Good news

John Winston Howard will fight the next election. Not everyone is rejoicing. It seems to me that Mr Kim Beazley is finished politically.

War's horrors

A horrifying picture from The Australian. According to Israel's PM the village of Qana had been the source of hundreds of Hezbollah rockets directed at Israel. The residents he claims had been warned beforehand to leave town but local police said many were too poor to afford the journey to larger towns. In all at least 54 were killed in the village including 37 children. For other hideous images go to Larvatus Prodeo here. Whatever spin you try to put on it these are totally ghastly outcomes. It is difficult to understand this carnage.

There are cheers squads on both sides endorsing the actions of the parties involved in this conflict. I think they need to look at these images and reassess - are there winners here? As an Israel supporter I am sickened by these images. It is conceivable that the outcome was pre-programmed by Hezbollah and it is clear that Israel did not seek this outcome. But if it was a mistake it is an almost unforgivable mistake. I am equally sickened by the romantic spin being placed by others on the military actions of Hezbollah in southern Lebanon - and particularly their firing of missiles from areas with civilians which invite this type of catastrophe. Our PM's Islamic advisor Sheik Fehmi Naji el-Imam, yesterday yelled pro-Hezbollah messages on the steps of Parliament House, Melbourne to a crowd which roared its approval. His claims made me feel ill.

'Long live freedom fighters', said the Lebanese-born Imam,
'But we have to remember that we are still proud of what is taking place in Lebanon', 'We are proud of the freedom fighters'.

Violent peace demonstration

The peace activists who launched a violent attack on PM John Howard in Perth today because of his support for Israel deserve contempt not tolerance. They are not participants in a 'debate' and nor are they taking advantage of democracy to 'express views'. They are violent, immature thugs. Some were Australian-Palestinians and Australian-Lebanese, the latter presumably including some of the super-snivellers who attacked the Australian Government so vehemently over the last two weeks for not getting their compatriots out of a dangerous Middle East combat zone quickly enough:

Protesters punched, kicked and threw projectiles at Mr Howard's car as police struggled to keep them at bay. One managed to break the flag on the bonnet of the Prime Minister's car.
Protesters shouted: 'We want Peace' while carrying pamphlets saying: 'Cluster bombs are used by Israel to burn our families in Lebanon. Is this fair?'

This last statement about cluster bombs might be true. But the outrage seems hypocritical when Israel's enemy Hezbollah is launching guided missiles from civilian areas in Lebanon into Israeli civilian areas. Hezbollah as new heroes for the left? The 'Party of God' which targets Israeli civilians and uses its own civilians as hostage protection from attack and as paydirt should attacks from Israel injure or kill them.

I wonder how does Australia's left would have wanted Israel to respond to Hezbollah? With flowers? With recordings of Allen Ginsberg singing Hare Krishna mantras? The latter would presumably be a Zionist provocation. Or perhaps they want Israel to just to walk away - take our country from us enlightened terrorists, its yours...

What is happening in Lebanon is terrible and emotions will run high. But the cause is Hezbollah not Israel.

Thanks to Week-by-Week for cover of the Howard demonstration.

Smoking, mortality and social disadvantage

Smoking is a modern scourge. The WHO global burden of disease study suggested that, in developed countries, 26% of male deaths and 9% of female deaths can be attributed to smoking—the single most important risk factor.

An article in the Lancet (synopsis only) points out a distinctive feature of the scourge of smoking - its equity effects. It is well-known that there is substantially greater mortality among those with low social advantage than those with high advantage. About half of this can be explained by the higher incidence of smoking among those who are socially disadvantaged. An accompanying Lancet op ed provides some detail about this study.

This finding will not surprise economists who have long believed that cigarette consumption can be inferior - increases in income reduce consumption. It is now known that while poor people smoke more when their incomes increase that the wealthy and the aged smoke less. Those on high incomes smoke less as their incomes increase.

As economists we often ponder the efficiency costs of addictive forms of behaviour - smoking, alcoholism, gambling and illicit drug consumption. It is good that researchers are looking at the social equity implications of these damaging forms of behaviour and, particularly the most hazardous, cigarette smoking. There is a forthcoming conference 18-19 September in Adelaide on these issues that I will try to attend.

A $30 wage claim

The ACTU claim for a $30, or 6.2%, wage growth claim for the 20% of Australia's workforce on minimum wages will give Australia's macroeconomic managers the horrors. It is this type of claim - not once-and-for-all banana or fuel price increases - that raise the prospect of reemerging inflation. The claims that workers have had their real wages eroded by price hikes and the prospects of an interest rate hike are foolish arguments if consequent cost-push pressures result in sustained higher inflation, much higher interest rates and reemerging high unemployment.

Wage policy should not be used to address issues of distributive justice - the so-called 'Fair Pay Commission' is an inappropriately-named instituition. Distributive justice needs to be addressed via fiscal policy and the tax-transfer mechanism. Irresponsible ACTU claim should be rejected by the FPC- they will disadvantage those struggling to hang onto low-paid Australian jobs and threatens the sustained economic expansion we have enjoyed for so long.

Moreover the FPC should reject these claims given its charter. This requires it to consider the welfare not only of those with jobs but also those thrown onto the unemployment scrapheap as a result of selfish trade union claims.

Update: The following discussion of minimum wages is useful in an Australian setting.

Vivisector

Motivated by Laura at Sarsparilla, I’ve bought a copy of Patrick White’s longest novel, The Vivisector . I will read it before September when a group blog (organised by Laura) will discuss it. A review of the novel is here and another here - I’ll collect further background material as I read. A Patrick White 'reader's group' is here which has links to a number of White-related sites.
I liked Laura's approach:

So I thought I would ask you, dear reader and internet friend, if you’d like to read a Patrick White novel with me: the general aim would be not to experience or prove “greatness,” whatever that is, but to see for ourselves…to make up our own minds…to enjoy each other’s company in a shared experience. ..I think we could do a nice low-stakes internet reading group where everyone can choose how much to participate (you needn’t write anything at all, if you don’t like to, for instance) and the point will always be simply to have fun and enjoy the reading.

Sounds like a fun thing to explore. I have tried to read Patrick White several times in the past and have to admit I did not enjoy. But that was then – now I am now older and wiser. I'd be interested in reader's observations concerning 'reading groups' generally - reading for me - at least since I left school - has been a solitary experience. Reading as part of a group seems like a pleasant way to expand your insight and pleasures. I am also interested to see how the blog-based experience unfolds.

Marketing junk foods to kids

The Age today discusses the spread of disinformation about junk food by advertising agencies.

Economists routinely argue that information is a public good underprovided by markets. It is more accurate to say that, when selling products is involved, the information that is provided is inevitably unreliable. This is particularly the case with food products.

Fast food producers, and the ad agencies who promote their deceptions, are serial child abusers. Targeting kids in advertisements they get complementary benefit of custom from reluctant parents (the 'nag factor'). They also get the kiddie customers for life. (On the supply side also most employees are kids who are employed at low salaries). These firmds 'free-ride' on the national health scheme which picks up the long-term damage inflicted by poor diets.

Young children do not have great powers of discrimination and can be induced through advertising to see junk food as 'normal food' rather than an occasional snack. They do however have good powers of persuasion through the 'nag' factor and fat, sugary food that kids prefer is often a reluctant choice by a parent trying to get kids fed while doing the shopping or travelling.

As a snack such consumptions are probably OK but if they become identified as 'food' there can be serious health consequences. Consumption of such foods is linked to significant health problems of obesity and rising incidence of Type 2 diabetes. 2 million Australians have diabetes.

According to the Cancer Council NSW:

Snack and fast-food companies routinely flout guidelines on television advertising to children and deliberately encourage a junk-food culture in which children no longer know how to eat healthily, according to Australia's most comprehensive study on advertising content. Nearly a third of all television advertising is for unhealthy or non-essential foods...

The Council found that formal regulations and a voluntary industry code were blatantly ignored and no punishment was applied to advertisers who defied regulations. Giveaway toys and movie tie-ins with takeaway meals and similar products were central to many ads, even though the Children's Television Standards allow them only to be 'incidental'. There were 194 breaches of the standards in relation to food.

