Friday, June 30, 2006

Muslims and Non-Muslims

I found this piece about Muslim attitudes to non-Muslims and Non-Muslim attitudes to Muslims enlightening. The two groups are not that far apart - they, for example, share common prejudices about each other.

The enemy for both sides, in my view, is divisive religious belief and prejudice not the other party.
'Western respondents tended to see Muslims as fanatical, violent, intolerant, and disrespectful towards women. This, frankly, is hardly a shock. What might surprise Western readers is that Muslim populations tend to think of them in precisely the same way - though they add that Westerners are selfish, immoral and greedy for good measure.'

Israeli tit-for-tat

Palestinian terrorists capture a young Israeli teenager Gilad Shalit and Israel lets them have it. 80 Hamas officials arrested including 8 cabinet ministers, warplanes buzz the 'summer palace' of the Syrian President Bashir Assad (the sonic booms must have put the fear of God into this supporter of factions like Hamas and Hezbollah) and dozens of air raids by Israel on the Gaza strip. What can Hamas say? 'All this and we only kidnapped one young Israeli and murdered a few. It 'aint fair'. It is you know, and very effective.

The Israeli's have met an ugly show of force by Hamas with a controlled though strong counter-punch designed to destroy Hamas. Hamas has nowhere to go and its naive Palestinian supporters will bear the costs.

If Hamas releases the young boy they are revealled for the terrorist supporters Israel has always described them as. But what is their alternative? To murder him as they did to the 18 year old Eliyahu Asheri. Then what happens to the Hamas politicians Israel has arrested? And what happens to Hamas' already tattered international image?

Further threats from Hamas - we will escalate? So what? How are they holding themselves back now? The Israeli response is appropriate.

Drugs that cure addiction

The grand daughter of Leon Trotsky (Nora Volkow) is a neuroscientist who believes that understanding the dopamine mechanisms in the brain will soon take us close to a pharmaceutical cure for addiction that is also a vaccine for all forms of addiction (gambling, sex, drugs).

Making money out of obesity & diabetes

The pharmaceutical companies have come up with Rimonabant that will control appetite weight and perhaps inhibit smoking.

The food company Nestlé comes up with a cereal bar that will inhibit obesity and diabetes. There is money in flab and this is the most promising basis for assuming a discovery will be made which limits the world epidemic of obesity and diabetes.
At the company's mountainside research laboratory... scientists are working on new products that alter the body's absorption of sugar, reduce fatty acids in the bloodstream, and step up the burning of carbohydrates during digestion. The first of these offerings, a cereal bar with a fiber additive that tamps down surges in blood sugar levels after eating, was launched in Asia last year and will soon be rolled out worldwide.

For now, the cereal bar is marketed mainly to people with type 2 diabetes, which is often triggered by obesity. But Nestlé says the same additive could later find its way into mass-market brands such as Stouffer's and Lean Cuisine prepared meals. And with more than 300 million obese people worldwide, including 30% of U.S. adults, it's easy to understand Nestlé's interest in the market.
Thanks John Shannon.

Thursday, June 29, 2006

Chinese car love

I tuned into ABC news radio this afternoon to hear a snippet on the Chinese car industry. By 2020 the Chinese market may be the biggest car market on earth – perhaps bigger than the US, with 18 million new vehicles per year and a fleet of 130 million vehicles in all. More models are now sold in China than in any market in the world including the US. Moreover, as China is increasingly the centre of world manufacturing, and car production is manufacturing, this is where car production as well as consumption will be concentrated. Chinese car production plants are already using robots in highly automated settings and sell a budget car for under $6,000 with a profit-margin per vehicle of about $16 per vehicle.

Last year The Economist set out the major commercial and environmental issues that kindled my interest in this industry. The following segments drawn from the Bangordaily set out things succinctly:

‘China, with its big city's broad boulevards suddenly jammed with cars, is plunging into the same love-hate automobile obsession that has long since absorbed the United States. As The Wall Street Journal reported recently, nearly 1,000 new cars are hitting the streets in Beijing every day, crowding a city already clogged with traffic and choked with pollution. The mayor complains that the flood of automobiles makes it hard to run the city. And local officials may ban private cars temporarily to improve air quality during the 2008 summer Olympic Games. Cars in China are already a curse and a blessing.

Aside from traffic jams and air turned blue by exhaust fumes, the country's automobile industry is a mainstay of its booming economic development. The
Journal reported that car sales were up 54% for this year's first quarter compared with last year. It said the Chinese auto market, the world's second largest, employs 1.7 million workers. At the current rate of increase, the 33 million vehicles on Chinese roads will surge to 130 million by 2020. As in many developing economies, owning a car has become a mark of success, widely achievable with higher wages and reduced car prices. A Chinese-made hatchback sells for $5,200. Consumer demand and the vital role of the automobile industry in the Chinese economy have left environmental considerations and mass transit largely in the lurch. Pollution restrictions and applications for a dozen new or expanded subway systems have been put on hold in deference to the automobile craze.

