Option value

John Quiggin64 Comments

Like most of us, I’m not expert on epidemiology. But I have spent most of my life studying risk management. In the current crisis, one of the most relevant issue,s and the one that policymakers seem to be ignoring is that of option value. To see what’s involved, consider a policy choice like shutting down bars and cinemas, as opposed to waiting two weeks to see what happens. If, in two weeks time, it turns out the virus has been contained, the ban can be reversed and the loss is that of the two week shutdown,. On the other hand, if the virus spreads through contact in these venues, there is no way of limiting the damage to two weeks.

Nearly all the time, this reasoning favors aggressive early action. The exceptions are actions like cancelling events scheduled some months in the future. Deferring the decision would increase losses in the event of a cancellation, but keep open the option of going ahead if the situation improved.

Sadly, there seems to be no sign that those in charge of the policy response understand this. Rather, the reasoning seems to be to wait until they are sure a risk-reduction measure is necessary before implementing it. That is a recipe for avoidable disaster.

Videopresentation invitation

John Quiggin10 Comments

I didn’t get a lot of responses to this invitation back in 2008, but I’m hoping for more now. I can offer video presentations on a wide range of topics (climate change, water, infrastructure, digital economy & culture, employment and macro policy in general, among others).

As regards technology, it seems that Zoom is state of the art now. I’m hoping to have that set up so I can do it from home, which will allow more flexibility about time.

Repost from 2008

With the release of the Garnaut report, it’s time for me to look again at ways to reduce my carbon footprint. I’ve been trying to reduce air travel, turning down invitations and offering to do videoconferences instead. That’s had some success, but mostly people aren’t set up to handle video, and, by the time invitations are made, there are often arrangements in place that make it difficult.

So, I’m going to take the initiative, and announce that I’m available to offer video presentations on a wide range of topics (climate change, water, infrastructure, digital economy & culture, employment and macro policy in general, among others). It’s easiest for me in business hours (9-5 pm, Mon-Fri, AEST) as that’s when I can use the UQ facilities, but I’m willing to look at alternatives at other times, if there’s someone who can handle the setup.

Obviously, I can only do a finite number of presentations, either in person or by video, so get in with your request.

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How coronavirus will wallop Australia’s economy – and what the government must do

John Quiggin74 Comments

The Guardian has a number of short pieces from economists on the likely economic effects of the coronavirus, and what should be done about it. Here’s mine

The government has finally recognised the correctness of the Rudd government’s response to the GFC

The Australian economy was slowing even before the bushfire catastrophe and the arrival of coronavirus. The economic costs of the bushfires, including damage to property and infrastructure, long-term health effects of smoke exposure and ecosystem destruction were massive, but the main effects on GDP will be felt by the tourism sector. The damage to Australia’s international image from widespread vision of the fires, accompanied by critical commentary to the effect that, as a climate laggard, we have brought this on ourselves, will be long-lasting.

The arrival of the coronavirus, just as the last bushfires were extinguished will have a greater short term impact on economic activity, almost certainly resulting in two or more quarters of negative growth. With an underlying growth rate of 0.5% per quarter, a 5% contraction in the 10% of the economy most exposed to the effects of coronavirus would be sufficient to reduce growth to zero.

It appears that the government has finally recognised the correctness of the Rudd government’s response to the GFC, and will follow that path, with some marginal attempts at product differentiation. It is likely that the effect on the budget balance will be substantially greater than the $10bn currently being discussed, and that the recent decline in the ratio of public debt to GDP will be reversed. In these circumstances, the massive tax cuts for high income earners, legislated for 2024-25 will probably prove unaffordable.

Sports rorts shorts

John Quiggin23 Comments

As I’ve said a few times before, I’m not a big fan of scandals. With much of the country burned over the last season (not even last summer, it started in June) and coronavirus in the way, our supposed leaders could do better than argue about handouts for boatsheds. But the corruption is obvious, and someone has to pay. So, here’s my suggestion.

Morrison’s chief of staff, John Kunkel admits that he ran the entire show (given that he was in charge of Morrison’s office, this is highly plausible) and that Morrison knew nothing about it (doubtful, but impossible to disprove). Phil Gaetjens ( Kunkel’s predecessor, now Secretary of PM & C admits he screwed up the investigation. Both of them resign, and everyone goes about their business.

Result: the Opposition get their scalps, and can claim vindication. The government protects Morrison and loses a couple of obscure apparatchiks (admit it , you had to Google them just as I did). The Australian public gets the leaders it elected back on the job. They might not do a good job, but that’s our problem for voting them in.