The findings are based on an analysis of 10,000 ads from 645 hours of television screened in Australian cities last June. Weekday ads for unhealthy foods peaked at an average of 5 an hour between 6-9pm on commercial, free-to-air channels. Nationally, 25% of advertising across all categories was for unhealthy foods. The effect was magnified by lack of promotion for healthy foods — these accounted for only 19% of total ads.

The findings will turn up the heat at today's Australian Health Ministers Conference, where the consumption of high-calorie foods is again on the agenda.

Food industry representatives will present a proposed new 'food marketing code' that would prohibit encouraging 'pester power', such as images of children putting products in supermarket trolleys, excessive eating or 'undermining the importance of healthy lifestyles'. Given their past record giving in such interest groups is akin to putting the 'cat in charge of the canary'.

Of course parents too must be educated to direct kids away from transfat-saturated unhealthy fast foods and generally unhealthy diets. Kids also probably watch too much television.

But it does seem to me that as a nation we are acquiriung unhealthy eating habits. Chips, pizza and meat pies have become 'lunch' for many people these days. Commercial interests foster such consumptions leaving the public health system to pick up the trail of damage in terms of cardiovascular disease and the ugly complications of diabetes such as kidney problems, blindness and limb amputations.

Is it sensible to allow deceptive marketing of dangerous food products during the afternoon and early evening hours that kids watch TV? Indeed why should society promote sales of such crap at any time?

Higher interest rates imminent

The strong CPI increase in the June quarter of 4% annual (and the CPI increases of around 3% for the previous 3 quarters) are the highest inflation rates for the last few years. This moves the RBA out of its inflation 'comfort zone' of 2-3% and, coupled with the employment of an extra 52,000 Australians during the June quarter, makes it very likely that official interest rates will adjust upwards from 5.75 to 6% at the August RBA Board meeting.

Happy birthday John!

Prime Minister John Winston Howard turns 67 today. He looks really fit and intellectually at his full strength - more like someone likely to fight on for a fifth term than someone about to retire as an aged pensioner.

If JWH stayed on and completed another term he would be 71 - the age that Robert Gordon Menzies retired as PM.

I am sure everyone in the blogosophere wishes John a happy birthday. But lest anyone should inadvertently forget: Happy birthday John from the blogosphere!

Defeating Iran

A short though insightful discussion of Iran's contribution to the current Middle East horrors is provided by Leanne Piggott. She sees the current conflict between Israel and Iran's proxy in Lebanon (Hezbollah) as an event that could transform global politics for a generation.

Iran is seeking a regional hegemony in the Middle East and is led by a man (Mahmood) who wants to destror Israel. Iran probably planned the Hezbollah incursion into Israel to derail the UN Security Council's scheduled meetings this week to deal with its refusal to allow monitoring of its nuclear facilities. The Security Council is in a position to impose sanctions for this failure.

Iran does seek nuclear weapons (its claims to the contrary are lies):

Just before the IAEA meeting last February, Iran's state-run news agency, Fars, reported that Iran requires nuclear weapons as a "means to create a balance in the arrangement of forces in the region". In talks with European officials concerning Iran's nuclear program, the regime's negotiators have consistently stated that Iran will not curb its nuclear work, and have threatened to destabilise the region if the matter is returned to the Security Council. (my bold).

The most recent Iranian threat was made on July 11, the eve of Hezbollah's attack on Israel.

But maybe Iran has overplayed its hand. Much of the Arab world seems alarmed by Iran's imperrial objectives and a US-Israeli airstrike against Iran's nuclear facilities cannot be ruled out - it may be the only way of eventually dealing with this preposterous terrorist state. Moreover, opposition to Ian's nuclear stance from internal Iranian groups such as the People's Mojahedrin Organisation of Iran and the broader coalition of resistance groups to which the PMOI belong, the National Council of Resistance of Iran deserve, according to Piggott, Western support. There are even strong conflicts within Iranian non-resistance politics to the path Mahmood is pursuing. These too should be encouraged.

Iran is being confronted with resistance in the conflicts it is encouraging among the Palestinians, in Lebanon, Iraq and Afghanistan. Even the Arab world is sensing Iran's imperialistic objectives. Internal opposition can be encouraged within Iran can be encouraged to divert Iran from its current program of hostilities without more blood being shed. There is no reasonable argument that Iran can be permitted to possess nuclear weapons and there are strategies to defeat Iran.

Tiger Woods

I was touched by the scene of Tiger Woods winning his second successive British Open Golf Tournament. As he sunk the final winning putt he was in tears. His recently deceased, and greatly-loved, father was not there to celebrate his victory. Tiger of course wanted the money, the fame and all those things - but really what he really wanted was his father to be there.

A few years ago I attended an Australian Chamber Orchestra concert at the Melbourne Arts Centre. Without warning during a dramatic musical presentation, I too suddenly felt tears rolling down my face. It only took me a few seconds to work out why. Same as Tiger - I was thinking of my dad who had died more than 25 years earlier. My dad loved classical music and knew far more about it and appreciated it more deeply than I ever could or will.

Like Tiger what I really wanted was for him to be there with me.

Gambling becomes a Victorian political issue

The pokies in Victoria have been a social disaster for low-income Victorians. Should pokie use be discouraged? The issue is whether the interests of the many 'responsible' gamblers should be sacrificed because an 'irresponsible' minority become compulsive players who destroy their own lives as well as the lives of their families. I think the damage of pokies outweighs the limited joys of their handles.

I rarely have much positive to say about the Greens as an Australian political force but on pokies they have driven a worthwhile agenda. In Victoria they propose cutting the 27,500 machines by 20,000 when gaming licences expire in 2012. I have previously urged the Victorian Liberals to imitate this policy and they now seem to have done so to some extent. Regrettably I doubt it is because Ted Baillieu has read my blog. But today Baillieu announced the Liberals would cut pokie numbers in Victoria by 5,000 thereby reducing the State Government's dependence on tax revenue from pokies to something below the $1 billion it currently gets. He will also spend much more addressing the problems faced by compulsive gamblers and make known statistics on the extent of compulsive gambling.

Watch for screams from the anti-social Tattersals and Tabcorp duopoly. Also watch for the dullard Labor Party response from their weak Gaming Minister John Pandazopoulos. The hope is that this will become a competition that ultimately reduces further the role of the mind-numbing and impoverishing pokie menace in Victoria.

Muslims on Islam

This provocative articulation, by a prominent Muslim, of problems in Islam was picked up by Tim Blair:

Let us, Muslims, be brutally honest.

We have inherited a culture of denial, of too often refusing to acknowledge our own responsibility for the widespread malaise that has left most of the Arab-Muslim countries in economic, political, and social despair ...

Many of our intellectuals in public life and our religious leaders in mosques remain adept in double-speak, saying contrary things in English or French and then in Arabic or Farsi or Urdu.

And finally:

We have made hypocrisy an art, and have spun for ourselves a web of lies that blinds us to the real world around us. We seethe with grievances and resentment against the West, even as we have prospered in the freedom and security of Western democracies.

Why are Islamic countries so consistently poor, so undemocratic without civil rights and with weak rights for minorities and particularly women? Why is a message of peace so constantly projected but, in reality, acts of war and terrorism pursued and even glorified?

Why the propensity to glorify death? Watching a recently-widowed mother in Lebanon on the TV tonight sobbing with her two war-injured children it was difficult for me to understand the point Hezbollah sought to make by attacking Israel. They know what the response will be.

Is there the need for a radical rethink? The Muslim thinkers cited in the three hyperlinks suggest so. Their views are of interest to Muslims and Non-Muslims alike.

Skilled immigrants help Australia out

Australia’s Department of Immigration and Multicultural affairs have published two recent reports on skilled migration. Skilled migration is now by far the most important component of our migration program – in 2005/06 about 70% of migrants were skilled.

