Spin Cycle

John Quiggin12 Comments

Responding to the post-budget opinion polls, most bloggers (myself included) have seen what they want to see Tim Dunlop focuses on the good news for Crean in the Age/SMH AC Nielsen Poll. Gareth Parker looks at the bad news in the Oz Newspoll, and Tim Blair (permalinks still bloggered) accuses the SMH of spin. As Rob Corr observes Tim B seems to have missed the fact that the SMH and Oz each have their own polls, both out on the same day.

But for the real spin story you have to visit the Newspoll site and read the raw poll numbers (downloadable as PDF). Newspoll found that 15 per cent of voters thought the budget would make them better off 38 per cent thought it would make no difference, and 32 per cent though it would make them worse off. This mildly negative result (fairly typical of responses over the 15 years Newspoll has asked this question) was spun by The Oz into a ringing endorsement ?53 per cent of voters thought the Budget would make them better off or no worse off ‘(emphasis added).

The AC Nielsen Poll asked a clearer question and got a clearer answer. Asked whether they would prefer the tax cuts announced in the budget or improvements in health and education, 20 per cent opted for the tax cuts and 77 per cent for improvements in services.

Bloggers redux

John Quiggin3 Comments

Ken Parish is back from a short hiatus, with a string of excellent posts and a new co-blogger, Geoff Honnor. Also back on air is Gummo Trotsky, whose posts include the best demolition yet of Keith Windschuttle’s paean to David Stove in The Killing of History. Those still off-air, and missed by their devoted readers, include Rob Schaap and Carita Kazakoff. The dozens I haven’t mentioned in either category can flame me in the comment box, or better still by posting about and thereby supplying me with the links I crave.

Still Bemused Too

John Quiggin

Brad de Long is Still Bemused

by the fact that there were 3.3 percent fewer hours worked in the nonfarm business sector in 2003:I (the first quarter of 2003) than in 2000:I. Such a prolonged shrinkage in hours worked–given America’s robust demographics–is an extraordinary labor market experience for the United States.

I’ve been thinking about this too, and, although I don’t have a fully worked-out story my view is that 2000 was exceptional, while 2003 is, in most respects, a return to normality. Looking at the decline in hours worked, between one-third and one-half is due to a decline in average hours per worker. This is a reversal of the historically unprecedented increase in average hours per worker that took place during the 1980s and 1990s.

At the same time, demand for labour was exceptionally strong. Employers were scouring remote rural areas, clamoring for access to prison labour and (Mickey Kaus’ favorite story) eager to take on former welfare recipients. The unemployment rate, at 4 per cent, was the lowest in recent times, but if anything that understates the tightness of the labour market. As things have slackened, there has been a big drop in participation

A final feature of the late 1990s was an incredible investment boom (the other side of the current account deficit). The result was that whereas labour productivity grew strongly in the late 1990s, multifactor productivity was relatively weak, a point that has attracted insufficient attention in assessments of the boom.

Not surprisingly, demand for labour was exceptionally strong. Everything fell in a heap when the bubble burst in 2001. As the investments in dotcoms and telecoms proved worthless, multifactor productivity actually fell. I would guess that MFP recovered a bit in 2002, but not much. Here’s some data I got from the Bureau of Labor Statistics MFP Home Page

Series Id:   MPU750023 (K)
Measure:     Multifactor Productivity (Index, 1996 = 100)
Sector:      Private Nonfarm Business

Year

1991 94.8
1992 96.7
1993 97.2
1994 98.2
1995 98.6
1996 100.0
1997 101.0
1998 102.2
1999 102.9
2000 104.4
2001 103.3

Manifestation

John Quiggin13 Comments

I’m going to do an interview with the 7:30 report about the proposed Free Trade Agreement with the US. If my bit isn’t cut and the whole piece isn’t bumped for something hotter (both normal occurrences in my experience with TV) it should go to air this evening.

If you prefer text to video as an information source, you can get a pretty good idea of what I’m going to say here. For the pro-FTA case, you can go here.

Update As half-predicted, the interview didn’t go to air. Another day, perhaps.

Update 21/5 The piece went to air tonight with a couple of soundbites from me.

The New Corruption

John Quiggin8 Comments

Tim Dunlop has some interesting thoughts on a factoid reported by Kevin Drum that Australians are less likely to pay bribes than inhabitants of any other country. (the Finns, though, are said to be the least corrupt).

The closest I’ve ever come to paying a bribe is once when I had to collect a very heavy consignment of household goods from the Sydney wharves and a friendly wharfie forklifted the stuff onto our truck in return for a very modest backhander. (Even in this notorious milieu, I wouldn’t have known what to do if my Dad hadn’t been with me).

Although it’s not relevant, I can’t record resisting that on the same visit I saw a squashed Ferrari. One of a consignment of six it had been accidentally dropped from a great height, compressing its already low-slung profile to a height of about a metre.

In part, my limited acquaintance with bribery reflects the fact that I grew up mostly in Canberra. Until about a decade ago, federal politics in Australia was corruption-free to an amazing extent. Ministers of both parties lost their jobs over minor breaches of customs regulations, and the idea of bribing a public servant was pretty much unthinkable.

