Although described in the news as a surprise, the timing of the Queensland election was fairly predictable. The government wants to keep the campaign separate from the local council elections in March, and to avoid going after the elections which may turn out badly for Labor in Brisbane following the mishandling of Jim Soorley’s retirement. Since no one wants to campaign over Christmas, the timing is a forced move.

I’m in the happy position of agreeing with the pundits that Labor is virtually certain to win and in welcoming this. The current crop of Labor state governments may be unexciting, but they are uniformly preferable to their opponents.

In the case of Queensland, Labor has an advantage that does not seem to have been remarked on. The only plausible alternative government is a Liberal-led coalition, but for historical reasons, this isn’t on offer. In fact there are only three Liberals in Parliament and of these only one is running for re-election. Instead the Opposition is in effect the National Party (there are also the remnants of One Nation and assorted independents). Even though the Nationals have held office for most of the past fifty years, I don’t think we’ll ever see another National Party premier.
Read More »

By mid-day this time. I’m up in the Snowy Mountains with a very flaky phone and Internet connection, but that’s all the more reason for you to talk among yourselves (in a civilised fashion, of course, and without resorting to coarse, language).

Normal service will really, truly be restored by next week.

I also dug out some old books on ESP and the paranormal. These were from the 1970s, about the time of Uri Geller and the Bermuda Triangle. It struck me that the debate here seems to have moved on, in the sense that no-one any longer takes seriously the idea that ESP etc might be real in the same sense as (say) radio waves, and was a reasonable subject for scientific investigation. The exposure of Geller as a fraud, his subsequent career in the back pages of the Women’s Day and the derision visited on the scientists he fooled with his conjuring tricks seem to have put an end to all this.

Of course, there are still plenty of believers but the belief is now general recognised as quasi-religious and therefore not subject to refutation by empirical evidence.

At least that’s my impression. I’d be interested to hear whether others see thing shte same way.

The Neoconservatives by Peter Steinfels. This book, written in 1979, is billed as the first major study of neoconservatism and covers both the obvious names (Kristol, Bell, Podhoretz, Decter) and some who now seem a bit surprising (Moynihan, Brzezinski, Jackson). It strikes me that there have been two main changes affecting the neoconservatives since Steinfels wrote.

First, the rise of the centrist ‘New Democrats’ associated with the Democratic Leadership Council in the 1990s attracted the support of the more moderate neoconservatives (confusingly, DLC supporters like Clinton are often called ‘neoliberals’ in the US, a term which is used in an entirely different sense elsewhere, much closer to neoconservatism in its meaning). The remaining neoconservatives are now strictly Republican partisans and have continued moving to the right.

Second, the Jewish element in neoconservatism (more dominant as a result of the first trend, which was more significant among non-Jewish neoconservatives) changed its character. Prior to Oslo, the general position was one of support for Israel, normally interpreted to mean support for the general position of whatever Israeli government was elected by the Israeli people. The neoconservatives in general took a rejectionist position on Oslo and became partisans of its opponents, Likud, the settler parties and the maximalist advocates of Eretz Israel. There was a piece by Podhoretz in Commentary about the time of Oslo making all this explicit. It will be interesting, in this context, to see how the neoconservatives react if Sharon finally comes to blows with the settlers. I predict that they will be bitterly divided.

For those anxious to see the end of my series on climatologist Stephen Schneider, and the famous doctored quote, here’s my bottom line.

He’s an alarmist who tends to overstate and overdramatization environmental threats, and he doesn’t always argue fairly, but he isn’t deliberately dishonest. The much-quoted statement is a description (in fact, characteristically, an overstatement and overdramatization) of a real problem that affects anyone with expert knowledge engaged in public discussion. The frequency with which the statement has been (mis)quoted is, paradoxically, an indication that the point Schneider makes is a valid one.

Now, those who want the whole argument can read on.
Read More »

Before the Iraq war, Kenneth Pollack The Gathering Storm was among the leading advocates of the arguments that Saddam’s weapons represented an imminent threat justifying preventive war. In this piece in the Atlantic he discusses why the intelligence on which he relied was so badly wrong.

What’s startling about Pollack’s piece is that he simply ignores the resumption of inspections in December 2002 and the declaration by Iraq that all its illegal weapons had been destroyed. These two events made it clear, within a matter of weeks, that none of the main suspect sites previously mentioned had any weapons and that the intelligence held by the US and UK (particularly as summarised for political and public consumption) was way off the mark. Until about a week before the Iraqi declaration, official statements from the US and UK governments implied not only that they had definite knowledge of Iraqi weapons but also that they knew where they were located. If this had been true, the weapons would have been pointed out as in the previous case of Cuba, and war would have been justified by the terms of Resolution 1441.

Even without such knowledge, it was obviously impossible to conceal nuclear weapons facilities under the UN inspection conditions. Since nuclear weapons are the only ones that represented a threat to the world more serious than that of ‘conventional’ weapons, the WMD-based case for war was greatly weakened by the beginning of 2003 and was completely untenable by the time the war actually took place.

