Responding to the critics, part 2

John Quiggin

Today’s Fin (subscription only) has a couple of letters responding to my review of Lomborg’s “Global Crises, Global Solutions
. One from Brent Howard takes the Copenhagen panel to task over their approach to discounting the future costs of global warming. I agree, and will maybe post more on this later. The other, from Rajat Sood, is odd. He doesn’t address the main review at all, focusing instead on my summary of The Sceptical Environmentalist. Sood denies my initial claim that Lomborg did not argue that the scientific evidence on global warming was wrong, focusing instead on the idea that it would be better to spend money on aid projects. (full letter over the fold) I expected the review to be attacked from various directions, but this one surprised me.

In response, I can’t do much better than quote Lomborg himself

Let us agree that human activity is changing our climate and that global warming will have serious, negative impacts. Nonetheless, all the information from the UN climate panel, the IPCC, tells us that it will not end civilisation … The end-of-civilisation argument is counterproductive to a serious public discourse on our actions. We do have a choice. We can make climate change our first priority, or choose to do other good first.

If we go ahead with Kyoto, the cost will be more than $150bn (£80bn) each year, yet the effect will first be in 2100, and will be only marginal. This should be compared with spending the $150bn each year on the most effective measures outlined in the Copenhagen Consensus, saving millions of lives. The UN estimates that for just half the cost of Kyoto we could give all third world inhabitants access to the basics like health, education and sanitation.

It’s true that Lomborg spends some time in his book discussing arguments that the threat of global warming may be overstated in scientific terms, but (wisely) he doesn’t rely on any of them.Here are a couple more sources, favourable and hostile, giving broadly similar summaries of Lomborg’s position.
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Responding to the critics, part 1

John Quiggin3 Comments

The Economists’ Voice has printed a comment by Thomas Grennes on my article on the US trade deficit. The abstract

John Quiggins’ article, “The Unsustainability of U.S.Trade Deficits” ignores the gains from international borrowing and lending and the gains from trading according to comparative advantage.

isn’t very informative, but he mainly argues against the idea of a zero current account deficit. Grennes misses my point fairly comprehensively. Here’s my draft response

Thomas Grennes’ letter ‘Neither Borrower nor Lender Be’, in response to my article on The Unsustainability of the US Trade Deficit illustrates my observation that ‘much analysis confuses the current account deficit and the goods and services deficit’. As stated in the summary, ‘Although substantial current account deficits can be sustained indefinitely, large deficits in goods and services trade cannot be. Even to stabilise the current account deficit, the United States must restore balance in goods and services trade within a decade or so.’ Grennes ignores this, and focuses entirely on the current account balance.

Grennes suggests that ‘a zero current account balance implies neither borrowing nor lending, and a zero balance appears to be what Quiggin advocates.’ In fact, I examine the adjustment needed to stabilise the current account at its current (historically high) level of 5 per cent of GDP, and show that this requires a fairly rapid return to balance or surplus on the trade account.

Even in the world of web-based journal publishing, it will probably take a month or two for this to get through the publishing process, so comments and suggested improvements are most welcome.

Pinochet’s private pensions

John Quiggin15 Comments

For twenty-five years or so, the privatised pension scheme introduced in Chile under the Pinochet regime by his labour minister, Jose Pinera, has been touted as a model for the world to follow. It’s been particularly influential in the US debate over social security privatisation but has also had some influence in Australia, which has a somewhat similar setup, though we arrived at it by a different route – Chile scrapped its defined-benefit state pension scheme, keeping a basic safety net, Australia started with a means-tested flat-rate pension, but has tried to expand private superannuation since the 1980s

Now the New York Times reports that the Chilean scheme is not delivering the promised benefits . Lots of people are getting less than they would have under the old scheme and large numbers are falling back on the government safety net. Fees have chewed up as much as a third of contributions.

Why has this bad news taken so long to emerge. Complaints about fees have been around almost since the start, but right through the 1980s, they were ignored becuase investment returns were exceptionally high. This in turn reflects the fact that Pinera had the good luck or good judgement to start the scheme when the stock market was at an all-time low, thanks to a financial crisis (in retrospect the first of many cases where financial market darlings got into trouble). The economy recovered and the stock market boomed. Once gross returns fell back to normal levels, the bite taken out by fees became unbearable.
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Best blog in Queensland!

John Quiggin10 Comments

One of the Australia Day events I didn’t catch up with until today was the announcement of the second (I think) annual Australian blog awards, run by Keks. Most of my favourites scored some kind of guernsey, including Barista (best Vic blog), Rob Corr’s Kick and Scream (best political and best WA), Troppo Armadillo (best NT and best group blog), Surfdom (best OS blog) and Gianna at She Sells Sanctuary (best personal blog). And this blog picked up the coveted “best blog in Queensland” award, beating off (sorry, couldn’t resist) Dawei’s House of Debauchery and Bee-yotching.