Bob Birrell et al, Australia's Net Gains from International Skilled Movement (May 2006) (140KB PDF file). Australia's Net Gains from International Skilled Movement - Appendices (May 2006) (370KB PDF file). A detailed empirical verification of the claim that Australia has been a very significant source of ‘brain gain’ up to 2004/05. This is due to the large numbers of skilled migrants arroiving in Australia and to the return home of skilled expats. While the immigration program is working well in this respect it does signify a dependence on immigration for skilled workers. One interesting statistic I picked up was the significant level of imported economists.

Peter McDonald et al. Immigration and the Supply of Complex Problem Solvers in the Australian Economy (2006) (230KB PDF file) argue that the number of older workers in the economy is increasing while the number of younger workers is falling or growing slowly. If labour shortages provide a stimulus to technological development and to higher productivity resulting from increases in capital per worker, this is not a problem provided older workers are substitutes for young workers. But in jobs that require the most sophisticated technological skills – complex problem solvers or CPS - older workers are not good substitutes for young workers. Psychology and economics show that complex problem solving skills deteriorate rapidly after age 40 and, consistent with this, in Australia, 80% of CPS are aged less than 40. The authors show that migration is a highly effective way of increasing the supply of CPS workers when the migration program is oriented towards high skills.

Good reading for those interested in migration policy.

Deaths dive

The Sunday Age presents a dramatic picture of the decline in heroin-induced overdose deaths. Deaths were 359 in Victoria in 1999, 39 last year and 9 so far this year. The reasons:

• Education about overdoses, including a big campaign this year via syringe programs.
• Substitution away from heroin may be in favour of amphetamines.
• The 2001 heroin drought and a heroin shortage in the first three months this year.
• The strength or purity of the available heroin being lower than a year ago, and way down on its purity at the height of overdose deaths five years ago.
• A steady rise in the number of people receiving methadone and buprenorphine treatment, with an increase from about 7000 in 2002 to nearly 11,000 this year.
• The 'war on terror' which has improved surveillance and international police co-operation thereby reducing heroin imports.

Even with substitutions to drugs such as amphetamines and esctacy this is good news since fatalities have fallen net - amphetamines caused about 14 deaths Australia-wide in 2004.

Weekend reflections

A freezing cold day in Melbourne today. After taking my son to a music lesson I spent the rest of the day reading the Weekend Australian and the biography of Harry Harlow, Love at Goon Park by Deborah Blum. During Harlow’s life the ‘animal rights’ movement didn’t have much of an impact so the sorts of criticisms I discussed in an earlier post were not relevant. It was his pioneering work as a psychologist in understanding the ‘science of affection’ (‘love’) that stand out. Harlow was a curious, cranky, imperfect human being who was obviously quite brilliant.

The newspapers today had some excellent articles on the conflict between Israel and Iran’s representatives in Lebanon. The initial killings and murders by Hezbollah were clearly designed to initiate a conflict that had been long planned and engineered by Iran. Hezbollah has got the outcome it wants and the unfortunate people of Lebanon are paying a terrible price. The Australian’s editorial says it all – Israel’s foes must understand that Israel will defend its existence. The article by Alan Dershowitz ‘When innocents are in the firing in’ makes the point that Hezbollah launch anti-personnel rockets from heavily-populated civilian areas seeking Israeli death gains and propaganda gains from Israeli responses which fall on civilians. The chorus of condemnation of Israel then serves the terrorist interest.

Israel is planning a limited ground offensive in Lebanon to weaken Hezbollah and presumably to attempt to provide strength to the Lebanese Government. The latter has said it will fight alongside Hezbollah against the Israelis (it has mentioned previously trying to disarm Hezbollah) so it is unclear what will happen. Israel’s objective is obviously to inflict heavy damage on Hezbollah that will weaken Iran’s capacity to operate via proxy in Lebanon.

Finally, I noticed via several blogs that the neocon William Kristol advocates the US attacking Iran now. Writing of Hezbollah’s Iranian-backed fight with Israel:

‘…..For that matter, we might consider countering this act of Iranian aggression with a military strike against Iranian nuclear facilities. Why wait? Does anyone think a nuclear Iran can be contained? That the current regime will negotiate in good faith? It would be easier to act sooner rather than later. Yes, there would be epercussions--and they would be healthy ones, showing a strong America that has rejected further appeasement’.

Paul Krugman ridicules this notion but argues this is probably driving current official US thinking. If it is driving US thinking it islikely that the US would be behaving now just as it is. It is giving Israel time to clean up Hezbollah strongholds in Lebanon, then nominally seeking a negotiated settlement by sending Dr Rice to end that conflict and then suddenly striking Iran’s nuclear facilities. The US must now be thinking about how this type of conflict would be played out if Iran had nuclear weapons. He must also be thinking that a peace deal which leaves Hezbollah intact and leaving Iran and Syria in their current strategic position will be almost worthless – some short-term gains in reduced civilian casualties but the type of problems being experienced now repeating as the terrorists regroup.

The US have already speeded up the delivery of refined missiles to Israel. Meanwhile savage critiques of the neocon 'attack Iran' position are being posted.

Fairly gloomy thoughts on a gloomy Saturday. If you have anything brighter to contribute I would welcome hearing about it. Feel free to contribute your views on anything.

Toyota's low profit is interesting

I bought a Toyota Camry a couple of years ago and it is a great medium-large sedan. It is economical to run and reliable. If fuel prices ever fall, and one of my stock market speculations proves more than a bit profitable, I would like to buy a Toyota LandCruiser and tour outback Australia. Toyota has a good market image in all types of vehicle markets and indeed sold a record 214,072 vehicles in 2005/06. It exported 71,748 vehicles and earned export income of $1.3 billion on this.

But overall Toyota made a net profit after tax of only $54.9 million (down from $70.8 million last year) on sales of $7.6 billion representing a return on sales of only 0.7%. Toyota claimed there was a sales slowdown because of increased petrol prices but its sales volumes performed well. Of course there was strong price competition from other local assemblers. Toyota also claims that the low profits reflect large capital expenditures of $420 million in 2006 compared to $176.8 million in 2005 for production of a new model Camry and the V6 Aurion salon. I will cjheck with my accounting colleagues but I thought large capital items would not be written off as quickly as this.

Toyota's low claimed profit figures have been challenged by the Australian Tax Office who, for several years have been pursuing claims of alleged transfer pricing of imported components for the Camry that allowed profits to be shifted offshore. At stake could be between $400 million-$1 billion in back taxes and penalties. In part such tax issues might vreflect squabbles between tax offices in Australia and Japan - with each party trying to maximise its slab of the surplus.

Also, recording low profits across the whole industry will be beneficial in maintaining high levels of protection paid as a production bounty to assemblers under the ACIS scheme. Tariff protection on locally produced cars has been substantially cut.

Toyota has been involved in transfer pricing claims in India and other countries. One interesting feature of the current Australian performance is that over 20065/06 the Japanese parent increased its global net income by b17.2% to $A119.9 billion. Of course Australia's sales would be a tiny part of this performance but they did increase strongly over the year.

Toyota would be a fascinating - and delightfully down-to-earth - case study for a PhD student interested in Australian industry economics and I would enjoy supervising such a project. Yes, this is advertising!

Super-snivellers?

Piers Akerman in The Daily Telegraph has labelled Lebanese-Australians whinging about the claimed slackness of the Australian Government's effort to remove them from the war zone in Lebanon as 'super-snivellers'.

THE latest Middle East conflagration has flushed out a new class of dual nationality super-snivellers who believe mere possession of an Australian passport guarantees them security in their 'other' homeland...

According to the Department of Foreign Affairs, up to 25,000 Australians - who also hold Lebanese passports - live permanently or semi-permanently in Lebanon.

This is an overly harsh judgement as people trapped in a war zone will be understandably fearful. However there are valid issues here. Much of the whinging is coming from Lebanese in Australia. Moreover, as Piers points out, an estimated 400 of those seeking to return to Australia now live in southern Lebanon in Hezbollah strongholds. How many of them, as Lebanese-Australians, voted for Hezbollah candidates - a group listed by the Australian Government as a terrorist organisation?

