best way to manage economies.

It is the liberation of markets and the opening-up of choice that lie at the root of the transformation. The deregulation of financial markets over the Anglo-Saxon world in the 1980s had a damping effect on the fluctuations of the business cycle. These changes gave consumers a vast range of financial instruments (credit cards, home equity loans) that enabled them to match their spending with changes in their incomes over long periods.

The Great Moderation has vanished with surprising rapidity, though in retrospect its unsustainability has been evident since the late 1990s. It is clear that the global economy is undergoing a severe recession, which will generate a substantial increase in the volatility of output. But even if the recession ends by mid-2009, as is suggested by some optimistic forecasters, crucial elements of the Great Moderation hypothesis have already been refuted. Over the period of the Great moderation, all the major components of aggregate output (consumption, investment and public spending) became more stable. By contrast, if a deep recession is avoided in 2009, this will be the result of a massive fiscal stimulus, with a huge increase in public expenditure (net of taxes) offsetting large reductions in private sector demand.

Just as the failure of the efficient markets hypothesis has destroyed much of the theoretical basis of the policy framework dominant in recent decades, the collapse of the Great Moderation has destroyed the pragmatic justification that, whatever the inequities and inefficiencies involved in the process, the shift to economic liberalism since the 1970s delivered sustained prosperity. If anything can be salvaged from the current mess, it will be in spite of the policies of recent decades and not because of them.