Does this sound familiar? Most Americans love their cars, often still preferring big SUVs despite record gasoline prices and rollover hazards. They put up with bumper-to-bumper morning and evening traffic in most big cities rather than turn to carpooling or mass transit for the sake of personal convenience and because the traffic burden has grown incrementally. Both countries will do well to mitigate their traffic problems by expanding rail service. And both must seize the pollution problem by improving exhaust control and limiting the use of high-sulfur fuels. They can see in each other a reflection of the consequences for not acting.China and the United States have a responsibility to harness their automobile industries to reduce the greenhouse gases that pollute the world's atmosphere and contribute to climate change. In their shared affection for the automobile, there is an opportunity to set
standards that will improve the health of the planet while still providing drivers in both countries all the traffic they can handle’.

The Chinese car industry is a remarkable development that will improve the quality of life for hundreds of millions of people although, this will be qualified by environmental concerns. Locally the development has major implications for the way we see the future of the Australian car industry which, to be blunt, looks dim. It also emphasises the urgency of developing non-fossil-fuel based car technologies and of dealing comprehensively with the global public good consequences of greenhouse gas emissions. If we don't do it, they won't and we should.

Wednesday, June 28, 2006

Correa flowers

Thanks Lee, made my day.

Mid week review

I have been busily marking exams and have just finished the last paper. Most teachers whether at schools or universities will tell you that the most uninteresting part of their work is grading assignments and exams. There are bright spots but, for the most part, it is an effort to keep your concentration and focus.

Hopefully I can now return to some serious blogging.

There have been a couple of recent posts on other blogs that interested me but which I didn't have time to pursue. One by Jason Soon at Catallaxy looked at the value of freedom - amongst other things it discussed the role of risk and the ability of people in a free society to make mistakes. A post by John Quiggin similarly asked whether he could be a libertarian social democrat. On this blog there have been heated exchanges over the right of the state to attempt to manipulate people's eating, gambling and drug-taking behaviours.

The extent to which you want the state to intervene in people's lives is, of course, a major issue distinguishing different camps of political philosophy. The debate is confused since no-one outside of North Korea or Cuba favours state socialism any longer - there is universal agreement on the value of a market economy - and, similarly, few endorse unbridled libertarianism. My own (not entirely consistent position) is that I am support free markets but have an ambivalent attitude towards the state. I support state intervention to address market failures, income and opportunity inequalities and to pursue active interventionist policies to stabilise the macroeconomy. In this respect my views are just consistent with those of most economists. But in fact I would go a fair bit further than this.

As the conservative I am, rather than the liberal my critics would suggest I should be, I am also concerned with the fact that people do seem to act irrationally and that, sometimes the State might want to intervene to nudge things in a particular direction. For the most part these are negative nudges (drug, food and gambling restrictions) but there are also positive nudges as well - I support public education and activities of the Australian Broadcasting Commission and SBS.

I can justify these views by appealing to pragmatism but justification is probably unnecessary since many in the Australian community support these public interventions.

The age old issue of the appropriate role of the state is a broad question and one that I will return to. But how involved do you believe government should be in changing habits of citizens? Are activist drug, food and gambling policies valuable or are they are pernicious interventions by the nanny state?

Monday, June 26, 2006

Got a minute?

My work life is plagued with interruptions – people who want me to deal with their concerns right then. Alison Motluk in NewScientist this week looks at the phenomenon of 'being interrupted'. Interruptions cost the US economy $588 billion per year. Information workers get interrupted on average every 3 minutes.

The effects are severe. Being bombarded with emails and phone-calls has a larger effect on your IQ than smoking marijuana and none of the euphoric delight. It can create apparent attention deficit disorder (distraction, disorganization, impulsiveness) so you can’t eventually get anything done – but symptoms disappear if you take a holiday.

Moreover, it is not just external events that drive us to distraction – 50% of interruptions we experience are self-imposed – about half of interruptions. We need to be delivered from temptation to be diverted, from the compulsive need to check our email, too chat with friends and so on. We need to prioritise.

The suggestions made for ‘surfing the wave of interruptions’ include making your office face away from the flow of people – I’ll switch mine so that – when I work I face out the window. Stand up when someone is in the process of interrupting you so they know what they are doing and don’t offer them a chair. Put a big clock in full view of visitors and glare at it while they are interrupting you. Cutting two centimeters off the front legs of a chair discourages long stays.

If you must put up with interruptions keep a notebook to signify where you are up to when interrupted. Or put workers in an open space environment of the type despised by Jason Soon – in such environments people interrupt each other more often but at more convenient times.

And, of course, be tough. Tell people twhen you are busy and apologise while doing so. Offer to schedule a meeting for another time, or have regular times each day when you have an open-door policy. Finally - and this is painful - have the guts to turn off your email, phone and instant messenger until the job is done.

Immaturity increasing: Academics as kids?

Neoteny describes a process by which paedomorphism is achieved – in neoteny, the physiological (or somatic) development of an animal or organism is slowed or delayed. So adults retain child characteristics.