Is it reasonable for Lebanese to take Australian citizenship but to then live semi-permanently in another part of the world and demand impossible levels of support from the Australian Government when things go wrong? Australia's Lebanese have proven problematic immigrant citizens - there are distinctive Lebanese connections with crime and with high social welfare dependency. Complaints about poor treatment from this group wear thin.

The situation in Lebanon is difficult and families there deserve support but Lebanese critics of hard-working Australian consular officials go too far. Moreover, claims that the Australian Government has been slack are unjustified - as pointed out at Crikey it will be difficult to extract 'Australian' nationals until Israel declares a cease fire.

Voice of the Bard in Brisbane

I was delighted to read that the University of Queensland is now hosting the VIII World Shakespeare Congress and that Professor Anwar Ibrahim is one of the many engaging speakers at this six-day event.

Professor Ibrahim was jailed by Dr Mahathir on trumped-up charges. Dr Ibrahim read the complete works of Shakespeare four times during the six years that he spent in solitary confinement in a tiny Malaysian prison cell. It helped him ‘escape’ his cell. He discusses his views on Shakespeare here.

Denialists continue to deny

Global warming denialists continue to deny while supporters of the global warming hypothesis display irritation with the denialists. Clearly global warming is a debate not a scientific fact. In my view there is a reasonable possibility that anthropogenic global warming is a reality that will have significant harmful consequences in the not-too-distant future. Hence I support moves to cut back on greenhouse gas emissions - at least until our knowledge of climate science improves to the point where we know we have no worries. There remains the doubt that all alarm over the issue is bunkum but I still favour some action.

Alan Wood in The Australian today firmly denies that a consensus on global warming has developed. He draws on an ABARE report emphasising the role of uncertainty in evaluating the issues. He also attacks the UN’s Intergovernmental Panel on Climate Change (IPCC) - the main source of the current consensus wisdom. The argument is the familiar one that the IPCC relies on the ‘hockey stick’ model of climate change - that after 900 years global warming during the 20th century takes off in a sharp upward surge like the end of a hockey stick. The 20th century was the warmest for the past 1,000 years, the 1990s were the warmest decade, 1998 was the warmest year and so on.

Michael Mann who developed this model has had his work criticised bySteve McIntyre and Ross McKitrick among others. These critiques have in turn been scrutinised both from the viewpoint of statistical logic and from a science/cultural viewpoint. Most recently the US National Academy of Sciences led by US statistician Edward Wegman have got into the act and supported the McIntyre-McKitrick critique of Mann.

‘Overall, our committee believes that Mann’s assessments that the decade of the 1990s was the hottest decade of the millennium and that 1998 was the hottest year of the millennium cannot be supported by his analysis’.

The Wall Street Journal editorialise on the basis of Wegman et al that current temperatures are within the range of normal variation given history. This poses problems for the IPCC which uses the hockey stick has a foundation for its views on climate change and uses the hockey stick as a logo. The hockey stick theory might be a lie!

An inconclusive exchange of insults on the Wegman et al document is at Deltoid. Generally the approach there seems to be – accept the evidence supporting the hockey stick and display impatience with respect to evidence that doesn’t. As debates go there is more heat than light.

What to make of this? Wegman et al comment in their report that the case for global warming isn’t suited for discussion on Web logs and maybe that is right. It is discouraging that such an important debate has taken such an inconclusive turn. But I don't change my pro-action views. On the balance of probabilities I think global action to deal with greenhouse gas emissions is sound policy. I'll have to live with the fact that I might be wrong.

Hezbollah unloved

It is obvious that the activities of Hezbollah are causing divisions in the Arab world. Many countries condemn the adventurism of Hezbollah outright while only a few support it.

Saudi Arabia has condemned Hezbollah for the kidnappings while Egyptian politicians are clearly concerned that Israel’s raids on southern Lebanon will boost support for Hezbollah and their fanatical supporters in Teheran. With the exception of the Palestinians the Arab countries are united in blaming Iran and Syria for the fighting in Lebanon. One general spin is that many Arab countries see the current conflict as thwarting the ambitions of the religious crazies in Iran with the bonus that the weight of this effort is being borne by equally unloved Israel. Many of these countries would like to see Hezbollah, as the Iran’s branch office on the Mediterranean, cop it in the neck.

The Iranian and Syrian leaders are in part using Hezbullah to divert attention from Iran's nuclear program and Syria's involvement in the assassination of former Lebanese Prime Minister Rafik Hariri. The Iranians are not Arabs and Iran is backing Shia groups in Iraq who seek to turn Iraq into an Iranian ally – the Sunnis in Iraq increasingly want the Americans to stick around. The Islamic paradises in Iran, Sudan and Afghanistan don’t look attractive to anyone in the Western world but also look repugnant to non-fanatical Muslims everywhere – the barbarism of the Iranian regime is getting and deserves universal condemnation. Moreover, Iran wishes to secure nuclear weapons and attack Israel. If it did so – or threatened to do so – much ‘collateral damage’ would fall on surrounding Arab states. This is presumably an extra inducement for Arabs to hope Hezbollah will cop it in the neck.

Hezbollah in Lebanon may rally more troops behind its ratbag causes or may face isolation and ultimate annihilation there because of its instrumental role in bringing catastrophe on this long-suffering nation. Israel will work towards achieving the latter view. It is no better than anyone else at resolving moral ambiguities but it is far better than any Arab country at winning wars.

Myth of addiction

One of the less orthodox views of the effect of drugs like heroin is that the addiction experience is largely a myth.

Stanton Peel is a prominent exponent of this viewpoint. The claim is that the horrors of withdrawal are exaggerated and largely due to drug users seeing themselves as 'victims' who do not wish to take responsibility for their actions. Users have internalised the view, propounded by the medical profession, that they need drugs to function. As a corollary the supposed addict has much greater freedom to choose than is commonly claimed. For example, a life of crime is not forced on an addict by their addiction - more plausibly they were criminals before they began using drugs. Indeed most of the econometric work examining the causal links between drug use and criminality support this view.

Jim Bugden forwarded to me a succinct recent statement of this type of viewpoint by Theodore Dalrymple in the Wall Street Journal. I'd be very interested in comments on it. These types of commentators are either identifying serious flaws in the way we think of addiction issues or have totally lost the plot.

What will Israel do?

Will Israel attack Iran and Syria? The greater than expected strength of Hezbollah attacks on Israeli cities like Haifa suggest that Israel (and perhaps the US) might seek to settle things more permanently. The Palestinians have voted for the terrorist Hamas while the most efficient branch of Middle East terrorism, Hezbollah, has broad support from Shia Lebanese, backed by Iran and Syria. Undemocratic states like Syria and Iran are attempting to subvert democracy throughout the Middle East by supporting, with military funding, those forces it sees as advancing its brand of Islamic fundamentalism.

Apart from Israel, Iran has the best equipped military forces in the region. Their strength can only grow and they are committed to wiping out Israel. Left unchecked Iran will develop nuclear weapons and may even provide them to terrorist groups in the region. These issues must be self-evident to all parties.

These same issues pose difficult immediate calculations for Israel and perhaps the United States. The moral arguments are all on Israel's side but these are largely irrelevant - the main consideration at present is whether decisive action at this stage would work or not.

China's peasants

China's peasants have lived difficult lives for centuries. Mao treated them as a source of surplus to fund his revolutionary armies and, of course, to provide cannon fodder. He also used their existence as an input into the set of ideological lies that helped him grab power.

I have been reading Chen Guidi and Wu Chuntad's, Will The Boat Sink the Water? which provides a peasant-level view of life in China over recent years. It describes a set of incidents where innocent Chinese peasants were persecuted - and in some cases murdered - by local officials who were often little more than thugs. It also describes the courage and ingenuity of the very poor people in China's countryside in seeking to ensure justice is done.

The book sees China's peasants as largely left behind by the Chinese miracle of glittering Shanghai sky-scrapers. Indeed the authors see the modernisation that is occurring as funded by the tax surpluses extracted from the sweat and blood of the peasants. The peasants, as their reward, are being cheated, lied to and deceived by local officials of the Communist Party. If anything it is only the central party organisation that gives them a glimmer of hope in their search for justice from corrupt dishonest local officials.

