Sunday, March 29, 2009

New site

I have a new site at WordPress:

http://www.harryrclarke.com/

Readers please adjust your browser settings.

It is goodbye Blogger for at least a while. I have got to express my sincere thanks to Goggle.com for making the incredible Blogger software available free. It is amazingly simple and powerful software. My reasons for making the change? I want to try something new and want to play around and learn about WordPress.

Bleg: I tried to export my earlier Blogger posts to this new Wordpress site but the WordPress instructions for the export (somewhat ominously) did not work. The problem with the export tool in WordPress is well-understood and analysed in their discussion groups. The usual suggested work-around is to first copy files to a WordPress.com hosted account and then copy them across to the Wordpress.org self-hosted account. That did not work for me as my Blogger archives are far, far too big.

If anyone knows some way to effect the export I'd appreciate any help/advice. I will pay to have the files successfully transferred.

Update: On 15/8/2009 I did copy most of the files across successfully without drama.

Saturday, March 28, 2009

What the Welsh do at night

This is power shepherding.  Literally brilliant.
Thanks Bernd

Joel Fitzgibbon

Defence Minister Joel Fitzgibbon's friendship links with a Chinese national seem to have gone well beyond the point of occasional, friendly personal encounters. Free trips to China and gifts from someone also making hefty financial contributions to the ALP seem completely over the top. Particularly when Fitzgibbon lies about the gifts until they are revealled to be facts and particularly given that he is the nation's defence Minister.

Can he be so naive as to assume other countries do not seek to influence and compromise ministers in pursuit of their national interest? How could a person in this position put himself in a position of appearing to be compromised?

Several major Australia-China issues are currently on the Australian political agenda. China seeks a substantial stake in the Australian resource sector.

Joel Fitzgibbon should resign or be sacked.

Accident-prone Liberals

This pessimistic - though I think accurate - piece from conservative columnist/journalist Doug Conway appeared in today's Manly Daily:

ANNA Bligh's historic win in Queensland extends to 25 the number of consecutive state and territory elections where conservative parties have either lost to Labor or won fewer seats.

The only aberration came last year in WA, where Colin Barnett's Liberals managed to form a minority coalition government with the independents.

In NSW the Coalition has not won in its own right since 1988, when Nick Greiner defeated Barrie Unsworth in a landslide.

By the time Nathan Rees goes to the polls in 2011, Labor will have held power in NSW for 16 years.

Anna Bligh's feat in becoming Australia's first directly elected female premier has delivered a fifth straight term to Queensland Labor, which has ruled for 18 of the past 20 years.

Bligh has given hope to other long-standing state Labor governments which must face the polls in the next two years: Victoria, SA and Tasmania as well as NSW.

State Liberals around the nation have consistently failed to unseat Labor governments despite a string of scandals and some clear cases of ineptitude.

Labor was returned to power in NSW two years ago with just a loss of a couple of seats. Yet Morris Iemma's government had been running one of the most sluggish economies in the country, failing to deliver on health, education and transport.

Labor governments, which at times seem to do everything in their power to get beaten, have proved unbeatable, often thanks to Liberal blunders.

An inquiry into vote-rigging in 2001 forced the resignation of senior Labor figures in Queensland but even that made no difference.

John Brogden resigned as NSW Liberal leader in 2005 after making racist jokes at the expense of premier Bob Carr's wife, and later attempted suicide.

Former South Australian Liberal premier John Olsen quit in 2001 after an independent report found he acted dishonestly in trying to attract telecom company Motorola to Adelaide.

Victorian Liberals have never recovered from the unforeseen uprising that tossed the autocratic Jeff Kennett out of office in 1999.

Labor's extraordinary run at state level is not because voters have always been satisfied with ALP government.

As one commentator remarked, it's because they have had insufficient faith in any alternative.

Thursday, March 26, 2009

H.E. Seyed Mohammad Khatami

I heard this remarkable man - ex president of Iran 1997-2005 - speak at La Trobe University this evening.  Mr Khatami is a Muslim cleric whose main interest is political philosophy.  I found his prepared speech, which ran for half an hour, academic and rather dry.  For another 2 hours however he took good-natured, though often pointed questions from his audience with grace, animation and (most of all) an erudite humor that had even the stern-faced security guards in stiches of laughter.  It was the largest public meeting I have attended at LTU with about 1300 in attendance - the audience filled 3 lecture theatres to capacity. 

A most enjoyable evening which touched on the conservatives in Iran, fanatical Muslims, fanatical neocons, Iranian nuclear power, Palestine, Barack Obama.

Khatami's public presence did not support the Jewish Community Council of Victoria's image of him as a Jew-hating supporter of terrorism.  In his public statements tonight he expressed religious solidarity with the Jews - in terms of a common religious heritage - but opposition to their occupation of Palestine, total opposition to religious fundamentalism and absolute opposition to terrorism.  He saw Obama as a positive force that was nevertheless likely to be thwarted by US pressure groups.  He skillfully promoted the Iranian national image - no mean feat given the press it receives.

The JCCV condemned LTU for inviting him but in my view we should listen. In human terms I've got to say that I feel some bond with people such as Khatami. I probably would not agree with some of his specific religious views but to be honest, if I was organising a barbie, I'd like him to come.  Maybe I am gullible and falling for a skilled propagandist! Maybe not.

World trade collapse

The value of world trade will fall 9% in 2009 compared to growth of a miserable 2% (not 4.5% as forecast) in 2008 the WTO said on Monday.  World production will fall by 1-2% in 2009, the first fall since the 1930s.  Further falls in trade can be anticipated as the recession intensifies - the unavailability of trade finance is proving a constraint for developing countrie and declines in exports have strong multiplierr effects on all trading economies.