Biologist Bruce Charleton argues that higher education is making people less psychologically mature. The modern world is unstable so a psychological neoteny effect – retention of childlike flexibility of attitudes, behaviours and knowledge - means adults never mature. Formal education, although continuing past physical maturity, leaves adults with immature minds.

‘The psychological neoteny effect of formal education is an accidental by-product — the main role of education is to increase general, abstract intelligence and prepare for economic activity. But formal education requires a child-like stance of receptivity to new learning, and cognitive flexibility. When formal education continues into the early twenties it probably, to an extent, counteracts the attainment of psychological maturity, which would otherwise occur at about this age’.

In hunter-gatherer societies, maturity was probably achieved during a person’s late teens or early twenties but modern adults, particularly highly-educated and socially-valuable people, fail to attain this maturity.

‘People such as academics, teachers, scientists and many other professionals are often strikingly immature outside of their strictly specialist competence in the sense of being unpredictable, unbalanced in priorities, and tending to overreact.’

Charlton added that modern cultures favour cognitive flexibility so immature people thrive and succeed, setting the tone not only for contemporary life, but also for the future, when our genes may change as a result of the psychological shift.

The faults of youth are retained along with its virtues. These include the mixed virtue of impulsiveness (as argued before), sensation and novelty-seeking, short cycles of arbitrary fashion and a sense of cultural shallowness.

David Brooks, in Bobos in Paradise documents a related phenomenon concerning the current blurring of the bourgeois world of capitalism and the bohemian counterculture. Brookes believes people have lost the wisdom and maturity of their bourgeois predecessors due to emphasis on expertise, flexibility and vitality.

Are your colleagues neotenic? Are you? Not me!

Flag Tim Blair.

Gittins supports food policies.

Co-worker Samantha pointed out to me this article by Ross Gittens supporting a case for activist food/obesity policies based on market failure ideas.

Sweethearts not bleeding hearts

I am not a fan of advertising on blogs - and not a fan of advertising generally - but I was interested in this match-making advertisement from the conservative Ace of Spades blog.

It seems sensible - go for a partner who shares your main political precepts.

Sunday, June 25, 2006

David Tilley under the knife

A powerful account of surgery and its aftermath by David Tilley at Barista. Fantasies, hallucinations and some keen observations on our health system. Well-written.

Courtesy of Tim Blair.

Water trading

Farmers are complaining about being given the right to sell off their claims to Australia's water supplies under the National Water Policy. There are circumstances where being given a choice can make you worse-off but this is not such a situation.

If a farmer facing bankruptcy is forced to sell his water rights then the sale is a consequence of the imminent bankruptcy not a cause of it. If denied the right to sell water in this sitiuation the farmer will be worse-off not better-off. We need trading of water rights so that scarce water resources go to their highest valued uses so that valuable irrigation water is not used to flood fields so grass will grow to feed dairy herds. Nor does the rice-growing industry make much sense in arid Australia.

For once The Age's editorial gets it right.

Saturday, June 24, 2006

Being fat & poor: The case of Krispy Kremes

Being fat can be caused by not having enough to eat and by being poor. Budget-constrained people eat a lot of junk food because they are not in a position to make healthy food choices. If they live day-to-day on low incomes they will gravitate to pubs and fast food outlets. This is particularly harmful for children of the poor who come to see potato chips and soft drink as food. Poor parents may not be able to afford to feed kids decent high-nutrient food and may end up providing them with the standard high carbohydrate poisons that leave them obese with the danger of diabetes. People in developed countries without access to adequate food tend to be overweight. Partly this is due to lack of information and opportunity but also MacDonalds is an affordable treat for the poor.

As a junk-food food case study, doughnuts are nutritionally barren. They are high in carbohydrates, fat and salt and contain dangerous transfats. To burn off the calories added by a single plain doughnut you must walk for more than 30 minutes. I’ve never liked doughuts even as ‘treats’ because they taste overly sugary and often seem to be stale. We have better food produce than this in Australia.

The US doughnut producer Krispy Kreme (much beloved by the heroic loser Homer Simpson) has been criticized for worsening obesity in Britain and has now arrived in Australia. An article in The Age (‘Krispy keeps us korpulant’) sets out the nutritional implications of this food and also explains where these stores are locating. Yes, almost all are in areas of socio-economic disadvantage. In Sydney 12 of 16 planned stores are in highly disadvantaged areas ranked 2-13 in the ABS list of 44 metropolitan councils. The first store in Victoria - at Narre Warren – is in the 10th most disadvantaged area in Melbourne.

Junk food enclaves in poor areas will worsen Australian’s future mortality due to obesity and diabetes. They will increase our national health bill and so should be taxed to internalize public sector health cost externalities. Most importantly, people who enter these stores must be provided with accurate information on the crap they are feeding themselves. 3-4 doughnuts can provide 75% of daily required calories, up to 108 grams of sugar and 96 grams of fat. The impact of eating 4 doughnuts with a coke is equivalent to eating 38 teaspoons of refined sugar. This is a plausibly horrific, meal for many kids. Parents and children should be aware of these facts both at the point of sale of such foods and in schools.