There are no grand theories in this book - just truth by vignette - a series of true stories of aching injustice to those at the bottom of China's class-based society. The book was banned by the government just two months after it was published - it was amazing to me it was not banned immediately.

There is interesting economics here. An essential part of the story is the way corrupt taxes are levied, phony agricultural targets are met during droughts and how free labour movements are restricted within China to the disadvantage of its poorest. The role of auditing and accountability become issues of major social importance. Many of the agricultural reforms designed to boost productivity are being undone by corrupt taxes that wipe out peasant incentives.

The book is well worth reading as an alternative to the standard eulogistic views on the development prospects of China.

More please?

Australia's Islamic leader, Sheik Taj Din al-Hilali in a display of broad religious tolerance dismissed the Holocaust as a 'Zionist lie' in a series of fiery, apolitical, sermons in which he lashed out at the West and the US-led occupation of Iraq.

And Sheik Hilali - the Mufti of Australia and a member of John Howard's Muslim Community Reference Group - has (in the past) praised suicide bombings and terrorist attacks . He now accuses the Government of being dishonest for claiming the anti-terrorism laws were not designed specifically for Muslims. 'These laws are tailored to target us precisely' he said in a sermon recorded at Sydney's Lakemba Mosque.

He might be wrong here. Why would we ever want to look twice at him? Lets target PlaySchool.

Indeed lets have more Muftis and Sheiks. Let's bring more unskilled migrants like this pair to enrich our cultural mix.

Sheik Hilali is an amateur historian He attacked the Western press for being afraid to admit that the Holocaust was 'a ploy made by the Zionists'.

He is also interested in numerical mathematics and trivialised the number of Jews killed by the Nazis. 'What's that six million all about? Is there six million?', said the Egyptian-born cleric.

In another Friday sermon, delivered two weeks ago at Lakemba Mosque he revealled a broad range of geopolitical and oncological interests - he called the US the 'breeders of oppression' and labelled Israel a 'cancer that is planted in the heart of the Ummah (Muslim community)'.

I feel proud that I live in a multi-cultural society where such voices can be heard. Who would ever want to rely on a racially non-selective immigration policy when our society is enlived with wit and intelligence from unskilled 'centres of tolerance' such as these.

Buying plonk skillfully

There is a currently a wine glut in Australia and hence an opportunity to stock up big on wines that you can happily imbibe over the next decade or so for reasonable prices. One could think of this as purchasing a short-term real investment where – in my case at least – I am more likely to consume than sell the asset over the next five years or so. Some of the purchases could also be an attempt to buy inexpensive high quality wines for medium to long-term cellaring - but this is more chancy proposition. From either perspective the time to buy would seem to be about now since already Australian wine producers see the glut coming to an end.

On wines I am a drinker (with admitted pretensions) not a deep thinker – my critics might say that’s true in other areas as well – but I’ll deal with these sorts of critics with, you guessed it, a bottle of vino.

At Clarke Mansions I have a reasonable cellar of wines with a few going back to the 1960s. I also have considerable practical experience of drinking the stuff although health concerns tend to limit my intake these days to below the unconstrained optimum. Occasionally I will have a posh booze-up with friends when we will discuss glass in hand, earnestly, without necessarily the greatest experience or knowledge, the comparative advantages of a Chateau Latour, a well-aged bottle of Grange or an early Wendouree cabernet.

When it comes to wines I am omnivorous – like ‘em all - whites, reds, dry wines even ‘stickies’ (especially the De Bortoli Noble One ). Really I enjoy anything that is well-made. (I also enjoy most spirits and beers so I am not generally hard to please!). This makes selectivity a real task because my main response in relation to many liquors offered is just 'more please'.

In what follows I present my considered, unbalanced and not very original views on Australian wines. The emphasis is on their crass economics as that’s what I am when it comes to drinking - a crass economist. My comments centre on warnings that occur to me about wines that you might want to try to cellar - some bitter experiences condition my remarks here. The big cellaring bargains at present – shiraz and cabernet – are wines that I don’t have a lot of specific things to say about – just buy lots now and take advantage of cyclically low prices.

Chardonnay. In my view if you want to skimp when you buy wine don’t drink Australian chardonnay. As the French winemakers say Australian chardonnay has ‘too much sunshine’ in it and too much oak. If you want to drink a reasonable chardonnay you have to pay for it. Then Petaluma, Bannockburn and particularly the Art Series Leeuwin Estate wines are all great Australian chardonnays but never cheap. Do yourself a favour and try them if you haven't - they are not expensive by global standards and quite profound wines. An almost acceptable cheapie is Seppelts Victorian Chardonnay which sells for about $12. Both the Leeuwin Estate and the Bannockburn age really well – a 1994 Leeuwin I drank this year was wonderful. But, generally I have had disappointing experiences cellaring Australian chardonnay – it seems to me these wines are generally best drunk young. I enjoy the restrained flinty taste on a good French Chablis but again I have been often disappointed and, again, I find it difficult to secure reliable material that will age well.

Generally don’t cellar chardonnay unless you can buy the more expensive specialist labels. Otherwise buy 'drink now' propositions as you need and target the occasional really good wine rather than the everyday $10-$15 rubbish that dominates offerings in the bottleshops.

Reisling. This is often a bargain in Australia mainly because the masses go for heavily-oaked chardonnays. I like the relatively inexpensive rieslings from the Clare Valley, Eden Valley and from cold-climate Victoria. One of my favorites from the latter is Seppelts Drumborg - this will age beautifully but is also delightful when drunk young.

I still have a 1973 Leo Buring Eden Valley Reisling – claimed by some to be one of the greatest Rieslings produced in Australia.

I recently bought a dozen of the 2005 Leo Burings Eden Valley for about $14-50 a bottle which I will start to drink about a decade from now. These are, in my view, some of Australia’s greatest wines. They will last decades if properly cellared. Jim Barry Reislings and various other wines from the Clare and Eden Valleys are good as is the wonderful Tasmanian reisling Moorilla Estate but there are numerous inexpensive rieslings that you can drink now or cellar.

By the way if you haven’t experienced aged reisling check that you like the flavor of it – it can have 'kerosene aspects' that don’t appeal to all. I like it!

Semillon. The great semillon wines of the Hunter Valley in NSW are widely (and correctly) recognized to be some of Australia’s greatest white wines. Murray Tyrrell makes some of the best. Contrary to popular opinion I have found that Mount Pleasant Elizabeth – a favorite when there was nothing else on a miserable restaurant wine list – has deteriorated in recent years. It often has a corked, ‘nail varnish’ finish that I don’t enjoy. Some of the early vintages however that I had kept for up to 20 years were wonderful.

The semillon that most will buy is Mt Pleasant but, as I say, I now find it disappointing these days. The Murray Tyrrell Semillons used to be a bargain – now much less so – but these are still pretty good. Some of the smaller Hunter Valley vineyards are also worth a look – the promising wines will have quite low alcohol and a slightly soapy, fairly neutral flavor when young. Leave them for 20 years and they will become golden toasted beauties. Generally a much better prospect for cellaring than chardonnay.

Sauvignon blanc. I have developed something of a palate for the non-herbaceous varieties of this over recent years, particular the Western Australian wines and (of course) those from New Zealand. It is definitely not my preferred white wine so I don’t have particularly definite views.

It does not cellar at all well so buy as you need or for a year or so down the track.

Pinot noir. Again don’t try to drink this stuff unless you are flush with funds. The Aussie cheapies are just not worth drinking. The Yarra Valley vineyards like Coldstream Hills and many of the boutique Mornington Peninsula specialists produce reasonably good pinot. But if you want something special you really are looking for at least an $80+ French burgundy and you can pay much more than this. I have wasted a lot of money (and effort) chasing quality French burgundy. Before I die I want to drink a Domaine de La Romanee Conti! The ‘Conti 98, which should cellar well for 30-40 years, will set you back over $3000US a bottle. I was impressed by the wine critic James Halliday’s description of drinking a DRC in the 1970s that was produced in the year of his birth, 1937 – he found tears involuntarily pouring down his face. He had discovered perfection.

