The natural party of government?

John Quiggin11 Comments

Federal Labor’s recent resurgence in the polls doesn’t surprise me. Even when Labor was at its lowest ebb last year, I pointed out the baselessness of the idea that Howard had captured the hearts of the electorate and argued that Labor has become, in the absence of foreign policy crises or spectacular incompetence, the natural party of government in Australia. I think we are seeing in part the same phenomenon as in 1996. Having won an election against the better judgement of the voters, the government now has six years of sins to atone for instead of just three. But over and above this is the fact that, on tax and expenditure issues, the electorate is well to the left of both major parties.

What’s more striking than the Federal results in many respects is this Newspoll on the Carr government, which, I think it’s fair to say, has displayed some pretty spectacular incompetence over the last couple of months, what with the rail and hospital crises and the botched attempt to railroad the (spectacularly incompetent) former Communications Minister Michael Lee into office as Lord Mayor of Sydney. Carr’s personal popularity has taken a beating as a result of all this. But

On the two-party-preferred vote, however, Labor still remains in a much stronger position than the Coalition. Labor has 54 per cent support, slightly down from 56 per cent at the state election, while the Coalition is at 46 per cent, slightly up from 43.8 per cent.

This suggests to me that it will take a truly catastrophic display of incompetence by Labor for the Liberals to win a state election in Australia, as long as they remain the party of small government, privatisation and tax cuts.

The pursuit of happiness

John Quiggin3 Comments

My view of the US is probably overly influenced by Hollywood, but I had the impression that the right to marry your high school sweetheart was a crucially important instance of the inalienable right to the pursuit of happiness set out in the Declaration of Independence. If so, it seems as if there’s a contradiction between this and this.

The ABC listens

John Quiggin13 Comments

Following complaints by readers, which I shared, I emailed my contact at the ABC about the fact that the sound from ABC programs is available only in RealPlayer. As I said in my email

The sound version of the talk is available on the ABC Website only in RealPlayer format. RealPlayer is a real pain – it’s hard to download the player without being harassed about paying for it and it seems to need upgrades every other week. If the site is going to have a single choice it should be Quicktime, but a better option would be to offer all three major formats. I can’t believe that this would be a huge effort compared to the cost of producing the content in the first place, including the time contributed by the ‘talent’.

Having complained about websites before, I expected, at best, an autogenerated reply. I was very surprised therefore, to get an immediate phone call from Paul Bolger of the ABC who explained the situation. Quicktime is ruled out because it can’t be operated in a way that stops downloading, which is problematic for the ABC because their programs typically contain copyrighted music (yet another thing wrong with copyright, IMO, but I digress). The initial choice of RealPlayer over WindowsMedia was based in part on the commendable desire not to extend Microsoft’s monopoly any further, but it’s likely that WMV format will be made avaiable sometime soon.

Meanwhile, there are more exotic possibilities such as MP3 (the problem again being the need to excise music content) and Icecast, a format derived from Ogg Vorbis an open free format of which I was vaguely aware, but have never used.

If anyone has any other suggestions, I’ll be glad to pass them on. In the meantime, I can only say that if this kind of responsiveness was par for the course, consumers would be a lot happier.[1]

fn1. The snarky economist at the back of my brain points out that, if this kind of responsiveness was par for the course, we’d all pay more. But I’m not convinced that the cutback in customer service symbolised by the rise of the call centre and automated phone response systems is economically efficient. First, I think there’s an externality effect. It’s hard (or at least I find it hard) to keep track of which companies and institutions are particularly bad and which are just having a bad day, so the general effect is to increase general dissatisfaction rather than dissatisfaction with a particular company. By contrast, I find it easy to remember and react (maybe overreact) to bad service on the premises. A second point is that you mostly call when you’re having problems, so the company has an incentive to get rid of you. In effect, by cutting back on consumer service after the event, it’s reneging on an implied term in the sale of contract, but you can only detect this if you already regret entering the contract in the first place. The cost for the company is that people with minor problems, who’d be grateful for having them fixed and would be a source of repeat business, are also annoyed by their bad treatment.

Some unsolicited advice for John Kerry

John Quiggin4 Comments

My post a week or so ago considering (and ultimately rejecting) the hypothesis that the 2004 election might be a good one for the Democrats to lose raised plenty of eyebrows, but the ensuing debate helped to sharpen up my thinking on the underlying issue, that of the unsustainability of current US fiscal policy and the appropriate Democrat response.

In the original post drew the conclusion that the only campaign strategy that would give a Democrat, once elected, any real chance of prevailing over a Republican congress, was that (supported by Dean, Gephardt, Kucinich and Sharpton) of repealing the entire Bush tax cut and starting from scratch. To the extent that primary voters considered this issue, they didn’t see it this way. With the possible exception of Lieberman, Kerry was the candidate most supportive of the tax cuts.

Like Bush, Kerry promises to cut the deficit in half over four years. He proposes to scrap the cuts for those earning more than $200 000, but to expand them for ‘middle-class families’, a group normally taken to include about 95 per cent of the population[1]. When other spending proposals are taken into account, the Tax Policy Center (a joint venture of the Urban Institute and Brookings Institution) estimates that Kerry’s proposals will yield a net increase in the deficit of $165 billion over four years , or $40 billion a year. (Of course, Bush will almost certainly spend more once the unbudgeted costs of higher defense spending and even more tax cuts are factored in). As I show below, this is relative to a baseline of around $550 billion.