It is pointless to ban soft-drinks in schools if school kids can ingest more sugar from legally-supplied junk such as doughnuts. No-one likes the nanny state telling us what to eat but stores such as Krispy Kreme are a social negative. We need to bankrupt them by coupling hefty taxes on the poisons they supply that capture the costs to society of the people they help to damage, by providing consumers wiuth information on the effects of eating such so-called 'food' and by providing consumers with the education and the opportunities to buy non-junk food.

Thursday, June 22, 2006

Problem gambling at 50%?

A new study claims that up to half of poker machine players in Victoria are problem gamblers. What does 'up to' mean here? Under a reasonable definition of 'problem gambling' this estimate seems high - the Productivity Commission's figure (for all gambling) is 15%. This is high in itself and signifies a real problem - but the 50% figure seems too large. The difficulty with exaggerated claims is that they can bring about disbelief in more modest, accurate claims. I'll dig out this report, check the data and report back.

The pokies are a menace but it is plausible that more than 50% of Victoria's Labor Party and more than 50% of the State Treasury are problem gambling supporters. Instead of trying to show that the Labor Party in Victoria are a sleezy bunch of dirt throwers (who glorify suicide bombers and President Assad of Syria) Victoria's Liberals should admit they were wrong in seeking to expand gambling in this State (following foolish early moves by the Labor Party) and pursue the principled actions of the Greens to dramatically slash poker machine numbers.

This is a worthwhile even if problem gambling on pokies is 15% not 50%.

Iraq shootings

My friend and colleague Professor Imad Moosa has just heard terrible news from his home town Basra in Iraq. His brother-in-law has been shot dead and his sister critically wounded by Shia militia. She was shot in the chest and stomach.

These ordinary people's lives have been threatened and damaged by the Iranian-supported militia that are turning Iraq into a fundamentalist madhouse. Today I saw a death threat letter received by Imad's family with photos of automatic weapons in its header - grim stuff. Imad's sister was threatened because she works for the 'infidels' - as a translator at the British Consulate. She is also a Sunni Muslim but married (for only 7 months) to a Shia! The sectarian hatred is not only evil, it is foolish and non-discriminating.

Imad's sister had been waiting for 2 months for emergency evacuation to Australia. Imad is an Australian citizen so it should be possible for his family to be evacuated here as soon as possible. In the meantime, the British forces in Basra should obviously protect their employees. It is difficult to understand why the Coalition don't do more to protect such civilians. There is a responsibility to protect such innocents.

You might think about trying to persuade Senator Vanstone to hurry up - she is a good Minister. You can (politely) email her regarding 'Imad Moosa's sister and family' at I sent Vanstone an email today.

Update: Imad's sister is in Kuwait and will be allowed to settle in Britain or Australia. What a nightmare for her and for the unfortunate people of Iraq.

Wednesday, June 21, 2006

The rise of cybersex

NewScientist discusses online games that lead to animated cybersex. In Second Life , a game that initially was of a non-sexual role-playing genus, a you can buy sexual positions and fetishes from minority online communities and get to the point where a nymphet will undress you and take you to bed. Couples can use it as a graphics enhanced version of phone sex. It is pretty hard to buy your way into an online sex community and, even if you did find a ‘sex room’, you might not be ‘accepted’ – you can’t just turn up!

Capitalism however is now generating online cybersex games for the masses – Red Light Centre was released in May and Naughty America is due for release later this year and will tie cybersex to online dating. Red light centre allows characters to try on erotic lingerie which can then be purchased online. In both games characters can be pre-programmed with a set of sexual actions.

The games are intended to appeal particularly to women who are too tired to dress and go out or women who have safety concerns with casual sex.

Rape? In the two new games cited this is impossible since both partners must consent before the games will perform any sexual act. But in Sociolotron, virtual rape is an integral part of the game, though users must ‘consent’ before rape occurs. This seems potentially scary. It’s the usual story - ambiguity. Will allowing violent people to commit virtual crimes reduce or increase the likelihood of them carrying out a crime in the real world? Psychologist Bruce Bartholow believes the impulse to commit violent acts is increased by playing such games.

Sounds right to me - although I think that, for many people, these games will be a liberating form of sexual expression that does not displace real sex. Indeed to use some economics jargon, there will be complementarities between real sex and cybersex as well as substitutions. It will, in time, come to be treated as neutrally and, with as little public interest, as masturbation or homosexuality.

There are also interesting issues related to fidelity and adultery that are well-discussed in this wikipedia entry. There are also cybersex addicts, cybersex jokes and even cybersex instruction hotlines. Cybersex is not a fringe activity – when I Goggle it there are 4.5 million entries!

In any event the horse has bolted. Censorship won’t work and moral criticisms won’t prevent those who wish to use cybersex technologies from doing so. We will have to learn to live with these new technologies – legally or illegally. My guess is that these types of software will make fortunes for the first-movers who create them. I also think these technologies will, in time, profoundly alter relationships between human beings and, of course, how we view the all-important activity of sex.

