Saturday, June 30, 2007
John Ashfield aged 6
This story damaged my day. Why is someone from the Department of Community Services not in jail? Why the need to suppress information about this little boy's death?
Krugman on Murdoch
Paul Krugman expresses his opposition to Rupert Murdoch's intended purchase of the Wall Street Journal. He argues that Murdoch's commercial motivations mean that US citizens have been misled on issues such as the war in Iraq.
'The problem with Mr. Murdoch isn’t that he’s a right-wing ideologue. If that were all he was, he’d be much less dangerous. What he is, rather, is an opportunist who exploits a rule-free media environment — one created, in part, by conservative political power — by slanting news coverage to favor whoever he thinks will serve his business interests.
In the US, that strategy has mainly meant blatant bias in favor of the Bush administration and the Republican Party — but last year Mr. Murdoch covered his bases by hosting a fund-raiser for Hillary Clinton’s Senate re-election campaign.
In Britain, Mr. Murdoch endorsed Tony Blair in 1997 and gave his government favorable coverage, “ensuring,” reports The New York Times, “that the new government would allow him to keep intact his British holdings.”
And in China, Mr. Murdoch’s organizations have taken care not to offend the dictatorship.
Now, Mr. Murdoch’s people rarely make flatly false claims. Instead, they usually convey misinformation through innuendo. During the early months of the Iraq occupation, for example, Fox gave breathless coverage to each report of possible W.M.D.’s, with little or no coverage of the subsequent discovery that it was a false alarm. No wonder, then, that many Fox viewers got the impression that W.M.D.’s had been found.
When all else fails, Mr. Murdoch’s news organizations simply stop covering inconvenient subjects.
Last year, Fox relentlessly pushed claims that the “liberal media” were failing to report the “good news” from Iraq. Once that line became untenable — well, the Project for Excellence in Journalism found that in the first quarter of 2007 daytime programs on Fox News devoted only 6% of their time to the Iraq war, compared with 18% at MSNBC and 20% at CNN.
What took Iraq’s place? Anna Nicole Smith, who received 17 percent of Fox’s daytime coverage.
Defenders of Mr. Murdoch’s bid for The Journal say that we should judge him not by Fox News but by his stewardship of the venerable Times of London, which he acquired in 1981. Indeed, the political bias of The Times is much less blatant than that of Fox News. But a number of former Times employees have said that there was pressure to slant coverage — and everyone I’ve seen quoted defending Mr. Murdoch’s management is still on his payroll.
In any case, do we want to see one of America’s two serious national newspapers in the hands of a man who has done so much to mislead so many? (The Washington Post, for all its influence, is basically a Beltway paper, not a national one. The McClatchy papers, though their Washington bureau’s reporting in the run-up to Iraq put more prestigious news organizations to shame, still don’t have The Journal’s ability to drive national discussion.)
There doesn’t seem to be any legal obstacle to the News Corporation’s bid for The Journal: F.C.C. rules on media ownership are mainly designed to prevent monopoly in local markets, not to safeguard precious national informational assets. Still, public pressure could help avert a Murdoch takeover. Maybe Congress should hold hearings.
If Mr. Murdoch does acquire The Journal, it will be a dark day for America’s news media — and American democracy. If there were any justice in the world, Mr. Murdoch, who did more than anyone in the news business to mislead this country into an unjustified, disastrous war, would be a discredited outcast. Instead, he’s expanding his empire.
'The problem with Mr. Murdoch isn’t that he’s a right-wing ideologue. If that were all he was, he’d be much less dangerous. What he is, rather, is an opportunist who exploits a rule-free media environment — one created, in part, by conservative political power — by slanting news coverage to favor whoever he thinks will serve his business interests.
In the US, that strategy has mainly meant blatant bias in favor of the Bush administration and the Republican Party — but last year Mr. Murdoch covered his bases by hosting a fund-raiser for Hillary Clinton’s Senate re-election campaign.
In Britain, Mr. Murdoch endorsed Tony Blair in 1997 and gave his government favorable coverage, “ensuring,” reports The New York Times, “that the new government would allow him to keep intact his British holdings.”
And in China, Mr. Murdoch’s organizations have taken care not to offend the dictatorship.
Now, Mr. Murdoch’s people rarely make flatly false claims. Instead, they usually convey misinformation through innuendo. During the early months of the Iraq occupation, for example, Fox gave breathless coverage to each report of possible W.M.D.’s, with little or no coverage of the subsequent discovery that it was a false alarm. No wonder, then, that many Fox viewers got the impression that W.M.D.’s had been found.
When all else fails, Mr. Murdoch’s news organizations simply stop covering inconvenient subjects.
Last year, Fox relentlessly pushed claims that the “liberal media” were failing to report the “good news” from Iraq. Once that line became untenable — well, the Project for Excellence in Journalism found that in the first quarter of 2007 daytime programs on Fox News devoted only 6% of their time to the Iraq war, compared with 18% at MSNBC and 20% at CNN.
What took Iraq’s place? Anna Nicole Smith, who received 17 percent of Fox’s daytime coverage.
Defenders of Mr. Murdoch’s bid for The Journal say that we should judge him not by Fox News but by his stewardship of the venerable Times of London, which he acquired in 1981. Indeed, the political bias of The Times is much less blatant than that of Fox News. But a number of former Times employees have said that there was pressure to slant coverage — and everyone I’ve seen quoted defending Mr. Murdoch’s management is still on his payroll.
In any case, do we want to see one of America’s two serious national newspapers in the hands of a man who has done so much to mislead so many? (The Washington Post, for all its influence, is basically a Beltway paper, not a national one. The McClatchy papers, though their Washington bureau’s reporting in the run-up to Iraq put more prestigious news organizations to shame, still don’t have The Journal’s ability to drive national discussion.)
There doesn’t seem to be any legal obstacle to the News Corporation’s bid for The Journal: F.C.C. rules on media ownership are mainly designed to prevent monopoly in local markets, not to safeguard precious national informational assets. Still, public pressure could help avert a Murdoch takeover. Maybe Congress should hold hearings.
If Mr. Murdoch does acquire The Journal, it will be a dark day for America’s news media — and American democracy. If there were any justice in the world, Mr. Murdoch, who did more than anyone in the news business to mislead this country into an unjustified, disastrous war, would be a discredited outcast. Instead, he’s expanding his empire.
Thursday, June 28, 2007
Professor Max Corden on Immigration
I am attending the Dynamics, Economic Growth and International Trade Conference organised by the Asian Economics Centre, University of Melbourne. Apart from participating in a panel on Climate Change and Economic Growth I am also providing a brief commentary on the contributions to the economics of immigration of one of Australia's most important contributors to international economics, Professor W. Max Corden. My draft remarks are below - reader comments are very welcome.
Max Corden has intersected with immigration debates in three ways:
(i) Max is an immigrant who arrived in Australia as a young boy in 1939. He is also someone who has spent a lot of time living outside Australia both in the UK and the United States as he reveals in his discussion with William Coleman in The Economic Record in December 2006.
This means that Max, who has always had an applied interest in the Australian economy, has looked at issues both from the viewpoint of an insider and an outsider. His attitudes to immigration I would characterise as ‘radically liberal’ and I think that this partly reflects Max’s understanding of sound economic theory which I believe points in this liberal direction. But Max’s liberal and tolerant attitudes towards immigrants and different cultures also reflect his background.
(ii) The second intersection that Max has had with immigration discussions arose from his interactions with Harry Johnson and James Meade (his PhD thesis supervisor) while Max was a student at the LSE. Harry Johnson was interested in the links between economic expansion (including expansion caused by population growth) on international trade and the terms of trade. Drawing on some thinking of Meade, Max provided an ingenious, geometrical framework for analysing the effects of a wide range of growth shocks on the terms of trade and the pattern on trade (Corden (1956)).
Max emphasised that both the production and demand consequences of such shocks must be assessed. For fixed terms of trade the production effects of factor endowment changes can be assessed via Rybczynski ‘s (1955) analysis. This suggested that the increased endowment of a scarce factor (specifically, labour in Australia) would lead to an expansion of the sector that used that input intensively (the labour-using, import-competing, manufacturing sector in Australia) and to a contraction in other export-oriented sectors (primarily, in Australia, agriculture). This would create an excess world demand for agricultural output thereby suggesting an improvement in the Australian terms of trade. Max’s key insight was that these effects could potentially be overruled if the growth was also associated with particular changes in consumer preferences. For example suppose the increase in labour supplies arose from immigration, and the preferences of the immigrant workers were strongly biased towards manufactures. These latter effects need to be very strong indeed to overrule the production effects, but, if they are, the terms-of-trade effects suggested on the production side can be reversed and these terms of trade can in fact deteriorate.
It is worth noting however that it is these perverse demand effects that are relied on in settings, such as in the Monash model and in the recent use of this model by the Productivity Commission (2006) to generate the startling and, in my view incorrect conclusion, that immigration of even skilled migrants generates unfavourable effects on the terms of trade which adversely impacts on the economic welfare of incumbent residents and their progeny (Clarke (2007)).
Max applied this analysis to studying the effects of population increase on a country’s trade in a broader setting in The Economic Record (Corden (1955)). Max examined the arguments that immigration might increase unemployment, create internal inflation and cause deterioration in the balance of payments. The argument he adopted inconsistently followed the style of James Meade. Like Meade’s total utility maximisation rule for determining optimal population – the optimal immigration intake for Max occurred once the fall in consumption per head that was a consequence of having more people was no longer compensated for by the political and other non-economic advantages of immigration. The slight inconsistency in Max’s use of this criterion is that, at one stage, he writes of determining optimal population in terms of maximising the average product of labour which I think Meade would not have done. Maximising the average product of labour leads to average utilitarian rules for optimal population of the type discussed by John Pitchford (1974) which focus naturally on ‘scale economies’ and ‘diseconomies’ issues.
Max is modest about these early papers but I think they initiated a valuable discussion that raised most of the key issues in analysing the economic implications of increasing human populations: Specifically Max discusses effects on fixed resource stocks, on incentives to invest and most importantly on the composition of international trade. Max makes the interesting insight that opening an economy up to trade reduces the size of the optimal population although, of course, living standards will be higher as the economy opens up. This insight is linked to the Brigden Committee’s (1929) famous ‘Australian case for protection’ which argued that the optimal population is lower if tariff protection is removed because protection will defend the level of real wages.
(iii) The third recognisable intersection that Max has made with contemporary immigration debates. I have enjoyed conversations with Max where he displays wide knowledge of the social and cultural impacts of immigration on settler countries like Australia and the United States. Max remains interested in immigration economics – as evidenced by his 2003 Richard Snape Lecture (Corden (2003)) but he is also keenly interested in broader assimilation and cultural diversity issues.
In the Snape Lecture Max assesses contemporary Australian immigration debates. He argues that the sensible population options for Australia are for moderate intakes of 100,000 migrants per year leading to a population of about 26 million by 2050 or for a more ‘radical’ policy that would raise intakes to 200,000 thereby leading to a population of 40 million by 2081. Max prefers the more expansionary option but argues that it is unlikely to be realised because of ‘the conservative approach to immigration policy by the public and the pragmatic approach by government’.
I wish to close by questioning this presumption. Many things are changing in Australia’s immigration environment. The Coalition Parties in Australia have substantially increased the size of the Australian immigration intake – the 2006/07 program involves up to 144,000 places while the Humanitarian Program has an intake of up to 13,000 (Fact Sheet 20 (2007)). The reasons for this expansion relate as much to macroeconomic conditions in the Australian economy as ideology. Australia is approaching the 17th consecutive year of its economic expansion and is enjoying low inflation, low unemployment and strong economic growth.
Moreover, we have substantially reduced the family component of the migration program thereby diffusing community concerns that the program was become interest-group driven. About two-thirds of those entering as migrants during 2006/07 did so because of the work or business skills they had. The rigidity in labour markets has been reduced through the Hawke-Keating government’s promotion of enterprise bargaining and later reforms.
With low unemployment concerns about the unemployment consequences of immigration fade. Indeed immigration is increasingly being seen as a means of containing demand-side pressures in the economy that emerge because of the unparalleled growth in commodity demands from countries such as China. In addition, since the migration intake is primarily oriented to accepting those with skills, concerns raised by earlier critics of the program (discussed in Lloyd (1993)), that sectional interest groups were driving immigration have faded. The shrill voices have become less strident.
If unemployment continues to it might yet be the case that Max’s enthusiasm for a much expanded immigration program will gain more general support.
References
J.B. Brigden, D.B. Copland, E.C. Dyason, L.F. Giblin & C.H. Wickens, The Australian Tariff: An Economic Inquiry, Melbourne University Press, Melbourne , 1929.
H. Clarke, “Comment on James Giesecke: The Economic Impact of a General Increase in Skilled Migration”, People and Place, 15, 2, 2007, 12-14.
W. Coleman, ‘A Conversation with Max Corden’ The Economic Record, December 2006, 379-395.
W. M. Corden, ‘Economic Expansion and International Trade: A Geometric Approach’, Oxford Economic Papers, June 1956, 223-228.
W.M. Corden, ’40 Million Aussies? The Immigration Debate Revisited’, Inaugural Richard Snape Lecture, Productivity Commission, 30 October 2003.
W.M. Corden, ‘The Economic Limits to Population Increase’, The Economic Record, November 1955, 242-260.
Department of Immigration and Citizenship, Australian Immigration Fact Sheet, Migration Program Planning Levels, 20, June 2007.
P.J. Lloyd, ‘The Political Economy of Immigration’ in J.J. Jupp & M. Kabala (eds), The Politics of Australian Immigration, Bureau of Immigration Research, AGPS, Canberra, 1993.
J.E. Meade, The Theory of International Economic Policy, vol 2, Trade and Welfare, Oxford University Press, London, 1955.
J.D. Pitchford, Population in Economic Growth, North Holland, Amsterdam 1974.
Productivity Commission, Economic Impacts of Migration and Population Growth, Productivity Commission, Final Report, Melbourne, 2006.
T.M. Rybczynski, ‘Factor Endowment and Relative Commodity Prices’, Economica, November, 1955.
Max Corden has intersected with immigration debates in three ways:
(i) Max is an immigrant who arrived in Australia as a young boy in 1939. He is also someone who has spent a lot of time living outside Australia both in the UK and the United States as he reveals in his discussion with William Coleman in The Economic Record in December 2006.
This means that Max, who has always had an applied interest in the Australian economy, has looked at issues both from the viewpoint of an insider and an outsider. His attitudes to immigration I would characterise as ‘radically liberal’ and I think that this partly reflects Max’s understanding of sound economic theory which I believe points in this liberal direction. But Max’s liberal and tolerant attitudes towards immigrants and different cultures also reflect his background.
(ii) The second intersection that Max has had with immigration discussions arose from his interactions with Harry Johnson and James Meade (his PhD thesis supervisor) while Max was a student at the LSE. Harry Johnson was interested in the links between economic expansion (including expansion caused by population growth) on international trade and the terms of trade. Drawing on some thinking of Meade, Max provided an ingenious, geometrical framework for analysing the effects of a wide range of growth shocks on the terms of trade and the pattern on trade (Corden (1956)).
Max emphasised that both the production and demand consequences of such shocks must be assessed. For fixed terms of trade the production effects of factor endowment changes can be assessed via Rybczynski ‘s (1955) analysis. This suggested that the increased endowment of a scarce factor (specifically, labour in Australia) would lead to an expansion of the sector that used that input intensively (the labour-using, import-competing, manufacturing sector in Australia) and to a contraction in other export-oriented sectors (primarily, in Australia, agriculture). This would create an excess world demand for agricultural output thereby suggesting an improvement in the Australian terms of trade. Max’s key insight was that these effects could potentially be overruled if the growth was also associated with particular changes in consumer preferences. For example suppose the increase in labour supplies arose from immigration, and the preferences of the immigrant workers were strongly biased towards manufactures. These latter effects need to be very strong indeed to overrule the production effects, but, if they are, the terms-of-trade effects suggested on the production side can be reversed and these terms of trade can in fact deteriorate.
It is worth noting however that it is these perverse demand effects that are relied on in settings, such as in the Monash model and in the recent use of this model by the Productivity Commission (2006) to generate the startling and, in my view incorrect conclusion, that immigration of even skilled migrants generates unfavourable effects on the terms of trade which adversely impacts on the economic welfare of incumbent residents and their progeny (Clarke (2007)).
Max applied this analysis to studying the effects of population increase on a country’s trade in a broader setting in The Economic Record (Corden (1955)). Max examined the arguments that immigration might increase unemployment, create internal inflation and cause deterioration in the balance of payments. The argument he adopted inconsistently followed the style of James Meade. Like Meade’s total utility maximisation rule for determining optimal population – the optimal immigration intake for Max occurred once the fall in consumption per head that was a consequence of having more people was no longer compensated for by the political and other non-economic advantages of immigration. The slight inconsistency in Max’s use of this criterion is that, at one stage, he writes of determining optimal population in terms of maximising the average product of labour which I think Meade would not have done. Maximising the average product of labour leads to average utilitarian rules for optimal population of the type discussed by John Pitchford (1974) which focus naturally on ‘scale economies’ and ‘diseconomies’ issues.
Max is modest about these early papers but I think they initiated a valuable discussion that raised most of the key issues in analysing the economic implications of increasing human populations: Specifically Max discusses effects on fixed resource stocks, on incentives to invest and most importantly on the composition of international trade. Max makes the interesting insight that opening an economy up to trade reduces the size of the optimal population although, of course, living standards will be higher as the economy opens up. This insight is linked to the Brigden Committee’s (1929) famous ‘Australian case for protection’ which argued that the optimal population is lower if tariff protection is removed because protection will defend the level of real wages.
(iii) The third recognisable intersection that Max has made with contemporary immigration debates. I have enjoyed conversations with Max where he displays wide knowledge of the social and cultural impacts of immigration on settler countries like Australia and the United States. Max remains interested in immigration economics – as evidenced by his 2003 Richard Snape Lecture (Corden (2003)) but he is also keenly interested in broader assimilation and cultural diversity issues.
In the Snape Lecture Max assesses contemporary Australian immigration debates. He argues that the sensible population options for Australia are for moderate intakes of 100,000 migrants per year leading to a population of about 26 million by 2050 or for a more ‘radical’ policy that would raise intakes to 200,000 thereby leading to a population of 40 million by 2081. Max prefers the more expansionary option but argues that it is unlikely to be realised because of ‘the conservative approach to immigration policy by the public and the pragmatic approach by government’.
I wish to close by questioning this presumption. Many things are changing in Australia’s immigration environment. The Coalition Parties in Australia have substantially increased the size of the Australian immigration intake – the 2006/07 program involves up to 144,000 places while the Humanitarian Program has an intake of up to 13,000 (Fact Sheet 20 (2007)). The reasons for this expansion relate as much to macroeconomic conditions in the Australian economy as ideology. Australia is approaching the 17th consecutive year of its economic expansion and is enjoying low inflation, low unemployment and strong economic growth.
Moreover, we have substantially reduced the family component of the migration program thereby diffusing community concerns that the program was become interest-group driven. About two-thirds of those entering as migrants during 2006/07 did so because of the work or business skills they had. The rigidity in labour markets has been reduced through the Hawke-Keating government’s promotion of enterprise bargaining and later reforms.
With low unemployment concerns about the unemployment consequences of immigration fade. Indeed immigration is increasingly being seen as a means of containing demand-side pressures in the economy that emerge because of the unparalleled growth in commodity demands from countries such as China. In addition, since the migration intake is primarily oriented to accepting those with skills, concerns raised by earlier critics of the program (discussed in Lloyd (1993)), that sectional interest groups were driving immigration have faded. The shrill voices have become less strident.
If unemployment continues to it might yet be the case that Max’s enthusiasm for a much expanded immigration program will gain more general support.
References
J.B. Brigden, D.B. Copland, E.C. Dyason, L.F. Giblin & C.H. Wickens, The Australian Tariff: An Economic Inquiry, Melbourne University Press, Melbourne , 1929.
H. Clarke, “Comment on James Giesecke: The Economic Impact of a General Increase in Skilled Migration”, People and Place, 15, 2, 2007, 12-14.
W. Coleman, ‘A Conversation with Max Corden’ The Economic Record, December 2006, 379-395.
W. M. Corden, ‘Economic Expansion and International Trade: A Geometric Approach’, Oxford Economic Papers, June 1956, 223-228.
W.M. Corden, ’40 Million Aussies? The Immigration Debate Revisited’, Inaugural Richard Snape Lecture, Productivity Commission, 30 October 2003.
W.M. Corden, ‘The Economic Limits to Population Increase’, The Economic Record, November 1955, 242-260.
Department of Immigration and Citizenship, Australian Immigration Fact Sheet, Migration Program Planning Levels, 20, June 2007.
P.J. Lloyd, ‘The Political Economy of Immigration’ in J.J. Jupp & M. Kabala (eds), The Politics of Australian Immigration, Bureau of Immigration Research, AGPS, Canberra, 1993.
J.E. Meade, The Theory of International Economic Policy, vol 2, Trade and Welfare, Oxford University Press, London, 1955.
J.D. Pitchford, Population in Economic Growth, North Holland, Amsterdam 1974.
Productivity Commission, Economic Impacts of Migration and Population Growth, Productivity Commission, Final Report, Melbourne, 2006.
T.M. Rybczynski, ‘Factor Endowment and Relative Commodity Prices’, Economica, November, 1955.
Science, prejudice & smoking
Ryo Nakajima in the Review of Economic Studies (subscription required) considers the role of ‘peer effects’ on the decision to smoke among teenagers. To what extent do teens smoke because their friends smoke? This is an important question since one quarter of US youth are smokers when they finish school. You could guess that peer group effect matter quite a lot and that is what this US study finds. The peer effects are particularly strong within genders and within particular racial groups.
We know that smoking behaviour varies markedly by gender and by race. Price elasticities are lower for girls than boys and much lower for whites than for black teenagers. One explanation for this is based on the strength of peer group interactions. Nakajima finds that peer interactions are stronger within genders and within racial groups.
Tax increases have very significant effects on smoking by youth and a ‘multiplier effect’ is found because of peer interactions. An increase in price causes reduced use and this reduced use, in turn, contributes to a further reduction because of reduced peer effects. The multiplier is more than 1.5.
Meanwhile there have been some foolish responses by the health industry to the decision of Phillip Morris to introduce a smokeless cigarette – the ‘Heatbar’. This heats cigarettes without burning the tobacco – it is claimed to be much safer.
Quit Victoria’s acting director Suzie Stillman urges the Federal Government to introduce a licensing system for all tobacco products. "Without this system, the tobacco industry will continue to use the Australian public as laboratory rats for their latest gimmicks."
Cancer Council Victoria director Professor David Hill said the technology was part of the industry's long-term strategy to portray tobacco products as fashionable and desirable to the young. "If the proposal is indeed technically legal, Philip Morris seem to have issued an invitation to government to respond with appropriate legislation or regulation."
I strongly disagree with the ethic expressed here. About 3.5 million Australians continue to smoke cigarettes – a very dangerous form of behavior. The best thing these people can do is to quit smoking but many seem unable to do this. Attempts to come up with a safer fag should be looked at and considered rationally.
Blind prejudice has no role here – it may only condemn committed smokers to unnecessary early deaths. One way of reducing the crippling damage caused by cigarette smoking is to induce companies like Phillip Morris to seek healthy substitutes.
Smoking cigarettes is not sinful – it is very dangerous. Any attempt to reduce the damage - whether by quitting or by coming up with safer alternatives such as smokeless tobacco, nicotine replacement therapies, electronic cigarettes and perhaps the Heatbar - should be given a hearing.
We know that smoking behaviour varies markedly by gender and by race. Price elasticities are lower for girls than boys and much lower for whites than for black teenagers. One explanation for this is based on the strength of peer group interactions. Nakajima finds that peer interactions are stronger within genders and within racial groups.
Tax increases have very significant effects on smoking by youth and a ‘multiplier effect’ is found because of peer interactions. An increase in price causes reduced use and this reduced use, in turn, contributes to a further reduction because of reduced peer effects. The multiplier is more than 1.5.
Meanwhile there have been some foolish responses by the health industry to the decision of Phillip Morris to introduce a smokeless cigarette – the ‘Heatbar’. This heats cigarettes without burning the tobacco – it is claimed to be much safer.
Quit Victoria’s acting director Suzie Stillman urges the Federal Government to introduce a licensing system for all tobacco products. "Without this system, the tobacco industry will continue to use the Australian public as laboratory rats for their latest gimmicks."
Cancer Council Victoria director Professor David Hill said the technology was part of the industry's long-term strategy to portray tobacco products as fashionable and desirable to the young. "If the proposal is indeed technically legal, Philip Morris seem to have issued an invitation to government to respond with appropriate legislation or regulation."
I strongly disagree with the ethic expressed here. About 3.5 million Australians continue to smoke cigarettes – a very dangerous form of behavior. The best thing these people can do is to quit smoking but many seem unable to do this. Attempts to come up with a safer fag should be looked at and considered rationally.
Blind prejudice has no role here – it may only condemn committed smokers to unnecessary early deaths. One way of reducing the crippling damage caused by cigarette smoking is to induce companies like Phillip Morris to seek healthy substitutes.