I think it’s safe to say this won’t happen. The problem for Kerry, then, is when to discover the deficit. There are three basic options:

fn1. It’s evidence of the startling lopsidedness of the Bush tax cuts, and the explosion of income inequality over the past two decades, that there is, nonetheless, a substantial revenue gain from repealing the cuts for the rich and ultra-rich. About half the benefits of the Bush tax cuts go to those on incomes over $200 000 per year.

UpdateBrad de Long points to Kerry’s appointment of Roger Altman as his budget priorities advise as evidence that Kerry will choose Option 1. Kevin Drum is underwhelmed. He supports Option 2 and expects Opinion 3.
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The Borda voting system is fatally defective

John Quiggin2 Comments

Before I argue that the Borda voting system is fatally defective, it may be worth considering what kinds of weaknesses could justify such a verdict. We know from Arrow’s Impossibility Theorem that any nontrivial voting system will encourage strategic/insincere voting in some circumstances and will not always elect the right candidate (unless ‘right’ is defined to coincide with the outcome of the voting system in question). So a fatal defect must be a lot worse than this. I claim that the Borda voting system is so vulnerable to strategic manipulation that it would be completely unworkable, provided only that there are no restrictions on candidacy.

Note: I did a Google before writing this and couldn’t find anything similar, but of course, when I checked again after doing the work, I found this almost perfect anticipation of my counter-example. But having done the work, I thought I’d post it anyway.
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HECS and flexibility

John Quiggin12 Comments

I didn’t get around to posting on the recent higher education reforms at the time, but they seem to be working out pretty much as I expected. In particular, the outcome of HECS flexibility is that (nearly) all universities are raising charges across the board by the full 25 per cent allowed under the policy. The explanation is simple. The top universities want the money and all the others need it too desperately to forgo it. Given that there is a lot of unfilled demand, and that the changes to repayment rules have lowered the effective cost to students (particularly those who don’t expect to earn lots of money after uni), there’s no economic reason not to increase charges.

The exceptions to the general pattern are essentially ideological and fall into two classes. First, some universities that oppose the whole idea have refused to increase charges, effectively betting on a change of government before the new charges apply. This group particularly includes those who see themselves as serving relatively low-income communities. If the government is re-elected, though, I expect most of them will raise charges over the next few years and mostly by the full 25 per cent.

Second, some universities that support the changes have made token exceptions, for example by selecting a few ‘socially desirable’ courses and offering free or low-cost entry to those courses. As regards these exceptions, three points are worth noting
1. In every case I’ve seen, the number of places affected is small or negligible
2. The discounts have nothing to do with any notion of responsiveness to student demand
3. This is just a rebranding of the existing practice of offering scholarships to appeal to currently dominant ideology

Looking at the substantive merits of the policy, I’d regard it as a second-best option. The match between HECS contributions and net social cost was pretty good before the increases, so an increase in the government contribution would have been a preferable policy. But since that wasn’t going to happen on an adequate scale, there was no real alternative to higher charges.

Condorcet rules?

John Quiggin1 Comment

The comments thread on the Crooked Timber edition of my last post led me to this site (hat-tip: novalis), advocating Condorcet voting and presenting a critique of the instant runoff/single transferable vote , the core of which is

IRV has serious problems. It allows a sufficiently small minority of voters to safely register “protest” votes for minor-party candidates–but only as long as their candidate is sure to lose. As soon as their candidate threatens to actually win, they risk hurting their own cause by ranking their favorite first, just as they do under our current plurality system. IRV is therefore unlikely to be any more successful than plurality at solving the classic “lesser of two evils” problem.

It’s straightforward to show, however, that this problem can only arise if your preferred candidate would be the loser in a Condorcet system. Hence, voting strategically yields the preferred Condorcet outcome.
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Does Australia exist?

John Quiggin5 Comments

Eric Maskin and Partha Dasgupta are smart guys, and it’s hard to believe they are totally ignorant of what happens in the Southern Hemisphere. So how can they justify writing a piece promoting a system of “rank-order voting” as superior to the existing American (plurality) and French (top-two runoff) systems, without mentioning that Australia has had this system (in a range of variants) for many decades[1].

A minor side point is that, in addition to having the world’s most complicated voting systems, Australia also has compulsory voting[2]. Typically more than 95 per cent of votes are formal, that is, list all candidates in order of preference, with no missing numbers or repetitions. In Dennis Mueller’s generally excellent book on Public Choice, he discusses the single transferable vote and suggests that, while attractive in theory, it’s too complicated to work in practice. Either Australians are a lot smarter than everybody else, or public choice theorists aren’t as smart as they think they are.

fn1. To be precise, Maskin and Dasgupta advocate the Borda weighted vote, whereas Australia has the single transferable vote (called preferential voting in Australia), but nothing in their argument distingushes the two.

fn2. More precisely, compulsory registration and attendance at the polling station – there’s nothing to stop you casting a blank ballot.