Spot the arithmetic error

John Quiggin10 Comments

This story in the Oz reports a decline in the return to education, but the argument is undermined by a problem with averages. Here are the crucial bits

THE gap in earnings between university graduates and people without a degree is closing, as the cost of getting a degree escalates.
…
While the proportion of the labour force aged 15 to 64 with a degree had almost doubled since 1993, the salary gap was closing against average earnings, he [Michael Gallagher] said.

The ratio of earnings for bachelor degree graduates to average earnings has fallen for both men and women but is more pronounced for women.

For example, between 1995 and 2001 it fell from 105.4 per cent to 93.9 per cent for women and from 96.8 per cent to 91.9 per cent for men.

Readers should not need a university degree to see the problem with this analysis, but I’ll spell it out over the page

Update Andrew Norton at Catallaxy has already made the same point
Read More »

Worse than the disease ?

John Quiggin6 Comments

My preferred cure for jetlag is to arrive in the morning and spend a fair part of the day outside, resetting your body clock, then have as normal an evening as possible, before going to bed about 10pm. In most respects, my schedule fitted this plan perfectly. Leaving Paris on Monday evening, I got into Brisbane this morning (Wednesday) and the day was suitably sunny. With the State of Origin starting soon, there’ll be no problem about staying up.

The only unusual feature is that my normal Wednesday includes karate training. I can now report that this is a complete, if problematic, cure for jet lag. Whatever term might describe my post-training condition, it is not jet-lagged.

GO MAROONS

Lomborg resigns from EIA

John Quiggin5 Comments

From bertramonline, some comment (a couple of weeks old now, but my Internet access has been spotty) on the news that Bjorn Lomborg has resigned as head of the Danish Environmental Assessment Institute and is returning to his academic job. Like me, Bertram is somewhat surprised by the limited media reaction to, and coverage of, Lomborg’s last big effort, the Copenhagen Consensus.

As attentive readers will recall, the conference concluded that fighting AIDS should be the top global priority in helping developing countries and also that climate change mitigation was a waste of money. I agree with the first of these conclusions, and more generally with the need for more spending on health poor countries, and I hope that Lomborg will put some effort into supporting it. I’ll try to keep readers posted on this.

Back in Brisbane

John Quiggin2 Comments

I’m back from my travels and, even after a week in Paris, Brisbane is as beautiful as ever, with blue skies, a mild winter day and the river looking as appealing as always.

My trip to Paris was very enjoyable, and my conference paper went very well. For a mixture of historical and stylistic reasons, my work on the economics of uncertainty is more highly regarded in France than in the United States. This prompted one of my co-authors to observe, rather unkindly I thought, that I could be regarded as the Jerry Lewis of decision theory.

Although I saw many interesting sights in Paris, the most surprising was that of four men in suits riding what appeared to be Segways (as far as I recall, I’ve seen descriptions, but not pictures, of these previously). Whether this was the beginning of a trend, or one of the many demonstrations and manifestations that abound in Paris, I couldn’t say for sure.

Belated birthday

John Quiggin2 Comments

In the rush of getting ready to travel overseas, I forgot to note it, but this blog was two years old on 21 June. It seems a lot longer ago than that to me. During that time I’ve moved the blog twice, and seen many other bloggers come and go, and in some cases return. There have been some big changes in the time I’ve been paying attention to the blog world, not all of them in line with what I would have expected.

Although the number of blogs has grown over time, there hasn’t been the explosion I expected to result from the capacity (in my experience highly addictive) to publish your thoughts to the world on a daily basis. By the way, this is a good time to invite anyone who thinks they should be on my blogroll to write and tell me[1].

The relationship between blogs and the print media has reached something that looks like equilibrium for the moment. Most journalists know now what blogs are, and most who engage in political and social commentary are aware that their words are going to be dissected by mostly-hostile commentators (I try to accentuate the positive, but even so, most of my links to articles in the mainstream press are critical).

Of course, as bloggers are to pundits, commenters are to bloggers. This blog developed a robust group of commenters early on, and has sustained lively debate ever since (much of it, unfortunately, lost in various database failures).

fn1. I’m generally happy to link to blogs in the listed category, though I reserve the right to make arbitrary judgements, and to put off updating the roll until I get a round tuit.

Monday Message Board

John Quiggin19 Comments

It’s Monday here in Paris, but just about Tuesday at home. I should be back on deck in a few days. In the meantime, talk among yourselves (even while I’m away, I expect civilised discussion and no coarse language.