The economic crisis that has descended on the globe will not end quickly. A move toward protectionism would naturally worsen things.

Wednesday, March 25, 2009

Tuesday, March 24, 2009

Monday, March 23, 2009

US vs. China on climate change

Given that the US has been so slow to come to the party to even think of seriously addressing climate change it seems almost hypocritical of it to threaten retaliatory tariffs on Chinese carbon intensive exports if China does not adequately price carbon.   Europe had already threatened to do the same to the US when Europe alone was pricing its carbon emissions. The move might force China to comply - I have written a paper analysing such outcomes in a  cut-and-dried game theory setting. The motivation is that by pricing carbon China then gets to collect the duties not the US.  Factors working against such an outcome are the abysmally low levels of energy consumption in a country plagued by extremes of climate and a country which is still distant from middle income status.

I prefer the Garnaut approach - tell China to cut its emissions growth to one half its GDP growth rate - not difficult at present - and then target rates of carbon emissions that converge to global uniformity by 2050.  Seems fairer given China's situation and more likely to be something China accepts.  China is already screaming 'protectionism' in relation to the US and vaguely suggesting a challenge at the WTO.  They are suggesting that destination accounting should prevail (customers not producers pay carbon taxes) with US consumers of Chinese carbon intensive goods being held to account. That is, of course, exactly what the US sees itself doing.

What is really to be feared is that attempts to clean up greenhouse gas emissions will become lost in beggar-thy-neighbour protectionism and a world trade war.

In praise of economics

Both of my university-age kids are studying economics.  When intelligent young people ask for advice on what to study at university I often advise them to study economics.  This often raises a wry smile given that people often know that all I have done all my life is work in economics.  But I try to discount the 'blinkering' effects of my vocational choice when offering advise. I believe what I am saying - indeed even though I sometimes (not often) complain about life in the universities I have never come close to losing my fascination with economics*.

I notice that in my own university which is experiencing a few enrollment pressures - that no such pressures are occurring in the economics area.  A third-year international trade course we teach has over 300 students enrolled this semester! Ten years ago  doomstayers were predicting the end of economics and its replacement with amorphous, non-analytical, 'smorgasboard' courses in 'business' and 'marketing' (NB I regard finance as part of economics and commerce/accounting as a useful discipline that should draw on economics).  I never believed pessimistic claims regarding the future of economics because, in the long-run, the market for quality will assert itself.

For the life of me I cannot understand how marketing can be taught without a solid background in microeconomics. How business students generally can function without knowing what the Reserve Bank and Treasury do.  I really don't see how you can sensibly discuss corporate strategy without knowing basic game theory or understand industrial relations issues without studying labour economics.  Students apparently agree with my perspective and are voting with their feet.

There is some slight advantage to students with poor analytical and maths skills in studying vocational disciplines but in the business area these disciplines don't have the intellectual rigour and intellectual fascination of economics.  Too often, too, they are dominated by verbiage, psycho-babble and non-rigorous reasoning. Moreover, business skills need to be taught partly on the job - not in universities.  The students from such programs too often emerge without a great deal of value-added from their studies.  They come to me with a thesis proposal and I can't help them - they have no quantitative skills and just don't know much.

Economics is the ideal liberal arts university major for students with curiousity and intelligence.


* I have a few regrets in the economics area. One is that I didn't do a systematic program in economic history and secondly that I did not pursue an early interest in the history of economic thinking. Both of these activities I now pursue as recreation.

Sunday, March 22, 2009

More nostalgia - Fairport Convention

Fairport Convention is one of my all-time favourite bands. They still perform although their early album with Sandy Denny Liege and Lief remains my favourite. Denny died tragically in 1978 after skipping through a number of groups. Liege and Lief is monumental folk-rock music:

'To rouse the spirit of the earth and move the rolling sky'.

Try: Come All Ye. The Deserter. Reynardine. Matty Groves. Tam Lin...... fantastic performances.

A beautiful later piece by Denny and this and this. Same incredible voice.

The rhythms of Tam Lin move me 40 years back through time - acrid, smoke-filled rooms, cheap, red wine and earnest discussions about the Vietnam War and conscription. But enjoying FC now in real time with a 1988 Balgownie Estate - Cabernet Savignon - made by the legendary vigneron Stuart Anderson. Great old wine with great music!

Saturday, March 21, 2009

Labor to be returned in Queensland

7.59pm: Despite some good swings to the new LNP I believe Labor will be returned with a much-reduced majority.  In the old Parliament Labor had a huge majority of 37 seats - LNP 23 seats, Labor 63. It was a huge ask for the new LNP to win.  My prediction is based on the ABC's extrapolation of trends given 19% of the vote counted. The LNP needed about an 8% swing to form government - I cannot see them getting that.

Update: By 9-30pm it was all over. The LNP only got a swing of 3.1% and the Labor Party are returned. The number of LDP seats will go up to around 32 which still leaves Labor with a big majority.  The result a disappointment for conservative politics in Australia. The economy is not yet driving voters from Labor.

Long pictures

I enjoyed this oldie from BoingBoing.