I have cellared some beautiful pinots with success – one of the best was some Yarra Yering pinot. The wine snobs have now grabbed this source – it was always pricey – and it is now quite hopeless to try to enjoy without worrying about your overdraft. Others that I bought that have aged well included Bannockburn (a favourite that cellars well) and the Tasmanian beauty Morilla Estate but again these are all quite pricey these days.

Generally don’t try to cellar pinot. Instead target an occasional quality label, pay a lot and enjoy it as a current treat. Look for cellaring bargains among other wine varieties.

Cabernet. You can make some bargain purchases here that can keep you supplied with booze for 20 years. Cabernet has lost out a bit to shiraz in recent years so there are numerous labels out there competing for your dollar. Generally I have bought both small quantities of a wide range of boutique cabernets for $20+ and much larger quantities of the high volume brands such as Wynn’s Cabernet. During the recent glut I have seen this is Melbourne for less than $20. It ages beautifully for up to 20 years – although I recall reading about a vertical tasting of Wynns that was recently held that sampled wines up to 50 years old. I have drunk an indecent number of Wynns from the early 1970s and regard these as among the best-value cellaring propositions I have enjoyed.

While Wynns has always seemed great value to me, there are a host of quality cabernets on the shelves that can be purchased for around $15 plus which will offer good cellaring. Picking almost at random I could nominate D’Arenberg’s the High Trellis which will likewise last for 20 years and which has some gamey French characteristics that are delightful.

Shiraz. The red wine selection that most of us make most of the time. There are literally hundreds of reasonable quality shiraz wines that sell for about $15-$20 per bottle. I think here that buying on the basis of location makes sense – the shiraz wines from MacLaren Vale in South Australia are, in my view, the pick of the country but, defying geography and agronomic sense, the great shiraz wines of the Hunter Valley with their earthy, feral characteristics are also outstanding. The Seppelts cold climate Victorian wines are a bargain at their price as is the outstanding range from Mount Langi Ghiran – I still have a few of the block-buster 1989s that still taste like huge, peppery distinguished wines.

The obvious question here is what to say about the Penfolds brand which is the Australian shiraz specialist and the producer of the monumental Grange Hermitage. I have purchased a vast amount of Penfolds wine over the years and generally find it does not improve much with bottle age. That is a very provocative statement that most will disagree with but I will stick to it. Current vintages of Kalimna (the name of this blog) and Bin 389 are delightful to drink but with more than a few year's bottle age they just seem to fade a bit without gaining complexity. I don't buy Penfolds as a cellaring proposition these days. I still have a reasonable cellar of old Granges - including a dozen of the famed 1986s - and these are delightful to drink with bottle age but their price these days makes them bad value compared to the competition.

Among the Penfolds I do drink with pleasure is one of the cheapest of their range, Koonunga Hill - I like the shiraz/cabernet blend. This will not set the house on fire but is a reliable everyday drinking wine with no obvious wine-making faults.

By the way don't neglect the sparkling shiraz wines made by groups such as Seppelts. These are a unique Australian wine that cellars well and is about the best foil I have ever discovered for barbecued turkey. Will cellar for 20 years in good vintages and currently a bargain.

Any of the good wine guides will help you through the mass of shiraz labels. Buying well-recognised brands which are known to cellar well is better than 'hit and miss'. The big producers have reputations to defend. I accumulate notes on good varieties from knowledgeable wine commentators (Tim White in the Australian Financial Review is good) and of course James Halliday (in the Saturday Australian) and then head off to raid the local liquor mega-markets like Dan Murphy’s or, in Sydney, Kemeny’s. I buy a couple of dozen individual bottles and give them a trial and then return to buy in dozen lots the wines I think might be good. All in the name of science, you understand.

By the way wines are making it big time in the blogosphere. Appellation Australian is a newer blog on Australian wines. Wino sapien is an attractive local web blog on wines – its author Edward also includes an alphabetical listing of tasting notes. A prominent US blog on various wines (with an exhaustive list of all major US sites) is Vinography .

Good drinking. You've heard some of my wine views - I'd welcome news of yours.

Israel the bully?

Israel seems to be heading towards all out war with Lebanon, Syria and even perhaps Iran after Shia-backed Hezbollah militants kidnapped two Israeli soldiers and killed seven others in a cross-border raid. This occurs on top of the kidnapping by Palestinians of Corporal Gilad Shalit by Hamas-alligned militants last month. Overnight Israel launched further air attacks both on Gaza (where they destroyed the Palestinian Foreign Ministry) and, along a second line of attack against Lebanon. In recent hours Israel has cut off air traffic into Beirut by a rocket attack on runways - it seems to have blockaded Lebanon. The conflict is becoming more serious by the hour.

Hezbollah is a state-sponsored terrorist group. Despite its cowardly denials, the main sponsor of this terrorism is Lebanon with auxiliary support provided by Syria and Iran. The deterrence principle discussed recently on this blog suggests that the threat of an overwhelming retaliation against these countries should have been enough to deter their aggression. It hasn’t worked.

Iran, Syria and Lebanon, as sworn enemies of the Jewish state, seek its destruction. Israel has a legitimate right to deny these forces the opportunity to wipe it out and to defend itself against jihadist terrorism. It is now under active attack on each of its three major land borders and Israel clearly sees current events as part of a regional conflict that goes beyond the kidnapping of 3 soldiers.

The deaths, injuries and property damage being suffered by the Palestinians are something that everyone can empathise with. Many of those killed or injured are innocent of terrorist involvement. But they (or their parents) did vote for Hamas – even when first elected the Israelis were concerned about its connections to terrorism.

I watched a biased TV report last night which emphasised the evils Israel is inflicting on innocent Palestinians. Innocents are indeed suffering but the reason for the suffering is the militant Hamas regime which launches missile attacks on Israel, kills its citizens and then runs and hides among its women and children and effectively turns its own citizens into hostages. When Israel responds to the outrages launched Hamas hysterics cry 'atrocity' in unison. Israel the ‘neighborhood bully’, being picked on by its neighbours on all sides and daring to assert its claim to be allowed to continue to exist.

Should be ashamed of itself? No, not at all. The only issue is whether the current strong response policy will work.

Heartburn over daft congestion economics

Sinclair Davidson in yesterday's Age argues that while 'Many of the 'solutions' to congestion assume it is caused by excess demand for the road. But much congestion is caused by reduced road supply'.

I had to read this statement three times to try to make sense of it. Excess demand here is the demand for road travel less the supply of road travel opportunities. If this is excessive it could be due to either excessive demand or deficient supply. Indeed it doesn't make sense to pose things in these terms - it is analogous to the economist Alfred Marshall's difficulty of trying to work out which blade of the pair of scissors cuts a piece of paper.

But it is quite clear from what follows what Sinclair intends. The congestion difficulties we face in Melbourne have little to do with the large numbers of cars using the roads without paying a toll reflecting congestion costs imposed. They instead stem from the Bracks Governments' speed limits, tram stops and having 'special events' that 'forever' disrupt traffic. Attempts to internalise congestion externalities by levying tolls for travel during congested periods are just a 'revenue grab' by the Bracks Government. Those seeking the imposition of such tolls 'want an immobile population' and 'a dreary, or even abandoned CBD'.

This is unsound economics and Sinclair should know better. People who travel on roads impose congestion costs on others. As has been known for at least half a century, attempts to internalise all such costs makes a community better-off in the sense that the value of the revenues gains exceeds costs to both the 'tolled-off' (those ending road use) and the 'tolled-on' (those who continue but who must pay the toll). Speed limits will have little impact on traffic flows under congested conditions because the traffic itself is moving so slow. And the Brack's Government far from favouring congestion tolls as a source of revenue (I wish they would) initially sought to exclude the consideration of such tolls from the terms of the recent VCEC inquiry.

This kind of daft economics causes heartburn to those of us seeking to change government attitudes to road pricing to improve the quality of life in our cities. We are not anti-travel at all - we just don't want to put up with congestion that can be eliminated to the net benefit of all.

