Coffee update

John Quiggin

A rather silly article in the Fin (Gloria Jean’s, purveyor of crap coffee in paper cups is described as ‘the leader in the specialty coffee market’, on the strength of its 140 food-court outlets), contains the gratifying news that Starbucks’ assault on the Australian market has been a failure so far. After opening 37 stores out of a promised 50 the purchaser of the franchise has given up and handed it back to Starbucks Central.

A couple of indicators of the problems ahead of Starbucks here.

First, the Qantas in-flight magazine I read on a recent trip had lots of restaurant reviews for visitors to Australian cities. Most included advice on both the brand of coffee served and the quality of preparation and service – the wine list was mentioned only occasionally.

Second, there’s the ubiquity of high-quality espresso. The Fin article I mentioned claimed that the number of cafes had declined marginally in the last couple of years, but if that’s true it’s only because espresso machines have become a universal feature the landscape. In my little corner of Brisbane I have a choice of buying my coffee at the Faculty rooftop cafe, the fish-and-chip shop, the bakery, the deli, the bookshop and the garden centre, not to mention a couple of dozen cafes and restaurants. Meanwhile, judging by the average news story on the subject, Starbucks thinks it’s competing with Gloria Jeans and McCafe.

Fridges with webcams!

John Quiggin

I’ve just had my first experience of public WiFi (I’ve had a little home Airport network for some time) and I think this may be, as others have suggested, the Next Big Thing. (First poster to say “Huh! I was doing this five years ago!” does not get a prize!)

It’s still expensive (though I understand there are ways of getting access for free if you know what to do) and coverage is still very limited. The other problem in getting properly untethered is the limited battery life of full-scale laptops – alternatives with miniature screens and keyboards/keypads are not for me.

Having got enthusiastic over one technology, I have to maintain my generally technosceptic stance by debunking another, and what better than yet another Internet-enabled fridge story. This is one about a proposed fridge with a webcam inside it. I’ve got used to the idea of bedroom and bathroom webcams by now, but a fridge webcam sounds as if it could be truly gross!

In any case, this got me thinking: What is it with gee-whiz technology journalists and fridges ? I suppose the answer is that it’s marginally less implausible than an Internet-ready microwave oven. But as a public service, I’m going to attempt a once-for-all debunking of the idea of Internet-enabled white goods and similar appliances.

There are two potential applications worth considering. The first is the idea of a fridge that will check its contents, note shortfalls and time-expired items and order replacements from the supermarket. This is silly for two reasons. First, the fridge can’t tell whether the milk is all gone or whether the kids forgot to put it back after making their breakfast cereal. Second, a superior technology is available now if anyone wants it. All you need is a barcode scanner and off-the-shelf inventory software. You swipe items as they enter the inventory and again when they are used. Assuming the existence of stores set up for automated phone orders, the last bit would be easy.

This approach covers all grocery items not just refrigerated goods, and is cheap and relatively easy. If you’re prepared to work a bit harder you can home-brew the software, do the data entry manually and you get the whole thing for free. My Dad actually implemented such a system a decade or so ago and ran it for several years, but got tired of it in the end. For most people, even cheap and off the shelf, this would not be worth the effort.

The other possibility is remote control – telling the oven to turn on an hour before you get home for dinner and so on. Again this is pretty much feasible already, using home automation systems such as X-10 and again very few people bother. The problem is that a disciplined person can achieve most of the required functionality with simple timers and a disorganised person will generally find it easier to wait until they get home.

The big exception to all of this is communications and entertainment. I’m not talking here about the silly idea of convergence in which the TV set, computer and phone would merge (if you think about, the potential benefit of this is the saving of one screen). Rather its the idea that instead of having to negotiate a badly-designed interface, different for each system, whenever you want to control, say, a video, you should be able to manage all your digital media from a system designed for flexible control, that is, a computer.

Sheilspotting

John Quiggin

Thanks to the magic of Trackback, I’ve been prematurely alerted to a new blog setup by Chris Sheil, late of Troppo Armadillo. The name Back Pages, and the fact that at least some of the posts are recycled suggests that this is still in the testing phase and may be some sort of “Best Of” site, but hopefully the fact that it’s on air means that Chris will be back in full voice shortly.

Update It was, as I speculated, a test site, and I’ve removed the link at Chris’ request. The Real Thing, he promises will be coming Real Soon Now.

Iraq importing immigrants?

John Quiggin

I was stunned by this piece from The Economist when it came out, and expected a furore. But, with the inevitable exception of Tim Dunlop and the unsurprising exception of Nathan Newman, no-one else seems to have noticed (Nathan’s post did get one link, from abulsme.com).