Einfeld goes to jail

Former head of Human Rights Commission and perennial liar Marcus Einfeld has gone to jail for at least two years.  The left loved him as a personality judge. But he lied about a $77 fine (he had lied about traffic convictions several times before), lied about his academic qualifications (he bought degrees) and his past directorships and plagiarised past legal judgements.  Einfeld made a career as a well-paid, blow-hard moraliser. Aborigines, refugees, Cornelia Rau ...Einfeld was a great defender of humanity.  I can't help wondering whether his claims in this regard were lies too or, as I often sensed when I heard him speak, just pompous insincerity.

No-one should dance with joy to see Einfeld cop his due.  There is tragedy here - he is 69 and his health is poor.  But for once the legal system worked reasonably well * and extenuating circumstances were not evoked for a favoured son.

* The qualification reasonably because his sentence was reduced because of the pain he has suffered on account of the press coverage received.   But the press didn't persecute him - they only identified his lies.

Thursday, March 19, 2009

Nostalgia - Norman Gunston & Frank Zappa

I had forgotten how good both of them were. Here goes Zappa on the Illinois Enema Bandit. And a totally disgusting version (with Captain Beefheart) of Willie the Pimp.  We miss you Frankie.

Tiger Woods to come to Oz

Tiger Woods will play in the Australian Open this year in Victoria.  He will be paid $4.5 million for his 3 day effort half of which will be subscribed by the Australian taxpaper.  This is his appearance fee and ignores possible winnings. The event will be held at Kingston Heath and I am already waitlisted for tickets in November.  If I am to be consistent with my judgement on the use of public funds to promote sporting events - I recently attacked Victoria's $47 million payment to a certain dwarfish Grand Prix operator - I should condemn the $2.25 million the public is coffing up for Woods.  I do condemn it - though weakly.  The reasons for my weaker condemnation of the Woods subsidy are that (i) $2-25 million is a lot less than $47 million and (ii) it might indeed be a good deal for Victoria - though the promised $19 million benefit that the Labor Party suggests will eventuate is out there in fairyland.  The benefit will be less than that.  Woods is absolutely numero uno in the world of modern golf and this is the major participant sport on earth.  He is not some racing-car-driving bogan but a gentleman who plays excellent golf.

I assume the PGA are coffing up the other half of the appearance fee. That's a big ask. I hope they do not get seriously into the red on this one.

Woods is a freak. He is the greatest golfer of his generation and, as I have suggested before on this blog, a wonderful person.  A guy with soul and feeling who can play golf with demonaic precision.  I can hardly wait!

Victoria is again seen as the sporting centre of Australia with NSW a distant second. Indeed Woods will not play in the Australian Open held in NSW shortly after the Masters - his appearance at the Masters will drain resources and crowds from the now much less interesting NSW event.  NSW do have Brian Eno to lead the 3 week music festival in Sydney and this should help the no-hopers running that state secure a few Mardi Gras votes. Prejudiced? No, not me.

Wednesday, March 18, 2009

Martin Feldstein & AIG (& Mankiw)

The famous Harvard-based economist Professor Martin Feldstein is on the board of the American insurer AIG that received $200 billion in handouts from the US government and which has just paid over $160 million in bonuses mainly to those managers responsible for its massive financial failure.  The bonuses were 'justified' by AIG as retention bonuses designed to retain staff although 11 executives paid the bonuses quit AIG anyway

Feldstein is a conservative Reagan-backer who is now a member of Obama's 'economic recovery team'. Gulp.  A great man - Feldstein has won all sorts of awards and is still prospering.

(Feldstein's Harvard colleague Greg Mankiw argues that Americans shouldn't worry about the bonuses to AIG - they are only 0.001% of annual GDP anyway.  On this basis every criminal in the US justice system should be released from jail.  Disagree with you Greg and more than just emphatically.  Like Feldstein, Mankiw is one of those nominally skilled economists in the US universities who has no sense of the deep dilemmas that confront the US.  Mankiw has learned a little but his intelligence here does not roam beyond the glib and the cute. His views on this issue illustrate the poverty of academic sensibilities in US universities).

1992 St Hubert's Cabernet

Last year I reviewed one of the best wines I drank that year, a 1991 St Hubert's Cabernet.  I thought I had exhausted my stock of these great old wines when I found, this evening, a 1992 St Hubert's Cabernet-Merlot nestled away, the sweet thing that it is, in a sinful back alley of my diminuitive cellar where it had the nape of its neck buried deep between magnums of Froggie plonk I had bought for a special occasion but forgotten about. 

This St Huberts is a gentle old wine with rich cabernet perfumes but with a gorgeous sweet-muted cabernet palate that still has a steely backbone and plenty of cleansing acid.  I remember when I bought this wine thinking it was a bit over-oaked.  Not at all - now the oak is obviously there but seamlessly integrated with mature fruit.  A great wine is so sweet and drinkable that it doesn't challenge.  Just a good drop and a reminder that the Yarra Valley can produce red wines which age well as well as good pinots and chardonnay for the bourgeois wine-drinking spoilers.

It will drink well for another 4-5 years but has probably reached its peak by now.

Executive remuneration

Here are the Terms of Reference for the Productivity Commission inquiry into executive remuneration in Australia.  It is a sensible inquiry because remuneration practices are part responsible for the excessive risk-taking and greed that has led to the current financial mess. 

My kneejerk reaction - the type of reaction that this inquiry hopes to forestall - is that remuneration decisions should be approved by the owners of a firm - its shareholders.  If these shareholders are too penny-pinching the firm's fortunes will suffer. 

But at least we won't have the old boy's club plotting organised theft of shareholder funds under the business-school-driven myth that huge payments are essential to 'allign' the interests of third-rate business thieves with those of those who employ them, their shareholders.  Whatever happened to old-fashioned morality and the desire to maintain a decent reputation?  I assume the business schools see such issues as irrelevant if you can devise a clever enough incentive contract.