Debating postmodernism

John Quiggin47 Comments

Next week, as I’ve mentioned, I’ll take part in a debate/dialogue with Stephen Hicks, a North American philosopher, who has criticised postmodernism from a right/libertarian perspective. He’s on a tour of Australia, and was invited to Brisbane by Murray Hancock who’s setting up The Brisbane Dialogue which has the ambitious objective of promoting civil discussion across political divides. I ended up being dobbed in (is this an Australianism?) to present the other side, and chose the topic “Postmodernism is a rightwing philosophy”. Longterm readers of my blogging won’t be surprised: I was making this claim as far back as 2003. Thanks to Kellyanne Conway and “alternative facts”, I’ll have plenty of material to work with.
I plan to argue that in the absence of any objective correspondence to reality, it’s the truths favored by the rich and powerful that will win out, not those of the oppressed. Trumpism is the obvious illustration of this, but rightwing postmodernism on issues like climate change and creationism long predates his rise.

Still, I have a couple of problems. First, I’m not a philosopher, so I’m working with a pretty simple interpretation of postmodernism, roughly stated as “there are multiple truths, and no one is better than another” More precisely, as I encountered it, postmodernism involved a Two-Step of Terrific Triviality, putting forward statements that encouraged the simplistic interpretation most of the time, but, when challenged, retreating to into total obscurity, or else into something more nuanced and not very interesting like “there may be an actual truth of the matter, but we can never know it for sure” . But is there a better interpretation of postmodernism, one that is both interesting and comprehensible?

My second problem is whether constructive dialogue on a topic like this will prove to be possible. I think we’ll agree at least on not liking postmodernism, and probably on some of the intellectual history. I have no idea, though, what Hicks thinks about Trump and Trumpism, or for that matter about climate change and science in general. I’ll see how it plays out.

Coming events

John Quiggin26 Comments

I’ve got quite a few events coming up in the next ten days. I’ll be in Adelaide for the Writers Week (program here), appearing at the Pioneer Women’s Memorial Garden, King William Road on Wednesday 4 March at 2pm in conversation with Jane Goodall, on the theme the Common Good. I’ll be signing copies of Economics in Two Lessons.

I’ve fitted in two earlier events on Tuesday 3 March. At 12 noon, I’ll be talking about the economic cost of the bushfire disaster, at the University of Adelaide (Level 6, Faculty of the Professions Building, Pulteney Street). Then at 5:30, I’ll be talking about Economics in Two Lessons to the Economics Society of Australia, Marjoribanks 126 SANTOS Lecture Theatre, Level 1, Nexus Building 10 Pulteney Street, Adelaide, SA 5000

On Monday 9 March, I’ll be back in Brisbane at the Customs House for the launch of The Brisbane Dialogues, an attempt to promote civil discussion across political divides. I’ll be debating North American philosopher Stephen Hicks on the topic (suggested by me) “Postmodernism is a rightwing philosophy”. As long-time readers will recall I was making this point long before Kellyanne Conway brought it to wider attention with the idea of “alternative facts“.

Planning for pandemics (repost from 2005)

John Quiggin

The news of deaths from bird flu in Indonesia is pretty scary. Although, as I’ve mentioned recently Indonesia has made a lot of progress in many respects, the handling of this threat so far seems to show the worst of both worlds: all the ill ffects of authoritian habits combined with the timidity of weak politicians. There have been a lot of coverups, and an unwillingness to tackle the necessary but unpopular task of slaughtering affected flocks of birds. Things seem to be improving now, but there’s a long way to go.

It seems very likely that, sooner or later, bird flu will make the jump that permits human-human transmission, and quite likely that a major flu pandemic will result. The world, including Australia, is very poorly prepared for this. One thing we could do to prepare is to adopt a national program encouraging annual flu vaccinations for everyone, instead of just for limited categories of vulnerable people.

The main benefit of this is not that the shots would provide immunity against a new and deadlier flu variant (though there might be some limited benefit of this kind) but that we would have the infrastructure, production facilities and so on to undertake a mass vaccination against such a variant if it arose. As it is, it seems likely that many countries will be scrambling to get access to an inadequate world supply of vaccines, but if Australia and other developed countries ramped up normal levels of production, it would be much easier to generate extra supplies for our neighbours.

I haven’t looked into it, but my guess is that, even without considering the possibility of a pandemic, the benefit-cost ratio from such a measure would be pretty high. Flu is very costly in economic terms, and I suspect that, if pain and suffering were thrown into the balance, a program of universal free vaccination would come out looking pretty good.

Notes  I wrote this in 2005 thinking about new flu strains. The only difference I see with “novel” viruses is that the time taken to produce the initial batches of a vaccine is likely to be longer. As is usual with my policy advocacy, little if anything has been done along the lines I suggested.