I find this startling. Far more than debates about imminence or WMDs, and even more than the daily drip of guerilla attack and counterattack, the success or failure of the US policy in Iraq depends on getting the economy moving. Any attempts in this direction are doomed to failure, if, as The Economist asserts, the occupying forces have a policy of not employing Iraqis

If this story is correct, and representative of the policies of the occupation forces in general, it’s time to abandon the “you broke it, you own it” stance I’ve advocated previously. Rather than pursue a strategy that is doomed to be an expensive failure, it would be better to pull out immediately, and let the chips fall where they may.

UpdateSteve Edwards also has a good comment on this, and on the US Democrats proposal to turn half the aid to Iraq into loans (I anticipated this some time ago, but not that it would come from the Dems).

More cost-benefit on road safety

John Quiggin

The debate on road safety has been lively, and has certainly helped me to sharpen my ideas on the subject. In particular, I’ve gone back to the most recent source of controversy, the proposal for banks of speed cameras on the Victorian section of the Hume Highway which would be able to check a driver’s average speed over sections of the Highway. The main effect would be to make it impossible to speed consistently (given fixed locations, the cameras don’t have much affect on such things as speeding up to overtake and so on).

This is a relatively straightforward case for cost-benefit analysis. People who formerly travelled at above the speed limit will go slower and take more time. On the other hand, since this will reduce both average speed and speed variance, there will be less accidents.

For the costs, I’ve assumed 15 000 cars per year, 20 per cent of whom speed consistently, maintaining an average of 130km/h (vs a limit of 110). I’ve given them a value of time saved of $20/hour (higher than is standard), and I estimate an annual cost of $10 million per year from enforcing the limit.

As already noted, the cost per life lost is above $20 million, between $5 million and $10 million so we only need to prevent one or two fatalities per year to get benefits>costs (there have been about 8 deaths per year in the last five years).

A slightly more involved calculation shows that the net externality generated by speeders and other dangerous drivers on the Hume is around half the total damage incurred from accidents (the actual cost incurred by safe drivers + the extra costs of defensive driving). On standard “pollution tax” arguments, the fine revenue that ought to be collected from the Hume, net of enforcement costs is therefore around $50 million per year.

This post has been updated to correct for an erroneous value-of-life calculation in the original version

NILF bludgers?

John Quiggin20 Comments

A reader asks a question to which I don’t have an immediate answer

I’ve noticed that in general people are always concerned with the unemployed and how/why they don’t work etc. Often this attitude is negative, and this is certainly capilized by the goverment.

So what I wondered is why doesn’t this attitude doesn’t seem to also apply to people who don’t work but don’t collect benefits ? What I mean by this is that it seems clear there are lots of indirect benefits that people still receive/received even if they don’t work (roads, schooling etc.) and direct benefits too (health-care) that must cost the community. However, this group seems exempt from the negative criticism of those that collect unemployment benefits in particular, and sometime it is also positive (if you make enough money to retire at thirty, thats great!). Why ?

Any thoughts on this?

Explaining (away) the productivity miracle

John Quiggin7 Comments

There’s been a lengthy debate, in the blogworld and elsewhere about the causes of recent growth in US labor productivity, and the associated fact that reasonably good output growth has produced little or no employment growth. Brad de Long, in particular has discussed this at length. My preferred explanation, which I put forward here is that

Beginning with productivity, it’s only labour productivity that’s grown rapidly and seemingly anomalously. Capital productivity has declined markedly, as has multifactor productivity (a weighted average of capital and labour productivity) In part this reflects the economics of embodied technical change – as computing power has become cheaper it has been applied more intensively. But there’s also a big hangover effect from the bubble and bust, when crazy signals from capital markets led lots of firms to undertake unprofitable investments. Once some semblance of reality returns, the natural response is to cut back and it’s much easier to sack the least productive workers than to reduce capital stock. So labour productivity rises fast, but output growth is weak.

This NYT piece gives lots evidence, admittedly msotly anecdotal, to back up my analysis. The key statement is the

the slow process of working through a glut of boom-era investment that continues to litter the economy with underused factories [ is weighing on job creation]

Along with lots of case studies of soap factories is the point that

Not since the severe recession of the early 1980’s has capacity use in manufacturing stayed so low for so long, government data show. Production as a percentage of total capacity fell precipitously in the aftermath of the last recession, which ended in 2001, and 23 months into the recovery, the upturn has still not come. On average, manufacturers are using less than 73 percent of their capacity.