Shareholders should call the shots and bear the consequences of doing so.

I'll follow the PC deliberations and change my views if they provide effective counterarguments. I'd be interested if readers could think of sensible counterarguments.

Papal bull

The Pope has reiterated his opposition to the use of condoms in AIDs ravaged Africa. The inhumanity of the Pope's position is self-evident. My basic comment - how can anyone take anything this man says seriously?

22 million people in Africa have HIV. In three Southern African countries the prevalence of AIDs exceeds 20% of the population. The Pope advocates abstinence as a God-driven policy stance. As is well known telling randy men and women not to have sex won't work and this failure (in the absence of condom use) can kill. The God-driven abstinence policy will inflict a horrible death on millions when the use of condoms is a cheap and effective way of avoiding this problem. 2 million people died in 2005 - 6000 people per day.

The difficulty is accentuated by the growth of Catholicism in Africa - numbers have trebled since 1978 to nearly 150 million in 2004. This is about 17% of the total population. Worldwide over this period Catholicism has its fraction of total population falling but voodoo still apparently sells in Africa.

The Pope's reason for sprouting this nonsense? Apart from his obvious expertise in matters of sex and human relationships I assume that this is because God told him what to do on his personal hotline. It is a 'deficit of morals' issue you see. Sex is something intrinsically evil unless you seek to breed and this should only occur between a heterosexual couple who remain monogamous forever. Break this law and you deserve to die. It is God's retribution for being randy and not listening to the Pope's bull.

Words can't express my contempt for these damaging, stupid views. Tolerance for callous stupidity has its limits and hopefully recognition of the stupidity here will have general equilibrium effects of denting this man's powerbase among the gullible in Africa and, indeed, around the world.

Update: The Pope's representative in the blogosophere is a cretin CL who posts anonymously under the distinguished label Currency Lad. In the past he inferred I had questionable sexual preferences because I defended some photos of Bill Hensen. I thought of suing this toad but he is anonymous and most people treat him as a joke. His comments are over at the sewerage blog LP.  The more bigotted and stupid the Pope gets the more his nitwit supporters see him as defending principle.

Tuesday, March 17, 2009

Jokes

A former boss of mine (now deceased)* collected jokes. He wrote them down and filed them and, on having enjoyed a few drinks, could recite joke after joke until the bar shut down.  I envied him intensely as although I love good jokes - particularly vulgar ones - I can never remember them.  I laugh like mad when they are first told but the next day I cannot recall them. Now I know why.  Its the unpredictability of their outcomes that does it:
"Really great jokes....punch the lights out of do re mi. They work not by conforming to pattern recognition routines but by subverting them. “Jokes work because they deal with the unexpected, starting in one direction and then veering off into another,” said Robert Provine, a professor of psychology at the University of Maryland, Baltimore County, and the author of “Laughter: A Scientific Investigation.” “What makes a joke successful are the same properties that can make it difficult to remember.” ''
This is neurology and memory research hard at work.

* Many years after I saw him last Bob B. published several books including two outstanding efforts in recreational, applied mathematics Towing Icebergs, Falling Dominoes, and Other Adventures in Applied Mathematics and Slicing Pizzas, Racing Turtles, and Further Adventures in Applied Mathematics.

Monday, March 16, 2009

Chinese debt worries

China is 'worried about' its $1trillion holding of US Treasury Bills.  The Chinese Prime Minister, Mr Wen, complains that the US has spent too much and saved too little - without mentioning that the consumption boom was funded in large part by Chinese lending.  Mr Wen can't sell the debt - its price would collapse - and is presumably fearful that the world's public borrowing binge will eventually drive up interest rates and again inflict huge capital losses on the Chinese holding.  Indeed Mr Wen must continue to lend to the US in order to prevent this happening. I assume the possibility of a collapse in the US dollar, fostered in part by debt concerns and the US option to inflate it away, would also have crossed Mr Wen's mind.

This is interesting. Mr C wants to sell lots of gunk to Mr A. Mr A has a demand for the gunk and buys it by issuing Mr C IOUs at low interest rates. The IOUs are backed up by Mr A's reputation alone but Mr A finds himself in a bind and needs to borrow so much more that the value of the IOUs is called into place because interest rates might now need to be raised.  Even if Mr A defaulted on the IOUs (or more realistically forced their value down) he would not lose a lot. Eventually Mr C would find it in his interest to forgive Mr A and to resume selling gunk again.  Mr A, despite bewilderingly complex current problems, remains well and truly in the box seat.

Afterthought: This situation of the weak exploiting the strong has parallels but is not equivalent to the US Government bailout of firms like A.I.G..  The US bailed out A.I.G. with $170 billion because the firm was 'too big to fail' and threatened the failure of the international financial system.  The bargaining strength in this difficult situation lies with A.I.G. which is probably the reason they felt they could get away with applying hundreds of millions of the bailout in bonuses to the parts of AIG that created the problem.  And this strength infuriates the bailout-er. Larence Summers says “There are a lot of terrible things that have happened in the last 18 months, but what’s happened at A.I.G. is the most outrageous.” Ben Bernanke says similarly “Of all the events and all of the things we’ve done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with A.I.G.” But the bailout must proceed!

Saturday, March 14, 2009

Bushfire damage

I drove along the Hume Highway going to and from Albury over the past two days following a teaching assignment there. The fire damage along the highway runs for nearly 20 km north from about the 50 km point north of Melbourne. It is striking that, for 12 km, the fire followed the centre nature strip along the highway - in places it seemed (I couldn't be sure) that this strip helped spread the fire*. The fire obviously raced along gullies and tree-lined ridges.