Tuesday, June 20, 2006

Mid-week review

I've been trying to get my head around the debate on industrial relations reform. As a supporter of the conservative side of politics I am untroubled by Kim Beazley's pact with the unions to emphasise the role of collective bargaining. With only 20% of the workforce unionised it won't work - it got the thumbs-down with voters in this morning's opinion polls even though many voters are influenced by Labor's scare campaign. The Coalition would easily win a Federal election now with more than twice as many (at 55%) supporting John Howard than Kim Beazley. The Australian electorate will be reluctant to support a leader who seeks to abandon our American allies and leave Iraq to a terrorist fate.

I am interested in some of the IR arguments being used to try to injure John Howard. One of the silliest to me is the claim that collective bargaining will induce greater productivity gains than individual contracts. How paying workers with different skills the same wage will improve productivity defies logic. In addition, some have argued that such uniform payments to all will reduce inequality in Australian wage outcomes. But paying everyone the same regardless of skills will reduce employment and increase inequality between prioveledged workers and those thrown on the unemployed scrapheap. The best employment outcomes that Australia has enjoyed for 30 years are threatened by these fantastic theories.

The best way to deal with inequality is via the tax/transfer mechanism not by forcing firms to pay wages in excess of productivity. It is embarrassing to have to state this to good economists who allow their politics to cloud their judgement.

In the limit the case for collective bargaining is false - if all unionised workers were paid the same wage the outcome would be massive inefficiency and unemployment.

The best way the welfare of the Australian workforce can be improved is to reduce unemployment to a low level and to increase the competitiveness of labour markets.

These claims seem to me to be self-evident. The counter-claim is that OECD labour market reports provide 'evidence' that minimum wages, employment protection and centralised bargaining do not adversely impact on unemployment. I'll look at this evidence over the next few weeks (it seems more ambivalent than commonly supposed) and report back but I must acknowledge my prior prejudices. I don't pay much attention to evidence unsupported by logic - it is just so difficult to isolate the effects.

In the meantime I am completing work on alcohol policy and have completed presentations for the Econometric Society in Alice Springs next month and the Economic Society of Australia in Perth in September. The illicit drugs research group of which I am a member will send 4 speakers in all to each conference. With the Australian Professional Society on Alcohol and Other Drugs (APSAD) Conference in Cairns in November I have much to do over the coming months. I am also doing consulting work on transport economics.

This is my informal weekly discussion and it is full of personal pronouns. I am interested in how your week has gone, your take on current industrial relations issues and on the political scene.

Monday, June 19, 2006

Bird Watching in Iraq (Cross-Posted at Birding Aus)

It interests me that in the midst of a chaotic war people go bird-watching. I am a pretty keen bird-watcher myself and have seen a fair number of Australian bird species. But bird-watching in a combat zone? The Economist book review section reports on bird-watching in wartime Iraq:

'IN EARLY 2004 Jonathan Trouern-Trend of the Connecticut National Guard started a year-long posting in Iraq. A birdwatcher since he was a boy, he used his spare time on base, and on trips "outside the wire", to look for birds, and wrote about the 122 species he saw in the Gulf in a blog that attracted thousands of readers. This tiny, beautifully illustrated book, produced in the style of a birdwatcher's diary, collects together the highlights of his online journal into a gentle war memoir that conveys a simple message of hope.

Mr Trouern-Trend was stationed at Camp Anaconda, one of America's biggest bases, in the Sunni triangle north of Baghdad. Although under almost daily mortar and rocket attack, the camp was full of wildlife; "a refuge of sublime natural beauty to those who looked."
Despite the effort of birdwatching in "full battle rattle", and the searing desert heat, Mr Trouern-Trend delights in the antics of the birds he sees: a spectacular Smyrna kingfisher perching on the reeds of the pond by the base laundry; white-cheeked bulbuls chasing each other in the tamarisk trees; wood pigeons unfazed by the roar of F-16s tearing down the runway; a flock of white storks riding a thermal "never once flapping their wings as they spiralled up higher and higher".

What makes this little book special is the author's joy that "something worthwhile or even magical" could take place amid the horror of war. "Knowing that the great cycles of nature continue despite what people happen to be doing is reassuring," he writes. "There is an order we can take comfort in and draw strength from."

Although the chaos in Iraq continues, those great cycles have already started to repair the damage. Iraqi ornithologists have begun surveying the birds of the country's southern marshes, which stretched for 20,000 square km (7,722 square miles) until they were drained and destroyed by Saddam Hussein's government. Some species feared extinct have recently been seen. Life goes on.

This was for a time recorded on a blogsite here. The book is Birding Babylon: A Soldier's Journal from Iraq , J. Trouern-Trend, Sierra Club Books; 79 pages; $9.95US ( in Australia , the cost $23.95 plus postage from

Update: Via Andrew Taylor at Birding-Aus I am referred to Restoring the Garden of Eden: An Ecological Assessment of the Marshes of Iraq.