Stiglitz on global warming

Joseph Stiglitz at The Economists’ Voice proposes practical solutions to global warming issues. Stiglitz sees the Kyoto Protocol as positive but recognises (i) that the world’s biggest polluter (the US) has not agreed to join it and (ii) that developing countries, which will shortly be contributing 50% of all emissions, are left without firm commitments to do anything under it. While Kyoto requires that countries bring emissions back to 1990 levels, developing countries complain, with some justice, that their energy consumption was low then relative to developed countries so the cutback requirement is unfair.

Stiglitz’s approach is to provide an enforcement mechanism. Non-signatories to Kyoto, such as the US, who continue to spoil the earth’s atmosphere, should have a WTO case of unfair subsidisation brought against them by countries who have signed such as Japan and Europe. Even the US recognises the role of such actions - it prohibited the import of Thai shrimp that had been caught in 'turtle unfriendly' nets. With respect to global warming the subsidies are the costs to the global environment caused by US firms not paying the full global costs of production. Complainant countries should accordingly prohibit the import of goods that benefit from such subsidies or at least levy hefty taxes on them. This is a bit like earlier proposals for counterveiling tariffs to help enforce international agreements.

Problems of bringing about change in the developing world could be resolved by scrapping the Kyoto agreement but introducing a global environmental tax on emissions that achieves global reductions in emissions equivalent to the Kyoto targets. This tax might change as information about global warming improves and technologies evolve. Each country could collect and utilise its tax revenues as it saw fit and could cut pre-existing taxes on capital and labour in response to the new revenue source. Such taxes would improve efficiencies because they are directed at a ‘bad’ (pollution) not a ‘good’ (like work and saving). Such taxes would have low costs – in some cases there might be net benefits.

These are worthwhile suggestions that apply the notion of unpaid social costs at the global level and which recognise the superiority of green taxes with their ‘double dividend’ advantages at the national level.

What we don't know about being fat?

A research agenda for obesity research:

We don't have a clear understanding of the connection between being somewhat overweight and being heathy. We are more certain that being obese (very overweight) results in poorer health. Long term, as our weight has increased, our longevity has improved. We have grown fatter but now live longer.

We are unsure that losing weight - perhaps even lots of weight - improves health for those who were originally very overweight. Losing lots of weight may worsen mortality. Most studies do not support the notion that weight loss among overweight people improves their mortality though it may reduce their mortality specifically due to weight-related disorders. If this is true then the modern passion for weight loss is sensibly motivated by aesthetics not health.

We are unsure that people can sustainably lose weight. Diets and exercise programs have short-run effects but invariably seem to fail longer-term. Is weight-gain a hard-wired trait?

As a particular case of this proposition: it is unclear that even 'well-designed' public health programs can lead to weight loss even if this is a good idea.

We don't know exactly why so many people are getting fat. Exercise or diet? Yes, certainly some mix of these two - by a 'law of nature' it must be so - but, exactly what, no-one knows. Or perhaps everyone knows and that's the problem. There are a myriad of theories explaining modern propensities to bulge but none works really well. We are not obviously getting lazier for example.

We don't know why poor people in developed countries are eating unhealthy foods when they are not time-poor and when healthy foods are cheaper alternatives?

This is an index of my modesty. On obesity we know little.

Peter Costello

Peter Costello's remarkable comments on John Howard's apparent fib 12 years ago ('I will stand aside after 1.5 terms') do not advance his personal objectives. In a ballot of the Federal Liberal Party young PC wouldn't stand a ghost of a chance against old JWH for the PM position. So, as an alternative to a ballot, PC is attempting to derive moral weight for the 'top job' from what he claims was JWH's undertaking, made 12 years ago, to step aside 6 years later - this is ancient history. A pity because PC is an excellent Treasurer and his misconception on this issue may backfire on him.

JWH won't forgive because of the damage it does both to JWH and to the Liberal Party. He will not step aside because of this move - he would hate the idea of being seen to have been 'pressured out'. JWH may retire for pre-established reasons - he is renovating his Sydney home - but, other things being equal, this move by PC will only make him dig in his heels and hang on for a while. JWH is an impressive performer and a winner - and he knows both of these things.

The Opposition parties can take limited joy from these events. They don't have the ministerial talent of the Liberal Party and their tattered policy mix doesn't offer much hope to an electorate with an economy enjoying such a sustained period of prosperity. The Labor Party's best hope to regain government is to emphasise divisions in the Government and watch them do just that.

When does deterrence work?

An interesting piece by father and son team, David and Robert Levine, Deterrence in the Cold War and the ‘War on Terror’ deals with the issue of when 'big stick' military deterrence policies will work for countries like the US and when they will not. I had problems with the exclusive emphasis by the authors on deterrence theory since approaches offering positive incentives for refraining from terrorism seem appealing - for reasons discussed by Bruno Frey in Dealing With Terrorism – Stick or Carrot? But the Levine/Levine piece is interesting. This is my first draft at reading a difficult paper and comments are welcome.

The success of US cold war policies in preventing Soviet aggression was based on deterrence - on the threat of bilateral massive retaliation with nuclear weapons. Thomas Schelling was a major thinker behind this approach with mathematicians like Herman Kahn and Albert Wohlstetter also being important.

Mutual deterrence worked effectively because of the possibility of ‘Mutual Assured Destruction’ or MAD. If the other side offered a certain level of aggressive activity and the other country could make perfect commitments, with no constraint on ability to retaliate, then the home country''s best deterrence plan was to commit to a sufficiently high level of response so enemy activity was always deterred. Because enemy activity never occurred as a result of this stance, the cost of going through with the commitment – although not the sunk cost of making it credible - never had to be borne.

Deterrence theory works if the enemy is a rational calculator with consistent values. This is not so for modern, non-state sponsored terrorism where the enemy are religious fanatics and thugs. Moreover, the stakes are lower with such terrorist thugs - potential deaths and property damage from terrorism are likely to be markedly lower than those from even a limited nuclear war. Levine/Levine modify the deterrence story to capture the idea of modern terrorism by assuming the enemy has ‘bounded rationality’ so, with some probability, it will take actions less advantageous than the ideal course of action given an implied response. A probability density parameterizes the ‘rationality’ of the enemy by measuring the enemy’s incentive to take non-optimal aggressions. Then the ‘friendly country’ has to choose a degree of retaliation to maximise its net benefits assuming the enemy plays from this distribution.

Again a simple deterrence policy proves appropriate. For enemy actions of less than some critical level intensity there should be no response while, for actions above this, retaliation should be massively fearsome.

The sense and limitations of this rule are apparent. Suppose there are ‘modest’ and ‘extreme’ levels of enemy attack. Theories of marginal deterrence suggests modest attacks should receive lower intensity responses than extreme attacks to limit scale of attack. But this ignores the fact that some, who previously made modest attacks, will now be deterred from making any attack at all. If low scale responses discourage modest aggressors from aggressing at all and encourage extreme aggressors to become more modest then a low scale response work best and simple deterrence theory fails. But, if a low response does not deter either modest or extreme aggression then a ‘let ‘em have it’ policy works better.

The ambiguity here stems from the fact that increasing response penalties may encourage a change in the mix of types who carry out various types of terrorism and this might be advantageous or otherwise. Generally, neither all-or-nothing policies nor policies of moderation need make inevitable sense.

All-or-nothing punishments also don't make sense if an enemy only ever learns too late that they have gone too far and have crossed a threshold. And the possibility of launching a maximum attack may not be credible – enemies may not believe modest attacks will lead to maximal responses so the pain of a substantial response may produce no additional gain. Finally, a third-party enemy of the enemy (Israel) might engineer modest attacks (such as car bombings), attributed to its enemy (e.g. Lebanon), to initiate a maximal response to that enemy by a third-party such as the US. The enemies’ enemies then have incentives to encourage the appearance of aggressive activity which limits incentives for a maximal response.

When applying deterrence theory to terrorism rather than the Cold War, the claim is that terrorists are less rational and a more heterogenous enemy. The effects on (say) US welfare of dealing wiirth terrorists rather than the old Soviet Union are therefore ambiguous. The US is worse-off dealing with terrorists because of the randomness of the enemy’s response and of the enemy's consequent need to exert more aggression to trigger a maximal response from the US. However terrorists cause the US less harm than even a limited nuclear war so this increases US welfare implying less tolerance of aggression.