Pine plantations and areas of native forest are completely destroyed over large areas. I also noticed that, even in large paddocks with only a few very isolated trees, the fire destroyed all vegetation. Sparseness of trees didn't help stem the ferocity of this monster.

Coming back into Melbourne I detoured via Whittlesea to the area west of the fire centre at Kinglake. I admit feeling ambivalent about what some might describe as a ghoulish interest but the truth is I was interested in seeing what had happened - among other things to valued bushwalking and birdwatching sites in Kinglake NP. I got about 4 km from Kinglake - I didn't get to the Park - when I was turned back by police. Entry into Kinglake will be for locals only for the next 2 weeks at least.

The scene in the area west of Kinglake is nightmarish although words can't express what is there. The whole area looks as if it has been intensely 'baked' and 'burnt'. There is still a smell of ash in the air. It is more than a fire - its a severe 'scorching'. There is not a blade of grass or any understory in much of the burnt out areas. Blackened tree trunks grow from blackened soils and stand starkly in landscapes that stretch out for miles over the Yarra Ranges. The fire was clearly very hot but also very extensive. Destroyed houses - one tragically that I saw just got caught by the extreme southern end of the fire - look like bomb sites. I have read exactly this description in the media but didn't intuit the reality. Chimney stakes stand but the houses themselves have been blasted to pieces. Farm sheds have been warped and scorched in the heat.

Again I was struck by the way the fire front charged across largely cleared farmland areas burning everything in its path. There were no simple escapes.

Driving through these areas is an emotional experience. You can sense - at least to some degree - the horror and fear that those living in these communities must have felt.

* A dark side to wildlife corridors. Not only do they spread unwanted 'weed' species rapidly they promote the spread of forest fires. Yet maintaining corridors provides insurance against climate change shocks and limits island biogeographic extinctions.

Commercial-in-confidence

For the right to operate the Australian Grand Prix in two weeks time the Victorian Government will pay Bernie Ecclestone $47 million.  In a civilised society politicians who abuse public trust in this way should be sacked and then jailed.  It is a totally disgraceful waste of public monies.

The $47m figure has only just been revealed.  Apparently Ecclestone threatened to take the Grand Prix away from any Government which reveals his fee. State Premier Brumby when asked of the fee claimed it is 'commercial-in-confidence'.  I wonder.  I suppose I have a nasty, suspicious mind but could it be that political leaders from Kennett to Brumby have paid these bribes to Ecclestone to secure a handful of petrol head votes from among the morons who go in for this 'sport'.  It would spoil the pollie fun to have to tell the adult population of Victoria - most of whom have zero interest in this retarded activity - that they are paying for it.

The Auditor General of Victoria claims that benefits from the Grand Prix had been overstated by $100 million.   There is no demonstrated net economic benefit to the state from it. Let's end this nonsense foreover - no more attempts to buy a few lousy votes for an environmentally-unsound, pointless activity.  If moron petrol heads want to watch this sort of activity let them pay for it entirely and include in that the cost of the externalities (reduced amenity values, emissions, noise and increased traffic congestion around the venue).

Thursday, March 12, 2009

Newspaper futures

A lot of printer's ink has been spilt on the issue of the future of newspapers.  I buy three each day (The AFR, The Australian and (on a discount offer) The Age), My wife likes the Herald-Sun.  Our families' purchases are a ridiculous exception to the standard view that newspaper demands are collapsing.  This NYT article claims - in relation to the US:
For more than two centuries, newspapers have been the indispensable source of public information and a check on the abuses of government and other powerful interests. And they still reach a vast and growing audience. Daily print circulation has dropped from a peak of 62 million two decades ago to around 49 million, and online readership has risen faster, to almost 75 million Americans and 3.7 billion page views in January, according to Nielsen Online.
This is a remarkable decline in print and surge in online patronage.  What is happening? One of the difficulties is that a lot of advertising is going online.  Another is that 'entrepreneurial' newspaper bosses have laden newspapers with a stack of debt from their purchasing binges around 2005-07 when news media prices were at peak levels.  The Fairfax family has problems in this regard in Australia and Murdoch has massive debt everywhere.

On the consumer side attitudes are changing too.  I read the main articles in the NYT almost every night online. This has the effect of reducing my interest in the Australian media. It is also time-consuming - I have less time to read newspapers.  My newspaper arrives around 6-00am and if I am up earlier I go online to see what they are saying.  This represents my gradual shift away from the printed media - its a shift that I think is likely to be widespread.

And newspapers are expensive - the online reads are free - even if they are not provided you can get the title of the article you are ofter - this is normally available - you can Google that and dig up the article somewhere.  (The exception to this is the AFR - it is expensive and I must buy it to gain the very selective information I want from it).

I have no objection to a pure online service but I don't see how the economics will pan out. Charging is difficult since there is so much free competition.  The online providers deliver a lot of social value but I don't see how that will yield a buck for them.

Interesting futures here.....

Rejected submission on lemons

In my youthful past when I sent an article to an academic journal and it was rejected my reaction was often one of fury.  This was often amplified by the fact that many referee reports are dismissive and careless*.  These days I still occasionally get angry but I have also become more philosophical as a product of what must be hundreds of interactions with editors and referees.

George Akerlof's paper on 'lemons' is one of the beautiful contributions I have come across in microeconomics. It shows depth of vision.  It changed the way we do microeconomics and the role we advocate for markets.

