Having established that the idea of ‘regional government’ makes no sense in the Australian context, let’s look at the real issue of centralism versus federalism. Would we be better off without a unitary system in which a single national government controlled everything [1]? I don’t think so[2]. I’ll present my case over the fold. You might also like to look at Ken Parish, Gary Sauer-Thompson and Andrew Norton. The Currency Lad disagrees, endorsing Keating’s view of the Senate, and Whitlam’s view of the states.
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Another terrible earthquake
There’s not much to say about the latest earthquake in Indonesia, except to hope that no worse news comes in from places that have not yet been contacted. Our thoughts go to those who have lost homes and loved ones.
Happy Birthday to me!
Well, today is my birthday. A gentleman never reveals his age, but it’s a perfect square[1]
fn1. And not the subject of a Beatles song
Regional government
I’ve long promised a post on why regional government, an idea favored by both Whitlam and Howard, is a silly idea. If people want a unitary system of government, with the national government absorbing all the powers currently exercised by the states, they should say so, instead of flirting with this figleaf.
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Monday Message Board
It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Discussion starter: what did you do on the Easter holidays. Civilised discussion and no coarse language, please.
Nasty easter eggs
I’ve been trying to resolve my comment spam problems, including false positives, but without much success, as you can see from the recent comments. Please bear with me, and put up plenty of real comments to push these guys off the front page, while I try to delete them once and for all.
Howard channels Whitlam, part 2
The increasingly centralist tendencies of the Howard government have been obvious for a while. Howard’s latest statement that Australia would be better off without state governments is only a bit stronger than what he said last year. As I pointed out at the time, both Whitlam and Howard are wrong on this, and the whole idea of regional governments won’t stand up to even cursory scrutiny.
What makes the statements more significant now is the fact that Howard has control of the Senate and can therefore repudiate the GST deal had, more generally, do whatever he likes. It will be interesting to see whether professed defenders of federalism, like the National Party, stand up to him on this.
Bankruptcy again
I’ve been reading Todd Zywicki’s paper An Economic Analysis Of The Consumer Bankruptcy Crisis (1Mb PDF). Zywicki’s approach is to look at aggregate time-series data on a set of suggested causes of rising bankruptcy, suggest that the pattern for these time-series doesn’t match the observed increase in bankruptcy, The main point is, as he says,
Static or declining variables, such as unemployment, divorce, or health care costs, cannot explain a variable that is increasing in value, such as bankruptcy filing rates.
Hence, he says, the ‘traditional model’ of bankruptcy as a “last resort” outcome of financial distress is no longer valid. He therefore falls back on the residual hypothesis of changes in consumer behavior in the form of an increased willingness to resort to bankruptcy, possibly due to the rise of impersonal modes of lending and the decline of moral sanctions. Zywicki doesn’t mention the other obvious residual possibility: an exogenous increase in willingness to lend to high-risk borrowers, but symmetry suggests he ought to.
I don’t think Zywicki’s is the ideal research strategy (see below) but it has the advantage that anyone can play, armed only with Google. So let me point to a variable that has risen in the right way and could reasonably be expected to lead to rising rates of bankruptcy. That variable is the volatility of individual income, or, in simpler terms, the economic risk faced by the average person.
What this means is that the bankruptcy ‘crisis’ is an outcome of the general changes in the US economy over the past 30 years or so. If it weren’t for expanded credit and increased reliance on bankruptcy, the distress caused by growing inequality and income volatility would have been substantially greater. If bankruptcy laws are tightened, distress will increase. To put it simply, bankruptcy is the lesser of two evils.
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Polls and markets
For those interested in this continuing debate, Andrew Leigh and Justin Wolfers have a new paper (PDF) comparing the performance of polls and betting markets in predicting election outcomes.
For what it’s worth, I think the two are about equally good, at least when an election is about to happen. There’s no indication that markets have significant private information: for example, they react, and sometimes overreact to ‘news’ that turns out, in retrospect, to be misleading. But most of the time, they provide a pretty good summary of available public information.
This is not too surprising to me. Although I’m strongly of the view that financial markets are not fully efficient in the semi-strong sense of making optimal use of all public information, the violations are subtle (but important!). Tests of election markets simply don’t have the resolution to pick up subtle violations, as opposed to occasional single-point observations, for example, the collapse of the Bush bet when the first exit polls on election day suggested a Kerry win.
Back on the air
Crooked Timber the mainly-academic group blog of which I am one-fifteenth, is back on air with a dedicated server and has published a big backlog of posts. Read and enjoy!
