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.

More on utilitarianism

John Quiggin8 Comments

There are a couple of things I really like about blogging compared to academic writing. The first is that the relatively terse nature of blogs means that you can take a firm position, without the thicket of qualifications and citations that are needed in academic writing. The other is that the usual boundaries between disciplines and between academics and non-academics are broken down. So I get to see how, for example, sociologists, legal philosophers and businesspeople react to arguments that would normally be confined to economists.

The responses to my short post on utilitarianism illustrated this
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The Memory Hole

John Quiggin8 Comments

Stephen Moore at National Review Online seems not to understand the way the Web works. When he’s caught in an absurd error or nailed on a misleading statement, he just alters his web columns without acknowledgement. A month ago, he was promoting “brilliant supply-side academics” like “Brian Wesbury of Chicago” as alternatives to Greg Mankiw on the Council of Economic Advisors. When I pointed out that Wesbury was not, as Moore implied, an economist at the University of Chicago, but a spokesman for a bank there, Moore edited the post to delete the word “academic”.

Now, Kevin Drum at Calpundit has caught Moore out making the basic error of adding percentages instead of multiplying them. And what do you know. Kevin reports that NRO has stealthily fixed Stephen Moore’s column. Unfortunately the fix makes nonsense of his article, which promises to show a tax rate of 70 or 80 per cent, when the corrected calculation only makes 60.

If he’s quick enough, Moore can get away with this kind of thing before the Wayback Machine or Google archives catch him. But the blogs recording his trickery won’t disappear. And next time I cite him, I’ll be sure to take a copy of the page before he changes it.

Update Brad de Long joins in the fun, pointing out yet more examples of flagrant dishonesty from Moore and the National Review team.

The highest taxing government?

John Quiggin20 Comments

Is this, as Simon Crean has repeatedly told us, the highest taxing government in Australian history? Before answering this question, I’ll make a more important point. If this isn’t the highest taxing government in Australian history, it ought to be. The demand for the kind of services provided by government (health, education, protection against income risk) rises more than proportionally with income. So the share of income allocated to publicly-provided services, as opposed to private consumption, should increase as income grows.

Update I’ve fixed a broken link to OECD data
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