Akerlof considers a car vendor selling second-hand cars that may either be 'quality vehicles' or 'lemons'. It is a standard market situation except for one thing - the vendor has better information about the quality of the cars sold than potential purchasers. This is asymmetrical information. Potential customers will drop their bid for a car below the price of a 'quality car' because they will suspect there is some probability the car might be a 'lemon'. On the supply side fewer people will wish to trade in their 'quality' vehicles if bidders offer a reduced price.  Thus iterating again the thought process of the buyer there will be an increased probability that any car is a lemon.  Again this will influence the decision to sell a 'quality' used car and so on...... 

The upshot might be that the market for second hand quality cars disappears completely - or is greatly dinminished - as a consequence of the knowledge advantage of the car vendor.  It is a brilliant insight with a host of applications in real markets - in health, education and in various professional services for example.

Akerlof made many valuable contributions in economics apart from the 'lemons' problem. Indeed I referred to his interesting work on behavioural macroeconomics on this blog.  He was awarded the Nobel Prize in economics.  In this interesting note Akerlof discusses the process of writing and submitting the 'lemons' paper. It was repeatedly rejected by leading journals in economics as 'trivial' but was anything but that.

* This carelessness doesn't always prevent publication. I have submitted one paper that I am now convinced was wrongly accepted. I am not saying where this is.

Capitalism beyond the crisis

An elegant and incisive attempt to put the current financial crisis in perspective is provided by Amartya Sen.  How should 'capitalism' evolve and what are the implications for economics? A related piece by Sen concentrating on the misinterpretation of Adam Smith's views is here.  No-one who has read Theory of Moral Sentiments by Smith could ever believe was a simple-minded supporter of laissez-faire.  Human beings are too complicated for that.

Wednesday, March 11, 2009

Asymmetric libidos & the right to say no

I am interested in - though rather late in responding to - Bettina Arndt's view that a few year's after having children 'most' women don't particularly enjoy sex but that most men do.  Indeed the claim is that once a woman has a secure relationship her sex drive ebbs quickly. It is one of these 'most' statements that you would want to be careful with - Arndt cites some evidence. If Arndt's analysis is correct it has strong implications not only for marital life - I'll also begin to laugh less frequently at the jokes men tell - after they have had a few beers - about 'not getting enough'. It clearly isn't a joking matter!

Arndt's prescription for what she sees as an epidemic of mismatched libidos on gender lines? Well, ladies, although she sees the right to say 'no' as an important advance in the 'rights of women', Arndt believes that women should be more careful about exercising that right because of the destructive impacts on men.  Indeed, The Age makes the astoundingly perceptive observation on the basis of the Arndt analysis that a happy marriage requires sex! Who could ever of thought such a thing!

Some ugly feminist responses to the Arndt argument are presented here along with a selection of blog links that I didn't care for.  The gist seems to be that Bettina is advocating 'rape in marriage' and that men faced with a reluctant spouse should accept a monastic lifestyle or find other means of 'relief'. I guess they weren't thinking at all about alternative 'trade in' or 'update' options but I assume that more than a few men would. This would often turn out to be a regretted outcome for all involved.

Tuesday, March 10, 2009

Rudd Government - a bad joke

The Rudd Government was elected in November 2007 with a me-tooist approach to policy. Policies were replications of those of John Howard. There were two exceptions - climate change policy and industrial relations.
  • By 2007 John Howard had designed an ETS but Rudd promised to get 'really' serious on climate change. After 15 months we have signed the irrelevant Kyoto Protocol and committed to a policy which seeks a maximum GGE emission cutback of a miserably low 15% to 2020. Would John Howard have done less than this?
  • On industrial relations Rudd promised to end the tyranny of the Coalition's WorkChoices Policy which delivered some flexibility in the workplace by allowing individual contracts between worker and employer. The policy helped deliver high wage growth and the lowest unemployment in 34 years. Moreover, this is one policy Rudd will deliver on. In the worst recession the world has faced in 80 years Rudd/Gillard will reregulate labor markets and reintroduce the executive authority of trade unions.

History may come to judge this government as one of Australia's worst. Sad for us all.

Labor's job destruction package

Julia Gillard's moves to reregulate Australian labour markets should be rejected by the Senate. The proposed moves helps trade unions but will destroy jobs in vulnerable industries such as hospitality where huge wage increases are about to occur. Regulating huge increases in holiday rates for restaurant staff has a simple and immediate effect as a restaurant-owner told me recently - we will shut the restaurant on holidays.

In the current economic situation Australia urgently needs the upmost wage restraint and the maximum labour market flexibility. Fiscal expansions will not cut labour costs and yet that is what is urgently needed if labour demands are to be sustained in industries facing reduced demand for outputs.

Think payroll tax cuts, superannuation levy subsidies - anything to keep the pressure off labour costs. But reregulating the labour market to enforce a union-driven demand for an enhanced role is utterly daft policy.

The Liberal Party should not duck the heat on labour market reform. The Howard Government generated strong wage growth and the lowest unemployment rates in Australia in 34 years. This is something to trumpet not deny.

Monday, March 09, 2009

Climate change policy pessimism & policy

Its only a small sample but 78% of Australians still have climate change concerns despite the economic crisis - only 35% want action deferred because of the crisis.  However at the current conference in Copenhagen prominent scientists from the Tyndall Centre for Change Research believe that an effective cooperative global agreement to restrict emissions at the UN meetings in Copenhagen in November is unlikely - they believe geoengineering solutions (mirrors in space, encouraging growth of plankton in the oceans) have more potential that what looks like becoming the 'weak daughter of Kyoto'.  These types of backstop policies should be taken seriously if agreement cannot be reached though the safest course is to seek agreement.