Smoking cigarettes is not sinful – it is very dangerous. Any attempt to reduce the damage - whether by quitting or by coming up with safer alternatives such as smokeless tobacco, nicotine replacement therapies, electronic cigarettes and perhaps the Heatbar - should be given a hearing.
Wednesday, June 27, 2007
Catch-up politics
In light of the government's broadband reaction this week as well as to climate changes over the last six months, ‘Is there merit in catch-up politics’? (Blogocracy-organised group blog (Joshua Gans, Tim Dunlop, Ken Parish, Kim, Robert Merkel, Andrew Bartlett and Tigtog, question 3).
My answer to this is a ‘two-handed’ economist response – on the one hand it sometimes is and, on the other, not. It is really an obvious point when you think about it – sometimes it makes sense to mimic someone else’s ideas, sometimes it does not.
Politicians can learn from each other and steal good ideas. That is the useful aspect of ‘catch up’ and applies when the community seeks a single best response to a policy issue. This works if there is no fundamental disagreement or division in the community over policy. Pollies can apply this type of catch-up, without losing face, by reverse engineering ideas to repackage them and by falsely claiming priority.
Indeed it is this imitation that should motivate people to advance political ideals and to argue them. Advancing ideals just to install one group of pollies into power is much less important than having the ideals voiced and pursued.
However if there is fundamental disagreement and views are bimodal – so different groups have markedly different views - then playing catch-up can lead to significant views in the community being underrepresented. This is the famous Hotelling Ice-Cream Salesman problem or the Tweedledum-Tweedledee theory of politics.
If the government is holding out in a bargaining situation (e.g. against Telstra re broadband) and faces an opportunistic, populist attack from an opposition party then, a desire to appear to be doing something could weaken its hand make us worse-off. I am not suggesting this is what happened in this case now.
Of course if one party holds silly policy views with populist appeal (e.g. support for ‘industry policy’) and another party copies it, then general ignorance increases as both parties go into populist overdrive and race towards idiocy. We are then all worse off.
While imitation of useful policy ideas is not necessarily harmful, a government that relies primarily on the policy ideas of others might not be thought of being able to deal effectively with the issues of the day in a closed-loop fashion. There should be reduced confidence in its ability to deal with new, unexpected circumstances.
Finally, imitation can lead to better policy, it can also cover up ‘free-rider’ externalities. If a government is not putting effort into coming up with effective policies and towards arguing the case for policies in the marketplace for ideas we all lose. This is so because aggregate effort falls on the part of the ‘free-riding’ party and because other groups then have reduced incentives in making this effort. The only way to avoid this failure is to give some reward to groups who do come up with innovative thinking.
I ran a bit short of time on this quiz as exam marking and doing a million other things.
Other contributions are:
Joshua Gans (proposer) responds here.
Kim’s view, those of Robert Merkel and Andrew Bartlett .
Tim Dunlop has just posed a view that I largely agree with.
My answer to this is a ‘two-handed’ economist response – on the one hand it sometimes is and, on the other, not. It is really an obvious point when you think about it – sometimes it makes sense to mimic someone else’s ideas, sometimes it does not.
Politicians can learn from each other and steal good ideas. That is the useful aspect of ‘catch up’ and applies when the community seeks a single best response to a policy issue. This works if there is no fundamental disagreement or division in the community over policy. Pollies can apply this type of catch-up, without losing face, by reverse engineering ideas to repackage them and by falsely claiming priority.
Indeed it is this imitation that should motivate people to advance political ideals and to argue them. Advancing ideals just to install one group of pollies into power is much less important than having the ideals voiced and pursued.
However if there is fundamental disagreement and views are bimodal – so different groups have markedly different views - then playing catch-up can lead to significant views in the community being underrepresented. This is the famous Hotelling Ice-Cream Salesman problem or the Tweedledum-Tweedledee theory of politics.
If the government is holding out in a bargaining situation (e.g. against Telstra re broadband) and faces an opportunistic, populist attack from an opposition party then, a desire to appear to be doing something could weaken its hand make us worse-off. I am not suggesting this is what happened in this case now.
Of course if one party holds silly policy views with populist appeal (e.g. support for ‘industry policy’) and another party copies it, then general ignorance increases as both parties go into populist overdrive and race towards idiocy. We are then all worse off.
While imitation of useful policy ideas is not necessarily harmful, a government that relies primarily on the policy ideas of others might not be thought of being able to deal effectively with the issues of the day in a closed-loop fashion. There should be reduced confidence in its ability to deal with new, unexpected circumstances.
Finally, imitation can lead to better policy, it can also cover up ‘free-rider’ externalities. If a government is not putting effort into coming up with effective policies and towards arguing the case for policies in the marketplace for ideas we all lose. This is so because aggregate effort falls on the part of the ‘free-riding’ party and because other groups then have reduced incentives in making this effort. The only way to avoid this failure is to give some reward to groups who do come up with innovative thinking.
I ran a bit short of time on this quiz as exam marking and doing a million other things.
Other contributions are:
Joshua Gans (proposer) responds here.
Kim’s view, those of Robert Merkel and Andrew Bartlett .
Tim Dunlop has just posed a view that I largely agree with.
Tuesday, June 26, 2007
Old red wines
I enjoyed two great old vintage wines last night with old friend Chongwoo and his kin. A 1976 Wolf Blass Black Label Cabernet-Shiraz for a pre-dinner warm-up was, I thought, in excellent condition - Chongwoo thought it a bit faded. These very old wines are a matter of taste - they don't appeal to all.
Wolf Blass took out three consecutive Jimmy Watson Trophies more than 30 years from 1974-1976 so this wine, though not a winner itself, has great pedigree. Good colour, brisk acidity – a gentle aged wine from the Barossa Valley and Langhorne Creek. I've said cruel things about Wolf Blass wines over the years - all is retracted!
Then some Italian tucker with a 1986 Chateau Tahbilk Shiraz. This wine has been a source of inspiration for me for over a decade as I have chewed my way through 2 dozen of the beasties all bought for an absolute song – a myopic restaurant owner decided his cellar was taking up too much space so he had a fire-sale. I remember filling the trunk of my car and congratulating myself for my far-sighted wisdom!
Now the CT-shiraz is definitely an old wine with cigar box bouquets and sweet fruit – an absolute classic. This vintage was one of the greatest of the Tahbilk shiraz wines though now it is getting scarce. It was an enormous wine when I bought it in the late 1980s and remained so for a decade. It is now (like me) maturing gracefully.
Recent Chateau Tahbilk wines (shiraz, cabernet, marsanne, chardonnay) have been uninspired in my view - they improve with breathing for several hours. Its a sad development.
Wolf Blass took out three consecutive Jimmy Watson Trophies more than 30 years from 1974-1976 so this wine, though not a winner itself, has great pedigree. Good colour, brisk acidity – a gentle aged wine from the Barossa Valley and Langhorne Creek. I've said cruel things about Wolf Blass wines over the years - all is retracted!
Then some Italian tucker with a 1986 Chateau Tahbilk Shiraz. This wine has been a source of inspiration for me for over a decade as I have chewed my way through 2 dozen of the beasties all bought for an absolute song – a myopic restaurant owner decided his cellar was taking up too much space so he had a fire-sale. I remember filling the trunk of my car and congratulating myself for my far-sighted wisdom!
Now the CT-shiraz is definitely an old wine with cigar box bouquets and sweet fruit – an absolute classic. This vintage was one of the greatest of the Tahbilk shiraz wines though now it is getting scarce. It was an enormous wine when I bought it in the late 1980s and remained so for a decade. It is now (like me) maturing gracefully.
Recent Chateau Tahbilk wines (shiraz, cabernet, marsanne, chardonnay) have been uninspired in my view - they improve with breathing for several hours. Its a sad development.
God
This is an interesting New York Times blog containing an interesting argument by Stanley Fish. The atheist’s claim that God does not exist - because actual religions are a bundle of contradictions that could not possibly be constructed by an omniscient God - does not undermine the case for the existence of God. Nor, of course, does recognising that it does not undermine the argument establish that God does exist.
‘It is God (if there is one) who is perfect and infinite; men are finite and confined within historical perspectives. And any effort to apprehend him – including the efforts of the compilers of the Old Testament, the New Testament and the Koran – will necessarily fall short of a transparency that will be achieved (if it is achieved) only at a future moment of beatific vision. Now – any now, whether it be 2007 or 6,000 years ago – we see through a glass darkly (1 Corinthians, 13:12); one day, it is hoped, we shall see face to face.
In short, it is the unfathomable and unbridgeable distance between deity and creature that assures the failure of the latter to comprehend or prove in the sense of validating the former.
If divinity, by definition, exceeds human measure, the demand that the existence of God be proven makes no sense because the machinery of proof, whatever it was, could not extend itself far enough to apprehend him.
Proving the existence of God would be possible only if God were an item in his own field; that is, if he were the kind of object that could be brought into view by a very large telescope or an incredibly powerful microscope. God, however – again if there is a God – is not in the world; the world is in him; and therefore there is no perspective, however technologically sophisticated, from which he could be spied. As that which encompasses everything, he cannot be discerned by anything or anyone because there is no possibility of achieving the requisite distance from his presence that discerning him would require.
The criticism made by atheists that the existence of God cannot be demonstrated is no criticism at all; for a God whose existence could be demonstrated wouldn’t be a God; he would just be another object in the field of human vision.
This does not mean that my arguments constitute a proof of the truth of religion; for if I were to claim that I would be making the atheists’ mistake from the other direction. Nor are they arguments in which I have a personal investment. Their purpose and function is simply to show how the atheists’ arguments miss their mark and, indeed, could not possibly hit it.
At various points Harris, Dawkins and Hitchens all testify to their admiration for Shakespeare, who, they seem to think, is more godly than God. They would do well to remember one of the bard’s most famous lines, uttered by Hamlet: “There are more things in heaven and earth than are dreamt of in your philosophy.”’
‘It is God (if there is one) who is perfect and infinite; men are finite and confined within historical perspectives. And any effort to apprehend him – including the efforts of the compilers of the Old Testament, the New Testament and the Koran – will necessarily fall short of a transparency that will be achieved (if it is achieved) only at a future moment of beatific vision. Now – any now, whether it be 2007 or 6,000 years ago – we see through a glass darkly (1 Corinthians, 13:12); one day, it is hoped, we shall see face to face.
In short, it is the unfathomable and unbridgeable distance between deity and creature that assures the failure of the latter to comprehend or prove in the sense of validating the former.
If divinity, by definition, exceeds human measure, the demand that the existence of God be proven makes no sense because the machinery of proof, whatever it was, could not extend itself far enough to apprehend him.
Proving the existence of God would be possible only if God were an item in his own field; that is, if he were the kind of object that could be brought into view by a very large telescope or an incredibly powerful microscope. God, however – again if there is a God – is not in the world; the world is in him; and therefore there is no perspective, however technologically sophisticated, from which he could be spied. As that which encompasses everything, he cannot be discerned by anything or anyone because there is no possibility of achieving the requisite distance from his presence that discerning him would require.
The criticism made by atheists that the existence of God cannot be demonstrated is no criticism at all; for a God whose existence could be demonstrated wouldn’t be a God; he would just be another object in the field of human vision.
This does not mean that my arguments constitute a proof of the truth of religion; for if I were to claim that I would be making the atheists’ mistake from the other direction. Nor are they arguments in which I have a personal investment. Their purpose and function is simply to show how the atheists’ arguments miss their mark and, indeed, could not possibly hit it.
At various points Harris, Dawkins and Hitchens all testify to their admiration for Shakespeare, who, they seem to think, is more godly than God. They would do well to remember one of the bard’s most famous lines, uttered by Hamlet: “There are more things in heaven and earth than are dreamt of in your philosophy.”’
Monday, June 25, 2007
Fatal car accidents & car speed
Tim Blair criticises the idea that small reductions in speed can greatly reduce the probability of a car accident. I think on this occasion he is incorrect.
I forget much of my high school physics but isn’t it true that impact is proportional to mass and speed squared? Thus increasing speed from 60 to 65 km per hour - by about 8% - increases the collision impact by 17%. This is quite apart from difficulties of stopping a faster car, problems with lower reaction times and so on. Taking all these into account it has been found that increasing speed as suggested does in fact double the accident probability.
The impact of speed on accidents is discussed here. Their suggestion is that reducing a car’s speed from 60 to 50 km per hour reduces the probability of killing a hit pedestrian by half although you are still almost certain to injure them. A more ccomplete bibliography is here.
Of course reducing car speeds to zero would reduce traffic accidents to zero. The question then is what are appropriate speeds from the perspective of trading off reduced travel times against reduced accident risks. There is quite a literature on this (see here for example) . My understanding is that current speed limits on urban residential streets get it about right.
I forget much of my high school physics but isn’t it true that impact is proportional to mass and speed squared? Thus increasing speed from 60 to 65 km per hour - by about 8% - increases the collision impact by 17%. This is quite apart from difficulties of stopping a faster car, problems with lower reaction times and so on. Taking all these into account it has been found that increasing speed as suggested does in fact double the accident probability.
The impact of speed on accidents is discussed here. Their suggestion is that reducing a car’s speed from 60 to 50 km per hour reduces the probability of killing a hit pedestrian by half although you are still almost certain to injure them. A more ccomplete bibliography is here.
Of course reducing car speeds to zero would reduce traffic accidents to zero. The question then is what are appropriate speeds from the perspective of trading off reduced travel times against reduced accident risks. There is quite a literature on this (see here for example) . My understanding is that current speed limits on urban residential streets get it about right.
Parading their own defects
In relation to emergency measures taken in the Northern Territory, in relation to indigenous affairs, Glenn Milne in The Australian today - says it better than I ever could.
The irresponsible leftwing blogs, the claims by David Marr and Peter Harcher in the SMH that the proposed Federal takeover of indigenous affairs policy is militaristic authoritarianism, the bleating cries of Lyn Allison that we should be ‘collaborating’ with dysfunctional communities and the evil claims by Jon Stanhope that the policies are simply 'racist' mainly parade the character defects of the people making these claims.
These include blame- and motive-based nastiness, a troubling view of human nature, a complete lack of any idealism and a thoroughly inaccurate prioritization of what is important in politics. It is interesting that Kevin Rudd has stated that he disagrees with the criticisms of these irresponsible people and with the notion that Howard is playing wedge politics. Rudd accepts that past policies – including those of the Hawke-Keating era - have failed and wants to move on. Good on him.
Quotes from Milne:
The irresponsible leftwing blogs, the claims by David Marr and Peter Harcher in the SMH that the proposed Federal takeover of indigenous affairs policy is militaristic authoritarianism, the bleating cries of Lyn Allison that we should be ‘collaborating’ with dysfunctional communities and the evil claims by Jon Stanhope that the policies are simply 'racist' mainly parade the character defects of the people making these claims.
These include blame- and motive-based nastiness, a troubling view of human nature, a complete lack of any idealism and a thoroughly inaccurate prioritization of what is important in politics. It is interesting that Kevin Rudd has stated that he disagrees with the criticisms of these irresponsible people and with the notion that Howard is playing wedge politics. Rudd accepts that past policies – including those of the Hawke-Keating era - have failed and wants to move on. Good on him.
Quotes from Milne:
‘Anybody who knows Howard and his Aboriginal Affairs Minister, Mal Brough, particularly anybody with knowledge of what Brough has seen and experienced first-hand, also knows this is a heartfelt initiative. Yet it is Howard's burden that at this stage of the political cycle his critics can immediately question his motives, even on an issue as clear-cut and emotional as this one’.It is worth reading the whole Milne article. Excellent.
‘the notion that Howard would use the sexual abuse of children as a vehicle for his own political advancement is simply vile. If that truly is the case, as a political class we may as well simply pack up and go home. We are barbarians without souls or hope of salvation’
Sunday, June 24, 2007
Setting up new computers with musical finale
I've set up new computers (one desktop, two laptops) in my home using Windows Vista Ultimate and the new Microsoft Office 2007. The only hitch that took me several hours to unravel was that the cable modem connection I needed required an ethernet not a USB cable. Everything eventually clicked and was in apparently good working order late last night - I even installed a surround sound system around my desktop to create inspiration when it might otherwise be lacking.
I celebrated completing this task by viewing some rock videos on DVD I bought from DirtCheapCDs in Swanston Street. Have you noticed that CDs are vanishing from stores and being replaced by MP3 files? Music stores seem to sell mainly DVDs. This is great if you are a fan of modern music but the format did not even exist when the music that I enjoy most was around.
The DVDs I purchased were recordings of older performances - I thought they were as good as anything I've seen for years and much better than the bopper nonsense my kids listen to - I know my vintage is showing! The three I looked at were:
The Band’s The Last Waltz was a movie made by Martin Scorsese in 1976 just before the group split up. It was released in 2002 as a DVD. The Band is one of the most talented and unique rock-country sounds that I have heard. Bob Dylan, Neil Young, Dr. John, Joni Mitchell... all joined in with the fun. Extreme musical talent, it sounded - if anything - better than the studio versions of the same material – here are some YouTube clips.
For pure exuberance and good vibes I have heard nothing as extraordinarily vibrant as Tina Turner’s One Last Time In Concert. This was made in about 2000 at Wembley Stadium and she really belts it out in a sweaty, sexy extravaganza. Lots of great sample clips here. The version of "River Deep Mountain High" was good but not up to the standard of the widely-televised version of years ago. I searched YouTube but couldn't find this older version.
Finally, I have been getting enormous pleasure for months from the Roy Orbison and Friend’s DVD Black and White. It is a black and white movie with supremely talented backing musicians. Clips here. Orbison had the most expressive, tragic voice I have heard - why does it feel so wonderful to be moved to tears? Co-performers included Jackson Browne, Elvis Costello, k.d. lang, Bonnie Raitt, Bruce Springsteen, Tom Waits, and Jennifer Warnes, along with the rhythm section from Elvis Presley's fabled late '60s and early '70s touring band. Great stuff.
I celebrated completing this task by viewing some rock videos on DVD I bought from DirtCheapCDs in Swanston Street. Have you noticed that CDs are vanishing from stores and being replaced by MP3 files? Music stores seem to sell mainly DVDs. This is great if you are a fan of modern music but the format did not even exist when the music that I enjoy most was around.
The DVDs I purchased were recordings of older performances - I thought they were as good as anything I've seen for years and much better than the bopper nonsense my kids listen to - I know my vintage is showing! The three I looked at were:
The Band’s The Last Waltz was a movie made by Martin Scorsese in 1976 just before the group split up. It was released in 2002 as a DVD. The Band is one of the most talented and unique rock-country sounds that I have heard. Bob Dylan, Neil Young, Dr. John, Joni Mitchell... all joined in with the fun. Extreme musical talent, it sounded - if anything - better than the studio versions of the same material – here are some YouTube clips.
For pure exuberance and good vibes I have heard nothing as extraordinarily vibrant as Tina Turner’s One Last Time In Concert. This was made in about 2000 at Wembley Stadium and she really belts it out in a sweaty, sexy extravaganza. Lots of great sample clips here. The version of "River Deep Mountain High" was good but not up to the standard of the widely-televised version of years ago. I searched YouTube but couldn't find this older version.
Finally, I have been getting enormous pleasure for months from the Roy Orbison and Friend’s DVD Black and White. It is a black and white movie with supremely talented backing musicians. Clips here. Orbison had the most expressive, tragic voice I have heard - why does it feel so wonderful to be moved to tears? Co-performers included Jackson Browne, Elvis Costello, k.d. lang, Bonnie Raitt, Bruce Springsteen, Tom Waits, and Jennifer Warnes, along with the rhythm section from Elvis Presley's fabled late '60s and early '70s touring band. Great stuff.
Saturday, June 23, 2007
Impacts of new grog & porn policies on indigenous Australians
As I noted in an earlier post the Federal Government will ban alcohol and pornography in aboriginal towns and communities in the Northern Territory and deliver half of government welfare payments to Aboriginal parents in the form of vouchers to make sure the money is spent on food and essential items. Government payments will be made contingent on children attending school. Children under the age of 16 will have compulsory medical examinations and extra police, and perhaps even the military, will be seconded to enforce these regulations. The government will also compulsorily acquire – with fair compensation - land granted under the Aboriginal Land Rights Act for a period of 5 years, while these problems are dealt with. A proposal to introduce similar quarantining regulations on welfare payments to non-indigenous families with children considered at risk will be put to cabinet shortly.
The primary intent of these measures is to address the problem of child sex abuse.
I support these policies though I caution they will not work perfectly. A major issue is the extent of financial support given to them. In my view there are three primary objectives of such policies.
(i) By banning alcohol and pornography on aboriginal land a geographical distance is established between aboriginals who consume these products and those who don’t. Aboriginals can continue to consume grog and porn but they will need to do so at a distance from non-users. Aboriginals have high levels of alcohol abstinence – those who do drink often do so to considerable excess. My guess is this move will prove popular within most aboriginal communities. Those who criticize the policy on the grounds that aboriginals will continue to consume grog in non-aboriginal towns miss this point.
(ii) The bans on alcohol and pornography increase the user costs of such goods by making them less convenient to consume. This should reduce demand for them. There will also be less casual buying of alcohol based on ‘availability’. In urban centers it is known that levels of drinking and problem drinking are related to outlet numbers.
(iii) The decision to provide half of the value of social security payments as vouchers that cannot be used to purchase grog reduces the income available for purchasing alcohol or porn. Straightforward economic theory suggests that because alcohol is a ‘normal good’ – its demand depends positively on income – that this should substantially cut alcohol consumption.
Part of the hysteria of the ‘left’ blogs on these measures is based on the idea that alcohol consumption and child sexual abuse reflects social disadvantage. That is true but a socially disadvantaged aboriginal who does not have easy access to alcohol is better-off than one who does. Alcohol is an independent cause of aboriginal (and non-aboriginal) problems associated with social disadvantage.
Measures (i)-(iii) will have significant effects in reducing levels of drinking and the consumption of pornography. This is an important end in itself. But doing this will improve aboriginal health as well as reducing violence towards women and children.
My research into addiction suggests than to advantages (i)-(iii) one might add.
(iv) The policies cited will improve the welfare of heavy drinking aboriginals. People who drink vast amounts of alcohol until they are absolutely drunk on a regular basis are not rational consumers whose preferences need to be respected for reasons of ‘non-paternalism’. Those with an alcohol dependency and those who drink for ‘cue-related’ reasons may be better-off with policies that restrict their freedom.
The libertarian ideologues will froth at the mouth with this type of suggestion but in the drug and alcohol field this view is unexceptional. It makes very little sense to be obsessed with the issue of ‘free will’ in relation to people with a chemical dependency to ethyl alcohol or any other drug.
The image of young kids cowering in fear from adult sexual predators is one that, as a father, worries me. The thought too of women being bashed by drunken male partners is also one that makes me want to tell the devout libertarian paternalists to take their obsession with ‘freedom of choice’ and shove it.
Finally, giving kids medical examinations to test for sexual molestation in an environment where it is not uncommon is simple sense. It increases the chance that those carrying out these unspeakable acts will be detected and reduces their incentives to commit these acts.
Little Children are Sacred. This is true. Black and white kids are the hope of the world. Young kids are not racist, they have no cultural hang-ups and they offer the prospects for a better future. Aboriginal Australians have often received shocking, murderous treatment from the time of white settlement. They have lived in Australia for over 40,000 years and are one of the oldest cultures on earth. But that they have suffered horribly is no reason not to take action to deal with the grog and child-abuse problems that now beset them. We should not allow our own guilt to stand in the way of addressing this terrible problem that wrecks lives and destroys an ancient culture. Current policies (free money, access to booze) have failed miserably.
As Noel Pearson said:
The primary intent of these measures is to address the problem of child sex abuse.
I support these policies though I caution they will not work perfectly. A major issue is the extent of financial support given to them. In my view there are three primary objectives of such policies.
(i) By banning alcohol and pornography on aboriginal land a geographical distance is established between aboriginals who consume these products and those who don’t. Aboriginals can continue to consume grog and porn but they will need to do so at a distance from non-users. Aboriginals have high levels of alcohol abstinence – those who do drink often do so to considerable excess. My guess is this move will prove popular within most aboriginal communities. Those who criticize the policy on the grounds that aboriginals will continue to consume grog in non-aboriginal towns miss this point.
(ii) The bans on alcohol and pornography increase the user costs of such goods by making them less convenient to consume. This should reduce demand for them. There will also be less casual buying of alcohol based on ‘availability’. In urban centers it is known that levels of drinking and problem drinking are related to outlet numbers.
(iii) The decision to provide half of the value of social security payments as vouchers that cannot be used to purchase grog reduces the income available for purchasing alcohol or porn. Straightforward economic theory suggests that because alcohol is a ‘normal good’ – its demand depends positively on income – that this should substantially cut alcohol consumption.
Part of the hysteria of the ‘left’ blogs on these measures is based on the idea that alcohol consumption and child sexual abuse reflects social disadvantage. That is true but a socially disadvantaged aboriginal who does not have easy access to alcohol is better-off than one who does. Alcohol is an independent cause of aboriginal (and non-aboriginal) problems associated with social disadvantage.