Things deteriorated in the later years of the Hawke-Keating government as it became expected that government ministers and senior public servants would move on to high-paying corporate jobs. It didn’t take long for people to work out that a few well-placed favors given out in office could be repaid with interest subsequently, and we’ve recently seen instances of blatant corruption at the ministerial and senior public service levels. (I won’t risk the first blog defamation case by naming names – Australian readers will know who I mean, and others wan’t care).

All of this has been accelerated by reforms (I don’t bother putting scare quotes around this much-abused word any more) which have grafted a US-style patronage system onto a Westminster system of unconstrained executive government. The logical outcome is a system with all the ill-effects of patronage, but without any of the checks and balances. This hasn’t yet come to pass – there are too many old-style public servants, and ministers haven’t yet realised the full extent of their power – but things are getting worse every year.

Data mining redux

John Quiggin5 Comments

Daniel Davies (permalinks bloggered) has an excellent post on data mining, using everybody’s favorite example of dodgy research, John Lott. I discussed the same issue here and “with specific reference to Lott, here.

In practical terms, Davies suggests that economists should keep log books recording their estimation strategies. I’ve urged this kind of requirement in the past. The scandalous fact is, however, that in the great majority of cases, economists don’t even keep their datasets, at least not in a publicly accessible form. To be fair, Lott did at least make his data available, though he didn’t record the data mining that must have been necessary to derive results that were so uniformly favorable to his case.

Ageism and mathematics

John Quiggin3 Comments

For those of us who are “of a certain age”, it’s encouraging to read this piece presenting some evidence against the presumption that, in the words of GH Hardy, “mathematics is a young man’s game”. The gender part of this claim was debated a little while ago, in relation to the highly mathematized fields of economics and analytical philosophy. The age part of it is also interesting and is related, as Jordan Ellenberg points out to the idea that mathematical progress is a matter of huge intuitive leaps.

It’s striking that, whereas vast amounts of intellectual energy and research effort have been expended on determining whether gender differences in mathematical ability are biologically or socially determined, discussion about age differences is still at the level of casual conjecture. Since discussion is at this level, I’ll throw in the casual conjecture that age differences in research output and creativity are due at least as much to socially determined career structures, as to the biological effects of aging.

Rawls and Bentham

John Quiggin4 Comments

Rereading what I said earlier about Rawls and utilitarianism, I think it needs a correction. Rawls really is proposing something different in its approach from classical utilitarianism. In particular, his approach focuses attention on the idea that we might want to pay attention to things like the relative position of different individuals in society rather than simply aggregating utilities across individuals. The most popular way of making this operational has been with social welfare weights that depend on an individual’s rank-order according to some welfare measure. I’m very attracted to this idea, partly because it’s analogous to an idea I developed in the theory of choice under uncertainty called rank-dependent (expected) utility.

Confusion arises with Rawls’ treatment because the maximally risk-averse (or inequality-averse) form of rank-dependence is maximin, just ‘as it is for expected utility. There’s a nice paper on this by Udo Ebert ‘Rawls and Bentham reconciled? in Theory and Decision 24, 215?223.

The other issue is whether you view rank-dependent models of this kind as being alternatives to utilitarianism or generalisations/variants. In the theory of choice under uncertainty, some people (including me) like to talk about generalised expected utility theory while others talk about non-expected utility theory.

Monday Message Board

John Quiggin16 Comments

Another Monday, another Message Board. Now that everyone has forgotten about Iraq (except the Iraqis, of course), there’s lots to get our attention on all news fronts – universities, tree-clearing and the Murray-Darling – to name just a few. If I get time, I’ll post on these and other things, but why don’t you have your say first. As always, civilised discussion and no coarse language, please.

Bursting bubbles

John Quiggin6 Comments

It looks as though the US dollar bubble has finally burst. The rapid depreciation of the dollar in recent weeks has brought exchange rates closer to their long-term equilibrium level and is therefore a good thing, though of course there are both costs and benefits. My main interest for the moment is in pointing out that the bubble representations yet another refutation of the efficient markets hypothesis, this time for bond markets (which might be expected to be immune from some of the sources of inefficiency that affect stock markets, such as the influence of amateur ‘noise traders’.

As I pointed out last October,

If you accept that the $US has to depreciate at some time, then holding bonds denominated in $US, and paying interest rates lower than those obtainable in other currencies, is a dumb idea. Unless you think either that European governments are likely to default on their debt or that euroland is poised for inflation, eurobonds are a better bet, and similarly for Australian government bonds denominated in $A. But I’ve given up even the residual belief in the efficient markets hypothesis that would lead me to try and work out a coherent explanation of perverse asset prices.

The failure of the efficient markets hypothesis is not complete. As this NYT report says, the proportion of new issues of debt denominated in euros has risen sharply in the last few years (relative to the predecessor currencies, most notably the deutschmark), and is now about equal to that in dollars. Given that most debt issues involve rolling over existing debt, it’s likely that the majority of new debt is being denominated in euros, and that, as the report indicates, some holders of debt are shifting part of their portfolio into euros. But this kind of gradual adjustment is not what the efficient markets hypothesis would predict.

Update 21/5 Dean Baker at In These Times also considers bursting bubbles. He correctly traces the problems back to the Clinton boom. In addition to the stock market and the dollar, Baker is concerned about a bubble in housing prices. My instinct is to agree. But it’s worth noting that if there’s a bubble in the US, where real prices have risen 30 per cent, the situation here in Australia, where prices have nearly doubled in a lot of markets, is far more dangerous.