Moreover although President Obama clearly wants mild GGE controls - at 14% reductions by 2020 his stance parallels weak Rudd-driven Australian targets - but the financial crisis suggests Congress might not go along with even this restricted target.

The Four Corners show on the ABC tonight (Heat on the Hill) provided an excellent guide to the current staste of play with respect to climate policy in Australia. Rudd has set a maximum cutback by 2020 of 15% which is pathetic and cannot help the November UN negotiations.  Very impressed with Ross Garnaut's remarks - one senses the deep disappoint he feels at Labor Party political cowardice in the face of interest group pressures. 

A central issue in the show was the distribution of free permits.  The principle is simple in my view. Provide exemptions from quotas for all exports of carbon-based goods at some base level and subject to the need to purchase a quota all imports of goods from countries which do not impose adequate controls on carbon emissions*.   The idea - effectively tax all local carbon consumption in accord with the principles of destination accounting. Thereafter provide no exemptions at all to the local consumers of carbon fuels - subject them all from 2010 to a $20 per tonne CO2E tax in a two-year transition to a full-fledged carbon trading scheme.

Of course doing this provides heightened reasons for other countries to switch to some form of carbon charging. They then collect the duties not the countries they seek to export to.

The ANU's Frank Jotzo made the claim during the show that it was fine to wipe out the Australian alumina industry because it was coal-based while alumina industries overseas relied on hydropower.  That seems unreasonable to me since the CO2 is consumed elsewhere. Moreover, in other industries where coal is the basic energy input in Australia and in a competitor country such as China - the result would be a carbon leakage that would shift activity to China but do nothing to limit global emissions.

A second central issue was that of long-term carbon control objectives.  The issues are serious enough to put a 350 ppm target for 2050 on the table and to seriously negotiate around that.  Harvard's Daniel Gilbert gets it right - the difficulty with climate change is that it is proceeding too slowly.  Dramatic shifts might invoke specific action but a gradual drift upwards in temperature over decades gives politicians like Kevin Rudd the chance to endlessly procrastinate.  The difficulty is that once dramatic shifts have occurred it may be too late.  The image of the frog gradually being boiled is the ultimate source of the Garnaut view that thiws is indeed a 'diabolical problem'.

The 100% exemption policy is consistent with the views of the Liberal Party which I support. I definitely do not support the Liberal Party's move to delay introduction of the scheme. It is now way past the time for action.

* If there were WTO objections to this under Article 1 of the GATT then appeal the decision and fight it.  The WTO does not have the right to imperil the world's economic future.

Saturday, March 07, 2009

Earthquake in Melbourne


I'd got back from Canberra last night about 8-30pm.  It had been a long day and I was wearily sitting in my office at home in the north of Melbourne when, at around 9-00pm, I heard what sounded like a motor outside the window - weird enough for me to stop and think 'What is that?'. Then the window frame itself started shuddering for 10 seconds or so.  It was an earthquake of magnitude 4.6 - the second I can recall experiencing in Melbourne.

Friday, March 06, 2009

Gloom in the markets

The extraordinary massacre on US equity markets continued Thursday with a 4% decline to levels not seen for 11 years. The Aussi market (above) declined 1.4% today. It is still inaccurate to call the current dip in the US the worst recession since the Great Depression - 1982 was worse - but the adjusted unemployment rate suggests things are getting close to that.  The actual unemploment rate in the US is 8.1% with 651,000 Americans loosing their jobs in February.

Your faithful scribe got hammered (ignoring his own advice to others) over the last week or so with some premature stock market punts - his foolish bet that things could not get worse has gone south. The market is close to the levels of a decade ago and has halved since its peak in late 2007. There is no question it can go lower. Note the relatively gradual rise and the subsequent - near vertical-fall.

I must - cut back on the Bollinger. Bin 65 Chardonnay is underrated!

Wednesday, March 04, 2009

Cricket & terrorism

The attacks on the Sri Lankan cricket team in Lahore cannot be condemned too forcefully.  Very plausibly it is Islamic terrorists who have killed 8 innocents (civilians and police officers) whose committed no crime at all.  A number of prominent cricketers were injured.  What a tragedy - cricket is much more than a game - it is a way to promote international understanding.

I am trying to figure out the motive for this terrible attack. Imran Khan last year criticised Australian cricketers for not playing in Pakistan since 1998. He argued that cricketers would never be attacked because cricketers were so uniformly popular throughout Pakistan.  A reasonable sounding hypothesis that turns out to be tragically wrong.

Speaking to Pakistani students this morning I was reminded of the fact that there is a war being waged inside Pakistan by terrorists and that thousands of innocents are being killed each year.  Many of these killings are carried out to instill terror among civilian populations but they do not get much publicity. It might be that the present attack is an attempt to instill widespread terror through an attack the terrorists know will be widely publicised.  In short, an attempt to effectively terrify local Pakistanis by attempting to kill foreign cricketers.

It is the only rationale I can come up with for this senseless attack which otherwise seems not only to be an utterly immoral action but something that will harm the objectives of the terrorists themselves.