Measures (i)-(iii) will have significant effects in reducing levels of drinking and the consumption of pornography. This is an important end in itself. But doing this will improve aboriginal health as well as reducing violence towards women and children.
My research into addiction suggests than to advantages (i)-(iii) one might add.
(iv) The policies cited will improve the welfare of heavy drinking aboriginals. People who drink vast amounts of alcohol until they are absolutely drunk on a regular basis are not rational consumers whose preferences need to be respected for reasons of ‘non-paternalism’. Those with an alcohol dependency and those who drink for ‘cue-related’ reasons may be better-off with policies that restrict their freedom.
The libertarian ideologues will froth at the mouth with this type of suggestion but in the drug and alcohol field this view is unexceptional. It makes very little sense to be obsessed with the issue of ‘free will’ in relation to people with a chemical dependency to ethyl alcohol or any other drug.
The image of young kids cowering in fear from adult sexual predators is one that, as a father, worries me. The thought too of women being bashed by drunken male partners is also one that makes me want to tell the devout libertarian paternalists to take their obsession with ‘freedom of choice’ and shove it.
Finally, giving kids medical examinations to test for sexual molestation in an environment where it is not uncommon is simple sense. It increases the chance that those carrying out these unspeakable acts will be detected and reduces their incentives to commit these acts.
Little Children are Sacred. This is true. Black and white kids are the hope of the world. Young kids are not racist, they have no cultural hang-ups and they offer the prospects for a better future. Aboriginal Australians have often received shocking, murderous treatment from the time of white settlement. They have lived in Australia for over 40,000 years and are one of the oldest cultures on earth. But that they have suffered horribly is no reason not to take action to deal with the grog and child-abuse problems that now beset them. We should not allow our own guilt to stand in the way of addressing this terrible problem that wrecks lives and destroys an ancient culture. Current policies (free money, access to booze) have failed miserably.
As Noel Pearson said:
‘We are dealing with children of the tenderest age who have been exposed to theThese policies are not going to work neatly. Improvements should be suggested and should be listened to. But the general thrust of the policies should be given bipartisan support. They should be given a chance. More than that, state governments should be encouraged to join in.
most terrible abuse…what matters more the constitutional niceties, or the care
and protection of young children.’
Nicotine the wonder drug?
I have previously posted a satirical piece on the health benefits of smoking. If you are thinking about the costs and benefits of tobacco it is very important to distinguish between non-smoking consumption of tobacco (by eating it, sniffing it or even inserting it up your rectum - yes this was done for centuries) and the smoking of tobacco.
Non-smoked tobacco is far, far safer than the deadly dangers posed by smoking tobacco products as I have emphasized. Indeed there might even be real health benefits from consuming clean nicotine:
Non-smoked tobacco is far, far safer than the deadly dangers posed by smoking tobacco products as I have emphasized. Indeed there might even be real health benefits from consuming clean nicotine:
‘Smoking may be bad for you, but researchers and biotech companies are quietly developing pharmaceuticals that are decidedly good for brains, bowels, blood vessels and even immune systems - and they're inspired by tobacco's deadly active ingredient: nicotine.
Nicotine acts on the acetylcholine receptors in the brain, stimulating and regulating the release of a slew of brain chemicals, including seratonin, dopamine and norepinephrine. Not surprisingly, the first scientific work that identified these chemicals and how they affect the body came out of nicotine research -- much of it performed by tobacco companies.
Now drugs derived from nicotine and the research on nicotine receptors are in clinical trials for everything from helping to heal wounds, to depression, schizophrenia, Alzheimer's, Tourette Syndrome, ADHD, anger management and anxiety.
"Nicotine is highly stigmatized -- and for good reason, because the delivery system is so deadly," says Don deBethizy, CEO of Targacept. "But the drug itself and the research generated by studying its effects on the brain both show great promise for helping us improve our physical and mental health."
Friday, June 22, 2007
Banning grog & porn to cut child abuse
Levels of child abuse in Australian aboriginal communities are completely over the top - there is systematic abuse of young kids in many communities. Young girls and boys are routinely taken as sexual partners. Often the abuse is preceded by alcohol consumption and by the viewing of pornography. The Prime Minister’s move to ban alcohol and pornography in aboriginal communities is a dramatic move designed to deal with an extreme situation. Another part of the policy package, quarantining welfare payments from being entirely spent on booze, is a move that will cut alcohol and therefore child abuse as well as promoting health. Howard's statement is here.
This policy packages provide a partial prohibition scheme on alcohol that is designed to eliminate its availability on aboriginal land – some of these lands are 'dry' already. The policy is a worthwhile move even if some aboriginals do leave their lands to drink. Most won’t because aboriginals as a whole have high levels of alcohol abstinence – it is the few drinkers who consume at vast levels who are doing the extreme damage that is occurring. Quarantining welfare payments is close to being a rationing scheme –it effectively prescribes the consumption bundle chosen by a welfare recepient. This is draconian but will only be a coercive measure for those currently abusing their government welfare check. The check isn't that large and most should be spent on food and essentials anyway.
Economists generally don't like either prohibitions or rationing schemes but there are exceptional emergency circumstances here that drive the need for a policy shock. Moreover as John Howard acknowledged last night - past policies have failed.
The Guardian has a useful review including the predictable reactions from those who would put anti-discrimination above the problems being faced. There is a potent quote:
Kim at the lavatory blog sees the issue purely as a political move. She would. She has previously declared that women who had their genitals cut out might have prejudiced views on Islam. People who say they dislike seeing young children raped are presumably also acting in a biased self-interested way that has nothing to do with stopping the abuse - they just seek a 'wedge' issue that will increase their electoral appeal. I find Kim’s attitude more hideous than usual. Mark Bahnisch supports her – he searches for grounds to attack the policy and refuses to confront the real problem. For them both it is just another opportunity to attack John Howard. Its an indictment of LP's sick approach to politics.
The Little Children are Sacred report had this to say:
Words cannot express my anger towards these leftist phonies. Do either of them have children? Can either of them not see any social issue - not matter how painful - other than in their nasty, partisan political terms?
The comments by Ken Parish are less prejudiced but still over the top. For sections of the 'left' the welfare of sexually-abused aboriginal kids can be sacrificed if there is the chance for a political attack on John Howard. The comments of Tim Dunlop I agree with almost entirely – the impact of the policies should be carefully thought through and we should try for a bipartisan approach.
This policy packages provide a partial prohibition scheme on alcohol that is designed to eliminate its availability on aboriginal land – some of these lands are 'dry' already. The policy is a worthwhile move even if some aboriginals do leave their lands to drink. Most won’t because aboriginals as a whole have high levels of alcohol abstinence – it is the few drinkers who consume at vast levels who are doing the extreme damage that is occurring. Quarantining welfare payments is close to being a rationing scheme –it effectively prescribes the consumption bundle chosen by a welfare recepient. This is draconian but will only be a coercive measure for those currently abusing their government welfare check. The check isn't that large and most should be spent on food and essentials anyway.
Economists generally don't like either prohibitions or rationing schemes but there are exceptional emergency circumstances here that drive the need for a policy shock. Moreover as John Howard acknowledged last night - past policies have failed.
The Guardian has a useful review including the predictable reactions from those who would put anti-discrimination above the problems being faced. There is a potent quote:
Alcohol kills an Aborigine every 38 hours and accounts for a quarter of deaths in the Northern Territory.I am pleased to see that Kevin Rudd states he will support the PM’s move. Even the Northern Territory Government seems to welcome the move. This issue should be above politics and the move should be given a chance. No points scoring should be attempted from any side. It is an extremely difficult policy to make workable. As a community we need to try to make it work and to improve the policy so it does.
Kim at the lavatory blog sees the issue purely as a political move. She would. She has previously declared that women who had their genitals cut out might have prejudiced views on Islam. People who say they dislike seeing young children raped are presumably also acting in a biased self-interested way that has nothing to do with stopping the abuse - they just seek a 'wedge' issue that will increase their electoral appeal. I find Kim’s attitude more hideous than usual. Mark Bahnisch supports her – he searches for grounds to attack the policy and refuses to confront the real problem. For them both it is just another opportunity to attack John Howard. Its an indictment of LP's sick approach to politics.
The Little Children are Sacred report had this to say:
‘Alcohol remains the gravest and fastest growing threat to the safety of Aboriginal children. There is a strong association between alcohol abuse, violence and the sexual abuse of children. Alcohol is destroying communities. The Inquiry recommended urgent action be taken to reduce alcohol consumption in Aboriginal communities’.The report also specifically mentioned the role of pornography. The claims John Howard is making are not fiction. So Howard is just concerned with politics Kim, Mark? He isn't but you both are.
Words cannot express my anger towards these leftist phonies. Do either of them have children? Can either of them not see any social issue - not matter how painful - other than in their nasty, partisan political terms?
The comments by Ken Parish are less prejudiced but still over the top. For sections of the 'left' the welfare of sexually-abused aboriginal kids can be sacrificed if there is the chance for a political attack on John Howard. The comments of Tim Dunlop I agree with almost entirely – the impact of the policies should be carefully thought through and we should try for a bipartisan approach.
Thursday, June 21, 2007
Efficiency-driven policies to encourage the Chinese to clean up their CO2 act
China last year overtook the US as the largest national emitter of CO2. This will crystallize preexisting concerns among developed countries that China’s emissions (as well as those of Indonesia and India) will need eventually to be controlled.
I have suggested two approaches to dealing with this issue:
(i) Introducing an international carbon tax with sufficient bite to meet Greenhouse gas reduction targets internationally and to levy tariffs on imports from non-complying countries – those that do not adequately impose the carbon tax. This is the somewhat coercive Stiglitz enforcement mechanism proposal. Non-taxing polluters are excluded from free trade because they are unfairly leaning on the rest-of-the-world by not internalizing their emissions. They are being levied with import tariffs to compensate for their environmental theft in exactly the same way that France seeks to attack US non-compliance with Kyoto.
The Stiglitz proposal moreover is designed to switch the tax base internationally from taxing socially-desirable pursuits (work-effort, saving) to pursuing double-dividend advantages from taxing social ‘bads’ such as pollution.
I have suggested two approaches to dealing with this issue:
(i) Introducing an international carbon tax with sufficient bite to meet Greenhouse gas reduction targets internationally and to levy tariffs on imports from non-complying countries – those that do not adequately impose the carbon tax. This is the somewhat coercive Stiglitz enforcement mechanism proposal. Non-taxing polluters are excluded from free trade because they are unfairly leaning on the rest-of-the-world by not internalizing their emissions. They are being levied with import tariffs to compensate for their environmental theft in exactly the same way that France seeks to attack US non-compliance with Kyoto.
The Stiglitz proposal moreover is designed to switch the tax base internationally from taxing socially-desirable pursuits (work-effort, saving) to pursuing double-dividend advantages from taxing social ‘bads’ such as pollution.
The attractive feature of this program is that it prevents 'carbon leakage'. By imposing direct restrictions on countries such as China it becomes impossible for pollution firms in developed countries to simply relocate to developing countries. Carbon leakage means jobs are lost in developed country and there is no improvement in the global environmental situation. This is the weakness of unilateral moves toward dealing with climate change - and indeed a weakness of the Kyoto Protocol.
Ultimately all countries need to tax carbon emissions or to be penalised by being excluded from trade.
(ii) Setting strict enough carbon emission quotas on complying developed countries (but not seeking to cap emissions from developing countries) to meet very stringent aggregate global emission targets but allowing developed countries to buy carbon credits from emission reductions that achieve via investments in developing countries. This is equivalent to the Clean Development Mechanism proposed (and used) under Kyoto. The difficulty with this proposal is that, as discussed in an earlier post, incentives can be distorted in developing countries. For example, incentives can be created to generate lots of pollution in order to make a sale.
I haven’t thought through the details of these respective viewpoints. My views might back-flip – I suspect there are intricacies here - and I might well have missed something entirely obvious. But I am increasingly coming to the view that option (ii) – despite its problems – has a much to recommend it. Aut least in the short-term before policy option (i) can be seriously considered.
Think of an analogy with conserving biodiversity existence values. These are the values associated with the happiness people experience from knowing that biodiversity species remain extant and can be thought of as a global public good. A species conserved in China contributes as much happiness as one conserved in Australia. Reflecting this suppose wealthy countries value the conservation of biodiversity irrespective of where it is located for existence value reasons and that these wealthy countries have a higher preference for conservation than do poorer developing countries. Suppose too that the options for conservation are better in developing than developed countries – there are lower cost conservation options in developing countries simply because very little conservation effort has been made. Then on efficiency grounds there is a case for resource transfers from rich to poor countries to effect good conservation outcomes on cost-efficiency grounds. These are not ‘charitable’ contributions but simply a consequence of seeking to best allocate conservation expenditures and where taxes to fund such conservation effort are set equal to marginal biodiversity conservation values in providing the global public good.
Roughly speaking developed countries have high willingness-to-pay reflecting their high marginal valuations on conservation. Moreover, the best opportunities to conserve are in developing countries where willingness-to-pay is lower. A resource transfer from rich to poor countries resolves this imbalance. (I once spelt out the analytics of this in a couple of published papers – unfortunately no online versions are available).
Does not an equivalent argument apply to CO2 emissions? Using the argument that the ‘environment is a luxury good’ (there are higher demands for environmental prissiness from rich countries) suggests that countries like the US and Australia have a higher demand for environmental prissiness than will (for example) the Chinese who are mainly targeting their quest for material wealth – they will kill* any animal that moves and have probably one of the environmentally dirtiest societies on earth. Being non-emotive, the Chinese have a low preference for conserving the natural environment – they want growth that will move them out of their miserable current circumstances.
Chinese energy consumption is low relative to developed countries but energy efficiencies are also low so that the opportunities for energy conservation in China are abundant and cheap as China moves toward higher energy consumption levels. Given the disparity in objectives between rich and poor countries and given that CO2 emissions are a global public bad it might make sense for there to be a transfer from wealthy to poor countries such as China to clean up the damage they are creating.
Proposal (ii) creates the incentives for the private sector to do this via a huge investment program that makes money by expanding the clean energy generation technologies in the west by cleaning up the dirt in the developing world. Yes there are huge incentive problems but the proposal to generate a developed country capital market response to cleaning up in the developing world will at least help to deal constructively with global warming issues.
This is a broad sketch since one needs to account for growing Chinese energy demands even if energy conservation is promoted. Moreover, while China has been singled out, many developing countries fit into the Chinese situation. In the longer-term it is essential to seek a transition whereby all countries take care of their own environmental damages. Indeed unless that happens measures to control emissions in deverloped countries will simply be swamped by environmental grubs in the developing world.
* The Chinese have no animal protection laws and their treatment of nature is appalling. See this YouTube if you have a strong stomach.
Wednesday, June 20, 2007
Working in a call centre
The Four Corners show ‘Tough Calls’ telecast Monday dealt with the introduction of new management styles in Telstra call centers. The show made me rethink. As an economist I teach the principles that are being employed by Telstra but, to be honest, I have never been in a call centre and in fact I have never had what my country-based relatives describe as a ‘real job’ - I’ve always been an academic who teaches people what do based on what he can see, feel and read in books and in supposedly learned journal articles.
The basic theory of agency, on which management theory develops, adopts a pessimistic view of people. It teaches that humans are essentially lazy, slackers. Bosses (‘principals’) direct workers (‘agents’) to do certain things but workers have different objectives to their principals and have an impulse to be slack and to deceive. The boss wants profit while the worker wants to earn his wage but to otherwise loaf or enjoy the quiet life. It’s a ‘cat-and-mouse’ game view of the world where the worker is a sneak who seeks to evade his contractual obligations.
Because workers cannot often be continuously monitored the boss must come up with incentive contracts that reward the worker well only if he/she works hard. This often means coming up with output-related measures of performance. Basically this is what Telstra is now doing. This is supposed to enhance economic efficiency – firms produce more and workers are better-paid.
The monitoring and measuring behavior that seems to occur in the Telstra call centers– counting toilet breaks and so on – is only distantly related to the notion of providing incentive contracts. It is more like a conventional work contract with some Taylorist embellishments since it basically rewards maximum effort and punishes anything that falls short of this maximum.
The tragic suicide deaths of two highly-productive (and very attractive) Telstra employees and the negative impressions many had of the work-culture under the new Telstra should force us all to think carefully about the value of this theory.
What do I conclude? Well the situation isn’t as negative as Four Corners suggests but there are problems that fair-minded people need to consider. Here are some provisional thoughts. Comments (of course) are welcome.
1. Ultimately workers need to be more productive if they are to sustainably derive better incomes. Incentive contracts increase worker productivity and hence allow some workers to be better remunerated.
2. Some people who fail such reward systems may be better suited to other forms of employment. Not all those who fail to succeed in such systems provide evidence against the use of incentive contracts.
3. Low-skilled jobs in call centers will end up being outsourced internationally unless high productivity standards are met. An excellent wikipedia entry on call centers is here. There are advantages in Australians processing decision problems faced by Australians but ultimately competition from other countries will drive work conditions in these types of service industries.
4. It is difficult to design good contracts. If productivity depends on a measurable output (‘widgets produced’) and a non-measurable output (‘quality of widgets produced’) then evaluating workers on the basis of the measurable output alone might not work.
5. Thus some contracts may fail to improve productivity (defined to include output quality) and might need to be replaced by non-incentive related schemes or schemes with lower incentive gradients.
6. That most of the theoretical work underlying such contracts comes from theoretical economists (like me) with limited understanding of real workplace environments and with only a smattering of psychological insight. Mr. Leon Dousset, the Telstra technician for 32 years who killed himself this year, clearly valued doing a job well. He did things ‘slowly’ because he took pride in his work – maybe the work wasn’t slow in the sense that it avoided the need for future work.
5. Work is important to us individuals and it helps us achieve feelings of self-worth. Having creepy, business school types checking on our toilet breaks detracts from what it means to exist in a free, liberal society. As an academic I would despise such treatment. Why should I expect that those in other occupations should find it less obnoxious?
6. In the same way subjecting individuals to verbal abuse and demeaning rituals is unwarranted and probably counter-productive. Telstra needs to rethink its attitudes to those who don’t met pre-set expectations. Issues of work culture are important and influence productivity throughout the workplace – it is noteworthy that the two Telstra workers who suicided were success stories not those failing to achieve targets.
6. The important issue is to secure good productivity from those who can provide it but to not damage and destroy the lives of those who cannot. This will be best supported in a free labour market where workers have the maximum range of options to contract with employees. Uniform wage rates and minimum wages will tend to work against the interests of less productive workers.
Competitive labour markets offer the best protection to workers who receive unjust or abusive treatment. They can then leave and go elsewhere. These supply constraints limit the ability of creative business school types to come up with unrealistic incentive schemes.
7. Social justice is important in determining the distribution of income in society but this is a responsibility of government and the tax-transfer mechanism not of business firms. Society is better-off as a whole in the sense of yielding high net wages and a high redistributable tax surplus if the workforce operates with high productivity.
8. Productivity is important but so too is decent treatment of people in the workforce.
The basic theory of agency, on which management theory develops, adopts a pessimistic view of people. It teaches that humans are essentially lazy, slackers. Bosses (‘principals’) direct workers (‘agents’) to do certain things but workers have different objectives to their principals and have an impulse to be slack and to deceive. The boss wants profit while the worker wants to earn his wage but to otherwise loaf or enjoy the quiet life. It’s a ‘cat-and-mouse’ game view of the world where the worker is a sneak who seeks to evade his contractual obligations.
Because workers cannot often be continuously monitored the boss must come up with incentive contracts that reward the worker well only if he/she works hard. This often means coming up with output-related measures of performance. Basically this is what Telstra is now doing. This is supposed to enhance economic efficiency – firms produce more and workers are better-paid.
The monitoring and measuring behavior that seems to occur in the Telstra call centers– counting toilet breaks and so on – is only distantly related to the notion of providing incentive contracts. It is more like a conventional work contract with some Taylorist embellishments since it basically rewards maximum effort and punishes anything that falls short of this maximum.
The tragic suicide deaths of two highly-productive (and very attractive) Telstra employees and the negative impressions many had of the work-culture under the new Telstra should force us all to think carefully about the value of this theory.
What do I conclude? Well the situation isn’t as negative as Four Corners suggests but there are problems that fair-minded people need to consider. Here are some provisional thoughts. Comments (of course) are welcome.
1. Ultimately workers need to be more productive if they are to sustainably derive better incomes. Incentive contracts increase worker productivity and hence allow some workers to be better remunerated.
2. Some people who fail such reward systems may be better suited to other forms of employment. Not all those who fail to succeed in such systems provide evidence against the use of incentive contracts.
3. Low-skilled jobs in call centers will end up being outsourced internationally unless high productivity standards are met. An excellent wikipedia entry on call centers is here. There are advantages in Australians processing decision problems faced by Australians but ultimately competition from other countries will drive work conditions in these types of service industries.
4. It is difficult to design good contracts. If productivity depends on a measurable output (‘widgets produced’) and a non-measurable output (‘quality of widgets produced’) then evaluating workers on the basis of the measurable output alone might not work.
5. Thus some contracts may fail to improve productivity (defined to include output quality) and might need to be replaced by non-incentive related schemes or schemes with lower incentive gradients.
6. That most of the theoretical work underlying such contracts comes from theoretical economists (like me) with limited understanding of real workplace environments and with only a smattering of psychological insight. Mr. Leon Dousset, the Telstra technician for 32 years who killed himself this year, clearly valued doing a job well. He did things ‘slowly’ because he took pride in his work – maybe the work wasn’t slow in the sense that it avoided the need for future work.
5. Work is important to us individuals and it helps us achieve feelings of self-worth. Having creepy, business school types checking on our toilet breaks detracts from what it means to exist in a free, liberal society. As an academic I would despise such treatment. Why should I expect that those in other occupations should find it less obnoxious?
6. In the same way subjecting individuals to verbal abuse and demeaning rituals is unwarranted and probably counter-productive. Telstra needs to rethink its attitudes to those who don’t met pre-set expectations. Issues of work culture are important and influence productivity throughout the workplace – it is noteworthy that the two Telstra workers who suicided were success stories not those failing to achieve targets.
6. The important issue is to secure good productivity from those who can provide it but to not damage and destroy the lives of those who cannot. This will be best supported in a free labour market where workers have the maximum range of options to contract with employees. Uniform wage rates and minimum wages will tend to work against the interests of less productive workers.
Competitive labour markets offer the best protection to workers who receive unjust or abusive treatment. They can then leave and go elsewhere. These supply constraints limit the ability of creative business school types to come up with unrealistic incentive schemes.
7. Social justice is important in determining the distribution of income in society but this is a responsibility of government and the tax-transfer mechanism not of business firms. Society is better-off as a whole in the sense of yielding high net wages and a high redistributable tax surplus if the workforce operates with high productivity.
8. Productivity is important but so too is decent treatment of people in the workforce.
Tuesday, June 19, 2007
Bow wave of the Sydney cyclone
As an ex-surfer (yonks ago!) in the Sydney area this picture made me gasp. The accompanying story is pretty good too. Tim Blair is providing an armory of resources for tracking the current path of the cyclone about to hit Sydney. On Tuesday 10-15pm, as I type this, it looks like it is about to hit from the south of the city.
Mr. Brendan Keilar
Yesterday in Melbourne a 43-year old male solicitor, Brendan Keilar, came to the rescue of an obviously distressed woman being violently dragged by a male from a taxi in Flinders Lane. The attacker responded by shooting the solicitor in the chest – he died an hour later. Mr Keilar was a brave man who didn’t ignore the cries of someone in a distress. He was killed as a result. This evening police are pursuing the killer. Another man was shot and is in a critical condition. The woman being assaulted was also shot and is in a serious condition.
We should be inspired by these individual acts of bravery. I recall the American Wesley Autry who threw himself on railway tracks in the face of an oncoming locomotive to pin-down and protect a man having a convulsion who had fallen there. The locomotive roared over his head and both Autry and the man he saved survived. Autry didn’t have time to think - he acted spontaneously.
There are brave people in all communities. They are an inspiration to us all. My sympathies go out to the wife and 3 children of Mr Keilar.
We should be inspired by these individual acts of bravery. I recall the American Wesley Autry who threw himself on railway tracks in the face of an oncoming locomotive to pin-down and protect a man having a convulsion who had fallen there. The locomotive roared over his head and both Autry and the man he saved survived. Autry didn’t have time to think - he acted spontaneously.
There are brave people in all communities. They are an inspiration to us all. My sympathies go out to the wife and 3 children of Mr Keilar.
More porkies from climate change denialists?
One suggestion (due to denialist Ross McKitrick) that is doing the rounds (Pommygranate, Tim Blair) is that carbon taxes should be tied to current degrees of global warming. This idea is flawed because climate change occurs with a lag in response to greenhouse gas emissions. NewScientist describes the lag:
Thermal inertia means that sea level changes will occur even if greenhouse gas emissions are drastically cut. This is quite apart from time-to-build issues involved in constructing new power generation technologies and in making investments to adapt to sea level changes and other consequences of climatic shift.
There are also cognitive lags in the brain-functioning of the denialist camp. The need for anticipatory policies has been extensively discussed in the climate change literature.
One wonders what Ross McKitrick is on about – these lagged effects have been discussed for years.