The Republican case for inflation

John Quiggin14 Comments

In keeping with the blog tradition of bringing you tomorrow’s talking points today, I thought I’d look a bit further than the current election campaign and consider the implications of a Bush victory. On past form, there’s no reason to suppose that a second term will lead Bush to abandon his tax cuts, or to propose any significant net reduction in expenditure. At least not when there’s an obvious alternative, that only a few shrill Democrat economists and some incredibly out-of-date Republicans would ever object to. The US government has at its disposal and endless source of costless wealth – the printing press that turns out US dollars. Hence there’s no need to do anything tough like raising taxes or cutting Socil Security benefits. The only problem is that, according to some economists, reliance on the printing press as a source of government finance is likely to cause inflation.

As a first line of defence, the views of these economists can be criticised. There are plenty of Keynesian critics of monetarism who’ve pointed out that there’s no simple or automatic relationship between the money supply and the rate of inflation, and probably there are some who’ve been incautious enough to deny that there is any relationship at all. In any case, in the new era, the dynamism of the US economy is such that everyone wants to buy US dollars as fast as the Treasury can print them (ignore any recent observations on currency markets that might suggest otherwise).

Still, these are only delaying tactics. What will really be needed is a set of talking points showing that inflation (properly referred to as price appreciation or something similarly positive) is actually a good thing. In the hope of bringing the debate forward a bit, I’ve advanced a few.
Read More »

A snippet on macro policy

John Quiggin22 Comments

Until fairly recently, macroeconomic policy (the management of unemployment, inflation and the exchange rate) was the central concern of economic policy. Since the early 1990s, and particularly under the Howard government, these concerns have shifted to the periphery.

The Hawke government abandoned targeting of the exchange rate with the floating of the dollar, but Keating in particular continued to regard the current account deficit as an important policy target, at least until the early 1990s. Excessive concern with the current account deficit was widely seen as one of the factors behind the policy miscalculations that produced the 1989-92 recession. The counterargument, put forward most prominently by John Pitchford, was that, in a deregulated market, the current account balance is ultimately determined by the corresponding set of borrowing and lending transactions, and that these should not be a concern of macroeconomic policy. This view is now fairly generally accepted. Even though the current account deficit is as large in relation to GDP as it was in the 1980s, only a minority of commentators[1] express concern about it.

More significantly, the government abandoned the idea of using fiscal policy to manage the economy, and ceased to take an active role in the determination of monetary policy, leaving this entirely to the Reserve Bank. Although the Reserve Bank, unlike other central banks did not take the view that it should be concerned solely with inflation, the resulting policy regime was one in which inflation targeting was the primary focus, and unemployment was, at most, a matter of secondary concern.
Finally, the government abandoned Labor’s target of an unemployment rate of 5 per cent, and declined to set an alternative target.

fn1. I’m a member of this minority

Some trivial impressions from Israel

John Quiggin2 Comments

I’ve spent the last five days in Israel, at a summer school on the Economics of Risk. Judging by the wrtings of visitors who’ve spent a similar amount of time in Australia, I ought by now to have formulated both an incisive analysis of Israeli society and a comprehensive plan for resolving the Israeli-Palestinian conflict. I haven’t done either, but I do have a few rather trivial observations to make.
Read More »

Terra Nullius

John Quiggin24 Comments

I’ve read a number of recent articles the burden of which is that the doctrine of terra nullius was a straw man invented by Henry Reynolds (sorry no links, but Christopher Pearson in the Oz states the point and lists others).

My own memory is that this doctrine was enunciated, both in name and in substance, by Justice Blackburn in a major case about 1971, which wasabout the beginning of Reynolds academic career. I’m prepared to believe that I’m wrong about the name, but I can’t see how the substance of Blackburn’s decision could have a basis significantly different from what we now call the doctrine of terra nullius . Maybe Ken Parish or some other well-informed person can set me straight.

Update: Commenter Dan has all the relevant info, so read the comments thread. Blackburn actually used the phrase “desert and uncultivated” which is taken in all the subsequent discussion to be synonymous with terra nullius.

My conclusion: Pearson and others are talking nonsense. The Blackburn decision made the validity or otherwise of the terra nullius doctrine a vital concern. Reynold’s research showed that this doctrine was not asserted as part of the British claim to sovereignty over Australia. Of course, the evidence can be read in ways more favorable to a terra nullius view, but there’s no sense in which this view was a straw man invented by Reynolds for the purpose of demolition.