Update: Pakistan's Daily Times assumes that Al Qaeda was the aggressor and makes sensible points:
International cricket is no longer possible in Pakistan; therefore we should stop accusing foreign teams of discriminating against Pakistan vis-à-vis India. The question here is of the survival of Pakistan, not of cricket. The country is split down the middle, its two mainstream parties getting ready to face each other in the streets amid rising violence. The politicians and other civil society organisations protesting against the government have so far enjoyed the “exemption” from terrorism allowed by Al Qaeda. Unfortunately, it seems they are not going to give up confrontation to unite against Al Qaeda.


Al Qaeda is hardly interested in the restoration of the deposed judges or the correct observance of democratic rules in Pakistan. It wants Pakistan as its own state, armed with nuclear weapons and an economy that can sustain global terrorism. It would be a pity if Pakistan responds, like an ex-ISI boss who has already done so, by accusing India’s RAW or Israel’s Mossad for this attack, as some commentators did in reference to the Marriott blast when an Indo-Pak media war was sparked by the Mumbai attacks. (my bold)

Tuesday, March 03, 2009

Mitigation contagion

An issue I have addressed in some of my recent research is whether having an additional country commit to mitigating their carbon emissions increases the pressure on or improves the net rewards to other countries if they mitigate.  Is the incentive to mitigate contagious? In the game theory models I have been working with there are mixed messages. On the one hand if a large country mitigates the possibility of global carbon leakages* diminishes since footloose carbon intensive industries are unlikely to move to that country but, on the other hand, holding out by not mitigating has appeal - if it holds out and does not mitigate a country gets all the carbon leakage benefits from those who do mitigate. 

From this sort of perspective the only contagion induced by a small country like Australia committing to mitigate is limited to moral effects - countries might not like to be identified with an increasingingly small group of bad guys who do not mitigate.  These moral effects - described in behavioural game theory - might be a non-negligible force - people and nations will often cooperate and behave as good citizens if they see others doing so and wish to share in a sense of doing the right thing.

A decisive event that many of us have long looked for is a specific decision to move to a low carbon economy in the US.  Most researchers see the decision of the US to mitigate as a necessary though not sufficient condition for other countries to enter into a comprehensive global carbon agreement. That seems to be happening thanks to the role of President Barack Obama.  This, according to the NYT, has created a wave of interest globally in pursuing mitigation.

The current economic difficulties provide a stress but overall the prospects for reaching a global agreement in Copehagen this year seem to have improved a smidgeon. Good.

* Loosely these refer to costs to a mitigating country and gains to a non-mitigating country that arise from the costs of GGE control. These might make vthe exports of the non-mitigating country more competitive and create a case for industry location shifts toward the non-mitigating country.

Monday, March 02, 2009

Gillard's use of our tax dollars to promote the ALP

I've praised Julia Gillard's abilities in the past but, at core, she is just a politician. In fact a politician who seeks to use our taxpaper dollars ($14.7 billion!) to promote her own political party. This is what recipients of Education Revolution packages must do for Ms. Napoleon in order to get their tax-payer funded dough:
"To receive funding under BER, there is a requirement to recognise and acknowledge the Commonwealth’s contribution. As a minimum, schools must adhere to the procedures and requirements set out in these Guidelines.

Recognition ceremonies: Schools receiving funding under the Primary Schools for the 21st Century and the Science and Language Centres for 21st Century Secondary Schools elements of BER must hold recognition ceremonies as part of their conditions of funding:

The Deputy Prime Minister (Ms. Napoleon) must be invited to

1. All opening ceremonies;

2. A convenient date for the ceremony for all parties should be chosen. Schools are required to choose three dates to allow greater flexibility for the Deputy Prime Minister (Ms. Naploeon) or representative to attend;

3. Ceremonies should not be scheduled on Parliamentary sitting days;

4. For assistance with organising an official opening, schools must contact DEEWR to arrange an Official Recognition ceremony through the BER website.

5. Provide the Deputy Prime Minister (Ms. Napoleon) with at least two months notice of any openings and public events relating to the projects;

6. Hold an official opening or ceremony within three months of the completion of the project, unless otherwise agreed by the Deputy Prime Minister (Ms. Napoleon); and

7. Make provision in the official proceedings for the Deputy Prime Minister (Ms. Napoleon) or representative to speak.

Once it is established that the Deputy Prime Minister (Ms. Napoleon) or representative is to open a facility, this arrangement cannot be changed without the Commonwealth’s agreement.

Publicity: Schools should acknowledge the Commonwealth’s assistance in publicity issued by the school regarding its BER funded project such as newsletters, web sites, articles in the local media, school outdoor signs and any other form of advertising available to the school.

Plaques: Schools will be required to affix a plaque, to be supplied by the Commonwealth, to all completed projects. This includes, but is not limited to, new buildings and substantially refurbished buildings. Where a plaque cannot be attached to a project because of the nature of the project, then a plaque must be placed in an appropriate location in the school, such as the front foyer or administration area.

Roadside signs: Schools will be required to affix a roadside sign, to be supplied by the Commonwealth, in front of the school for projects being funded under the Primary Schools for the 21st Century..."
Publicly bow and scrape scumbags! Honour the great Ms. Napoleon!

Sunday, March 01, 2009

Creeping socialism in America?

I don't agree with the gist of the message here - the US need a more inclusive healthcare system, probably need more public spending on education and the globe certainly needs US GGE controls to bring about an effective international agreement. But I enjoyed this cartoon that sums up the conservative view of Obamaism.  The right's paranoia is aired more explicitly here. again I disagree with the central message - it seems to me if you do wish to stimulate the economy do so in ways that provide a broad range of much needed social payoffs. You get a potential stimulus benefit plus a potential social payoff bonus.

Thanks JS for the story & Slate for the cartoon.