The equity premium

John Quiggin1 Comment

The Economists’ Voice is one of the more interesting (at least to me) ventures in academic publishing on the Internet. The aim is to provide analysis of economic issues from leading economists, something that has been sorely lacking in recent years[1]. It’s intended to contain deeper analysis than is found on the Op-Ed page of the Wall Street Journal or New York Times, but to be of comparable general interest. Unfortunately, it’s not free but you can get guest access to read particular articles.

Simon Grant and I have an article on the implications of the equity premium, an issue that’s been discussed in various ways on this and other blogs.
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NZ election

John Quiggin62 Comments

The polls are just closing in the NZ election, for which the opinion polls have been all over the place. I’m surprised the result is even close. Helen Clark seems to have done a pretty good job, the Nationals were terrible when last in office, and while Don Brash seems like a nice enough guy in personal terms, he wasn’t much of a success as head of the Reserve Bank. The Monetary Conditions Index he introduced was a disaster and he zigged where the RBA zagged at the time of the Asian crisis, producing an unnecessary recession. However, we’ll know the result soon enough.

Update 6:30 pm Although I don’t have any knowledge of the details of the NZ system (such as which areas are counted first), the Nationals have a big lead with 20 per cent of the vote counted, and will presumably form the new government, either with an outright majority or with the support of NZ First.

Further update Sunday AM A premature concession last night! As in Australia, it appears that rural polling places finish counting first. It looks as though Labour may be returned, although the complex relationships between the various minor parties may complicate this. A sidelight of interest in relation to the debate over economic reform is that ACT (Association of Consumers and Taxpayers) was wiped out. It originally stood for uncompromising support of the free-market reforms of the Rogernomics era, but broadened its basis with law-and-order and anti-Maori rhetoric. The disappearance of ACT is not really good news, since the Nationals have adopted much of the same rhetoric on race issues, but it can reasonably be said to mark the end of the era of radical reform.

Yet Further update Sunday PM Wrong again! Rodney Hide of ACT got back in with an electorate seat, and MMP may give ACT one more. That’s what comes of trying to follow elections while in dialup mode, I guess.

The coming dollar crisis

John Quiggin38 Comments

Brad DeLong has a great discussion of the opposing views on the coming dollar crisis.

More soon on this, but my one-sentence take is that the optimists believe that it is possible to generate as much US dollar liquidity as required to prevent a large increase in interest rates (despite a depreciation), without generating domestic inflation in the US. In this, they have recent US history on their side. The pessimists think that, sooner or later, this kind of policy will fail. In this, they have long-term history on their side

The cost of private tollways

John Quiggin22 Comments

Victorian Opposition leader Robert Doyle has been forced to abandon his promise to make the Scoresby freeway toll-free. What’s really interesting about the Age report on the subject is that it starts by referring to a “$2 billion” project, but ends by referring to an Econtech report saying it would cost $4.3 billion to buy out the private contractor. Roughly speaking the first figure is the actual construction cost and the second is the present value of the amount the public will have to pay (the Bracks government estimated the latter figure at $7 billlion). This is a fine example of the excess cost associated with PPPs and private tollways.

In any case, a toll on a road of this kind makes no economic sense. What is needed is congestion pricing, as in London. Having announced an inquiry into ‘radical’ methods of addressing congestion, the Bracks government has ruled out the only workable solution in advance

Telstra and the guillotine

John Quiggin36 Comments

Having taken nearly ten years to sell half of Telstra, the government seems to be in an awful hurry to sell the rest, ramming the necessary legislation through Parliament with almost no debate. Yet it’s clear that they still don’t have a clue about how to sell Telstra for an adequate price, what control they want to exercise in the future or how to implement the policy of structural separation.

It’s hard to avoid the conclusion that this resort to the guillotine was not due to any particular urgency about this legislation. Rather the government had the numbers and couldn’t resist using them. This is a bad sign for the future, both for Australia and the government. Such hubris generally turns out badly for all concerned.

Windschuttle flips again

John Quiggin82 Comments

Henry Farrell pointed me to this Financial Times report of an interview (over lunch) with Keith Windschuttle, which begins with Windschuttle saying he regrets his involvement in the dispute over Australia’s Aboriginal history, seeing as a distraction from his ambition to write a polemical defence of Western civilisation, aimed at the US market, and make heaps of money in the process.

â€?If you have a reasonably big hit in America you’re talking about hundreds of thousands of dollars,â€? he says. “That’s my aim – to have a couple of big sellers and have a leisurely life.â€?

It is unclear how much of this is intended as tongue-in-cheek affectation, but it’s certainly consistent with notable elements of Windschuttle’s past career, which has been marked by repeated political and methodological somersaults.

Although a lot of attention has been focused on Windschuttle’s political jump from Marxist left to Christian right, I’ve always been more interested in his shift in methodological stance. Having made his name as a defender of objective truth against politicised history in both left-wing and right-wing varieties, Windschuttle has become a practitioner of an extreme form of politicised history, and now looks ready to abandon any remaining links to the world of fact.
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Monday message board

John Quiggin78 Comments

It’s time, once again for the Monday Message Board. Civilised discussion and no coarse language, please. I’m hoping to do a post looking at the four years since 11 September 2001, but in the meantime I’d be interested in your thoughts.

Freedom on the March

John Quiggin14 Comments

The Egyptian elections were the subject of plenty of triumphalism when they were announced earlier in the year, and now it looks as if it was all justified. Not only did the elections go ahead, but with 88.6 per cent of the vote going to the pro-American incumbent, Hosni Mubarak, all that talk about how the ‘Arab street’ is opposed to US foreign policy has been refuted once again.