‘The time lag occurs because rising air temperatures take time to make themselves felt throughout the immense thermal mass of the oceans. This "thermal inertia" means that Earth has not yet felt the full effect of today's level of greenhouse gases’.
Thermal inertia means that sea level changes will occur even if greenhouse gas emissions are drastically cut. This is quite apart from time-to-build issues involved in constructing new power generation technologies and in making investments to adapt to sea level changes and other consequences of climatic shift.
There are also cognitive lags in the brain-functioning of the denialist camp. The need for anticipatory policies has been extensively discussed in the climate change literature.
One wonders what Ross McKitrick is on about – these lagged effects have been discussed for years.
Monday, June 18, 2007
Election polls and gambling markets
According to the AC Neilson poll Labor has hung onto a landslide lead against the Government's sustained assault even though John Howard strongly outstrips Kevin Rudd on leadership and economic credentials and is regarded as having a better grasp of foreign policy. Kevin Rudd is seen as more open to ideas than John Howard. Labor has lost only one point in a month, leading the Government 57-43 per cent in two-party preferred terms.
According to Newspoll, Labor remains in a position to wipe out the Coalition at the next election, 56 to 44 per cent.
The two polls are close but the rate of shift back to the Liberals is greater for Newspoll. As usual the analysis of the polls splits on party lines – The Age providing the AC Neilson poll sees solid support for Labor being maintained while The Australian sees the cup as half empty for Labor – the Liberals are catching up! It is pathetic.
The odds favoring a Liberal victory have shortened in the betting markets. Its close to a 50:50 bet though Labor has a slight edge.
According to Newspoll, Labor remains in a position to wipe out the Coalition at the next election, 56 to 44 per cent.
The two polls are close but the rate of shift back to the Liberals is greater for Newspoll. As usual the analysis of the polls splits on party lines – The Age providing the AC Neilson poll sees solid support for Labor being maintained while The Australian sees the cup as half empty for Labor – the Liberals are catching up! It is pathetic.
The odds favoring a Liberal victory have shortened in the betting markets. Its close to a 50:50 bet though Labor has a slight edge.
Alcohol, addiction, congestion, migration & biodiversity
I have put online some recent papers of mine. Comments are welcome.
Thinking About Alcohol Policy. A reasonably liberal approach to the issue of regulating alcohol use.
The case against the case against skilled migration. An argument refuting suggestions Australia does not derive long-term gains from skilled migration. Awful double negatives I know.
Conserving biodiversity in the face of climate change. A survey of the economic issues that arise in attempting to adapt biodiversity strategies to the uncertain effects of climate change.
Being rational about rational addiction. A critical examination of the Becker and Murphy 'rational addiction' thesis (with Svetlana Danilkina).
Targeting urban congestion: equity and second-best issues. First-best arguments for comprehensive congestion pricing are often rejected because of equity implications and because pricing can only be partial. This paper revives a case for pricing with these constraints.
Thinking About Alcohol Policy. A reasonably liberal approach to the issue of regulating alcohol use.
The case against the case against skilled migration. An argument refuting suggestions Australia does not derive long-term gains from skilled migration. Awful double negatives I know.
Conserving biodiversity in the face of climate change. A survey of the economic issues that arise in attempting to adapt biodiversity strategies to the uncertain effects of climate change.
Being rational about rational addiction. A critical examination of the Becker and Murphy 'rational addiction' thesis (with Svetlana Danilkina).
Targeting urban congestion: equity and second-best issues. First-best arguments for comprehensive congestion pricing are often rejected because of equity implications and because pricing can only be partial. This paper revives a case for pricing with these constraints.
Sunday, June 17, 2007
Bloomsday
I forgot today to celebrate the anniversary of Bloomsday, 16th June 1904 on Saturday. It was celebrated in Sydney and in Melbourne. A lifetime ambition of mine is to celebrate in Dublin. Another is to read Finnegan's Wake with a pleasure and understanding.My earlier posts on JJ have not aged nor improved – here and here.
In digging around and trying to find some celebratory and new to say I came across this old post by John Quiggin on the attitudes of Joyce’s family to intellectual property. In particular Joyce’s grandson, Stephen Joyce, apparently didn’t want free recitations of his grandfather's work in Dublin.
This insistence is unfortunate but it can be at least understood if you realize the terrible poverty that JJ lived in for decades while writing Ulysses and Finnegans Wake. The poverty must have been hard on his kids. It obviously was for daughter Lucia who, after a fling with Samuel Beckitt, went mad. You can read of this in Carol Shloss’s, Lucia Joyce: To Dance in the Wake.
Joyce was a great writer but a poor husband and dad!
Older wines: the 1984 Metala Cabernet-Shiraz
Metala Cabernet Shiraz was one of the more reliable, long-lived South Australian red wines that is sourced mainly from Langhorne Creek in South Australia. At a recent retrospective, wines from Metala were sampled back to 1945 – the 1951 shiraz-cabernet was still sound after 50 years in the bottle and one of the best wines sampled. The 1945 vintage port was also very much alive and was described, with the degree of hyperbole, that one expects from a reviewer - who has spent his (or her) whole day sampling 60 years of vintaged wines - as ‘one of Australia’s great wine treasures’.
No I didn’t go to this retrospective and I can only comment on one of the supposedly lesser wines reviewed there, the 1984 shiraz-cabernet, which I drank this evening. The wine was in near perfect drinking condition showing bottle age characteristics, but much strength and character. There were (as earlier reviewers found) some herbaceous characters which I didn’t find troubling in the least. Good color, with no browning, and with tea leaf flavors and nose. A great old wine that, while certainly not outstanding, was pleasurable drinking.
I didn’t start a cellar until the late 1980s and recall scouting around Melbourne then for wines with a few years’ bottle age. I paid $16-99 for this, then, and I reckon in retrospect it was a bit pricey since at a 5% discount rate that would work out at about $50 today. But, I could have enjoyed it 10 years ago!
The reviewers at the retrospective mentioned were less complimentary about this wine than I was. It could have been that in a lineup dating back to 1945 this wine under-performed others or it just might be that I don’t enjoy their expert ‘good taste’. Their comments follow:
‘ 1984 Stonyfell Metala, Langhorne Creek, South Australia.
A disappointing Metala with too much herbaceous, unripe fruit character. Deep brick red colour, with orange, tawny brown hue. The nose displays herbaceousness, tea leaf notes, followed by an earthy end note. On the palate, flavours of spice and tea leaf over a herbaceous background. Firmish, dry tannins, followed by a tea leaf aftertaste. Drink (2002).
RATING: 78/100’.
No I didn’t go to this retrospective and I can only comment on one of the supposedly lesser wines reviewed there, the 1984 shiraz-cabernet, which I drank this evening. The wine was in near perfect drinking condition showing bottle age characteristics, but much strength and character. There were (as earlier reviewers found) some herbaceous characters which I didn’t find troubling in the least. Good color, with no browning, and with tea leaf flavors and nose. A great old wine that, while certainly not outstanding, was pleasurable drinking.
I didn’t start a cellar until the late 1980s and recall scouting around Melbourne then for wines with a few years’ bottle age. I paid $16-99 for this, then, and I reckon in retrospect it was a bit pricey since at a 5% discount rate that would work out at about $50 today. But, I could have enjoyed it 10 years ago!
The reviewers at the retrospective mentioned were less complimentary about this wine than I was. It could have been that in a lineup dating back to 1945 this wine under-performed others or it just might be that I don’t enjoy their expert ‘good taste’. Their comments follow:
‘ 1984 Stonyfell Metala, Langhorne Creek, South Australia.
A disappointing Metala with too much herbaceous, unripe fruit character. Deep brick red colour, with orange, tawny brown hue. The nose displays herbaceousness, tea leaf notes, followed by an earthy end note. On the palate, flavours of spice and tea leaf over a herbaceous background. Firmish, dry tannins, followed by a tea leaf aftertaste. Drink (2002).
RATING: 78/100’.
Sugar
It is an old theme on this blog but, in my view, the major cause of the obesity-diabetes epidemic in modern societies (developing and developed) is related to excessive sugar consumption. A sugar soft-drink or sugar-laden fruit juice drink per day increases the chance of a woman contracting diabetes by 80%.
Sweets, soft-drinks and fruit drinks, cakes, biscuits, alco-pops, pizza were once seen as 'treat' consumption items. For many people they are now routinely consumed as regular food along with carbohydrate-dense but nutritionally impoverished bread and rice products as well as increasingly saccarine fruits.
Casual inspection suggests to me that more than half of the isles in a modern supermarket push high sugar products such as soft-drinks, sweets, flours, cakes, biscuits, breads, bread spreads etc - essentially all sugar-dense, low-nutrition foods.
Lee Smith drew my attention to a useful article on our overconsumption of sugars in today's Age. It is an excellent read.
In my view Dr. Aikins was right. Our diets would be much better based on a mix of healthy proteins and fats with an end to bread and the ubiqitous bread roll. Lots of salads and green vegetables should be consumed, much less potato and generally a reduced obsession with high sugar fruits such as the over-ripe sugary apples, bananas and oranges that doting mums force down their childsren's throats on the mistaken impression that the sugar in them is somehow safer than that in a lollypop.
To assume that adults are well-informed and can (and should) make rational choices for themselves and their children is naive. Most adults are obsessed in their food-selection habits with fat content - they will select a 'no fat' muesli bar as a snack even if it is mainly a sugary 'treat'. Bread and rice are part of most people's everyday diets yet they are primarily just a source of simple carbohydrates that are broken down almost immediately on injestion into sugars.
Taxing sugary foods is impractical (and regressive) but advertising high sugar foods probably should be restricted and that certainly soft-drinks and fruit drinks should be banned from school canteens. I think the composition of the worst types of sugar-indulgent junk food, such as Krispy Kremes Doughnuts, should be exposed and publicised.
The best way of addressing diabetes and obesity issues is to change peoples attitudes to food and to encourage the private sector to deliver foods which are not sugar-dense. Bacon and eggs is a wonderful breakfast and McDonald's hamburgers make a reasonable lunch if you ditch the bread roll in the bin.
I have been working on other economic issues for the past few months but intend resuming my economic work on nutrition and health policy in the second half of 2008.
Sweets, soft-drinks and fruit drinks, cakes, biscuits, alco-pops, pizza were once seen as 'treat' consumption items. For many people they are now routinely consumed as regular food along with carbohydrate-dense but nutritionally impoverished bread and rice products as well as increasingly saccarine fruits.
Casual inspection suggests to me that more than half of the isles in a modern supermarket push high sugar products such as soft-drinks, sweets, flours, cakes, biscuits, breads, bread spreads etc - essentially all sugar-dense, low-nutrition foods.
Lee Smith drew my attention to a useful article on our overconsumption of sugars in today's Age. It is an excellent read.
In my view Dr. Aikins was right. Our diets would be much better based on a mix of healthy proteins and fats with an end to bread and the ubiqitous bread roll. Lots of salads and green vegetables should be consumed, much less potato and generally a reduced obsession with high sugar fruits such as the over-ripe sugary apples, bananas and oranges that doting mums force down their childsren's throats on the mistaken impression that the sugar in them is somehow safer than that in a lollypop.
To assume that adults are well-informed and can (and should) make rational choices for themselves and their children is naive. Most adults are obsessed in their food-selection habits with fat content - they will select a 'no fat' muesli bar as a snack even if it is mainly a sugary 'treat'. Bread and rice are part of most people's everyday diets yet they are primarily just a source of simple carbohydrates that are broken down almost immediately on injestion into sugars.
Taxing sugary foods is impractical (and regressive) but advertising high sugar foods probably should be restricted and that certainly soft-drinks and fruit drinks should be banned from school canteens. I think the composition of the worst types of sugar-indulgent junk food, such as Krispy Kremes Doughnuts, should be exposed and publicised.
The best way of addressing diabetes and obesity issues is to change peoples attitudes to food and to encourage the private sector to deliver foods which are not sugar-dense. Bacon and eggs is a wonderful breakfast and McDonald's hamburgers make a reasonable lunch if you ditch the bread roll in the bin.
I have been working on other economic issues for the past few months but intend resuming my economic work on nutrition and health policy in the second half of 2008.
Saturday, June 16, 2007
Glenn Stevens on wage market flexibility
In an address to a business audience Thursday in Brisbane Glenn Stevens made perhaps his most important policy speech since becoming RBA Governor. He emphasized the importance of the supply side response – in particular the labour market response – in Australia gaining all the benefits from the massive growth in China – without inflation taking off. In effect he sided with Paul Keating who recently emphasized the role of labour market reforms that confine high wage growth to the more productive sectors of the economy.
He is saying that the Labor Party is wrong in attributing Australia’s recent economic success entirely to the minerals boom. It is more precisely the minerals boom plus structural reform in the economy.
‘Unless supply is somehow forthcoming expanding demand just produces overheating and inflation’. With such overheating come contractionary monetary policy, bankruptcies and job losses.
Stevens argues that extra migrants and low prices of Chinese goods have helped produce this outcome but that the main reason for the outcome is the increased labour market flexibility over the past two decades.
‘…my guess at present is that at least some of the explanation for these better-than-expected outcomes probably has to do with changed behaviour in the labour market. Despite, on most counts, the tightest labour market conditions for a generation, growth in most measures of labour costs has remained well disciplined for the past two years or more, after a mild acceleration earlier. Wages are rising quickly in some areas, but quite slowly in others. That is, relative wages are changing, adjusting to the forces at work on the economy, but without, so far at least, a serious inflation of the whole economy‑wide cost structure’.
Stevens saw the WorkChoices legislation that came into place 15 months ago as part of this move to flexibility. It has contributed to the sustainability of an expansion that is now approaching its 17th year. This accords with recent RBA research confirming that
deregulating labour markets along with product markets drives productivity growth.
As The AFR editorialized (subscription only) on Friday:
‘The question the government will pose every day until the election, and Labor must answer, is can we afford Labor’s misguided plan to return to a more regulated labour market than the one Paul Keating gave us in 1993? Mr Stevens is saying diplomatically that labour market flexibility trumps all. The answer must be no.’
The ACTU lies when it claims underemployment is up in the economy – it isn’t as full time jobs are growing at the expense of part-time jobs and workforce participation is at record levels. As the AFR point out tax revenues have also surged giving us the capability of a generous safety net.
Australia’s future economic prospects are excellent – we should build on the economic successes of the past 17 years – not take actions which endanger our continued prosperity.
He is saying that the Labor Party is wrong in attributing Australia’s recent economic success entirely to the minerals boom. It is more precisely the minerals boom plus structural reform in the economy.
‘Unless supply is somehow forthcoming expanding demand just produces overheating and inflation’. With such overheating come contractionary monetary policy, bankruptcies and job losses.
Stevens argues that extra migrants and low prices of Chinese goods have helped produce this outcome but that the main reason for the outcome is the increased labour market flexibility over the past two decades.
‘…my guess at present is that at least some of the explanation for these better-than-expected outcomes probably has to do with changed behaviour in the labour market. Despite, on most counts, the tightest labour market conditions for a generation, growth in most measures of labour costs has remained well disciplined for the past two years or more, after a mild acceleration earlier. Wages are rising quickly in some areas, but quite slowly in others. That is, relative wages are changing, adjusting to the forces at work on the economy, but without, so far at least, a serious inflation of the whole economy‑wide cost structure’.
Stevens saw the WorkChoices legislation that came into place 15 months ago as part of this move to flexibility. It has contributed to the sustainability of an expansion that is now approaching its 17th year. This accords with recent RBA research confirming that
deregulating labour markets along with product markets drives productivity growth.
As The AFR editorialized (subscription only) on Friday:
‘The question the government will pose every day until the election, and Labor must answer, is can we afford Labor’s misguided plan to return to a more regulated labour market than the one Paul Keating gave us in 1993? Mr Stevens is saying diplomatically that labour market flexibility trumps all. The answer must be no.’
The ACTU lies when it claims underemployment is up in the economy – it isn’t as full time jobs are growing at the expense of part-time jobs and workforce participation is at record levels. As the AFR point out tax revenues have also surged giving us the capability of a generous safety net.
Australia’s future economic prospects are excellent – we should build on the economic successes of the past 17 years – not take actions which endanger our continued prosperity.
Traveler’s Dilemma
‘Lucy and Pete, returning from a remote Pacific island, find that the airline has damaged the identical antiques that each had purchased. An airline manager says that he is happy to compensate them but is handicapped by being clueless about the value of these strange objects. Simply asking the travelers for the price is hopeless, he figures, for they will inflate it.
Instead he devises a more complicated scheme. He asks each of them to write down the price of the antique as any dollar integer between 2 and 100 without conferring together. If both write the same number, he will take that to be the true price, and he will pay each of them that amount. But if they write different numbers, he will assume that the lower one is the actual price and that the person writing the higher number is cheating. In that case, he will pay both of them the lower number along with a bonus and a penalty--the person who wrote the lower number will get $2 more as a reward for honesty and the one who wrote the higher number will get $2 less as a punishment. For instance, if Lucy writes 46 and Pete writes 100, Lucy will get $48 and Pete will get $44.
What numbers will Lucy and Pete write? What number would you write?’
Kaushik Basu (a noted game theorist) has a non-technical and beautifully written exposition of this famous Traveler’s Dilemma problem in the most recent Scientific American. Real people who play such games do not behave rationally but, by so doing, derive a kind of meta-rationality since, as a consequence of not behaving rationally, they do much better than they would by behaving rationally. It is a paradox of rationality that also arises in standard Prisoner’s Dilemmas.
An entertaining and informative light read.
Instead he devises a more complicated scheme. He asks each of them to write down the price of the antique as any dollar integer between 2 and 100 without conferring together. If both write the same number, he will take that to be the true price, and he will pay each of them that amount. But if they write different numbers, he will assume that the lower one is the actual price and that the person writing the higher number is cheating. In that case, he will pay both of them the lower number along with a bonus and a penalty--the person who wrote the lower number will get $2 more as a reward for honesty and the one who wrote the higher number will get $2 less as a punishment. For instance, if Lucy writes 46 and Pete writes 100, Lucy will get $48 and Pete will get $44.
What numbers will Lucy and Pete write? What number would you write?’
Kaushik Basu (a noted game theorist) has a non-technical and beautifully written exposition of this famous Traveler’s Dilemma problem in the most recent Scientific American. Real people who play such games do not behave rationally but, by so doing, derive a kind of meta-rationality since, as a consequence of not behaving rationally, they do much better than they would by behaving rationally. It is a paradox of rationality that also arises in standard Prisoner’s Dilemmas.
An entertaining and informative light read.
Friday, June 15, 2007
Reducing carbon emissions in poor countries
In my recent post on getting wealthy countries to pay for reducing carbon emission reductions in developing countries I didn’t mention that a scheme close to that proposed already exists under the Kyoto Protocol. This is the Clean Development Mechanism. I draw heavily on an excellent wikipedia post in preparing these notes on CDM.
The CDM. CDM allows industrialised countries with a greenhouse gas reduction commitment to invest in emission reducing projects in developing countries as an alternative to making costly emission reductions at home. In theory the CDM allows for a drastic reduction of costs for industrialised countries, while achieving the same emission reductions. However, critics argue that emission reductions under the CDM may be fictive – in early 2007 the CDM came under fire for paying €4.6 billion for destruction of HFC gases while according to a study this would cost only €100 million if funded by development agencies.
The CDM arose out of the negotiations of the Kyoto Protocol in 1997. The US wanted flexibility in achieving emission reductions. Eventually, and largely on US insistence, CDM and two other flexible mechanisms (emissions trading and joint implementation) were written into Kyoto.
Determining baselines and additionality. An industrialized country seeking credits from a CDM project must obtain the consent of the developing country hosting the project that it will contribute to sustainable development. Then, the applicant must make the case that the project would not have happened anyway – it must establish additionality - and provide a baseline of future emissions in absence of the registered project. The emission reduction depends on the emissions that would have occurred without the project.
With costs of emission reduction typically much lower in developing countries than in industrialised countries, emission reduction targets in industrial countries can be received at much lower cost by receiving credits for emissions reduced in developing countries as long as administration costs are low The IPCC Has projected GDP losses for OECD Europe with full use of CDM to between 0.13-0.81 % of GDP versus 0.31 to 1.50 % with only domestic action.
Excessive profits. However, many CDM projects have led to excessive profits. In early 2007 a study found that the main type of CDM projects paid as much as 50 times more for the emission reductions than the costs alone would warrant, with the excessive profits ending up with the factories and the carbon traders.
The particular CDM projects in question involved refrigerant-producing factories in developing countries that generated the powerful greenhouse gas HFC 23 as a by-product. By destroying the HFCs, the factories earn CER credits worth €4.6 billion. But a simple and relatively cheap piece of equipment (a scrubber) would cost only €100 million to destroy HFC 23. While the CER credits are cheaper than the typical cost of reducing emissions in industrialized countries this anomaly is seen as a major loophole in the carbon trading system. The HFC 23 emitters can earn almost twice as much from the CDM credits as they can from selling refrigerant gases. The UN claims this loophole is now closed.
Environmental concerns with CDM. There are also environmental concerns. As CDM is an alternative to domestic emission reductions, the perfectly working CDM would produce no more and no less greenhouse gas emission reductions than without the CDM. But if projects that would have happened anyway are registered as CDM projects, the use of CDM will result in higher total emissions, as the spurious credits will be used to allow higher domestic emissions while not delivering lower emissions in the developing country hosting the CDM project. Similarly, spurious credits may be awarded through overstated baselines. CDM Watch argues that a majority of the CDM projects up to 2005 would have happened anyway.
NGOs have also criticized the inclusion of unsustainable hydropower projects, of sinks and the exclusion of renewable energy projects as CDM projects.
Getting developing countries involved in carbon trading. Within CDM the United Nations Development Program (UNDP) have recently announced the MGD Carbon Facility to help developing countries conceive projects intended to reduce emissions of greenhouse gases. The idea is to get developing countries to the point of being able to operate in international carbon markets. The insurance giant Fortis will purchase, and sell-on, the emissions-reduction credits generated by projects and use the proceeds to finance investment and to promote development.
The MDG Carbon Facility will operate within the framework of the CDM and Joint Implementation, the market-based mechanisms under the Kyoto Protocol that allow developed countries to meet their compliance targets by financing projects in developing countries that contribute to reducing greenhouse-gas emissions.
The CDM has been at the center of a rapidly expanding, billion-dollar international market for carbon credits. However, early signs indicate that the CDM is unlikely to deliver the broad-based benefits that many hoped it would, at least in the near to medium term. CDM projects have so far been limited in geographic reach, and focused primarily on 'end-of-pipe' technologies that generate limited benefit for long-term sustainable development.
By expanding the CDM's presence into countries and regions previously considered inaccessible to carbon finance, the MDG Carbon Facility will help people in these areas acquire the resources and knowledge to take greater control over their future environment and development paths.
Once a developing country gains proficiency in carbon finance, in attracting private-sector investment and in developing project technologies that deliver longer-term development benefits, the MDG Carbon Facility will exit that market. It will have accomplished its market transformation objectives and no longer needing to play its role as a bridge between developing countries and the global carbon market.
The CDM. CDM allows industrialised countries with a greenhouse gas reduction commitment to invest in emission reducing projects in developing countries as an alternative to making costly emission reductions at home. In theory the CDM allows for a drastic reduction of costs for industrialised countries, while achieving the same emission reductions. However, critics argue that emission reductions under the CDM may be fictive – in early 2007 the CDM came under fire for paying €4.6 billion for destruction of HFC gases while according to a study this would cost only €100 million if funded by development agencies.
The CDM arose out of the negotiations of the Kyoto Protocol in 1997. The US wanted flexibility in achieving emission reductions. Eventually, and largely on US insistence, CDM and two other flexible mechanisms (emissions trading and joint implementation) were written into Kyoto.
Determining baselines and additionality. An industrialized country seeking credits from a CDM project must obtain the consent of the developing country hosting the project that it will contribute to sustainable development. Then, the applicant must make the case that the project would not have happened anyway – it must establish additionality - and provide a baseline of future emissions in absence of the registered project. The emission reduction depends on the emissions that would have occurred without the project.
With costs of emission reduction typically much lower in developing countries than in industrialised countries, emission reduction targets in industrial countries can be received at much lower cost by receiving credits for emissions reduced in developing countries as long as administration costs are low The IPCC Has projected GDP losses for OECD Europe with full use of CDM to between 0.13-0.81 % of GDP versus 0.31 to 1.50 % with only domestic action.
Excessive profits. However, many CDM projects have led to excessive profits. In early 2007 a study found that the main type of CDM projects paid as much as 50 times more for the emission reductions than the costs alone would warrant, with the excessive profits ending up with the factories and the carbon traders.
The particular CDM projects in question involved refrigerant-producing factories in developing countries that generated the powerful greenhouse gas HFC 23 as a by-product. By destroying the HFCs, the factories earn CER credits worth €4.6 billion. But a simple and relatively cheap piece of equipment (a scrubber) would cost only €100 million to destroy HFC 23. While the CER credits are cheaper than the typical cost of reducing emissions in industrialized countries this anomaly is seen as a major loophole in the carbon trading system. The HFC 23 emitters can earn almost twice as much from the CDM credits as they can from selling refrigerant gases. The UN claims this loophole is now closed.
