What I’ve been reading

John Quiggin9 Comments

Never saw it coming by Karen Cerulo is a study of disaster preparedness or rather its absence. Cerulo argues that the failure to prepare for disaster is not a matter of individual incompetence or fecklessness. Rather she argues it reflects a bias towards optimism that is deeply embedded in American culture.

In the abstract the argument seems convincing, and there is plenty of psychological evidence to support it. But I find myself disagreeing with a lot of the detailed argument. On the one hand, some disasters can’t be prepared for in any effective fashion, so it makes sense not to worry about them.

On the other hand, Cerulo cites as an example of successful preparedness the massive Y2K remediation effort undertaken in the United States. As I’ve pointed out on many occasions, other countries undertook no preparation and came out fine. Russia and Italy are notable examples – the US State Department issued a travel advisory for Italy as did UK authorities and Australia actually evacuated its embassy in Moscow leaving a skeleton staff to wait out the cataclysm. This isn’t being wise after the event. Once the 2000 fiscal year began with no serious incidents it was obvious that for anyone except nuclear reactor managers and the like, ‘fix on failure’ was the optimal response.

I’m not sure what to make of my disagreements on the details.Some disagreements is to be expected in any detailed argument. But the range of disagreement leads me to think that maybe handling low-probability catastrophic risk is something we are not very good at, sometimes preparing for non-existent risks and at other times failing to foresee obvious possibilities.

Winning the lottery

John Quiggin7 Comments

I never win lotteries or raffles (maybe because I study them in my research on uncertainty) so it figures that my first win in decades should be the compulsory door prize at our Seiyushin karate Christmas party. Prize: five rounds with our Kancho (founder) (he’s the one in the picture). I collect on Wednesday night, so don’t expect much in the way of blogging on Thursday.

Precognition

John Quiggin35 Comments

Faced with documentary evidence that the Australian Ambassador to the UN, John Dauth, told AWB chairman Trevor Flugge of the Iraq invasion a year in advance, correctly observing that even if weapons inspectors were readmitted this would only produce a brief delay, DFAT’s response is to say that it was just a lucky guess. This line has been swallowed with enthusiasm by JF Beck and, in comments here, by Currency Lad.

If this is an example of Dauth’s unaided powers of prediction, it’s a pity no-one asked him what would happen after the invasion.

Friedman and Hayek

John Quiggin26 Comments

Brad DeLong gets the distinction between Friedman and Hayek pretty much right in my view.

I think that there is an important difference between Friedman and Hayek. Hayek is an economic (classical) liberal but a social conservative: a believer in respect for throne and altar. Social conservative Hayek can see Pinochet as a good thing: far better to have an authoritarian state that maintains the conservative moral order, if it can be persuaded to adopt laissez-faire economics, than it is to have a democracy that regulates the economy. Friedman, by contrast, hates and fears a government that prohibits use of recreational drugs in your home almost as much as he hates and fears a government that won’t let you undersell your politically-powerful competitors. For Friedman, Pinochet is a bad–an aggressive, powerful military dictator–whose evil the Chicago Boys can curb by persuading him to adopt laissez-faire policies.

Roughly speaking, Friedman’s position was that even a dictatorship (such as Chile or China) would be better off with free-market economic policies. Hayek’s was to prefer a liberal dictator to a democratic government lacking liberalism.

Gaffes

John Quiggin18 Comments

In ordinary life, we know that the word “gaffe” means an inconvenient truth. If your SO asks “does this make me look fat” or “can I get away with a combover” the true answer is almost certainly a gaffe (if not, they wouldn’t have asked).

In politics, some avoidance of inconvenient truths is inevitable for much the same reasons. Ambitious upstarts have to say somethng along the lines of “I love and respect our leader” and patient leaders have to say “Colleague X is doing a great job” until the day the knife or axe is ready for use. In matters of this kind, no-one expects truthfulness.

But, as used by the MSM, the term “gaffe” means inconvenient speaking of the truth about policy questions. the latest instance is the statement by Queensland Liberal leader Bruce Flegg that recycled water is safe, and that, given the uncertainty of future rainfall, there is little choice but to go for recycling.

The first statement is supported by overwhelming evidence, and the second by any reasoned assessment of the situation. But because the Nationals are bidding for the support of the large segment of the public with irrational fears on the topic, and Labor is ducking the issue with proposals for a referendum, Flegg’s statment of the plain truth is a gaffe.

We’ll all be rooned

John Quiggin32 Comments

Today’s Courier-Mail has a report pushing the Beattie Government’s plans for new dams, and threatening financial ruin if they aren’t built. Crucial quote:

As its efforts to win approval for the controversial Traveston Crossing Dam in the Mary River Valley move into top gear, the Government has used a consultant’s report on possible economic losses to the region to push its case for the project.

The lack of new water sources could end up costing southeast Queensland at least $55 billion and perhaps as much as $110 billion by 2020, according to the consultants ACIL Tasman.

Even before this episode, the name ACIL Tasman wasn’t one that filled me with confidence. All consultants like to produce reports that support their client’s preferred position, and my experience of ACIL Tasman is that the approach to this outcome is “whatever it takes”.

I haven’t been able to find the report yet, but the numbers seem way off-beam to me. This report says that the total revenue for SEQ Water and sewerage businesses was about $1.4 billion in 2005/06, growing at about 6 per cent a year. ACIL Tasman wants us to believe that limits on additional supplies could cost between $5 billion and $10 billion a year.

I find this implausible, at least as an economically meaningful cost estimate. A doubling of water prices would be enough to reduce demand significantly over time (even allowing for underlying growth in population and income), and make all sorts of supply options, such as desalination, economically feasible, without any need for new dams. The welfare cost of this would be around 0.5 billion a year (I’ll do a proper check on this number later). So, I’d say ACIL Tasman is out by a factor of 10 to 20.

I haven’t seen enough information to determine whether the proposed dams pass the cost-benefit test. But this report makes me think the case must be pretty weak.

If you can’t beat them …

John Quiggin11 Comments

Back in August 2005, Anita Quigley had this to say about blogging:

“Why some pimply-faced geek, sicko or average Joe Blow thinks someone else wants to read every random thought that crosses their mind is beyond me. Alongside the belief that we all have a novel in us – we haven’t – blogging is the ultimate form of narcissism.�

Hmm