The absurd legalism that suggests that war was justified because, although the weapons had been destroyed, Iraq’s accounting for the destruction was not sufficient to satisfy the Bush Administration, can be dismissed. This kind of argument would be available to justify any war of aggression, any time (that is, Country A asserts a violation of international law by Country B, demands an explanation, then asserts that the explanation is inadequate).

What remains defensible is the argument that Saddam was an evil dictator, and that the world community could justifiably overthrow him. This was the argument that should have been made. It would have required the issue of a postwar government to be addressed in advance instead of being left in limbo as it was, and still is.

Quoted today’s Age

Seven’s director of programming and production, Tim Worner, said his network was not gambling heavily on reality TV. “That notion is querulous.”

Here’s part of my next AFR piece, which will focus on the claim that long-term interest rates, particularly in the US, are bound to rise. Comments much appreciated.

The idea of bubbles in asset prices is a troublesome one for economists. To say that there is a bubble in the price of some asset is to claim that the relevant financial market is not doing its job properly. In the atmosphere of uncritical reverence for ‘the markets’ that prevailing during most of the 1980s and 1990s, such a claim was unthinkable for all but a handful of heretics (Will rational bubbles fall on the infallible markets ?, AFR, 24 Jun , 1994.)
Even now that a more measured view has been restored, the suggestion that market prices for assets are unsustainable raises what American economist Deirdre McCloskey has called ‘the American question’ – ‘if you’re so smart, why aren’t you rich?’. To make the point more explicitly, if asset prices are out of line with economic fundamentals, why don’t economists and others who can see this back their judgement in the markets and make large speculative profits. This argument is the cornerstone of the famous ‘efficient markets hypothesis’.
The now-standard response is usually attributed to the great economist and successful speculator, John Maynard Keynes (though there is no evidence that he actually said it) and states ‘‘the market can stay irrational longer than you can stay solvent’. This point is illustrated by the experience of the greatest speculator of all, George Soros, who bet heavily, in 1998 and 1999, that the NASDAQ stock market was overvalued.
Soros was right, but the market kept on rising, and he was forced to liquidate his short positions. By the time the market turned down in April 2000, Soros had lost billions of dollars. As one of the many economists who shared Soros’ view of the dotcom mania (Don’t overrate E-commerce, AFR,,8 April 1999), I was glad to have stayed on the sidelines, although I did switch my superannuation strategy away from overvalued US shares.
The same issues arose in relation to the US dollar bubble that ended about a year ago. Although any competent economist could see that the US dollar was grossly overvalued (US dollar needs a pasting,AFR, 29 March 2001.), the currency was supported by the stated ‘strong dollar’ policy of the Clinton and Bush administrations, and the evident market belief that this policy meant something. Once again, a lot of money was lost by those who were prematurely right in their belief that the US dollar must depreciate.

I’ve got my Powerbook back, but I’m still recovering from the hard disk crash. I’m only half a day late with the Monday Message Board – back to normal next week, I hope.

Please post your comments on any topic – civilised discussion and no coarse language please.

Ozblogger Gianna points to this report in the Australian and suggests that it falls to me to sort it out. Looking at the thinning ranks of Australian econobloggers, she’s probably right.

The report is based on a Labor press release which appears to be based on the income tax statistics for 1999-2000 and 2000-01. The central claim

JOHN Howard’s battlers are going backwards, with new tax research showing that lower and middle-income earners suffered a reduction in real incomes of up to $430 a year between 2000 and 2001.

Analysis of Australian Taxation Office figures carried out by the Opposition, which adjusts earnings against increases in the cost of living, has found the incomes of Australia’s middle class shrank by between $150 and $430 a year.

The figures also show the gap between the rich and poor has widened, with the incomes of the wealthiest 5 per cent of taxpayers increasing by $4159 a year in real terms over the same period and their average taxable incomes increasing from $146,661 to $150,820.

I wouldn’t put a lot of weight on this – it’s only a couple of years data and the numbers were affected by the introduction of the GST in that year. That said, there’s no doubt that the basic claim of the release is true. Almost everyone (even, as I recall, the Centre for Independent Studies) agrees that the inequality of market incomes has been increasing over the past twenty years or so, though different studies date the increase at different times and attribute different causes.

Although real incomes have generally risen for all income groups over the past decade or so, the bulk of the gain has been concentrated among the top 20 per cent of income-earners. The rate of growth of real incomes for everyone else has been very slow. So it takes only a modestly bad year, or a price shock like the GST to see real incomes going backwards.

Under Hawke and Keating, the increasing inequality of market incomes was offset to some extent by progressive changes in tax and welfare policy, but the reverse has been true under Howard. One of the experts cited in the report suggests that the figures are distorted by tax concessions associated with negative gearing and encouraged by the cut in capital gains tax under Howard. That’s probably true, but, contrary to what he says, implies that the real picture is even more unequal than that given in the statistics.