Environmental concerns with CDM. There are also environmental concerns. As CDM is an alternative to domestic emission reductions, the perfectly working CDM would produce no more and no less greenhouse gas emission reductions than without the CDM. But if projects that would have happened anyway are registered as CDM projects, the use of CDM will result in higher total emissions, as the spurious credits will be used to allow higher domestic emissions while not delivering lower emissions in the developing country hosting the CDM project. Similarly, spurious credits may be awarded through overstated baselines. CDM Watch argues that a majority of the CDM projects up to 2005 would have happened anyway.
NGOs have also criticized the inclusion of unsustainable hydropower projects, of sinks and the exclusion of renewable energy projects as CDM projects.
Getting developing countries involved in carbon trading. Within CDM the United Nations Development Program (UNDP) have recently announced the MGD Carbon Facility to help developing countries conceive projects intended to reduce emissions of greenhouse gases. The idea is to get developing countries to the point of being able to operate in international carbon markets. The insurance giant Fortis will purchase, and sell-on, the emissions-reduction credits generated by projects and use the proceeds to finance investment and to promote development.
The MDG Carbon Facility will operate within the framework of the CDM and Joint Implementation, the market-based mechanisms under the Kyoto Protocol that allow developed countries to meet their compliance targets by financing projects in developing countries that contribute to reducing greenhouse-gas emissions.
The CDM has been at the center of a rapidly expanding, billion-dollar international market for carbon credits. However, early signs indicate that the CDM is unlikely to deliver the broad-based benefits that many hoped it would, at least in the near to medium term. CDM projects have so far been limited in geographic reach, and focused primarily on 'end-of-pipe' technologies that generate limited benefit for long-term sustainable development.
By expanding the CDM's presence into countries and regions previously considered inaccessible to carbon finance, the MDG Carbon Facility will help people in these areas acquire the resources and knowledge to take greater control over their future environment and development paths.
Once a developing country gains proficiency in carbon finance, in attracting private-sector investment and in developing project technologies that deliver longer-term development benefits, the MDG Carbon Facility will exit that market. It will have accomplished its market transformation objectives and no longer needing to play its role as a bridge between developing countries and the global carbon market.
Thursday, June 14, 2007
Blair on motives & the media
British PM Tony Blair gives all sections of the media - including the blogosphere - a carefully directed spray. He accuses the media of behaving like a 'feral beast' that 'tears people and reputations to bits'. He is concerned with the emphasis on analysing motives (a theme I have also recently emphasised) and in critiquing policies at the expense of explaining what the policies are.
The media (including the blogosphere) spend far too much time thinking about the motives for policies and critiquing policies and far too little time thinking about what the implications of policy will be. Newspapers, for example, become 'viewspapers' as news gets usurped by (often) uninformed commentary.
Blair:
' Tell me how many maiden speeches are listened to; how many excellent second-reading speeches or committee speeches are covered. Except when they generate major controversy, they aren’t . If you are a backbench MP today, you learn to give a press release first and a good Parliamentary speech second'
'...as a result of the changing context in which 21st-century communications operates, the media are facing a hugely more intense form of competition .... They are not the masters of this change but its victims. The result is a media that increasingly and to a dangerous degree is driven by “impact”. Impact is what matters. It is all that can distinguish, can rise above the clamour, can get noticed. Impact gives competitive edge. Of course the accuracy of a story counts. But it is secondary to impact. It is this necessary devotion to impact that is unravelling standards, driving them down, making the diversity of the media not the strength it should be but an impulsion towards sensation above all else'. (my bold)
'....scandal or controversy beats ordinary reporting hands down. News is rarely news unless it generates heat as much as or more than light. Second, attacking motive is far more potent than attacking judgement. It is not enough for someone to make an error. It has to be venal. Conspiratorial'. (my bold)
'... there will often be as much interpretation of what a politician is saying as there is coverage of them actually saying it. In the interpretation, what matters is not what they mean; but what they could be taken to mean. This leads to the incredibly frustrating pastime of expending a large amount of energy rebutting claims about the significance of things said, that bears little or no relation to what was intended'. (my bold)
'...it is rare today to find balance in the media. Things, people, issues, stories, are all black and white. Life’s usual grey is almost entirely absent. “Some good, some bad”; “some things going right, some going wrong” – these are concepts alien to today’s reporting. It’s a triumph or a disaster. A problem is “a crisis”. A setback is a policy “in tatters”. A criticism, “a savage attack”'.
These are fair comments from an experienced politician.
The media (including the blogosphere) spend far too much time thinking about the motives for policies and critiquing policies and far too little time thinking about what the implications of policy will be. Newspapers, for example, become 'viewspapers' as news gets usurped by (often) uninformed commentary.
Blair:
' Tell me how many maiden speeches are listened to; how many excellent second-reading speeches or committee speeches are covered. Except when they generate major controversy, they aren’t . If you are a backbench MP today, you learn to give a press release first and a good Parliamentary speech second'
'...as a result of the changing context in which 21st-century communications operates, the media are facing a hugely more intense form of competition .... They are not the masters of this change but its victims. The result is a media that increasingly and to a dangerous degree is driven by “impact”. Impact is what matters. It is all that can distinguish, can rise above the clamour, can get noticed. Impact gives competitive edge. Of course the accuracy of a story counts. But it is secondary to impact. It is this necessary devotion to impact that is unravelling standards, driving them down, making the diversity of the media not the strength it should be but an impulsion towards sensation above all else'. (my bold)
'....scandal or controversy beats ordinary reporting hands down. News is rarely news unless it generates heat as much as or more than light. Second, attacking motive is far more potent than attacking judgement. It is not enough for someone to make an error. It has to be venal. Conspiratorial'. (my bold)
'... there will often be as much interpretation of what a politician is saying as there is coverage of them actually saying it. In the interpretation, what matters is not what they mean; but what they could be taken to mean. This leads to the incredibly frustrating pastime of expending a large amount of energy rebutting claims about the significance of things said, that bears little or no relation to what was intended'. (my bold)
'...it is rare today to find balance in the media. Things, people, issues, stories, are all black and white. Life’s usual grey is almost entirely absent. “Some good, some bad”; “some things going right, some going wrong” – these are concepts alien to today’s reporting. It’s a triumph or a disaster. A problem is “a crisis”. A setback is a policy “in tatters”. A criticism, “a savage attack”'.
These are fair comments from an experienced politician.
Getting wealthy countries to pay for Chinese carbon cutbacks
China will shortly become the largest carbon emitter on earth. It is difficult to understand how global emission targets can be met without involving China - and for that matter the grubby developing countries Indonesia and India. Currently China as a signatory to the Kyoto Protocol is not obliged to adopt carbon targets until after 2012.
The G8 countries last week supported a new global framework to reduce carbon emissions but the difficulty is to get China involved. The core issue is to attract the massive capital resource flow to China that will achieve this outcome.
Michael Molitor (AFR 13/6/07, subscription only) argues that we should rethink the idea of trying to persuade China to cap their carbon emissions. Their recent statement on climate change makes it clear they are not yet prepared to have a cap and they want much higher levels of energy consumption. Moreover, a cap in itself will not encourage an investmjent program to cut Chinese emissions when China is growing rapidly and has many competing demands on its scarce capital resources.
An alternative approach to efficiently reduce emissions is to put really stringent caps on OECD carbon emissions but to allow OECD-based firms to buy carbon credits from carbon abatement programs anywhere – and, in particular, in China – where incredibly inefficient electricity generation technologies provide the greatest pool of carbon abatement opportunities on earth and, indeed, the greatest investment opportunity of the 21st century.
The global carbon market rather than a cap would then drive dramatic and easy-to-achieve carbon reductions in China. If you wanted to give this program a kick start then a deal with the Chinese might be attempted which gave preferential investment status for foreign investment in return for a delay in the introduction of a cap from 2013 to 2018.
I’ve got to say that Molitor’s proposal has a an attractive sound to it. Perhaps it is more attractive than my earlier suggestion to force China to comply with a cap by levying savage export taxes on Chinese goods to compensate for the unpaid carbon costs the Chinese economy is imposing on the globe. The Molitor proposal relies on developed countries investing in carbon reductions where these can be most readily and cheaply delivered. I will think about it further – and welcome commentary and feedback.
My major concerns with this proposal are the incentive effects that might arise for the Chinese to create very high-carbon emitting technology to secure developed country investment. The basic arithmetic of the proposals also seems suspect - presumably the caps on developed country emissions would need to be very substantial. But it is an interesting suggestion that serves investigation.
The G8 countries last week supported a new global framework to reduce carbon emissions but the difficulty is to get China involved. The core issue is to attract the massive capital resource flow to China that will achieve this outcome.
Michael Molitor (AFR 13/6/07, subscription only) argues that we should rethink the idea of trying to persuade China to cap their carbon emissions. Their recent statement on climate change makes it clear they are not yet prepared to have a cap and they want much higher levels of energy consumption. Moreover, a cap in itself will not encourage an investmjent program to cut Chinese emissions when China is growing rapidly and has many competing demands on its scarce capital resources.
An alternative approach to efficiently reduce emissions is to put really stringent caps on OECD carbon emissions but to allow OECD-based firms to buy carbon credits from carbon abatement programs anywhere – and, in particular, in China – where incredibly inefficient electricity generation technologies provide the greatest pool of carbon abatement opportunities on earth and, indeed, the greatest investment opportunity of the 21st century.
The global carbon market rather than a cap would then drive dramatic and easy-to-achieve carbon reductions in China. If you wanted to give this program a kick start then a deal with the Chinese might be attempted which gave preferential investment status for foreign investment in return for a delay in the introduction of a cap from 2013 to 2018.
I’ve got to say that Molitor’s proposal has a an attractive sound to it. Perhaps it is more attractive than my earlier suggestion to force China to comply with a cap by levying savage export taxes on Chinese goods to compensate for the unpaid carbon costs the Chinese economy is imposing on the globe. The Molitor proposal relies on developed countries investing in carbon reductions where these can be most readily and cheaply delivered. I will think about it further – and welcome commentary and feedback.
My major concerns with this proposal are the incentive effects that might arise for the Chinese to create very high-carbon emitting technology to secure developed country investment. The basic arithmetic of the proposals also seems suspect - presumably the caps on developed country emissions would need to be very substantial. But it is an interesting suggestion that serves investigation.
Wednesday, June 13, 2007
What I have been reading
Books on water, tobacco and the acid-rock musical era.
I was informed by and enjoyed Fred Pearce’s When the Rivers Run Dry, Transworld, 2006 which dealt with global water problems briefly and concisely but which provided a good sense of perspective. Excellent value. Traversing all continents it highlights the monumentally huge water resource problems in India, Pakistan, various African countries, the Middle East, Europe, South America, Australia and China and the relation of these problems to groundwater mismanagement, building dams and of course irrigation schemes. Issues of flooding, water shortages, catastrophic problems of groundwater abuse and contamination gave me perspective on the problems of the Murray-Darling. For all our sins, Australia’s problems are negligible compared to those of the developing world. As I have suggested before Australia may derive economic advantage from the water-driven misery of other countries.
I also thoroughly enjoyed Iain Gately’s Tobacco: A Cultural History of How an Exotic Plant Seduced Civilization, Grove Press 2001. He writes in a humorous, incisive way and I kept reaching for my pen to mark down points that I will use in my academic research into the evil weed. He starts 18,000 years ago – 500 years ago if you refer to puffing on the stuff but the real punch lines for me were Gately’s later chapters where he describes the development of automatic cigarette machines in the 1880s coupled with vast levels of marketing expenditure. Cigarettes really took off around the turn of the century when the great surge in lung cancer deaths began. The responses of the cigarette companies in the 1950s to the emerging horror is frightening. The demand for evidence of a causal mechanism explaining cancers when US deaths per thousand increased 9-fold in about 20 years reminds me of similar claims by the global warming denialists. But this is an interlude of morbid drama in what is overall a great read. Gately adores smoking but recognizes that it kills you.
I struggled through Dennis McNally’s A Long Strange Trip, Corgi 2003 which dealt with the history of one of the beloved rock groups of my adolescence, The Grateful Dead. The book was just too long and hagiographic for my tastes. I kept at it because of the interesting intersections which other acid-rock bands of the late 1960s such as Quicksilver Messenger Service, Jefferson Airplane, Country Joe and the Fish and the country-oriented New Riders of the Purple Sage. The Allman Brothers, the Band, Joan Baez, Crosby Stills, Nash and Young, Bob Dylan, The Fugs, Santana, Rolling Stones and Frank Zappa all fitted in at various times as well as non-musical components such as Ken Kesey’s Merry Pranksters (including for a time Neal Cassidy), Baba Ram Dass, Owsley-Stanley III and Timothy Leary. If you don’t recognize these names you won’t want to read this book and even if you do recognize them you may not. The book is mainly focused on Jerry Garcia who could be a monumentally talented guitarist. Objectively speaking the book is a testimony to the destructive powers of dope and booze. Jerry Garcia ended up a very sick, overweight man who squandered his talents on heroin and cocaine. Many others from the musical scene in this era just died from overdoses, liver diseases and drug-related accidents.
I was informed by and enjoyed Fred Pearce’s When the Rivers Run Dry, Transworld, 2006 which dealt with global water problems briefly and concisely but which provided a good sense of perspective. Excellent value. Traversing all continents it highlights the monumentally huge water resource problems in India, Pakistan, various African countries, the Middle East, Europe, South America, Australia and China and the relation of these problems to groundwater mismanagement, building dams and of course irrigation schemes. Issues of flooding, water shortages, catastrophic problems of groundwater abuse and contamination gave me perspective on the problems of the Murray-Darling. For all our sins, Australia’s problems are negligible compared to those of the developing world. As I have suggested before Australia may derive economic advantage from the water-driven misery of other countries.
I also thoroughly enjoyed Iain Gately’s Tobacco: A Cultural History of How an Exotic Plant Seduced Civilization, Grove Press 2001. He writes in a humorous, incisive way and I kept reaching for my pen to mark down points that I will use in my academic research into the evil weed. He starts 18,000 years ago – 500 years ago if you refer to puffing on the stuff but the real punch lines for me were Gately’s later chapters where he describes the development of automatic cigarette machines in the 1880s coupled with vast levels of marketing expenditure. Cigarettes really took off around the turn of the century when the great surge in lung cancer deaths began. The responses of the cigarette companies in the 1950s to the emerging horror is frightening. The demand for evidence of a causal mechanism explaining cancers when US deaths per thousand increased 9-fold in about 20 years reminds me of similar claims by the global warming denialists. But this is an interlude of morbid drama in what is overall a great read. Gately adores smoking but recognizes that it kills you.
I struggled through Dennis McNally’s A Long Strange Trip, Corgi 2003 which dealt with the history of one of the beloved rock groups of my adolescence, The Grateful Dead. The book was just too long and hagiographic for my tastes. I kept at it because of the interesting intersections which other acid-rock bands of the late 1960s such as Quicksilver Messenger Service, Jefferson Airplane, Country Joe and the Fish and the country-oriented New Riders of the Purple Sage. The Allman Brothers, the Band, Joan Baez, Crosby Stills, Nash and Young, Bob Dylan, The Fugs, Santana, Rolling Stones and Frank Zappa all fitted in at various times as well as non-musical components such as Ken Kesey’s Merry Pranksters (including for a time Neal Cassidy), Baba Ram Dass, Owsley-Stanley III and Timothy Leary. If you don’t recognize these names you won’t want to read this book and even if you do recognize them you may not. The book is mainly focused on Jerry Garcia who could be a monumentally talented guitarist. Objectively speaking the book is a testimony to the destructive powers of dope and booze. Jerry Garcia ended up a very sick, overweight man who squandered his talents on heroin and cocaine. Many others from the musical scene in this era just died from overdoses, liver diseases and drug-related accidents.
Tuesday, June 12, 2007
Motives and public policy views
The question I posed to this week’s Blogocracy-organised group blog (Joshua Gans, Tim Dunlop, Ken Parish, Kim, Robert Merkel Andrew Bartlett and Tigtog) was:
But elsewhere, for example, if you are offering a desired political policy, they are unimportant. If you are going to evaluate policies sensibly you should ignore motives and concentrate on the consequences of policies. Indeed to do other than this is to commit a ‘Motives Fallacy’.
Logicians identify the 'Motives Fallacy’ as the belief that exposing the motives behind an expressed opinion shows that the opinion is false. This is a fallacy since it appeals to ulterior (extralogical motives) rather than the truth of the issue at hand.
The problem with falling prey to this fallacy in a political debate is that attention is turned away from the analysis of policy consequences. Policies just become part of a political game that seeks to establish who might win or lose. The specific effects of policies remain unanalyzed by the person who says 'X is only just saying that because of Y' where Y has nothing to do with the effects of the policy.
Excellent discussions of this (and other) fallacies is here and the Jamie Whyte book.
In Australian political debates motive fallacies are so repeatedly and commonly used – particularly, but not exclusively*, by the political left - that serious discussion is almost nonexistent. John Howard supports WorkChoices not to improve the efficiency of labour markets but because he is opposed to trade unions. John Howard supports the war in Iraq not as a defense against the expansion of terrorism but because he wants to win favor with the Americans, because he hates Arabs. Ayaan Hirsan Ali sees Islam as oppressive towards women because she had her genitals cut out with a pair of scissors.
Other favourites of mine include claiming that teachers are lying about workloads because they just want lighter teaching loads or that university academics are lying about university salaries being uncompetitive because they want more money.
To be clear the asserted motives might be correct here – John Howard may hate trade unions and have developed WorkChoices to attack them but this has zero to do with rejecting the claim that WorkChoices may improve labour market efficiency. Similarlly AHA might be making sound judgments about Islam irrespective of her history. Maybe teachers are overworked and universities are not recruiting the best staff they can.
Arnold Kling points out that even respected economists such as Paul Krugman and Brad de Long are often in the grips of a motive fallacy.
Motives are often attributed to people because we are too lazy or too time-constrained to explore the implications of an argument. They can also be used to reflect our attitudes to an opinion or viewpoint that someone expresses. But this has naught to do with expressing judgments on the value of political positions adopted.
In my view we should try to get rid of motive-based arguments in our own thinking and to try to recognize – and criticize – this type of flawed argument when it arises in the media and in blog discussions. It will be a long process in bringing about this type of cultural change and I am not exclusively pointing the finger here.
In short, we should try to reason logically.
Anyway I will respond in turn to the various arguments by my co-bloggers.
Joshua Gans’ response to the question seems to me to ignore the point. He is concerned with whether or not you can identify the motives which from the perspective of policy evaluation is irrelevant. The argument itself still needs to be considered regardless of the motives for advancing it. Joshua consider’s Telstra’s claim:
In all cases Joshua is committing a motives fallacy by supposing you infer something about the truth of Telstra’s claims by positing motives for them.
Joshua refers to the case of a courtroom but here establishing motives is important for establishing culpability because claims concern issues of fact that a juror cannot often make a direct determination on. This has nothing to do however with making a case for or against some public policy proposal on the basis on the motives of the politician or commentator.
I’ll comment on other responses to my question as they come in and possibly revise my appraisal of Joshua's views if he makes an indignant, convincing response.
Robert Merkel responds with a fair amount of sympathy for my position. He also recognises, as I do, that we attribute motives as a shortcut in dealing with arguments. This won’t however - I would emmphasise - invariably lead to sound judgments.
It seems to me that backing expert judgment is a sensible approach that involves no motives issues. If you want to form a reasoned view on climate change and don’t have background expertise to evaluate a proposition then listen to the consensus view of knowledgeable climate scientists. That is more-or-less what I do.
On the other points that Robert suggests that motives-related heuristics can be justified I disagree. Repeating something often enough does not make it true and motives need not determine how policy will be modified given exogenous shocks.
Finally Robert (like Joshua) makes a case for using motives to assess an argument when there is imperfect information. Well that is true if you cannot make a judgement about the situation yourself – the case where expertise comes in or in a testimony in a criminal trial. I agree with this.
Tim Dunlop. I agree with some of Tim’s remarks but not the main thrust which as with Joshua I think constitute another motives fallacy.
Tim agrees with me that motives are important in assessing court evidence. But he questions my view that motives are irrelevant in assessing political debates. He argues that motives are relevant in assessing the believability of a person making a claim and that is what is important ‘what we are assessing is not the outcome of the policy, but the believability of the person making the claim’.
But his argument here reverts to the case for believing evidence at a trial. He claims it might be very difficult to assess arguments, such as the case for WorkChoices that I mention, so it is important to assess the believability of the claims which depend on motives.
If motives are driven by considerations other than the argument then it is reasonable to assume that the case he is putting forward is being influenced by those motives. His view might wrongly reflect these motives so it is reasonable to take them into account.
But again now Tim reverts to making a motives fallacy. He is forced now to assess the status of the motives (whether or not they enhance believability) which the ‘motives fallacy’ makes clear are completely irrelevant if you are in a situation where you can think through the implications of a policy proposal. If you cannot think through these implications then you are back in the courtroom situation.
You cannot dismiss an argument on the grounds that a person has low credibility. You can say you don’t have time to go into it or that their track record might be poor but not that the argument is unsound. You need to put in some work to reach the latter conclusion.
It strikes me that all sides of politics commit these fallacies so that, for example, much blog discussion is people shouting past each other and not even trying to hear. How many times have I heard advanced the proposition that John Howard or George Bush have proven themselves to be a total liar and that therefore their policy prescription on X (X= global warming, immigration, labour market reform, Iraq policy etc etc) is wrong. Normally I do not agree with the ‘liar’ description but defending these individuals on that basis is to commit a motives fallacy myself that parallels that of the lazy critics. The best defense is to try to force these critics to come to grips with the specific proposal and to examine and critique it. That is what political discussion should be about.
Relying on motive fallacies produces weird conclusions. Mr Rudd and the Labor Party recently condemned the Coalitions ‘cap and trade’ policy for addressing global warming on the grounds that the policy was purely poll-driven. This is a pure motives fallacy since the proposal might have been a good one even if these motives were accurate. You need to think about the effects of the policy and whether a carbon tax would work better, whether agriculture and waste generation should have been included and so on. This type of analysis gives the proposal fair treatment and helps develop better policy.
The other discussants are Robert Merkel, Kim Jameson, Ken Parish, Tim Dunlop, Joshua Gans, Andrew Bartlett and Tigtog. My response to their points is over the fold.
How relevant are motives in assessing the public policy stance of a politician or commentator?I had early posted on this topic here. To summarize my tentative conclusions I argued that if someone was asserting a statement of fact that the observer cannot evaluate ('I wasn’t there at the time', 'I didn’t steal the potato chips') then motives are important. This is obviously the case in a court of law where the culpability of a defendant is asserted.
But elsewhere, for example, if you are offering a desired political policy, they are unimportant. If you are going to evaluate policies sensibly you should ignore motives and concentrate on the consequences of policies. Indeed to do other than this is to commit a ‘Motives Fallacy’.
Logicians identify the 'Motives Fallacy’ as the belief that exposing the motives behind an expressed opinion shows that the opinion is false. This is a fallacy since it appeals to ulterior (extralogical motives) rather than the truth of the issue at hand.
The problem with falling prey to this fallacy in a political debate is that attention is turned away from the analysis of policy consequences. Policies just become part of a political game that seeks to establish who might win or lose. The specific effects of policies remain unanalyzed by the person who says 'X is only just saying that because of Y' where Y has nothing to do with the effects of the policy.
Excellent discussions of this (and other) fallacies is here and the Jamie Whyte book.
In Australian political debates motive fallacies are so repeatedly and commonly used – particularly, but not exclusively*, by the political left - that serious discussion is almost nonexistent. John Howard supports WorkChoices not to improve the efficiency of labour markets but because he is opposed to trade unions. John Howard supports the war in Iraq not as a defense against the expansion of terrorism but because he wants to win favor with the Americans, because he hates Arabs. Ayaan Hirsan Ali sees Islam as oppressive towards women because she had her genitals cut out with a pair of scissors.
Other favourites of mine include claiming that teachers are lying about workloads because they just want lighter teaching loads or that university academics are lying about university salaries being uncompetitive because they want more money.
To be clear the asserted motives might be correct here – John Howard may hate trade unions and have developed WorkChoices to attack them but this has zero to do with rejecting the claim that WorkChoices may improve labour market efficiency. Similarlly AHA might be making sound judgments about Islam irrespective of her history. Maybe teachers are overworked and universities are not recruiting the best staff they can.
Arnold Kling points out that even respected economists such as Paul Krugman and Brad de Long are often in the grips of a motive fallacy.
Motives are often attributed to people because we are too lazy or too time-constrained to explore the implications of an argument. They can also be used to reflect our attitudes to an opinion or viewpoint that someone expresses. But this has naught to do with expressing judgments on the value of political positions adopted.
In my view we should try to get rid of motive-based arguments in our own thinking and to try to recognize – and criticize – this type of flawed argument when it arises in the media and in blog discussions. It will be a long process in bringing about this type of cultural change and I am not exclusively pointing the finger here.
In short, we should try to reason logically.
Anyway I will respond in turn to the various arguments by my co-bloggers.
