It’s 90 years today since the Armistice that brought a temporary halt to fighting on the Western Front of the Great War. The War had already brought forth the horrors of Bolshevism and fighting in Russia continued well beyond the Armistice. Within a few years, Fascism and Nazism were also on the march. Full-scale war resumed in the 1930s, first in Spain, Abyssinia and the Far East and then throughout the world. The War brought nothing but evil, and its evil has persisted through almost a century since it began.
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A bit more on the economics of happiness
I was discussing the economics of happiness with my son, and in particular the Easterlin paradox. Within a given country, people with higher incomes are more likely to report being happy. However, in international comparisons, the average reported level of happiness does not vary much with national income per person, at least for countries with income sufficient to meet basic needs. The same is true over time – average happiness levels don’t change much even as incomes rise.
This is often taken to mean that it’s relative rather than absolute income that determines happiness, so an increase in everyone’s income won’t make anyone happier. Hence, we shouldn’t worry so much about increasing income, but should focus more on factors likely to contribute to happiness. The point that struck me was that, given Easterlin’s data, the paradox is almost certain to apply whatever potential source of happiness we consider, in one form or another.
Monday Message Board
It’s time once again for the Monday Message Board. Post your thoughts on any issue. Civilised discussion only. Please avoid snarks and trolling and strictly no coarse language.
Financial crisis presentation
I’m attaching my presentation to the BrisScience lecture series on The Financial Crisis and what it means for you(2.7 Mb PDF). It incorporates part of a cartoon exposition that circulated early in the year, in the style of (but apparently not by) xkcd. I left a fair bit out, partly because I only give PG-rated talks and the cartoon was NSFW (coarse language), but you can read the whole thing at BoingBoing.
Free-market responses to the crisis?
I’m working on questions of a new financial architecture in the wake of the financial crisis and the various bailouts, and I’m interested in whether there is a well-worked out free market alternative to the policies we’ve seen so far.
To be clear, I’m not interested, at this point, in arguments about whether free markets are to blame for the crisis. I’m also not interested in criticism of the bailout unless it’s presented as part of a reasonably detailed argument that doing nothing, or doing something different, would produce a better outcome. Finally, I’m not interested in responses based on fringe economic theories, for example, anything based on gold or the ideas of Ron Paul[1]. That is, I’m interested in work by mainstream economists putting forward a more free-market alternative to the policy of partial nationalisation adopted so far.
fn1. I’ll post on this later, but in this thread, I will terminate with prejudice anything of this kind, and similarly for meta-comments that Paul is not really a fringe figure or that someones right to free speech is being censored here.
A farewell to Surfdom
Tim Dunlop has announced the closure of the Road to Surfdom blog. It’s been a gradual process. Tim moved to the News.com blogocracy site a couple of years ago, and recently announced his retirement from blogging there.
Tim was one of the pioneers of Australian blogging. He started Surfdom in May 2002, at a time when the dominant voices in blogging where those of the US-centric warbloggers, beating the drum for war with Iraq. Tim joined Rob Corr and a handful of others putting forward more an alternative view.
I started blogging a few weeks after Tim and in those long-gone days, we found we thought very much alike, not only sharing the same views, but often writing almost identical posts, to the extent that we seemed to be blogtwins.
That was when the Iraq war and the merits or otherwise of the Bush administration were matters of lively debate, and much of the news was viewed through that prism. Bloggers had something to prove, particularly given the acquiescence of the mainstream media in the spurious case for war. Most of the pioneers from that time have proved their point and moved on, but the space they helped to create has been filled by millions more blogs, including dozens (maybe hundreds, I don’t keep up as well as I should) of Australian political blogs.
Blogging is going to be very different now in all sorts of ways, and Tim is taking a new direction, with plans to write a book. I wish him all the best.
Plea for help
You guessed it, it’s a bleg(gh!). To improved the performance of this site, I need to move the blog from its current shared hosting to a different accelerated server. This involves various bits of SQL database magic that are beyond my skills. If someone can help, I’ll be happy to reward them with a post on a topic of their choosing or (if professional skills are needed) with a reasonable monetary return for their time.
Weekend reflections – special edition
The move to the new server is complete, and I have high hopes that the problems that have plagued the site for so long may be behind us. While I get some posts going, it’s tim for weekend reflections, which makes space for longer than usual comments on any topic. As always, civilised discussion and no coarse language.The Projectionist movie full
Bad models or bad modellers
The idea that bad mathematical models used to evaluate investments are at least partially to blame for the financial crisis has plenty of appeal, and perhaps some validity, but it doesn’t justify a lot of the anti-intellectual responses we are seeing. That includes this NY Times headline In Modeling Risk, the Human Factor Was Left Out Laserblast movie download . What becomes clear from the story is that a model that left human factors out would have worked quite well. The elements of the required model are
(i) in the long run, house prices move in line with employment, incomes and migration patterns
(ii) if prices move more than 20 per cent out of line with long run value they will in due course fall at least 20 per cent
(iii) when this happens, large classes of financial assets will go into default either directly or because they are derived from assets that will default in the event of a 20 per decline in house prices
It was the attempt to second-guess human behavioral responses to a period of rising prices, so as to reproduce the behavior of housing markets in the bubble period, that led many to disaster. A more naive version of the same error is to assume that particular observed behavior (say, not defaulting on home loans) will be sustained even when the conditions that made that behavior sensible no longer apply.
Australia at risk?
According to FT Alphaville, former investment bank Merrill Lynch has done an analysis of country credit risk which, alarmingly if unsurprisingly, given the factors considered, lists Australia as the riskiest country in the world. The analysis uses seven measures “current account financing gap, FX reserves/short-term external debt ratio, exports to-GDP ratio, private credit-to-GDP ratio, private credit growth, loans-to deposits ratio and banks capital-to-assets ratio”, and you don’t need to look up the figures to know that Australia is at risk on all of these measures.
OTOH, our strong points such as large and positive public sector net worth don’t get measured here. And, given that the top 10 low-risk country list is headed by Nigeria, and includes Colombia, Indonesia and Russia, it’s obvious that this is not an index of economic health. Still, our chronic current account deficits represent a real vulnerability, a point I got tired of making during the years of easy money (Hat-tip: Felix Salmon).
I won’t get time to blog on the Mid-Year Economic Forecast for a while, but I’ll note one of the few pieces of good news. The silly idea of announcing “aspirational” tax cuts for the government’s next term has been abandoned.
John Quiggin 