Save the whales?

Should whales be treated differently from other non-human animals? Should whaling continue to be restricted or should controlled harvesting, beyond levels of ‘scientific whaling’ now practiced by Japan and Norway, be allowed? To be frank I don’t want to see any whales killed but, if pressed, my (non-vegetarian) arguments for this position fray at the edges.

There are claims that there is currently a surplus of whale meat in Japan and that it is currently being turned into dog food – a claim rejected by the Japanese. The role of whale meat as a significant Japanese food has even been questioned. As Masako Fukui in The Australian remarks:

‘…traditional whaling seems to reside in that realm of mythical reality that characterizes so much of what's called tradition in Japan. After all, whale consumption took off in Japan only after World War II, when US general Douglas
MacArthur encouraged whale consumption to supplement Japanese protein intake. By the time of the moratorium in the 1980s, beef and other sources of protein were being consumed in the Japanese diet. So when the ban began in 1986, fewer than 1000 jobs were lost in the whaling industry’.

There are even moves to distribute whale meat to Japanese school children to reactivate traditional demands for it.

Finally, there are claims that whale killing is cruel because whales die an agonizing death – this argument in itself will drive endeavors to come up with an efficient means of dispatching whales.

The argument favoring harvesting seems to be that the Japanese regard whales just as large animals that can be harvested for their protein and fat. Others regard whales as charismatic megafauna that should be protected. This is an ambiguous claim in terms of brain size though whales are indeed charismatic social animals .

Japan and the pro-whaling nations seem today to have wrested control of the International Whaling Commission from those opposed to whaling setting the stage for a resumption of commercial whaling from next year – the ban on commercial whaling has been overturned by a small majority though this needs to be agreed to by 75% of the 70 delegates when the IWC meets next year to have effect. The Japanese will presumably attempt to make voting at the IWC secret and to eliminate the attendance at IWC meetings of conservation groups as observers. This might swing the vote to resumption of whaling as the ‘shame factor’ is eliminated from voting in favor of whaling.

Whales are a global common property resource and, on this basis, John Quiggin’s suggestion that the case for whaling should be resolved by a vote among nations is a sound one. Since most Australians oppose whaling – 93% disapprove of eating whale meat - the Australian Government is correct to pursue strong opposition to whaling via the IWC. (By the way since only 37% of Japanese approve of eating whale meat the Japanese Government too should reconsider their position).

One interesting proposal that won’t go over well with whale kill supporters is to create a quota of whale harvesting rights that could be auctioned off to the highest bidder. Then those who would prefer to see whales swim free would be able to outbid the few remaining humans who want to kill and eat whales. This won’t work because the Japanese see whale populations as residing at the top of the food chain – they not only have to be killed off for food but also to protect fish stocks. This claim is widely rejected by fishery experts (here and here) – dwindling fish stocks are due to over-fishing not to increasing whale populations - but this false claim is unlikely to dent the enthusiasm of the Japanese for killing these magnificent animals. They seem just as hell-bent on their mission as I am in opposing their intentions.

Adam Smith & Behavioral Economics

1. Introduction. Adam Smith is recognised in The Wealth of Nations as a proponent of self-interested behavior. Recently Ashraf et al (2005) have argued that, in Theory of Moral Sentiments, (TMS), Smith reveals himself to be an observor who anticipated much of modern behavioral economics. He also provided leads that modern economists can take up as a research agenda. These classroom notes (based on Ashraf et al. (2005)) explore these ideas. Comments are very welcome.

In TMS Smith adopted a ‘dual-process’ view of a human’s psychological perspective similar to that used in modern behavioral economics and neuroscience. The view is of an ‘impartial spectator’ who looks at individual behavior from the perspective of an outsider and also from the viewpoint of the ‘passions’ including emotions, fear, anger, sex and hunger drives as well as motivational factors such as pain. In terms of modern neuroscience, behavioral outcomes are a consequence of judgments made by different sections of the brain. The key elements involve the prefrontal cortex (the area just behind one’s forehead), which is concerned with planning and behavioral inhibition and the limbic system (located below the cerebral cortex) which is responsible for emotions and the way people feel.

Thus, to Smith, while much of human behavior was under the influence of the passions these passions could be moderated by an internal ‘voice of reason’, the ‘impartial spectator’, who allowed one to see one's own feelings and the pulls of immediate gratification from the perspective of an external observer.

In the area of self-control and self-governance, the ‘impartial spectator’ takes the form of long-term self-interest. Thus a potential drug user might think ‘I won’t snort that cocaine because it may lead me to do it tomorrow and so on, creating a long-term problem’. Here there is a conflict between passions and the impartial spectator. The conflict is important when studying savings decisions, since savings is exactly a decision to delay immediate gratification for a long-term interest, to stay the voice of a short-term pull for the voice of the ‘impartial spectator’.

For social interactions, the ‘impartial spectator’ allows us to see things from another's perspective and not to be blinded by our own needs.