Joshua Gans’ response to the question seems to me to ignore the point. He is concerned with whether or not you can identify the motives which from the perspective of policy evaluation is irrelevant. The argument itself still needs to be considered regardless of the motives for advancing it. Joshua consider’s Telstra’s claim:
that there is insufficient return to investing in fibre to the node infrastructure and that they will only do it with a subsidy or protection of competition.Since they have a stated interest in taking care of their clients one might be sceptical as Joshua suggests but you cannot disprove their claim on the basis of motives. Nor does it matter if Telstra is stating something that ran against its interests or whether Telstra was operating under the constraint that it could not directly lie. The Milgrom-Roberts piece on truth-telling he refers to assumes that people will lie if it is in their self-interest to do so. But that is not correct. Claims regarding the case for revisions of media ownership laws might be correct even if made by proprietors and sound environmental claims might be made by poor as well as wealthy environmental ministers.
In all cases Joshua is committing a motives fallacy by supposing you infer something about the truth of Telstra’s claims by positing motives for them.
Joshua refers to the case of a courtroom but here establishing motives is important for establishing culpability because claims concern issues of fact that a juror cannot often make a direct determination on. This has nothing to do however with making a case for or against some public policy proposal on the basis on the motives of the politician or commentator.
I’ll comment on other responses to my question as they come in and possibly revise my appraisal of Joshua's views if he makes an indignant, convincing response.
Robert Merkel responds with a fair amount of sympathy for my position. He also recognises, as I do, that we attribute motives as a shortcut in dealing with arguments. This won’t however - I would emmphasise - invariably lead to sound judgments.
It seems to me that backing expert judgment is a sensible approach that involves no motives issues. If you want to form a reasoned view on climate change and don’t have background expertise to evaluate a proposition then listen to the consensus view of knowledgeable climate scientists. That is more-or-less what I do.
On the other points that Robert suggests that motives-related heuristics can be justified I disagree. Repeating something often enough does not make it true and motives need not determine how policy will be modified given exogenous shocks.
Finally Robert (like Joshua) makes a case for using motives to assess an argument when there is imperfect information. Well that is true if you cannot make a judgement about the situation yourself – the case where expertise comes in or in a testimony in a criminal trial. I agree with this.
Tim Dunlop. I agree with some of Tim’s remarks but not the main thrust which as with Joshua I think constitute another motives fallacy.
Tim agrees with me that motives are important in assessing court evidence. But he questions my view that motives are irrelevant in assessing political debates. He argues that motives are relevant in assessing the believability of a person making a claim and that is what is important ‘what we are assessing is not the outcome of the policy, but the believability of the person making the claim’.
But his argument here reverts to the case for believing evidence at a trial. He claims it might be very difficult to assess arguments, such as the case for WorkChoices that I mention, so it is important to assess the believability of the claims which depend on motives.
If motives are driven by considerations other than the argument then it is reasonable to assume that the case he is putting forward is being influenced by those motives. His view might wrongly reflect these motives so it is reasonable to take them into account.
But again now Tim reverts to making a motives fallacy. He is forced now to assess the status of the motives (whether or not they enhance believability) which the ‘motives fallacy’ makes clear are completely irrelevant if you are in a situation where you can think through the implications of a policy proposal. If you cannot think through these implications then you are back in the courtroom situation.
You cannot dismiss an argument on the grounds that a person has low credibility. You can say you don’t have time to go into it or that their track record might be poor but not that the argument is unsound. You need to put in some work to reach the latter conclusion.
It strikes me that all sides of politics commit these fallacies so that, for example, much blog discussion is people shouting past each other and not even trying to hear. How many times have I heard advanced the proposition that John Howard or George Bush have proven themselves to be a total liar and that therefore their policy prescription on X (X= global warming, immigration, labour market reform, Iraq policy etc etc) is wrong. Normally I do not agree with the ‘liar’ description but defending these individuals on that basis is to commit a motives fallacy myself that parallels that of the lazy critics. The best defense is to try to force these critics to come to grips with the specific proposal and to examine and critique it. That is what political discussion should be about.
Relying on motive fallacies produces weird conclusions. Mr Rudd and the Labor Party recently condemned the Coalitions ‘cap and trade’ policy for addressing global warming on the grounds that the policy was purely poll-driven. This is a pure motives fallacy since the proposal might have been a good one even if these motives were accurate. You need to think about the effects of the policy and whether a carbon tax would work better, whether agriculture and waste generation should have been included and so on. This type of analysis gives the proposal fair treatment and helps develop better policy.
Kim Jameson, Correctly identifies attempts to avoid the motives fallacy as an attempt to make political debate rational. Her view is that rhetoric and appeals to emotion are just as important as logic. Kim disagrees with the proposition that political debate should be primarily on the merits of policy when in fact we vote for packages of policies identified as ‘left’ or ‘right’, for example, so that ‘general orientation’ is as important as specific policies. If you agree with this approach to politics then Kim is right. You should consider the general motives of politicians not the specific policies they espouse.
I don’t agree with this view and don’t think it gets you far in analysing political issues. It was the Labor Party that introduced enterprise bargaining and cut tariffs not the Liberals. The Liberal Party conversely has proven itself to be a high immigration, big spending government of the type Labor might have been expected to be. You need to look at specific policies and analyse their consequences – ‘general orientation’ gets you nowhere.
Andrew Bartlett is a Senator in the Parliament so I was very interested in his views. Andrew agrees with other commentators that we assign motives as a shortcut to assessing policies and notes this says nothing about the accuracy of claims. He tries to consider arguments on their merits but does consider motives particularly if a proposer has a bad track record of propounding poor arguments. He claims that motives give a guide as to whether a politician will keep promises when implementing policy.
Ken Parish. I disagree with Ken's views - my reasons are at his blogsite. These views are the reason I posed this question. Like many on the left Ken seems to be prepared to reject policy views entirely if they come from politicians who have what are, in his view, poor motivation. It puts the emphasis on the reasons behind a proposal rather than the proposal itself. My blog posting on Tony Blair's comments on the media here shows these attitudes to be among Blair's concerns as well. It seems to me this approach almost guarantees poor public policy outcomes for the reasons Blair discusses.
Tigtog. This came in late and I was running out of steam. Its similart to Ken Parish's views but has greater support for my position that what matters are the consequences of policies not their motivational rationale. To Tigtog however motivation is however important for judging 'trustworthiness'. Of course as I argued above - at length - my view is that trustworthiness, deceit, honor, honesty, union-hating, jew-hating, believing in Santa Claus motivations have bugger-all to do with assessing whether a policy is good policy.
(*) Using the terms ‘left-wing’ and ‘right-wing’ can support motives fallacies. Of course while we should be aware of fallacies when people are arguing with us we should also watch out for our own fallacies.
The other discussants are Robert Merkel, Kim Jameson, Ken Parish, Tim Dunlop, Joshua Gans, Andrew Bartlett and Tigtog. My response to their points is over the fold.
Outsourcing torture
Last night Four Corners continued its two-part series into the case for officially-sanctioned torture. My review of the first part was here. The second part is entitled Ghost Prisoners. It deals with the outsourcing of torture. This show is less concerned with the theory and with more of the practical implications of torture. Its findings confirm my initial impressions that torture is almost never a reasonable way of dealing with a terrorist suspect.
Routinely, under its so-called Rendition Program. the CIA fly terrorists, low level militants and innocents to Egypt and even to Islamic countries like Syria (yes!), Jordon, Morocco, Saudi Arabia – the prisoners are ‘rendered’ – they are dealt with effectively by people ‘with similar cultures’. In practice this means they are brutally tortured.
In countries such as Egypt torture is routine for almost any police suspects.
Much of this episode is taken up with the case of the Australian, Mandouh Habib who was taken to Egypt for 6 months. Habib had connections with terrorists and was in some respects a creepy, violent man with links to Islamic fanatics. He had traveled to Pakistan and Afghanistan he claims to escape death threats at home. In Kabul he coincidentally (perhaps) stayed in the same guesthouse as David Hicks.
Captured in Afghanistan and shipped to Pakistan he was then airlifted to Cairo where he he seems to have been subject to terrible torture - hideous – humiliation, solitary confinement and severe physical abuse. Eventually he admitted everything although it subsequently turned out to be lies. He was then shipped to Guantanamo Bay and eventually released – Four Corners claimed to avoid investigation into the procedures governing his rendition.
Almost certainly the Australian Government knew of his rendition. It would be natural for them to know given that the US is a close ally. Documentary proof seems to confirm this.
Under international law the torture of prisoners is illegal. The US, and other governments, may be able to claim that while they sent prisoners to other countries that they did not know they were being tortured. This would be a certain lie but might be enough to avoid hefty compensation payments.
But the torture of many of these men is probably immoral and again, as the first Four Corners showed, almost completely ineffective. Habib once he had been tortured long enough confessed to anything – but it was uninformative garbage as his eventual release demonstrates. I cannot agree that these practices help fight the international war on terrorism.
Australia cannot reasonably agree or be complicit in the outsourcing of torture if it at the same time condemns countries, like Egypt, for its human rights abuses. We should not mimic or utilize the barbarousc criminal justice practices of these uncivilized regimes.
Routinely, under its so-called Rendition Program. the CIA fly terrorists, low level militants and innocents to Egypt and even to Islamic countries like Syria (yes!), Jordon, Morocco, Saudi Arabia – the prisoners are ‘rendered’ – they are dealt with effectively by people ‘with similar cultures’. In practice this means they are brutally tortured.
In countries such as Egypt torture is routine for almost any police suspects.
Much of this episode is taken up with the case of the Australian, Mandouh Habib who was taken to Egypt for 6 months. Habib had connections with terrorists and was in some respects a creepy, violent man with links to Islamic fanatics. He had traveled to Pakistan and Afghanistan he claims to escape death threats at home. In Kabul he coincidentally (perhaps) stayed in the same guesthouse as David Hicks.
Captured in Afghanistan and shipped to Pakistan he was then airlifted to Cairo where he he seems to have been subject to terrible torture - hideous – humiliation, solitary confinement and severe physical abuse. Eventually he admitted everything although it subsequently turned out to be lies. He was then shipped to Guantanamo Bay and eventually released – Four Corners claimed to avoid investigation into the procedures governing his rendition.
Almost certainly the Australian Government knew of his rendition. It would be natural for them to know given that the US is a close ally. Documentary proof seems to confirm this.
Under international law the torture of prisoners is illegal. The US, and other governments, may be able to claim that while they sent prisoners to other countries that they did not know they were being tortured. This would be a certain lie but might be enough to avoid hefty compensation payments.
But the torture of many of these men is probably immoral and again, as the first Four Corners showed, almost completely ineffective. Habib once he had been tortured long enough confessed to anything – but it was uninformative garbage as his eventual release demonstrates. I cannot agree that these practices help fight the international war on terrorism.
Australia cannot reasonably agree or be complicit in the outsourcing of torture if it at the same time condemns countries, like Egypt, for its human rights abuses. We should not mimic or utilize the barbarousc criminal justice practices of these uncivilized regimes.
Monday, June 11, 2007
Happy birthday Her Majesty Queen Elizabeth II
Loyal subjects of Her Majesty Queen Elizabeth II today celebrate across the Commonwealth our beloved monarch’s birthday on 21st April 1926. Long may you reign over us! HM is 81 years old today and still alive though recovering in hospital after a Papal head-butt.
The Queen’s birthday has brought drought relief to southern Australia – you can turn it off now Liz, at least around Newcastle – and a much appreciated long-weekend for her grateful, ever-abased, peasant folk down south.
Australia Zoo is holding a uniquely Australian celebration of dubious propriety. If you can stay in a Queen-sized bed at the Zoo with one of their pythons (to be specific, not HM!) you go into a draw to win the bed. No you do not also get a date with HM.
And I thought my Bindi joke was of questionable taste.
The Queen’s birthday has brought drought relief to southern Australia – you can turn it off now Liz, at least around Newcastle – and a much appreciated long-weekend for her grateful, ever-abased, peasant folk down south.
Australia Zoo is holding a uniquely Australian celebration of dubious propriety. If you can stay in a Queen-sized bed at the Zoo with one of their pythons (to be specific, not HM!) you go into a draw to win the bed. No you do not also get a date with HM.
And I thought my Bindi joke was of questionable taste.
Sunday, June 10, 2007
Living it up in a torture cell with Paris Hilton
Cry-baby Paris Hilton is back in jail. We can all feel relieved that this talentless, brainless, moderately attractive celebrity* – is demonstrating the sought-after impartiality of the US criminal justice system**. Her time in the clink-cum-holiday farm is probably the most productive contribution she has made to society in her otherwise worthless, wasted life. She justifies all the derision we can muster. Doesn’t she? Well, doesn’t she?
Waleed Aly makes some astute observations about Paris and the sanctimonious contempt that most of us feel towards her. Even as critics we continue to consume her and, in so doing, validate our own superior tastes – we have indeed become her clients.
That Paris was originally sent to jail for ‘days’ on a drink-driving charge has almost no significance to any of us yet reading about it fascinates us and has driven the press in Australia for a week. Paris may be a nonentity but she is famous because she is famous, a celebrity because she is a celebrity, a celebrity nitwit because she is a rich nitwit.
We love the fact that someone/some institution has finally said no to this flashy tart with the big bank balance.
Aly concludes:
The lino didn't match her eyes and the curtains came from Wal-mart. The pharmaceuticals don’t keep you thin and the, and the…
We shall overcome Paris!
* She has that bare-minimum common set of components that puts her on common ground with half the humans on the planet.
** At year end 2005 there were 3,145 black male sentenced prison inmates per 100,000 black males in the US, compared to 1,244 Hispanic male inmates per 100,000 Hispanic males and 471 white male inmates per 100,000 white males.
Waleed Aly makes some astute observations about Paris and the sanctimonious contempt that most of us feel towards her. Even as critics we continue to consume her and, in so doing, validate our own superior tastes – we have indeed become her clients.
That Paris was originally sent to jail for ‘days’ on a drink-driving charge has almost no significance to any of us yet reading about it fascinates us and has driven the press in Australia for a week. Paris may be a nonentity but she is famous because she is famous, a celebrity because she is a celebrity, a celebrity nitwit because she is a rich nitwit.
We love the fact that someone/some institution has finally said no to this flashy tart with the big bank balance.
Aly concludes:
‘Our scoffing at Paris more truthfully condemns ourselves. It is difficult to escape the thought that our obsession with celebrity banality is an admission of existential defeat’.It’s a fair call – Paris Hilton’s prominence is self-inflicted social pain. While I frown upon her brainless shopping sprees, her banal utterances and her goofy sunglasses I will rush to read about her in tomorrow’s press. I might even discard my principles and offer to ghost-write an account of her fearful times at the hands of the monstrous LA police-state torturers. I'll settle for 25%.
The lino didn't match her eyes and the curtains came from Wal-mart. The pharmaceuticals don’t keep you thin and the, and the…
We shall overcome Paris!
* She has that bare-minimum common set of components that puts her on common ground with half the humans on the planet.
** At year end 2005 there were 3,145 black male sentenced prison inmates per 100,000 black males in the US, compared to 1,244 Hispanic male inmates per 100,000 Hispanic males and 471 white male inmates per 100,000 white males.
That Paul Keating interview
Its now almost ancient history but I missed the original televised interview with Paul Keating and had to read transcripts. The YouTube recordings of Paul Keating in action are certainly worth watching (Part 1, Part 2, Part 3).
I’d be interested in comments on these from all sides of the political debate. It is a stirring interview and one of the best I’ve seen for quite a while.
Keating king-hits the Labor Party’s organizational wing, boring old lefty Julia Gillard and the trade unions. So, in that sense, it was a god-send for the Coalition.
But Keating does take a broad and generally accurate view of the economy on issues such as the role of exchange rate flexibility and of the decisive advantages of enterprise bargaining over national wage cases. His criticisms of the trade union movement are sound – they are dead institutions appropriate to another age and his view on labour markets seems sensible – totally free markets with (i) a minimum wage, conditions constraint and (ii) a guarantee of no positive discrimination against trade unions.
It is a pleasant change to see a politician open up and being honest and direct. And as an ex-PM Keating did more and is a country mile more interesting than, that wingeing old, do-nothing grandmother of Australian politics, Malcolm Fraser. Stick to your camellias Malcolm.
I’d be interested in comments on these from all sides of the political debate. It is a stirring interview and one of the best I’ve seen for quite a while.
Keating king-hits the Labor Party’s organizational wing, boring old lefty Julia Gillard and the trade unions. So, in that sense, it was a god-send for the Coalition.
But Keating does take a broad and generally accurate view of the economy on issues such as the role of exchange rate flexibility and of the decisive advantages of enterprise bargaining over national wage cases. His criticisms of the trade union movement are sound – they are dead institutions appropriate to another age and his view on labour markets seems sensible – totally free markets with (i) a minimum wage, conditions constraint and (ii) a guarantee of no positive discrimination against trade unions.
It is a pleasant change to see a politician open up and being honest and direct. And as an ex-PM Keating did more and is a country mile more interesting than, that wingeing old, do-nothing grandmother of Australian politics, Malcolm Fraser. Stick to your camellias Malcolm.
Saturday, June 09, 2007
More competition & accountability needed among private schools
Increased receipts from the Commonwealth have bolstered the coffers of Victoria’s public schools but these schools have increased their fees – in many cases dramatically. There is nothing wrong with the public sector paying a part of these costs but the funds should be used carefully.
The Age editorializes:
The schools themselves often under-invest in scholastic programs while spending huge amounts on sports facilities, unneeded performing arts centers and so on.
In many cases private schools operate as sales-maximizing local monopolies which account to nobody – not to the public sector, not to shareholders and certainly not to parents. More competition in this sector is required to keep fees down and to achieve cost efficiency by reining in frivolous expenditures. School boards need to be directly elected by and responsible to fee-paying parents.
The Age editorializes:
One example from several is Scotch College. Since 2000, it has raised its fees annually by an average of 8 per cent to more than $19,000 this year. Its funding from Canberra has more than doubled to $3.68 million this year. Some increases are more akin to explosions: Mentone Grammar fees have increased almost 80 per cent from $10,230 for year 12 in 2000 to $18,166 this year. Commonwealth grants have risen $760,000 to almost $3 million.Much of the extra resources appear to have been spent of capital works that appear to be at least in part monuments to principals and school boards. For the most part these capital works are paid for without incurring significant debt. Hence the current cohorts of students cross-subsidize the costs of other cohorts. It would be much farer to keep fees lower and to spread the cost of capital works across the various cohorts of students who use these facilities by debt-financing such works.
The schools themselves often under-invest in scholastic programs while spending huge amounts on sports facilities, unneeded performing arts centers and so on.
In many cases private schools operate as sales-maximizing local monopolies which account to nobody – not to the public sector, not to shareholders and certainly not to parents. More competition in this sector is required to keep fees down and to achieve cost efficiency by reining in frivolous expenditures. School boards need to be directly elected by and responsible to fee-paying parents.
Friday, June 08, 2007
Smart blondes
Do good looks, high income and intelligence go together?
Do some folk really have it all?
(1) men generally place greater emphasis on looks;
(2) women generally place greater emphasis on income and status.
(Men do care about a woman’s income or status and women care about a man’s appearance but the relative strengths of these concerns differ for men and women).
(3) more-intelligent men tend to achieve higher income and status.
(4) both intelligence and physical attractiveness are traits with significant inheritable components.
Propositions (1)-(3) imply that attractive women will pair up with intelligent men while (4) implies that the offspring of such unions will tend to display above-average values of both traits. So beauty and brains go together. This view as Frank notes is consistent with economic evidence showing that attractive people earn more. Plain women tend to marry men with poor educations.
Do some folk really have it all?
A married couple were awakened by a call at 2 a.m. The wife, a blonde, picked up the phone, listened a moment and said, "How should I know, that's 200 miles from here!" and hung up. Her husband asked, "Who was that?" She replied, "I don't know; some woman wanting to know if the coast is clear."There are thousands of dumb blond jokes and almost as many jokes about the lack of intelligence among athletes. But in fact, according to Robert Frank, blondes should be more intelligent, on average, than others for four reasons.
(1) men generally place greater emphasis on looks;
(2) women generally place greater emphasis on income and status.
(Men do care about a woman’s income or status and women care about a man’s appearance but the relative strengths of these concerns differ for men and women).
(3) more-intelligent men tend to achieve higher income and status.
(4) both intelligence and physical attractiveness are traits with significant inheritable components.
Propositions (1)-(3) imply that attractive women will pair up with intelligent men while (4) implies that the offspring of such unions will tend to display above-average values of both traits. So beauty and brains go together. This view as Frank notes is consistent with economic evidence showing that attractive people earn more. Plain women tend to marry men with poor educations.
‘By similar reasoning, if gentlemen prefer blondes, fair-haired women should pair more often with intelligent, more successful men, and since hair color is at least weakly inheritable, a positive correlation should also emerge between blondness and intelligence.'What, then, accounts for dumb blonde jokes? The logic that governs decisions about investment in education and training suggests an answer. How intelligent you appear to others depends not only on your native mental abilities, but also on the extent to which you cultivate them through investment in education. In turn, the extent to which a person pursues such investments in “human capital” depends on how their returns compare with those for alternative investments.
'If blondes are perceived as more attractive, then being blond may create valuable opportunities that do not require onerous investments in education and training. The dumb blonde stereotype may thus stem from the fact that blondes rationally choose to invest less than others in education and other forms of human capital.
The human capital story suggests a similar rationale for the dumb athlete stereotype. Contrary to popular impressions, intelligence and athletic ability may be slightly positively correlated in the population as a whole. The link shouldn’t be surprising. It is the brain, after all, that controls the body.But because gifted athletes enjoy many attractive social and employment opportunities that others do not, they may rationally choose to invest less, on average, in human capital. The dumb athlete stereotype is further reinforced by the fact that varsity athletes at any given university are actually less intelligent than their classmates, since many were admitted primarily on the strength of their athletic skills, not because of their academic achievements.
If each university admitted people whose last name begins with the letter “M” with SAT scores 400 points lower that those of other applicants, the false impression would quickly form that people with names like Martin and McDermott were mentally deficient. It is the same with athletes. The bottom line is that popular perceptions about the intelligence of blondes and athletes may stem more from the academic choices made by members of these groups and from choices that others make about them than from any innate differences in mental ability.
Or perhaps jealous brunettes and nonathletes with time on their hands simply sit around making up jokes about their rivals’.
Don’t trial L-platers but discard discredited 'natural rate' theories
In the midst of a catastrophic drought the Australian economy has grown at 3.8% over the past year, its fastest rate for 3 years. The non-farm sector in the March quarter grew at the phenomenal rate of 4.6%. As the drought ends growth rates will improve further.
Australia is in the longest expansion in its history with record low unemployment of 4.2% (the lowest in 33 years) and low inflation. The number of part-time jobs has fallen, the number of full-time jobs has risen strongly and the participation rate has continued to rise to 65%. An extra 10,000 workers are getting jobs each week. Moreover the boom is not restricted to the ‘resource’ states alone as Labor Party would suggest – the biggest reduction in the jobless occurred in NSW.
If anyone doubts the value of unemployed people getting a job, or of part-timers getting a full-time job, read this heart rendering account. The story touched me.
Peter Costello’s views on the situation are here. The RBA’s graphs of recent developments in the Australian economy are here. The ABS figures are here.
Labor argues that what Australia really needs now is a change of government that will end a decade of economic mismanagement. It argues we urgently need to reestablish ‘fairness’ in labour markets. Only if we assign a more substantial role to Australia’s trade unions can economic prosperity be sustained and unemployment kept low. As Mr. Swan warned us yesterday our productivity growth is woeful and the employment growth we have enjoyed is due to Labor’s economic reforms more than a decade ago. Paul Keating attributes the gains to the Labor reforms of the 1980s. Good grief - I'll settle for this state of misery thanks!
One thing we should do is to reassess lame duck theories of natural rates of unemployment and non-accelerating inflation rates. With inflation less than 3% and unemployment about to fall below 4% these theories should be consigned to the rubbish bin – inflation creates unemployment and the way to keep unemployment low is to allow the RBA to do its job and to keep inflation low. I have never believed natural rate theories. If they were valid why were exceedingly low rates of inflation and unemployment possible in Australia for 20 years after the Second World War? Why are we enjoying record low unemployment and inflation simultaneously now?
The natural rate apologists say that the natural rate is falling due to structural changes in the economy (such as the abolition of pattern wage agreements) so that the economy can exist with a comparatively lower level of unemployment with a given inflation rates. Every time both inflation and unemployment unexpectedly fall they say a structural shift has occurred. This is unhelpful.
These ‘natural rate’ theories have a dangerous impact on policy thinking – this morning’s Age, reverts to true form when it complains that the recent surge in employment will have the harmful effect of requiring an interest rate rise. But why given that there are no prospects of inflation?
Macroeconomists should find better things to do with their time. Fostering growth, allowing the RBA to do its job, allowing labour markets to operate as freely as possible and getting the disguised unemployed among the ranks of the macroeconomics profession to study microeconomics.