The left wing of Ozplogistan swept the awards, which is partly a reflection of who bothered to vote, but partly a reflection of the extent to which the left now dominates the virtual sphere in Australian politics, however poorly we may be doing In Real Life. When I started blogging in the distant days of 2002, right-wing bloggers dominated the scene. A year ago, I’d have said the balance was about the same as in the Australian electorate as a whole. Today, although there are some good right-wing and centre-right blogs, they are a distinct minority.

Anyway, thanks very much to Keks for taking the trouble to run this exercise. I know how much work goes into this kind of thing and I really appreciate it.

Patriotic pride

John Quiggin2 Comments

It’s not often I get to an international sporting event on Australia Day, but tonight’s NBL match between Brisbane Bullets and NZ Breakers qualifies at a stretch. Brisbane won by the satisfyingly crushing margin of 40 points. Aussie, Aussie, Aussie! Oi, Oi, Oi!

Let’s hear it for holidays

John Quiggin9 Comments

Ross Gittins says

Those who whinge about lost production on public holidays are misguided

, and readers won’t be surprised to learn that I agree. Here’s a piece I wrote before Christmas. It was planned as a leisurely holiday piece for the Fin, but the tsunami disaster gave us something more urgent to think about.

In many ways, the Christmas holidays represents the Australian economic problem in microcosm. On the one hand, we expect and look forward to a break from work. Even if we don’t take a holiday, Australians have traditionally taken it for granted that not too much will get done in December and January.

On the other hand, we spend a lot on Christmas presents and they seem to get more lavish every year. If we want to spend more, we need to work more to pay for it.

In the short run, we can bridge the gap with the trusty credit card, but that just means a lot more work to pay it off, some time in the future. It seems as if the only solution is to stop taking those long Christmas breaks and go back to work straight after New Year.
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Lessig on the limits of copyright (Crossposted at CT)

John Quiggin6 Comments

This is my second report on last week’s Creative Commons conference. Lessig’s closing lecture was given in the Banco court of the Queensland Supreme Court (very plush – those lawyers don’t stint themselves) and was focused on traditional copyright issues . For Brisbane readers, an interesting tidbit titbit was that we haven’t seen OUTFOXED: Rupert Murdoch’s War on Journalism because neither the Courier-Mail nor the Australian (both Murdoch-owned) would carry more than minimal ads for it. One of the costs of being in a one-newspaper town.

The main point of the lecture was a historical survey of the relentless extension of copyright, along with some discussions of a failed attempt to stop this in the case of Eldred vs Ashcroft. This case is notable for the fact that, as has happened before, the economics profession almost unanimously supported the losing side. As Lessig argued copyright has been extended in length, scope and force to the extent that nowadays virtually everything is copyright, virtually forever.

Given that the defenders of unlimited copyright are interested mainly in protecting the merchandise markets for Mickey Mouse and Winnie the Pooh, it’s often struck me that the sensible political resolution would be to concede defeat on this point, and seek to liberalise copyright for the 99 per cent of literary and artistic output that doesn’t have such huge monopoly value. One step in this direction, which Lessig discussed in his talk, is the case of Kahle v. Ashcroft which challenges changes to U.S. copyright law that have created a large class of “orphan works.” Orphan works are books, films, music, and other creative works which are out of print and no longer commercially available, but which are still regulated by copyright.

As I’ve said previously, in the end, I don’t think either law or technology will be decisive here. Rather it’s that the value of being freely connected to a huge network will exceed any benefits that can be obtained by gating off a particular part of the network and demanding payment for access. After all, the reason we have an open Internet is that it drove proprietary networks out of business or else absorbed them. Attempts to create “walled gardens” within the Internet haven’t been abandoned entirely, but they haven’t prospered either.

In this context, the most exciting feature of the conference was the launch of the Australian version of the Creative Commons licence. Widespread voluntary adoption of this kind of license will render measures like the extension of copyright irrelevant. In this context, the version of the license I particularly like the “Share Alike” version, which resembles the GNU public licence in requiring derivative users to adopt a similarly open licence. The greater the volume of material with this kind of licence that is out there, the greater the incentive to make use of it, even at the cost of forgoing commercial copyrights. Since most commercial culture depends ultimately on unpaid appropriation of older material, the effects will be cumulative (or, in today’s popular jargon, ‘viral’)[1].

As I mentioned, I was struck by the quality of Lessig’s presentation. He’s a great speaker and I was so struck by the elegance of his minimalist Powerpoint presentations that I got him to send them to me . He mostly uses a white typewriter font on black background with just one or a few words per slide. In the spirit of remix, I plan to see how much of this look and feel I can appropriate for my own work[2].

update By coincidence, just after I finished this the latest London Review of Books arrived, complete with a lengthy article on the monopolistic practices of the London booksellers in the 18th century, a point also addressed by Lessig. Unfortunately, the article itself is subscriber-only

fn1. This reminds me that my CC licence got lost in the shift from Movable Type. Another job to be done.

fn2. I’ve just decided to make the shift from Powerpoint to Keynote and Lessig mentioned he was doing the same. I’ll be trawling the web for examples.

Monday Message Board

John Quiggin41 Comments

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Civilised discussion and no coarse language, please. I probably won’t have anything more to say about the Labor leadership, but I’d be interested in the thoughts of others.