2. Smith on Behavioral Economics. TMS contains numerous insights on the way the ‘impartial spectator’ and the passions interact to determine various choices with a paradoxical character.

Loss Aversion. In TMS (p.176-177) Smith argued that ‘Pain …is, in almost all cases, a more pungent sensation than the opposite and correspondent pleasure’. 200 years later Kahneman and Tversky (1979) called this loss aversion. Furthermore, brain imagining studies show that gains and losses are processed in different ways (O’Dougherty et al (2001). This can mean that opportunity costs will be weighted less heavily than out-of-pocket costs.

Impulsiveness and Self-Control. TMS (1759, p. 273) viewed the passions as essentially myopic. For the ‘impartial spectator’, in contrast, ‘the pleasure which we are to enjoy a week hence, or a year hence, is just as interesting as that which we are able to enjoy this moment’ (p. 272). These views correspond closely to what is now termed quasi-hyperbolic discounting where extra weight is placed on current rewards but, thereafter, consumptions are discounted at ‘moderate; exponentially declining rates (Laibson (1997)). Moreover, both Smith’s views, and the hyperbolic discounting hypothesis, are supported by neuroscience: The prospects of immediate rewards activate the limbic parts of the brain while longer-term issues are evaluated in the pre-frontal cortex (McClure et al. (2004)).

Overconfidence. Smith recognized optimism biases with most people being excessively optimistic (having an ‘overwhelming conceit’) about their prospects for rewards and understating chances of loss. Such views are replicated in modern behavioural economics into research on mergers and business failures and can be derived from evolutionary considerations (Postelwaite & Compte (2005)). Smith also understood that his claims regarding optimism applied only to those in ‘tolerable health and spirits’ the view also advanced in recent research suggesting, that optimism biases do not arise for the ‘clinically depressed’ (Taylor and Brown (1994)).

Altruism. At various points in TMS, Smith saw altruism as an important though fickle passion. Sometimes sympathy falls short of what is appropriate. Thus Smith noted that Europeans might undervalue the human costs of a catastrophic earthquake in China. Sometimes Smith saw sympathy as excessive, as for example, when we feel sympathy for the dead who themselves experience nothing.

These views are replicated in modern thinking. When people are controlled by their passions one might expect to see both callousness and extreme generosity. In addition altruism may be greater towards a ‘identified victim’ than a statistically equally probable though unknown victim (Small & Loewenstein (2003)). Also, when people know something about people the amount they tend to give increases, but has greater variance. This suggests greater sympathy when knowledge is obtained but also more snap judgments about who deserves (Bohnet & Frey (1999)).

Smith claimed this variability would be reduced by the ‘impartial spectator’ who would act to exert more discrimination in establishing a case for altruism.

Fairness. Smith saw altruism as an erratic force but ‘fairness’ as having a more reliable civilizing role. Fairness was an intrinsic human emotion that was the source of ideas about justice. Contemporary research suggests that fairness is an important emotion even in non-human primates (Brosnan & de Waal (2002)). The ‘impartial spectator’ or the ‘man within’ would internalize other people’s sense of fairness. Acting without respect to the ‘sacred’ rules of justice would lead to an individual being subject to the ‘contempt and indignation’ of others. Indeed:

‘There is no commonly honest man who does not more dread the inward disgrace of such an action, the indelible stain which it would for ever stamp upon his own mind, than the greatest external calamity which, without any fault of his own, could possibly befal him; and who does not inwardly feel the truth of that great stoical maxim, that for one man to deprive another unjustly of any thing, or unjustly to promote his own advantage by the loss or disadvantage of another, is more contrary to nature, than death, than poverty, than pain, than all the misfortunes which can affect him, either in his body, or in his external circumstances’. (TMS, p. 138)

Trust. For Smith transactions required a mix of concern for fairness (reinforced by fear of negative appraisal by the ‘impartial spectator’), altruism and trust to facilitate initial gains-from-trade in situation where agents had not previously traded. For example moral values can drive voluntary exchange rather than violence when two agents meet for the first time and exchange is an option. Smith believed that trust and a concern for fairness, were vital for the functioning of a market economy. Trust and reciprocity were foundations for the early beginnings of the market, allowing reciprocal gift exchange to emerge, and leading to trade.

One might think that the need for trust and trustworthiness diminishes as a market develops, but if anything the opposite is true. For example we trust managers to carry out the interests of shareholders. While we can build contracts to align manager incentives with those of shareholders we are never able to completely contract on all the things we care about and want to enforce. Implicitly, then, we hold a belief that managers have internalized the values we care about, and trust them to act on those, particularly when they might come in conflict with their own interests.

There are similarly other professions where individuals are entrusted to serve, like doctors, teachers, auditors, but cannot be monitored fully. We rely on individual professionalism and honor (or ‘enlightened self interest’) to carry out their occupations.

Across organizations, in the marketplace, factors like brand reputation and warranties help facilitate transactions without requiring complete trust. Within organizations, the issue of trust and trustworthiness, of employees to their bosses, of managers to each other and to shareholders, becomes even more important, and even more difficult to replace by market forces or better incentives and contracts.