Australia is in the longest expansion in its history with record low unemployment of 4.2% (the lowest in 33 years) and low inflation. The number of part-time jobs has fallen, the number of full-time jobs has risen strongly and the participation rate has continued to rise to 65%. An extra 10,000 workers are getting jobs each week. Moreover the boom is not restricted to the ‘resource’ states alone as Labor Party would suggest – the biggest reduction in the jobless occurred in NSW.
If anyone doubts the value of unemployed people getting a job, or of part-timers getting a full-time job, read this heart rendering account. The story touched me.
Peter Costello’s views on the situation are here. The RBA’s graphs of recent developments in the Australian economy are here. The ABS figures are here.
Labor argues that what Australia really needs now is a change of government that will end a decade of economic mismanagement. It argues we urgently need to reestablish ‘fairness’ in labour markets. Only if we assign a more substantial role to Australia’s trade unions can economic prosperity be sustained and unemployment kept low. As Mr. Swan warned us yesterday our productivity growth is woeful and the employment growth we have enjoyed is due to Labor’s economic reforms more than a decade ago. Paul Keating attributes the gains to the Labor reforms of the 1980s. Good grief - I'll settle for this state of misery thanks!
One thing we should do is to reassess lame duck theories of natural rates of unemployment and non-accelerating inflation rates. With inflation less than 3% and unemployment about to fall below 4% these theories should be consigned to the rubbish bin – inflation creates unemployment and the way to keep unemployment low is to allow the RBA to do its job and to keep inflation low. I have never believed natural rate theories. If they were valid why were exceedingly low rates of inflation and unemployment possible in Australia for 20 years after the Second World War? Why are we enjoying record low unemployment and inflation simultaneously now?
The natural rate apologists say that the natural rate is falling due to structural changes in the economy (such as the abolition of pattern wage agreements) so that the economy can exist with a comparatively lower level of unemployment with a given inflation rates. Every time both inflation and unemployment unexpectedly fall they say a structural shift has occurred. This is unhelpful.
These ‘natural rate’ theories have a dangerous impact on policy thinking – this morning’s Age, reverts to true form when it complains that the recent surge in employment will have the harmful effect of requiring an interest rate rise. But why given that there are no prospects of inflation?
Macroeconomists should find better things to do with their time. Fostering growth, allowing the RBA to do its job, allowing labour markets to operate as freely as possible and getting the disguised unemployed among the ranks of the macroeconomics profession to study microeconomics.
Thursday, June 07, 2007
Buddhism in Thailand
As an ex resident and as someone with profound respect for the institutions and people of the distinctive country of Thailand let me say blankly that the current proposal there to change the constitution to make Buddhism the national state religion is stupid. The current government of Thailand is an unelected military junta and elections will be held this year. Effectively Thailand is a Buddhist country with Buddhism permeating every aspect of Thai life. More than 90% of Thais are Buddhist.
But southern Thailand has a significant Muslim population and 2,000 people have died there since 2004 in a conflict where Buddhists are increasingly seen as the enemy. Within Buddhism throughout the country there is increasing paranoia about the rise of Islam.
Changing the constitution to make Buddhism the official religion will not change people’s beliefs but will make the situation in the south much worse. It will also shift the ethos of Thai Buddhism from being an open tolerant religion.
I am no defender of intolerant Islam (or indeed of any religion) which sees itself as the religion and denies the role of other belief systems. The recent events in what used to be tolerant Malaysia are appalling. Other Islamic countries are much worse in terms of making the lives of non-Muslims very difficult.
The attractive feature of Thai Buddhism has been its refusal to display religious intolerance – from both a moral and practical viewpoint this should not change.
Wednesday, June 06, 2007
The case for torture
Last Monday Four Corners provided a discussion of the moral and practical case for torture. It is the first of a two-part coverage. The second-part will deal with the issue of shipping suspects to foreign countries and ‘outsourcing’ torture.
I have previously discussed torture via the ‘ticking bomb’ problem on John Quiggin’s blog. This is a thought experiment which poses the issue of the case for torture starkly. Is it morally justifiable to torture someone in order to extract a confession on the whereabouts of a ‘ticking bomb’ if the subject knows where the bomb is hidden and where failure to detect will result in the deaths of millions? Do we need to choose between the evils of being cruel to an individual or millions of deaths? This way of posing this question tests the limits of utilitarianism.
The question itself has an immediate practical application in this age of Islamic terrorism. While torture is banned under international law the war on terror has changed things. Islamic terrorists who will kill innocents at the drop of a hat and have no reservations about torturing their opponents are people that one feels nothing but revulsion towards. Should they not be tortured to reveal their plots to kill? An immediate moral issue if this argument is accepted is to pin down the threshold. What is the utilitarian threshold (the number of saved lives) that justifies torture?
Dr Stanley Milgram’s obedience experiment showed that most of us have within us the propensity to torture. In these experiments subjects were asked to give electric shocks of increasing severity to other subjects if they answered a question wrongly. Those portrayed as receiving the shock did not actually experienced a shock but prerecorded screams reflected pain that those administering the shocks thought resulted from their actions. More than half those giving the electric shocks in these experiments readily gave up to the maximum possible shock. The implication drawn was that anyone could be trained to torture and that low levels of torture could always be ramped up. It is a gloomy picture of the human condition.
What specifically is torture? Presumably cruel and degrading treatment is torture but this can be hard to identify. Some seemingly benign activities such as making a person stand motionless for long periods of time are in fact dreaded forms of punishment. They impose high levels of self-inflicted pain which is one of the main approaches used by successful torturers. The other ingredient is sensory deprivation which also evokes intense suffering. A combination of these techniques works best of all. Old fashion mutilations and physical tortures are unnecessary if one seeks to impose suffering to extract information. Phobias, such as placing people in coffins or dark places or in sexually humiliating positions, can also be exploited as a torture technique.
From this perspective the hideous events at Abu Ghraib have been dismissed by many as aberrant actions by marginal US service people. But from the viewpoint of the ‘science of torture’ the practices used were standard methods and anything but an aberration. In the main the techniques relied on sensory deprivation and self-inflicted pain. Having hooded people standing still for hours with arms outstretched, as happened at Abu Ghraib, is a standard torturing technique.
By broadening the range of activities classified as ‘torture’ the issue of what is permitted becomes arguable. Is prolonged, intense questioning torture? Most of us would accept the value of such questioning for resolving serious crimes or terrorist threats.
There is a Kafkaesque ‘science of effective torturing’. The CIA, for example, have prepared the Kubark Manual for coercive questioning. How to do it?
While the existence of this manual raises intense moral concerns there are practical issues that the CIA have learned through its application. Interestingly the CIA has found that irrespective of moral concerns torture just doesn’t work. Torture provides unreliable information that is expedient rather than practically useful. Strong individuals resist even severe torture while the weak will say anything. It has been argued that false information extracted under torture led to the US involvement in Iraq.
For totally amoral agencies there are therefore practical arguments against torture because it just does not work. Indeed, the most successful way of extracting information, according to one CIA operative, was to build rapport. This was a useful way of getting accurate information.
Yet others argue that torture can always be made effective if appropriately designed. Others argue ways that one can always design repeat punishments and a punishment regime that guarantees eventual delivery of accurate information.
Another practical argument against torture is that public support for a justifiable cause is lost and resistance by an enemy is intensified.
Four Corners pointed out that more than half of the refugees coming to Australia have been tortured. Many of these people are psychologically devastated and have problems that never disappear. This is a startling conclusion that we need to keep in mind when thinking of the refugee and humanitarian intake. The psychological consequences continue forever.
Others in the intelligence community (often with strong moral ethics) argue that since the practice of torture is so widespread it should be legalized so we can at least decide consciously the terms under which it is used. . One suggestion is to use ‘torture warrants’ provided by a judge to justify torture. This is somewhat analogous to the case for legalizing illicit drugs. It puts things on the table where harm can be minimized even if the harm itself continues.
I found this episode of Four Corners to be a thoughtful and confronting. I would not always be an opponent of torture if I thought the rewards in terms of saved lives were large enough – for example if the hypothetical ‘ticking bomb’ problem actually arose.
But these hypothetical situations may not resemble any actual situations we face. It is hard to codify a set of situations where torture might be justified and, even if this codification could be effected, I have my doubts that information yielded by torture would compensate for the sufferings experienced by the subject and the damage done to the torturers. Moreover, the vast potential for abuse of any law giving the right to torture in any extreme situation makes me doubt the wisdom of ever seeking to justify a case for torture.
Watch Four Corners next Monday for the sequel episode of this interesting topic.
I have previously discussed torture via the ‘ticking bomb’ problem on John Quiggin’s blog. This is a thought experiment which poses the issue of the case for torture starkly. Is it morally justifiable to torture someone in order to extract a confession on the whereabouts of a ‘ticking bomb’ if the subject knows where the bomb is hidden and where failure to detect will result in the deaths of millions? Do we need to choose between the evils of being cruel to an individual or millions of deaths? This way of posing this question tests the limits of utilitarianism.
The question itself has an immediate practical application in this age of Islamic terrorism. While torture is banned under international law the war on terror has changed things. Islamic terrorists who will kill innocents at the drop of a hat and have no reservations about torturing their opponents are people that one feels nothing but revulsion towards. Should they not be tortured to reveal their plots to kill? An immediate moral issue if this argument is accepted is to pin down the threshold. What is the utilitarian threshold (the number of saved lives) that justifies torture?
Dr Stanley Milgram’s obedience experiment showed that most of us have within us the propensity to torture. In these experiments subjects were asked to give electric shocks of increasing severity to other subjects if they answered a question wrongly. Those portrayed as receiving the shock did not actually experienced a shock but prerecorded screams reflected pain that those administering the shocks thought resulted from their actions. More than half those giving the electric shocks in these experiments readily gave up to the maximum possible shock. The implication drawn was that anyone could be trained to torture and that low levels of torture could always be ramped up. It is a gloomy picture of the human condition.
What specifically is torture? Presumably cruel and degrading treatment is torture but this can be hard to identify. Some seemingly benign activities such as making a person stand motionless for long periods of time are in fact dreaded forms of punishment. They impose high levels of self-inflicted pain which is one of the main approaches used by successful torturers. The other ingredient is sensory deprivation which also evokes intense suffering. A combination of these techniques works best of all. Old fashion mutilations and physical tortures are unnecessary if one seeks to impose suffering to extract information. Phobias, such as placing people in coffins or dark places or in sexually humiliating positions, can also be exploited as a torture technique.
From this perspective the hideous events at Abu Ghraib have been dismissed by many as aberrant actions by marginal US service people. But from the viewpoint of the ‘science of torture’ the practices used were standard methods and anything but an aberration. In the main the techniques relied on sensory deprivation and self-inflicted pain. Having hooded people standing still for hours with arms outstretched, as happened at Abu Ghraib, is a standard torturing technique.
By broadening the range of activities classified as ‘torture’ the issue of what is permitted becomes arguable. Is prolonged, intense questioning torture? Most of us would accept the value of such questioning for resolving serious crimes or terrorist threats.
There is a Kafkaesque ‘science of effective torturing’. The CIA, for example, have prepared the Kubark Manual for coercive questioning. How to do it?
While the existence of this manual raises intense moral concerns there are practical issues that the CIA have learned through its application. Interestingly the CIA has found that irrespective of moral concerns torture just doesn’t work. Torture provides unreliable information that is expedient rather than practically useful. Strong individuals resist even severe torture while the weak will say anything. It has been argued that false information extracted under torture led to the US involvement in Iraq.
For totally amoral agencies there are therefore practical arguments against torture because it just does not work. Indeed, the most successful way of extracting information, according to one CIA operative, was to build rapport. This was a useful way of getting accurate information.
Yet others argue that torture can always be made effective if appropriately designed. Others argue ways that one can always design repeat punishments and a punishment regime that guarantees eventual delivery of accurate information.
Another practical argument against torture is that public support for a justifiable cause is lost and resistance by an enemy is intensified.
Four Corners pointed out that more than half of the refugees coming to Australia have been tortured. Many of these people are psychologically devastated and have problems that never disappear. This is a startling conclusion that we need to keep in mind when thinking of the refugee and humanitarian intake. The psychological consequences continue forever.
Others in the intelligence community (often with strong moral ethics) argue that since the practice of torture is so widespread it should be legalized so we can at least decide consciously the terms under which it is used. . One suggestion is to use ‘torture warrants’ provided by a judge to justify torture. This is somewhat analogous to the case for legalizing illicit drugs. It puts things on the table where harm can be minimized even if the harm itself continues.
I found this episode of Four Corners to be a thoughtful and confronting. I would not always be an opponent of torture if I thought the rewards in terms of saved lives were large enough – for example if the hypothetical ‘ticking bomb’ problem actually arose.
But these hypothetical situations may not resemble any actual situations we face. It is hard to codify a set of situations where torture might be justified and, even if this codification could be effected, I have my doubts that information yielded by torture would compensate for the sufferings experienced by the subject and the damage done to the torturers. Moreover, the vast potential for abuse of any law giving the right to torture in any extreme situation makes me doubt the wisdom of ever seeking to justify a case for torture.
Watch Four Corners next Monday for the sequel episode of this interesting topic.
Gambling on election polls
The Galaxy Poll forecasts a two-party preferred vote in the forthcoming election of 53% for Labor and 47% for the Coalition. It is only a single poll and in inconsistent with the other polls so I see it only as very weak evidence of an improvement in the Coalition’s prospects. The poll itself did do well in the leadup to the 2004 election. As of today (June 6) Sporting bet was paying $1-70 for a $1 wager on a Labor win and $2-05 for the Coalition. The odds have moved a few cents against Labor in the few days since the Galaxy Poll was announced.
The question is whether I should put a $1000 bet on Labor? Suppose I did:
If Labor did win I would net about $700 which would buy me 4 dozen 2004 Kalimna shiraz and would yield me a-once-weekly decent bottle of plonk for almost a year. (Expected utility theory suggests that reasonable decision makers should focus on the expected utility of the prizes they gain from participating in a lottery). The probability weight I should attach to this is about 0.55.
If Labor lost I would lose $1000 but gain the utility of having the party I support electorally in power for another term and being able to avoid several years of comradely triumphalism in the blogosphere. While this might be a somewhat muted victory it would compensate a little for the lost $1000. The probability of Labor losing seems from Sportingbet to be about 0.45.
I might back Labor who are favourites at this stage – but I’ll wait for a few weeks to see if I can get a better price on them.
The question is whether I should put a $1000 bet on Labor? Suppose I did:
If Labor did win I would net about $700 which would buy me 4 dozen 2004 Kalimna shiraz and would yield me a-once-weekly decent bottle of plonk for almost a year. (Expected utility theory suggests that reasonable decision makers should focus on the expected utility of the prizes they gain from participating in a lottery). The probability weight I should attach to this is about 0.55.
If Labor lost I would lose $1000 but gain the utility of having the party I support electorally in power for another term and being able to avoid several years of comradely triumphalism in the blogosphere. While this might be a somewhat muted victory it would compensate a little for the lost $1000. The probability of Labor losing seems from Sportingbet to be about 0.45.
I might back Labor who are favourites at this stage – but I’ll wait for a few weeks to see if I can get a better price on them.
Tuesday, June 05, 2007
China tells us what we already know
China’s much heralded ‘action plan’ to address global warming does not say much that is new. China will ‘integrate climate change policy’ into its industrial and energy sectors, but will not sacrifice economic growth to satisfy international demands. We have heard this before.
It will combat global warming through energy saving, agricultural adaptation, and forest expansion. These are all ‘no regrets’ options – China needs to do these things anyway. Chinese energy efficiencies are very low so it is prudent to try to improve them irrespective of climate change.
The difficulty is that the US, China and Indonesia are the world’s three biggest greenhouse gas emitters. US’s emissions are 6 billion tonnes annually, China’s are 5 billion tonnes and Indonesia’s are 3 billion tonnes.
The Chinese blueprint also says developed nations must bear ‘the most blame’ for greenhouse gas emissions. It claims that China has the ‘right’ to develop and that not developing will create bigger costs than climate change.
China welcomed proposals on global warming by US President Bush (15 top polluting nations, including China and Australia to discuss climate change and agree on long-term goals to combat global warming by end 2008) but stressed that new agreements should not displace the Kyoto Protocol – they don’t want this to change since under Kyoto they are not obliged to do anything.
The detailed plan itself has not been released.
My preferred option is for China to be part of a global emissions trading scheme with relatively large initial carbon allocations that woould grow at a moderate rate until it reaches developed country status. These carbon credits could be purchased by developed countries and the funds released used to purchase carbon-friendly technology in China.
Unless China starts to try seriously to meet carbon targets in the short-term the main effect of pricing carbon in developed countries will be to shift polluting industries offshore. The environment will not be improved.
If China (and the US and Indonesia) do not comply they should be hit with strong tariffs on its exports that reflect their unpriced carbon content. The international community can force these grubs to clean up their act if they are unprepared to do so themselves.
It will combat global warming through energy saving, agricultural adaptation, and forest expansion. These are all ‘no regrets’ options – China needs to do these things anyway. Chinese energy efficiencies are very low so it is prudent to try to improve them irrespective of climate change.
The difficulty is that the US, China and Indonesia are the world’s three biggest greenhouse gas emitters. US’s emissions are 6 billion tonnes annually, China’s are 5 billion tonnes and Indonesia’s are 3 billion tonnes.
The Chinese blueprint also says developed nations must bear ‘the most blame’ for greenhouse gas emissions. It claims that China has the ‘right’ to develop and that not developing will create bigger costs than climate change.
China welcomed proposals on global warming by US President Bush (15 top polluting nations, including China and Australia to discuss climate change and agree on long-term goals to combat global warming by end 2008) but stressed that new agreements should not displace the Kyoto Protocol – they don’t want this to change since under Kyoto they are not obliged to do anything.
The detailed plan itself has not been released.
My preferred option is for China to be part of a global emissions trading scheme with relatively large initial carbon allocations that woould grow at a moderate rate until it reaches developed country status. These carbon credits could be purchased by developed countries and the funds released used to purchase carbon-friendly technology in China.
Unless China starts to try seriously to meet carbon targets in the short-term the main effect of pricing carbon in developed countries will be to shift polluting industries offshore. The environment will not be improved.
If China (and the US and Indonesia) do not comply they should be hit with strong tariffs on its exports that reflect their unpriced carbon content. The international community can force these grubs to clean up their act if they are unprepared to do so themselves.
Don’t forget supply effects when considering pricing carbon emissions
Economists and journalists tend to focus mainly on the effects of higher prices in restricting socially excess demands. There are also effects on supply that are positive. For the global warming externality the supply effects induced by carbon charges will substantially limit the economic damage policies impose on energy users.
As I posted in February firms motivated to make money out of climate change will, by their self-interested actions, help to reduce the adjustment costs imposed by climate change as a consequence. Carbon taxes or carbon emission prices created by emission quotas will encourage such firms. Other firms will punt that the threat of climate change is exaggerated and will pursue status quo policies that will save us all should the forecasts of the climate change pessimists prove overly pessimistic.
The Economist this week shows that firms are falling over themselves to prove their ‘greenness’:
Moreover, the Economist makes the obvious point about encouraging investments:
There are many good points here including an interesting argument for carbon taxes rather than 'cap and trade' schemes as we will adopt in Australia. Of course Australia mudst learn from the difficulties of the European scheme.
A series of other Economist articles on the same issue are here.
As I posted in February firms motivated to make money out of climate change will, by their self-interested actions, help to reduce the adjustment costs imposed by climate change as a consequence. Carbon taxes or carbon emission prices created by emission quotas will encourage such firms. Other firms will punt that the threat of climate change is exaggerated and will pursue status quo policies that will save us all should the forecasts of the climate change pessimists prove overly pessimistic.
The Economist this week shows that firms are falling over themselves to prove their ‘greenness’:
Global investment in renewable power-generation, biofuels and low-carbon technologies rose from $28 billion in 2004 to $71 billion in 2006, according to New Energy Finance, a research company. The stock prices of clean-energy companies have been rocketing up. Silicon Valley's venture capitalists are piling into the business, convinced that they can design revolutionary technologies, bring down prices and turf out incumbents in the energy business just as they did in the software business. Oil firms, carmakers, power generators, nervous of being outmanoeuvred, are jacking up their investments in renewables and biofuels.
As the likes of General Electric and BP put money into cleaner technologies, costs will fall. The price of a watt of solar photovoltaic capacity dropped from around $20 in the 1970s to $2.70 in 2004 (though a silicon shortage, caused by rocketing demand as a result of madly generous German subsidies, has pushed it up since). The price of wind power has fallen from $2 per kilowatt hour in the 1970s to 5-8 cents now, compared with 2-4 cents for coal-fired power. More investment will bring prices down further; and, as the gap shrinks, so the costs of switching from dirty energy to the clean sort will fall……. (my bold)
Moreover, the Economist makes the obvious point about encouraging investments:
The best way for governments to encourage investment in cleaner energy is to make the polluter pay by putting a price on CO2 emissions. According to the IPCC, the body set up under the auspices of the UN to establish a consensus on global warming, a price of somewhere between $20 and $50 per tonne of CO2 by 2020-30 should start to stabilise CO2 concentrations at around 550 parts per million (widely reckoned to be a safeish level) by the end of this century. A $50 price tag would raise petrol prices in America by around 15% and electricity prices by around 35%—hardly draconian when set alongside recent fluctuations. The IPCC reckons that stabilising at 550ppm would knock around 0.1% off global economic growth annually. (my bold)
A carbon price can be established either through a tax or through a cap-and-trade system, such as the one Europe adopted after signing up to Kyoto. A carbon tax would be preferable, because companies would then be able to build a fixed price into their investment plans; but businesspeople and politicians are both strangely averse to the word “tax”. A cap-and-trade system can be made to work, but the price has to settle at a level that affects commercial decisions. Europe's hasn't: the price has been too volatile, and, for much of its existence, too low, to shift investment patterns much.
Europe has tightened its system up, and the carbon price has risen to a level which could start to make a difference. But Europe, by itself, will not save the planet. It
is America that matters, not just because it is the world's biggest polluter, but also because without its participation, the biggest polluters of the future—China and India—will not do anything.The best news in the fight against climate change is that business is starting to invest in clean energy seriously. But these investments will flourish only if governments are prepared to put a price on carbon.
There are many good points here including an interesting argument for carbon taxes rather than 'cap and trade' schemes as we will adopt in Australia. Of course Australia mudst learn from the difficulties of the European scheme.
A series of other Economist articles on the same issue are here.
Sunday, June 03, 2007
Teeth economics
Labor proposes giving free dental care to those earning less than average earnings ($55,000) to reduce the 650,000 waiting list for public dental care. I wonder how this will work. The price of dental services is not determined by government – it is market-driven. Given that it takes time to train new dentists and that there is currently an excess demand for State Government-provided public services I assume that the extra servicing would be achieved by offering the additional work to those dentists who currently serve private patients.
This would mean an increase in the demand for the services of such dentists which would raise their supply price. The hourly cost of a dentist is around $295 and it is claimed 20% of patients are not currently seeing such dentists because of the cost of services.
I don’t have data so let me make some guesses of the impact here.
The induced rise in dental costs might be more than proportional to the extra demand so the cost per hour of dental services might rise quite a bit – say by 30% to nearly $400. If each of those on waiting lists has say 4 hours of dental services required the cost of this plan would be, ignoring administrative and other costs, around $1.04 billion.
These other costs should include the lost consumer surplus from those who currently pay for their own privately-provided services but who will now face higher prices. Also many of those who currently pay for their own services but earn less than average annual incomes will now opt to augment the temporarily-shortened public queues. These factors add to costs significantly. In addition these proposals provide no incentives for people to take better care of their teeth.
The cost figure here is a rough back-of–the-envelope calculation but its outcome does accord with press estimates of the cost which come to around $1 billion. Almost predictably the Labor Party provides no estimate of these costs (new Shadow Health Minister says all will be made clear closer to the election) and, as usual, hopes the public will treat the reform as a costless social welfare measure. The Age predictably describes the dental reform as ‘well-targeted’ though it acknowledges no costings have been provided.
This seems to me a poorly-thought-through policy option. Options which increase the supply of dentists by reducing university admission scores and which improve dental health through education would have had the respective effects of increasing dental supplies and reducing the demand for such services. These measures would have improved access to cheaper dental services.
A major beneficiary of this plan are the dentists who predictably support it - they will earn higher incomes funded by the tax-payer and subject to no government control. Income will be distributed from those who pay for their services to those who currently don't and those earning less than average income who will defect to the public scheme as public waiting lists fall.
Overall the supply of dental services to the community will not increase since this measure addreeses demand and not supply. There will be no more services net - its just that some who now pay will opt out of treatment or settle for lower standards of treatment to give way to those on the public list.
Finally, one has to ask why the State Governments who are responsible for public health care will suddenly now perform better.
Keep your expectations low
The emotional issues I went through as an adolescent often took the form of a sense of disappointment with the behavior of others and of me. A mathematician I knew at the time told me my problem stemmed from undue optimism. Hence I tried, for a time, to be more pessimistic-realistic about possible achievements in the hope that I would be less disappointed and, yes, happier.
This is a variant on old though different themes. Buddhism for example teaches that, through meditation, you can reduce your desires and hence, with enough meditative effort, get closer to what in modern parlance might be called your bliss point.