If multifactor productivity were really rising we’d expect to see new investment and hiring as US producers displaced competing imports, especially with the dollar depreciating. But there’s no sign of this so far.

Updated Brad de Long has responded to the same article with a restatement of his main argument

Louis Uchitelle frames the issue the wrong way around: there is no such thing as “overinvestment,” there is only too little aggregate demand. If you think that there is “overinvestment,” dropping the interest rate will cure you of that belief. At least, it will until you hit a liquidity trap… But it looks like that is no longer a dangerous possibility.

There’s a disconnect here between the macro arguments Brad is making and the micro arguments I’m making. My intuition is that the size of the US CAD indicates that deficient aggregate demand is not the problem. But I need to think more about this.

Meme watch

John Quiggin9 Comments

While I’m dubious about the validity of the Dawkins analogy between memes and genes, there’s no doubt that we need some sort of word for a minimal unit of argument that is subject to reproduction and selection, and meme seems to have become that word.

One I’ve noticed in particular among supporters of the Howard government is exemplified by Michael Baume in today’s Fin (subscription required). He writes that the Howard government has halved youth unemployment, then immediately follows up with the small print “since the Keating era peak in 1992”. If seen similar comparisons regarding interest rates and, I think even occasionally on inflation. In all these cases, the majority of the improvements occurred before Labor lost office.

In political terms, this is a straightforward case of claiming your opponents’ accomplishments as your own. Underlying this is the fact, which I’ve pointed out that, in economic terms, the Howard government is essentially a continuation of those of Hawke and Keating, with a gradual (and not continuous) slowdown in the pace of microeconomic reform.

As it’s normally used, this argument is clearly dishonest. There might be circumstances in which it could be used honestly, particularly in relation to policy instruments under direct government control. For example, if the government controlled interest rates, it might say that “we have kept interest rates low, and will always do so. By contrast, Labor allowed them to rise to 17 per cent”. But in terms of targets like unemployment, the natural base point for comparisons is 1996, not 1992, and the government’s performance looks most unimpressive.

Monday Message Board

John Quiggin9 Comments

Time as usual for the Monday Message Board. As the discussion on speeding has attracted a couple of abusive comments with foul language, I’ll stress the usual reminder that this is a PG-rated blog. No coarse language, and civilised discussion, please.

As always, comment on any topic that takes your fancy, but in the light of my recent exercise in bloggerative democracy, I’m interested in your thoughts on the question “What is the Next Big Thing in blogging/the Internet in general?”

The GG as a politician

John Quiggin7 Comments

As is often the case, I’m coming late to a story that more alert ploggers have covered at length, that of Governor-General Michael Jeffery’s remarks supporting pre-emptive military action. Roughly speaking, it seems that opinion is divided along left-right lines as might be expected. The left line, represented by my blogtwin, Tim Dunlop focuses on the Howard government’s hypocrisy in view of its criticism of less overtly political statements by William Deane. The right line, which I’ve seen but can’t now locate a good instance of, is that the hypocrisy is on the side of the left, who cheered Deane on, but are now deploring Jeffery. I have a couple of observations.

First, this is a typical instance of the policy dynamic under the current government. When faced with some aspect of Labor’s behavior in office (weak code of ministerial conduct, publicly funded political advertising and so on) the Howard government has initially deplored it and promised to do better. But when this inevitably proves inconvenient, the response is to take actions which are claimed to be in line with precedents from the Labor government but which in fact are “pushing the envelope”. Ministerial conflicts of interest and use of public money to fund political ad campaigns allow for much more impropriety (relative to the views of propriety that prevailed until the 1980s) than under the last Labor government (though who knows what the next one will be like).

In the present case, the government disliked Deane’s attempts to act as a social conscience, so it decided to appoint Hollingworth who seemed to have a track record that would protect him from adverse comparisons with Deane combined with a willingness to look dignified and stick to his script. When it turned out that the latter qualities, in operation as Archbishop of Brisbane, had produced some disastrous outcomes, the government decided to give up on neutrality and appoint someone who would speak out on their side of the debate.

The second point is that, as a result of this, it’s now clear that the post of Governor-General is a political one and that anyone who holds it is a politician. The natural conclusion is that a politician holding such an important office should have the legitimacy that can only be derived from popular election.

This is logically independent of the Republic issue. We can have an elected governor-general (David Solomon pushed this idea after 1975, and Ken Parish revived it recently) or an appointed president. Realistically speaking though, a move to directly electing the GG would lead straight to a republic with a directly elected president. By giving up on the idea of the GG as a neutral figurehead, the government has effectively conceded defeat on the main arguments against both a republic and direct election.