Dodging a bullet

John Quiggin24 Comments

Looking at the stories of pervasive corruption coming out of the Burke inquiry in WA, a point I haven’t seen noted is that Federal Labor dodged a bullet by dumping Kim Beazley just as the scandal was breaking. Beazley was no doubt telling the truth when he said he’d never spoken with Burke about the latter’s business interests. Still, given is role in WA Labor, he could scarcely have been unaware that Burke was in a position to influence ALP preselections, and that Burke was using that power for his own personal enrichment. That might not have been a crime, but it was obviously damaging to the Labor party. And given the damage Burke had already caused, having such a person as a friend was an indication of judgement so poor as to cast doubt on Beazley’s capacity for high office.

Sticking with state issues, I can’t recall such a deplorable choice as that being faced by the voters of NSW on May 24. If ever a Labor party could do with a spell in opposition to sort itself out, the NSW branch is that party. Iemma seems decent enough, but thoroughly mediocre, Carr made a dreadful mess of things but profited handsomely out of it, and the ministerial team seems On the other hand, thinking over the string of mediocrities, sharpers and no-hopers who’ve led the NSW Liberals since the corrupt but competent Robin Askin departed the scene, I can’t thing of one who’s less appealing than Peter Debnam.

By contrast with these states and with the systematic corruption of the Federal government (the fact that no-one in government can be charged with anything over the payment of hundreds of millions of dollars to Saddam Hussein indicates a situation far worse than if a single minister or public servant had acted corruptly), the problems faced by the other Labor state governments seem pretty minor. Still, I nearly spat out my morning coffee when I read that Peter Beattie was canvassing yet another canal project, reviving and expanded the Bradfield scheme. I can only hope this is some sort of diversionary tactic.

Update Not as clean a dodge as all that, as it emerges that Rudd met Burke several times. The factional system that gives power to people like Burke is a disaster for Labor. More generally, the decay of mass political parties is a big problem for Australia.

Discounting the future, yet again

John Quiggin74 Comments

Felix Salmon gnashes his teeth at yet another incorrect report on discounting and the Stern review, by David Leonhardt in the New York Times.

Using his discount rate and other assumptions, a dollar of economic damage prevented a century from now is roughly as valuable as 7 cents spent reducing emissions today. (In fact, it’s less than that, because Stern adds another discount rate, called delta, on top of eta.)
Leonhardt says that “spending a dollar on carbon reduction today to avoid a dollar’s worth of economic damage in 2107 doesn’t make sense” – but this is a straw man, since Stern never comes close to saying that we should do such a thing. Leonhardt also spends a lot of time on the academic qualifications of Stern’s opponents, but neglects to mention that Stern himself, a former chief economist of the World Bank, is actually a real expert on discount rates, and understands them much better than most economists do.

Salmon is right, both about the Leonhardt piece and, unfortunately, about the limited understanding of discounting issues on the part of economists in general.
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The Oz jumps the shark

John Quiggin18 Comments

Seeing a link to a story headed Cheney brings out the hate in peaceniks I thought it would be the usual stuff from one of the increasingly desperate pro-war pundits at the Oz. But this piece purports to be a news story.

The actual events detailed in the story don’t do much to justify the headline or the similarly hyperbolic opening paras. A small group of protesters (about 350) marched down George Street despite not receiving police permission. Scuffles broke out and ten people were arrested and charged when protesters tried to break through police lines. No injuries were reported on either side. In other words, a run-of-the-mill minor demo just like hundreds of others we have seen.

Although the Oz has been increasingly detached from reality lately (its editorial the other day referred to Howard’s triumph over Rudd in the Obama stoush, and it has long since lost the plot on global warming) it has generally made at least some attempt to adhere to the idea that news and opinion are supposed to be separate. Obviously, that particular shark has now been jumped.

What’s wrong with happiness measurement ? (crossposted at Crooked Timber)

John Quiggin10 Comments

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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Revising my priors

John Quiggin43 Comments

Looking at the desperation with which opponents of climate science, and of sensible policy responses such as Kyoto, are holding on to positions that have clearly become untenable, has prompted me to think about my own views on a range of issues, to see whether I am holding on to beliefs that can’t be sustained in the light of accumulating evidence.

The most obvious problem for me is that of continued macroeconomic stability in the face of trade and current account deficits driven (or so it seems) by speculative asset price booms. I’ve long argued that such deficits can’t be sustained and that neither Australia nor the US is on a path to a smooth adjustment. However, while deficits have continued and, in the case of the US, grown steadily, evidence of anything but smooth adjustment is certainly thin on the ground.

The rapid growth of China, and the apparent willingness of the Chinese government (and maybe also the public) to hold low-return $US assets and to buy large quantities of commodity exports from Australia has rendered previous projections largely irrelevant. While the “Bretton Woods II” story that emerged a couple of years ago seemed implausible to me, it has held up pretty well so far.

While I’m not ready to join the optimists just yet, it’s clearly necessary to rethink the implications of a Chinese economy that is already a substantial part of the global total, and growing rapidly.
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RSMG back on air

John Quiggin2 Comments

Things have been pretty frantic at the Risk and Sustainable Management Group (my research team at UQ, focusing on the Murray-Darling and related issues) as we raced to prepare five papers for the Australian Agricultural and Resource Economics Society meeting in Queenstown NZ last week. There’s lots of news about this at the RSMG blog.

We’ve also had a complete redesign of our website, which is now located here. We’ll be updating Working Papers and adding lots of publications in the near future.

I plan to write more about water and climate at this blog in future. Discussion much encouraged.

Revising my priors

John QuigginLeave a comment

Looking at the desperation with which opponents of climate science, and of sensible policy responses such as Kyoto, are holding on to positions that have clearly become untenable, has prompted me to think about my own views on a range of issues, to see whether I am holding on to beliefs that can’t be sustained in the light of accumulating evidence.

The most obvious problem for me is that of continued macroeconomic stability in the face of trade and current account deficits driven (or so it seems) by speculative asset price booms. I’ve long argued that such deficits can’t be sustained and that neither Australia nor the US is on a path to a smooth adjustment. However, while deficits have continued and, in the case of the US, grown steadily, evidence of anything but smooth adjustment is certainly thin on the ground.

The rapid growth of China, and the apparent willingness of the Chinese government (and maybe also the public) to hold low-return $US assets and to buy large quantities of commodity exports from Australia has rendered previous projections largely irrelevant. While the “Bretton Woods II” story that emerged a couple of years ago seemed implausible to me, it has held up pretty well so far.

While I’m not ready to join the optimists just yet, it’s clearly necessary to rethink the implications of a Chinese economy that is already a substantial part of the global total, and growing rapidly.
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Another own goal for the denialists?

John Quiggin141 Comments

Blogospheric opinion has divided on predictable lines over the Queensland Land and Resources Tribunal’s rejection of objections to a new coal mine by environmental groups who wanted offsets for the carbon emissions of the mine. Brickbats have come from Andrew Bartlett, Tim Lambert and Robert Merkel, while Jennifer Marohasy and Andrew Bolt have cheered the Tribunal and its presiding member, President Koppenol.

But this looks awfully like an own goal for the denialists to me.
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