A couple of times I have tried to modify the standard microeconomic model of consumption to account for this behavior. Thus a consumer allocates his time between work, leisure and meditation to constrain his/her desires for comnsumption goods and other pleasures. The greater the effort ‘invested’ in meditative pursuit the higher the marginal utility gained from any given bundle of goods or from a sensual encounter. The difficulty lies in coming up with sensible interior optima – optima that don’t involve for example investing much of your time in meditation and living on lentils.
These thoughts come to mind this Sunday morning as – for the 1,924th time - I do not go to Sunday Church but instead think about breakfast and my bowels.
I am also searching the papers for something worth reading. Eventually I find this on the miserable secret of marital bliss. It’s the same theme – keep your aspirations low and greater happiness will ensue in the midst of door-slamming teenagers and failed dreams. The writers even suggest that Buddhist meditation can help you cope.
I am interested in whether readers accept this line. That I find it interesting probably indexes to some degree my own disfunctionality.
I quote from the article - it is my bolding:
This is a variant on old though different themes. Buddhism for example teaches that, through meditation, you can reduce your desires and hence, with enough meditative effort, get closer to what in modern parlance might be called your bliss point.
A couple of times I have tried to modify the standard microeconomic model of consumption to account for this behavior. Thus a consumer allocates his time between work, leisure and meditation to constrain his/her desires for comnsumption goods and other pleasures. The greater the effort ‘invested’ in meditative pursuit the higher the marginal utility gained from any given bundle of goods or from a sensual encounter. The difficulty lies in coming up with sensible interior optima – optima that don’t involve for example investing much of your time in meditation and living on lentils.
These thoughts come to mind this Sunday morning as – for the 1,924th time - I do not go to Sunday Church but instead think about breakfast and my bowels.
I am also searching the papers for something worth reading. Eventually I find this on the miserable secret of marital bliss. It’s the same theme – keep your aspirations low and greater happiness will ensue in the midst of door-slamming teenagers and failed dreams. The writers even suggest that Buddhist meditation can help you cope.
I am interested in whether readers accept this line. That I find it interesting probably indexes to some degree my own disfunctionality.
I quote from the article - it is my bolding:
‘THE key to a happy marriage and family life is accepting that misery and suffering are unavoidable, American researchers say.
Therapists claim that "mindful acceptance" of family rows...and painful relationships is better than believing in perfection.
But they fear that childhood fairytales, love stories and modern counselling techniques are promoting an unhealthy belief that true domestic bliss can be achieved. "Our culture perpetuates the myth that, with enough effort, we can achieve a state without suffering," says a new report in the Journal of Marital and Family Therapy.
...."In the US, the value placed on the 'can-do' spirit and triumph over adversity creates an environment where suffering can be viewed as a symptom of personal failure..."
Psychologists have worsened the problem by using the term "mental health" to signify an ideal psychological state where people are free from suffering, according to Dr Diane Gehart and Dr Eric McCollum, family therapy professors.
They believe that a Buddhist meditation technique could provide a new way of coping with family suffering.
"Mindfulness", where a person tries to focus on their thoughts and actions in the present moment, is used by psychiatrists to cope with anxiety.
The American family therapists believe it could play a bigger role in people dealing with abuse, divorce, rejection and loss. "We suggest a different antidote to the struggle: mindful acceptance of our relational pain and of the many aspects of a relationship over which we have no control," they say.
"Mindful acceptance is the realisation that while some pain is inevitable, the suffering of the struggling against things we cannot change is not."
Saturday, June 02, 2007
The carbon emissions ‘cap and trade’ scheme – a second read
I reported earlier on press releases describing the carbon trading report here. I have now had a chance to go through some of the actual report (here) myself. This is my second read – I’ll probably end up making a third and a fourth. The report (and particularly its chapter 7) interest me. I think it is a very important and well-reasoned document.
Some of the reactions by the Coalition’s foes to the proposed ‘cap and trade’ scheme have been predictable – John Quiggin argues that the ‘main implication of this report is that we should have got started on all this ten years ago (or at least, back in 2003 when he states Howard killed the idea) and that we’ll now have a more costly adjustment path than if we had acted sooner’. Well, maybe, but at least a decent proposal is on the table.
The Labor Party itself argues that the plan is discredited because Howard is ‘poll driven’ – this is a particularly foolish example of the motives fallacy. This issue is whether the plan is a good one or not.
Finally, The Age points out that the plan will increase energy prices – well, yes, that is what it is trying to do given that most of our energy supplies are carbon-based. It is trying to increase prices so people will use less of such fuels and energy suppliers will have incentives to search for less carbon-intensive technologies.
For all the hyperbole about John Howard’s restricted vision on climate change, Australia has committed to restrain its emissions to 108% of its 1990 levels to 2012. Because of much reduced land clearing it is one of the few countries likely to meet its Kyoto target.
I think there is a lot in the emissions trading plan that is very good and that the cynicism of many commentators is unwarranted.
It is a very broadly-based carbon trading system that is better than the defect-ridden European trading scheme and the less useful schemes advanced by State governments in Australia. All the big polluters (900 power stations, aluminium smelters, oil refineries, large factories) are captured. Paul Kelly describes it as an innovative scheme that other countries should imitate. The breadth of the scheme reduces the cost to the economy of meeting specific emission targets.
The scheme would cover 80% of total emissions and 55% of emissions outside of agriculture and waste disposal which would not be covered.
It moves toward taking action before the rest of the world does so – a decisive advance. It also sets up a debate between the inept heavy-handed State-based schemes which see centralized government promotion of renewable technologies such as wind and solar replaced by a market-driven approach which provides incentives for energy-entrepreneurs and energy-consumers to come up with economically efficient solutions. The plodders in the Victorian Government (particularly Thwaites) with their irrational policies are criticizing the scheme – their sensitivity is justified because they will be well and truly caught with their pants around their ankles. The comments of the ACF on the need for an a priori commitment to renewables are foolish.
The plan has been criticized for moving slowly. This is difficult to understand since the targets will not be decided until next year. Given the resource-orientation of our exports and the likelihood that carbon-intensive industries will immediately just move offshore if Australia makes unilateral large cuts I think caution here is warranted. It is pointless to destroy our major industries if the only effect is to drive such industries to countries where they will not be subject to emission controls. Moreover the case for being cautious is strengthened by the broad base of the scheme.
Features of the report:
1. Unlike the Labor Party posturing it recognizes the real costs of the measures to be adopted. It recognizes the need to cut carbon emissions and that this will cost us. It therefore stresses the need for a cautious response at least initially.
Australia’s economy is built on extractive natural resource industries. We need deeper emissions cuts with time but should be careful, not cavalier, with these.
2. The report takes it as a premise that we need to create a more certain policy environment where we spell out what we will do. Currently many investments are being deferred because of lack of certainty. The issue is to address the uncertainty concerns of the power sector and other areas of industry. This is one of the reasons for needing to act now.
Thus we need forward projections of desired emissions cutbacks and a forward carbon price that will help business plans.
3. Unlike other approaches (e.g. the State Labor governments) this is a market-driven approach not one that involves picking future energy sector winners. Markets will decide the energy sector winners (not governments) and markets will determine a market for offsets such as forest plantations.
Picking winners will impose unnecessary economic costs if market-based procedures can select the cost-minimizing ways of reducing emissions targets.
4. The last point raises the issue of offsets generally. Australia creates 1.2% of the world’s emissions but has vast biodiversity resources which offset these omissions. This is an important contrast to Europe, China and Japan.
5. Our emissions-intensive exporters should not lose business to overseas competitors who face no emissions control. This would hurt us and achieve nothing in improving the global environment. Indeed given that our own emissions-intensive industries are world’s best practice, off-shoring these activities might lead to a deterioration in the global environment.
6. Exploring new technologies and seeking greater international co-operation on climate change should continue to be central, auxiliary policies.
7. The greatest efficiency in reducing the costs of emissions cutbacks would occur through international emissions trading schemes. This seems a long way off however. Our scheme should be flexible enough to integrate with a future global scheme.
8. Agriculture and waste disposal would initially be exempted but should be brought into the scheme as soon as ambiguities in computing emission levels and in measuring the sector’s contributions to carbon offsets is clarified. It is important that agriculture be rapidly brought into the scheme since it can contribute to the market for offsets. It can already operate in the offsets market.
9. After setting long-term emission goals and desired emissions trajectories, some emissions permits would be distributed in 2012 as an initial once off free distribution providing compensations to existing businesses which suffer asset value losses (this is essentially the BCA plan) as a consequence of emissions trading. Additional contracts would be auctioned. This is sensible and improves political acceptability. The free permits would be dated and would last for 10 years or more. Other permits would be issued for 5 years.
A ‘safety valve’ emissions fee will allow accommodation of unexpected costs during the first few years of the scheme. This fee would be set a bit higher than the expected price of a traded permit and would apply to firms emitting more than their quota to encourage compliance with the quota. This fee would prevent unforeseen demands for quotas driving emission costs to levels that would damage industry.
10. Quotas could be ‘banked’ or carried forward but quotas could not be borrowed to meet current commitments. This promotes efficiency and flexibility.
11. Revenues from auctioned quotas and emission fees would be channeled in low emissions R&D and to address market failures which limit the uptake of improved energy efficiency technologies. So there is hypothecation provided the revenues are not wasted.
There are a host of other interesting details such as seeking efficient markets. The nitty-gritty details of the scheme are presented here. A very good read.
Some of the reactions by the Coalition’s foes to the proposed ‘cap and trade’ scheme have been predictable – John Quiggin argues that the ‘main implication of this report is that we should have got started on all this ten years ago (or at least, back in 2003 when he states Howard killed the idea) and that we’ll now have a more costly adjustment path than if we had acted sooner’. Well, maybe, but at least a decent proposal is on the table.
The Labor Party itself argues that the plan is discredited because Howard is ‘poll driven’ – this is a particularly foolish example of the motives fallacy. This issue is whether the plan is a good one or not.
Finally, The Age points out that the plan will increase energy prices – well, yes, that is what it is trying to do given that most of our energy supplies are carbon-based. It is trying to increase prices so people will use less of such fuels and energy suppliers will have incentives to search for less carbon-intensive technologies.
For all the hyperbole about John Howard’s restricted vision on climate change, Australia has committed to restrain its emissions to 108% of its 1990 levels to 2012. Because of much reduced land clearing it is one of the few countries likely to meet its Kyoto target.
I think there is a lot in the emissions trading plan that is very good and that the cynicism of many commentators is unwarranted.
It is a very broadly-based carbon trading system that is better than the defect-ridden European trading scheme and the less useful schemes advanced by State governments in Australia. All the big polluters (900 power stations, aluminium smelters, oil refineries, large factories) are captured. Paul Kelly describes it as an innovative scheme that other countries should imitate. The breadth of the scheme reduces the cost to the economy of meeting specific emission targets.
The scheme would cover 80% of total emissions and 55% of emissions outside of agriculture and waste disposal which would not be covered.
It moves toward taking action before the rest of the world does so – a decisive advance. It also sets up a debate between the inept heavy-handed State-based schemes which see centralized government promotion of renewable technologies such as wind and solar replaced by a market-driven approach which provides incentives for energy-entrepreneurs and energy-consumers to come up with economically efficient solutions. The plodders in the Victorian Government (particularly Thwaites) with their irrational policies are criticizing the scheme – their sensitivity is justified because they will be well and truly caught with their pants around their ankles. The comments of the ACF on the need for an a priori commitment to renewables are foolish.
The plan has been criticized for moving slowly. This is difficult to understand since the targets will not be decided until next year. Given the resource-orientation of our exports and the likelihood that carbon-intensive industries will immediately just move offshore if Australia makes unilateral large cuts I think caution here is warranted. It is pointless to destroy our major industries if the only effect is to drive such industries to countries where they will not be subject to emission controls. Moreover the case for being cautious is strengthened by the broad base of the scheme.
Features of the report:
1. Unlike the Labor Party posturing it recognizes the real costs of the measures to be adopted. It recognizes the need to cut carbon emissions and that this will cost us. It therefore stresses the need for a cautious response at least initially.
Australia’s economy is built on extractive natural resource industries. We need deeper emissions cuts with time but should be careful, not cavalier, with these.
2. The report takes it as a premise that we need to create a more certain policy environment where we spell out what we will do. Currently many investments are being deferred because of lack of certainty. The issue is to address the uncertainty concerns of the power sector and other areas of industry. This is one of the reasons for needing to act now.
Thus we need forward projections of desired emissions cutbacks and a forward carbon price that will help business plans.
3. Unlike other approaches (e.g. the State Labor governments) this is a market-driven approach not one that involves picking future energy sector winners. Markets will decide the energy sector winners (not governments) and markets will determine a market for offsets such as forest plantations.
Picking winners will impose unnecessary economic costs if market-based procedures can select the cost-minimizing ways of reducing emissions targets.
4. The last point raises the issue of offsets generally. Australia creates 1.2% of the world’s emissions but has vast biodiversity resources which offset these omissions. This is an important contrast to Europe, China and Japan.
5. Our emissions-intensive exporters should not lose business to overseas competitors who face no emissions control. This would hurt us and achieve nothing in improving the global environment. Indeed given that our own emissions-intensive industries are world’s best practice, off-shoring these activities might lead to a deterioration in the global environment.
6. Exploring new technologies and seeking greater international co-operation on climate change should continue to be central, auxiliary policies.
7. The greatest efficiency in reducing the costs of emissions cutbacks would occur through international emissions trading schemes. This seems a long way off however. Our scheme should be flexible enough to integrate with a future global scheme.
8. Agriculture and waste disposal would initially be exempted but should be brought into the scheme as soon as ambiguities in computing emission levels and in measuring the sector’s contributions to carbon offsets is clarified. It is important that agriculture be rapidly brought into the scheme since it can contribute to the market for offsets. It can already operate in the offsets market.
9. After setting long-term emission goals and desired emissions trajectories, some emissions permits would be distributed in 2012 as an initial once off free distribution providing compensations to existing businesses which suffer asset value losses (this is essentially the BCA plan) as a consequence of emissions trading. Additional contracts would be auctioned. This is sensible and improves political acceptability. The free permits would be dated and would last for 10 years or more. Other permits would be issued for 5 years.
A ‘safety valve’ emissions fee will allow accommodation of unexpected costs during the first few years of the scheme. This fee would be set a bit higher than the expected price of a traded permit and would apply to firms emitting more than their quota to encourage compliance with the quota. This fee would prevent unforeseen demands for quotas driving emission costs to levels that would damage industry.
10. Quotas could be ‘banked’ or carried forward but quotas could not be borrowed to meet current commitments. This promotes efficiency and flexibility.
11. Revenues from auctioned quotas and emission fees would be channeled in low emissions R&D and to address market failures which limit the uptake of improved energy efficiency technologies. So there is hypothecation provided the revenues are not wasted.
There are a host of other interesting details such as seeking efficient markets. The nitty-gritty details of the scheme are presented here. A very good read.
Aged riesling from Knight at Granite Hills
The Knight family Granite Hills Vineyard at Mount Macedon produces probably the best Riesling in Victoria. I have only a few of these in my cellar and tonight I drank the 1989 Knight Granite Hill Riesling. It was originally an austere, cool climate-style Riesling that, in a good vintage, would last 20 years from birth. This was my second really top old Victorian wine in a week – I was cock-a-hoop with this one.
What a transformation 18 years in the cellar had brought about. This lean young 11.8% alcohol Riesling was now a brilliant golden color with intense bouquet of kerosene-aged Riesling and with strong, sweet botrytis overtones. On the palate, intense sweet honeyed, botrytis flavours with a glimpse of old Riesling flavours and gentle acid. Fruit slightly faded but still good length – a scrumptious, aged white wine that showed it was an old wine but no sign of deterioration.
It won’t improve at this age but should last another 5 years with careful cellaring. My guess at market value – I saw some of the 1994s at around $50 - is that this would sell at auction for $50-$60 – a bargain.
I’ve had a fair degree of success cellaring Rieslings. They are cheap wines at birth to buy – apart from a few Petaluma wines, some of the wonderful Tasmanian Moorila Estate Rieslings and some of the monumental old Leo Buring Rieslings (I have one of the great 1973’s left – a recent review described it as having the flavor of thick-cut lime marmalade) I seldom pay more than $20 for these wines. They all seem to cellar well. Ever the economist – they are generally a ‘market opportunity’. The older Leo Burings made by John Vickery are just some of the greatest wines ever made in Australia. Like JWH and Andy Warhol portraits of Marilyn they are national treasures to be bought irrespective of price.
I like young Rieslings such as the recent batch of Leo Burings, the earlier Mitcheltons and most of the Clare Valley Rieslings. The aged variants are very different and some people don’t take to them, particularly with their slight kerosene bouquets. But this Knights wine would appeal to anyone who appreciates a sweet desert.
What a transformation 18 years in the cellar had brought about. This lean young 11.8% alcohol Riesling was now a brilliant golden color with intense bouquet of kerosene-aged Riesling and with strong, sweet botrytis overtones. On the palate, intense sweet honeyed, botrytis flavours with a glimpse of old Riesling flavours and gentle acid. Fruit slightly faded but still good length – a scrumptious, aged white wine that showed it was an old wine but no sign of deterioration.
It won’t improve at this age but should last another 5 years with careful cellaring. My guess at market value – I saw some of the 1994s at around $50 - is that this would sell at auction for $50-$60 – a bargain.
I’ve had a fair degree of success cellaring Rieslings. They are cheap wines at birth to buy – apart from a few Petaluma wines, some of the wonderful Tasmanian Moorila Estate Rieslings and some of the monumental old Leo Buring Rieslings (I have one of the great 1973’s left – a recent review described it as having the flavor of thick-cut lime marmalade) I seldom pay more than $20 for these wines. They all seem to cellar well. Ever the economist – they are generally a ‘market opportunity’. The older Leo Burings made by John Vickery are just some of the greatest wines ever made in Australia. Like JWH and Andy Warhol portraits of Marilyn they are national treasures to be bought irrespective of price.
I like young Rieslings such as the recent batch of Leo Burings, the earlier Mitcheltons and most of the Clare Valley Rieslings. The aged variants are very different and some people don’t take to them, particularly with their slight kerosene bouquets. But this Knights wine would appeal to anyone who appreciates a sweet desert.
Friday, June 01, 2007
A sensible cap and trade scheme for national carbon emissions?
The PM’s taskforce recommends a cautious start to carbon emissions trading by 2012 with carbon caps being initially set generously to take into account impacts on the economy. If the report is adopted (how could it not be at this stage of the election cycle?) it will be a shift for JWH who has previously rejected emissions trading and greenhouse reduction targets.
Kevin Rudd has pledged to start emissions trading by 2010 and has set a long-term emissions reduction target of 60% on 2000 levels by 2050. The report is cautious about this type of target, warning of the prospect of significant economic losses if cuts are set too stringently.
The complete report will be released today here. (Update it is here).
The claims I record here about the report come from the press and from an excellent interview with Grant King (managing director of Origin Energy) on Lateline last night. The transcript is available - note that interviewer Tony Jones didn’t understood that the market will determine the carbon price with a cap and trade’ scheme not the government.
The report advocates a flexible ‘cap and trade’ which is a version of the standard ‘tradeable permits’ model beloved of resource economists. Quotas on emissions are set and assigned in some way with trade in these quotas allowing them to settle into areas of the economy where cuts would otherwise be expensive to make. The idea is to encourage those who can cut back on emissions cheaply to do so and for those who find it more expensive to use a quota. This then meets emission targets at lowest community cost.
As an environmental economist I think this scheme has much to recommend it. I also suspect that the price at which quotas trade will be lower than expected as the limitless creativity of capitalism discovers innovative new ways to cut emissions. Initially anyway prices will be relatively low – perhaps $30 per tonne of CO2 – because quotas will be generous. But even as quotas are tightened I suspect carbon prices will rise by less than is expected. At above $30 per tonne Grant King forecasts that carbon emissions by 2020 will be back at around year 2000 or 2010 levels.
Already the AFR suggest the report will be criticized because of its failure to commit to deep initial cuts. The difficulty here is that firms, such as electricity generators, may want to know early on what the costs of carbon will be in order to sensibly plan their investment expansion decisions – a long-term predictable regime is what industry requires. That more stringent quotas will be established in the future provides firms with partial information and the report apparently provides forecast carbon prices as a consequence of the scheme and this is useful information. Some firms have achieved certainty by negotiating special deals with state governments at the expense of the rest of the community.
A valuable feature of the report is that it suggests an international consensus on trading is a long way off so Australia should go it alone and not wait for the rest of the world. The world's major emissions markets now are in Europe. Trading schemes can also be domestic, such as in some US states, or global, as envisaged under the Kyoto Protocol. The report suggests that the Australian scheme should be flexible enough to link up with a future international scheme.
The report suggests some politically sensitive sectors of the Australian economy, such as agriculture, should be exempt. This is ill-advised. Agriculture is an important source of carbon emissions and should be treated as with any other industry. The world’s 1.5 billion cattle contribute as much to global warming as do its 900 million cars.
The report sees Australia as needing all available low-emission energy options (solar, wind, hydro, geothermal, "clean" coal and nuclear) to achieve the large reductions in CO2 emissions required to deal with global warming. Picking winners should be avoided in this respect.
The taskforce report says revenue raised by the emissions trading scheme will initially fund new technologies designed to develop low-emission energy sources. In a second phase, revenue raised will be returned to business and households, which will face higher energy costs as a result of the new price imposed on pollution.
A big issue is how the cap will be distributed whether it will be auctioned off and so on. It is also important to know the period over which the contracts will prevail – will they be annual or will they be very long-term pollution rights that operate for decades? My view is that giving them away to current large polluters to offset their losses is not the way to go. Many non-polluting groups in the community (including consumers) will be hit by higher energy prices as a consequence of pricing carbon so that in terms of distributive justice all should share in the benefits conveyed in owning a quota.
Kevin Rudd has pledged to start emissions trading by 2010 and has set a long-term emissions reduction target of 60% on 2000 levels by 2050. The report is cautious about this type of target, warning of the prospect of significant economic losses if cuts are set too stringently.
The complete report will be released today here. (Update it is here).
The claims I record here about the report come from the press and from an excellent interview with Grant King (managing director of Origin Energy) on Lateline last night. The transcript is available - note that interviewer Tony Jones didn’t understood that the market will determine the carbon price with a cap and trade’ scheme not the government.
The report advocates a flexible ‘cap and trade’ which is a version of the standard ‘tradeable permits’ model beloved of resource economists. Quotas on emissions are set and assigned in some way with trade in these quotas allowing them to settle into areas of the economy where cuts would otherwise be expensive to make. The idea is to encourage those who can cut back on emissions cheaply to do so and for those who find it more expensive to use a quota. This then meets emission targets at lowest community cost.
As an environmental economist I think this scheme has much to recommend it. I also suspect that the price at which quotas trade will be lower than expected as the limitless creativity of capitalism discovers innovative new ways to cut emissions. Initially anyway prices will be relatively low – perhaps $30 per tonne of CO2 – because quotas will be generous. But even as quotas are tightened I suspect carbon prices will rise by less than is expected. At above $30 per tonne Grant King forecasts that carbon emissions by 2020 will be back at around year 2000 or 2010 levels.
Already the AFR suggest the report will be criticized because of its failure to commit to deep initial cuts. The difficulty here is that firms, such as electricity generators, may want to know early on what the costs of carbon will be in order to sensibly plan their investment expansion decisions – a long-term predictable regime is what industry requires. That more stringent quotas will be established in the future provides firms with partial information and the report apparently provides forecast carbon prices as a consequence of the scheme and this is useful information. Some firms have achieved certainty by negotiating special deals with state governments at the expense of the rest of the community.
A valuable feature of the report is that it suggests an international consensus on trading is a long way off so Australia should go it alone and not wait for the rest of the world. The world's major emissions markets now are in Europe. Trading schemes can also be domestic, such as in some US states, or global, as envisaged under the Kyoto Protocol. The report suggests that the Australian scheme should be flexible enough to link up with a future international scheme.
The report suggests some politically sensitive sectors of the Australian economy, such as agriculture, should be exempt. This is ill-advised. Agriculture is an important source of carbon emissions and should be treated as with any other industry. The world’s 1.5 billion cattle contribute as much to global warming as do its 900 million cars.
The report sees Australia as needing all available low-emission energy options (solar, wind, hydro, geothermal, "clean" coal and nuclear) to achieve the large reductions in CO2 emissions required to deal with global warming. Picking winners should be avoided in this respect.
The taskforce report says revenue raised by the emissions trading scheme will initially fund new technologies designed to develop low-emission energy sources. In a second phase, revenue raised will be returned to business and households, which will face higher energy costs as a result of the new price imposed on pollution.
A big issue is how the cap will be distributed whether it will be auctioned off and so on. It is also important to know the period over which the contracts will prevail – will they be annual or will they be very long-term pollution rights that operate for decades? My view is that giving them away to current large polluters to offset their losses is not the way to go. Many non-polluting groups in the community (including consumers) will be hit by higher energy prices as a consequence of pricing carbon so that in terms of distributive justice all should share in the benefits conveyed in owning a quota.
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