Terrorist states such as Syria, Iran and North Korea can be dealt with using the basic deterrence theory. Threats of an overwhelming response will keep such countries in check given the evident desire of their political elites to remain in power. They can cause great harm and will threaten to do so but won’t because they will be totally squashed if they do and realise this.

However dealing with non-state terrorist groups, such as Al-Qaeda, is more difficult. Terrorists are a diffuse group so enemy behaviour has a high random (irrational) component. The enemy is mobile and elusive so threats to retaliate will be less precise. Finally the enemy have imprecise motivating values ranging from thuggish misogyny to ignorant Islamic fanaticism based on zero understanding of any belief systems other than that of their fathers. Finally it will often just not be credible to retaliate massively against limited actions by a bunch of terrorist lunatics.

If the lunatic terrorists have terrorist state support then this increases their danger but then the deterrence theory should be applied to the state supporters if it cannot be applied to the terrorists. It is only with state support that such groups can do relatively significant damage so that fearsome retaliation should be threatened against countries providing such support.

One is finally left with the difficult case of a terrorist group operating without state support. This is difficult to tackle using the deterrence theory but fortunately these terrorists can do much less damage. Levine and Levine argue that a 15 kiloton nuclear bomb in Manhattan could kill upward of 200,000 people which, while terrible, is of a much smaller magnitude than a limited nuclear war between superpowers of the type that could haver occurred during the Cold War. Leviner/Levine claim the main cost of such a threat to the US is the threat of overreaction through lost respect for civil liberties. It requires a response but certainly a community response proportionately smaller than that appropriate to a bilateral nuclear attack. Capture them and/or kill them but don't ruin the democratic values the terrorists are seeking to obliterate in open societies - the cost is too high.

It is here however that deterrence theory does lose attraction and the approach of Bruno Frey, mentioned above, makes sense. Carrots work better than sticks. I’ll post on the Frey viewpoint separately as my review of the Frey book which I'll finish over the next week or so.

Thanks Damien Eldridge for the Levine/Levine reference.

Back

I had 8 days in the Northern Territory and I have been too busy both with work and pleasure to write much for my blog. I spent most time in Alice Springs but had the last couple of days at Uluru. Both towns are reasonably big tourism centres with substantial aboriginal populations. I had a great time and thoroughly enjoyed the visits. Alice Springs is an interesting conference location and Uluru is just amazing.

John Quiggin gave an interesting talk at the Econometric Society meetings in Alice Springs on Employment in Remote Aboriginal Communities. This is work in progress so no online version is yet available - if one becomes available I'll link to it. John suggested that an improvement would be to expand the role of Community Development Employment Projects (CDEP) which currently provide most employment for aborigines in remote areas. These are like Work for the Dole schemes. They could be augmented with various protectionist policies such as employment subsidies, tariff protection for commmunity outputs or even output subsidies.

The possibility of offering 'reserved employment' in particular occupations seems sensible. Aborigines are extensively involved in the tourism industry in cities like Alice Springs and increased involvement in these types of activities might be an option. All these types of policies have a 'tough love' component to them - rewards go to those who work.

It is doubtful that Australia has overspent on aborigines given their poor health, education and low capital base status. John linked the failure of development programs for aborigines with the well-known difficulties in fostering regional development schemes. Sensibly he argued that magic bullets won't work and that evidence-based policies are the way to go.

Talking to locals in Alice Springs it was obvious that substantial barriers are already present between whites and the blackfellas. The recent horror stories on child abuse have produced a kneejerk overreaction among some. But there is also enormous respect among many whites for blackfella culture and skills.

One of my resolutions is to get better informed on the situation facing Australia's original inhabitants. It is something I should know more about and I will.

Media blabbermouths

When should the mass media shut up and not release leaked material. Well I would have thought that secrecy was a moral stance if it inhibited international terrorism, committed no illegal acts and did not harm the interests of law-abiding citizens.

The NY Times story releasing information on the secret US Government’s attempt to uncover terrorist links by inspecting international banking records is here, Video coverage is here. The LA Times joins in here. Michelle Malkin points out that whatever else you can say about the program it is no longer secret while The Media Blog points out the damage done by these media blabbermouths to the war against terror. A survey of responses is at Pyjamas Media. Tim Blair provides a local view of these irresponsible journalists.

The critical counter-response by Dick Cheney is here while the lame counter-counter response of the NY Times editor is here. It just didn’t stack up. The press in this instance went for a cheap scoop – it was an irresponsible decision that should be condemned.

A town like Alice

I have been slack the last couple of days here in Alice Springs with respect to all things other than enjoying myself.

Yesterday I explored some of the gorges in the West McDonnell Ranges while today I headed east to the equally spectacular East MacDonnell Ranges. Saw some aboriginal Rock Art, some great flora and fauna (notably a flock of about 30 red-tailed black cockatoos) and spent time in the Alice Springs Botanical gardens. I ended up today being locked inside the Alice Springs Sewage Farm after going there (with authorization) to look at the reasonably good populations of water-birds there. A couple of council workers helped us escape over a fence!

Alice Springs is great country for a holiday and I will come back with more time. Tomorrow the Econometric Society meetings begin and it will harder to enjoy myself.

The aboriginal issue here in Alice Springs is stark. Many non-socially functional aborigines and a white population that are generally anti-backfella. It’s a major problem and I’ll post on it once my entirely casual observations after talking to locals have gelled.

Thoughts on non-romantic love

Love is supposed to be a bit like a cocaine rush –according to Helen Fisher the neurotransmitter dopamine is the culprit that turns the infatuated brain into a Roman candle – a review of her work from a neuroscientific viewpoint is here.

We have known for more than a decade that body odors are a driver of sexual attraction – that women choose men whose smell promises an immune system different from their own. Alternative sweaty T-shirt studies suggest that:

‘what women want most is a man who smells similar to her father. Scientists suggest that a woman being attracted to her father's genes makes sense. A man with these genes would be similar enough that her offspring would get a tried and tested immune system. On the other hand, he would be different enough to ensure a wide range of genes for immunity. There seems to be a drive to reach a balance between reckless out-breeding and dangerous inbreeding'.

Men like a waist to hip ratio of 70% in a woman to ensure good breeding prospects while women like broad chests and rugged strength, but - unlike men - are more firmly focused on brains and status as complementary inputs into their long-term breeding investments.

Where does all this leave romantic love? Well some cultures don’t have it at all – for example societies where marriages are arranged. Perhaps romantic love is naïve positivism – certainly better than cynicism anyway. But love driven purely by biological needs seems as unrealistic as the romantic ideal. Biology doesn’t just drive psychology – the two things go together with our emotional responses registering physically and vias versa.

Targeting the red centre

I am heading off to the Econometric Society meetings in Alice Springs tomorrow. What a great place to hold a conference! Apart from meeting old friends I am also making a quick detour to Uluru which I have not visited before.

Many of the conference papers are available online at the ESAM website. These are some that interested me particularly:

Voluntary contributions to a public good (Is being selfish just too complicated?)
The costs of inflation in Australia and New Zealand
Paternal uncertainty and the economics of mating, marriage, and parental investment in children (Economic implications of unfaithfulness?)
The shrinking of middle management and the rise in CEO compensation
An empirical investigation of the influence of employment status on the relationship between obesity and healthy eating for UK females (Fat again).
Healthy, wealthy and insured?
Derivation of nutrient prices from household level consumption
To integrate or not to integrate? The role of country size (relative bargaining power?)
Does the reason for buying health insurance influence behaviour?
Media concentration with free entry (What would happen in Aus?)
Thinking Rationally About Rational Addiction (Yes, that’s mine!)
Demand for marijuana, cocaine and heroin (Yes please.)
A Panel Data Analysis of Addictive Expenditure.

I am unsure how active my blog will be over the next few days – it will depend partly on how I find the conference and what opportunities there are in Alice Springs for fun.

If the reader who lives in Alice Springs feels like a yarn please do so – I am at Lasseters.