Moreover there are costs of breaking trust and of risking reputation. The costs of sacrificing ethical standards of conduct are much larger than any individual might imagine, precisely because they decrease trust and affect organizational and market functioning as a whole

These insights are demonstrated in modern experimental economics where positive reciprocity can create trust even where there are moral hazard reasons for supposing it should not arise (see Camerer (2003, chapter 2)). In addition trust has been shown in numerous surveys to be correlated with economic growth (Knack and Kiefer (1997)) while anthropology surveys suggest the sharing is more equal in ultimatum games conducted in market-based economies (Henrich et al (2004)).

Materialism and Happiness. In TMS Smith argued that economic development was driven by the illusion that material wealth would bring about permanently greater happiness. Equally personal catastrophes (such as loss of a limb) were not seen by Smith has inducing permanent unhappiness since people adapt to circumstances. He saw both pain and pleasure as transient phenomena. In particular the anticipation of status from wealth was much better than the realization.

Contemporary research supports these views. Frederick & Loewenstein (1977) review various studies showing that ongoing health and wealth issues have little impact on subjectively perceived happiness. Moreover people generally believe, as Smith recognized, that pleasure and pain will actually last longer than it does (Loewenstein et al (2003)).

Smith also believed that while the accumulation of great wealth deceives the rich by not bringing them welfare gains, it would, generate overall economic development and by an ‘invisible hand’ (TMS (p. 184)) advantage the poor.

‘It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth. The earth by these labours of mankind has been obliged to redouble her natural fertility, and to maintain a greater multitude of inhabitants. It is to no purpose, that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon them. The homely and vulgar proverb, that the eye is larger than the belly, never was more fully verified than with regard to him. The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the oeconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice. The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for’. (TMS, p.184).

Thus cross-sectional differences in income will bring about only small changes in happiness because the rich dissipate increased wealth on trinkets while the distribution of necessities is more equal.

3. Smith’s Unexploited Ideas. Smith’s TMS provides promising leads for future research. They isolate four ideas.

Desires to be Well-Regarded by Posterity. While modern economists have considered bequest motives, Smith in TMS (p. 115-116 ) was more also concerned with people’s desire to maintain a reputation during the period where they are dead even at the expense of their welfare while alive.

‘Men have voluntarily thrown away life to acquire after death a renown which they could no longer enjoy. Their imagination, in the mean time, anticipated that fame which was in future times to be bestowed upon them. Those applauses which they were never to hear rung in their ears; the thoughts of that admiration, whose effects they were never to feel, played about their hearts, banished from their breasts the strongest of all natural fears, and transported them to perform actions which seem almost beyond the reach of human nature. But in point of reality there is surely no great difference between that approbation which is not to be bestowed till we can no longer enjoy it, and that which, indeed, is never to be bestowed, but which would be bestowed, if the world was ever made to understand properly the real circumstances of our behaviour.’ (op cit).

Negative Reactions to Being Misjudged. Smith recognizes that people care not only about outcomes but the source of outcomes. In particular they derive strong disutility from an ‘unmerited reproach’ (TMS, p. 121).

‘Unmerited reproach, however, is frequently capable of mortifying very severely even men of more than ordinary constancy. Men of the most ordinary constancy, indeed, easily learn to despise those foolish tales which are so frequently circulated in society, and which, from their own absurdity and falsehood, never fail to die away in the course of a few weeks, or of a few days. But an innocent man, though of more than ordinary constancy, is often, not only shocked, but most severely mortified by the serious, though false, imputation of a crime; especially when that imputation happens unfortunately to be supported by some circumstances which give it an air of probability. He is humbled to find that any body should think so meanly of his character as to suppose him capable of being guilty of it.’ (op cit).

Contemporary research confirms that procedural fairness in legal proceedings is important as well as outcomes (Lind & Tyler (1988)). While the probability of suing for wrongful dismissal is correlated with a workers belief that the dismissal was unjust (Lind et al. (2000)).

Thus people react negatively to being misjudged presumably has strong implications for principal and agent analysis if a principal understates the effort by an agent.

Mistaken Beliefs in the Objectivity of Tastes. People do have different tastes based on culture and experience but typically underestimate such determinants and wrongly suppose such preferences are objective.

‘Few men have so much experience and acquaintance with the different modes which have obtained in remote ages and nations, as to be thoroughly reconciled to them, or to judge with impartiality between them, and what takes place in their own age and country. Few men therefore are willing to allow, that custom or fashion have much influence upon their judgments concerning what is beautiful, or otherwise, in the productions of any of those arts; but imagine, that all the rules, which they think ought to be observed in each of them, are founded upon reason and nature, not upon habit or prejudice. A very little attention, however, may convince them of the contrary, and satisfy them, that the influence of custom and fashion over dress and furniture, is not more absolute than over architecture, poetry, and music’. (TMS, p.195)
Ross & Ward (1996) refer to the propensity of people to see their beliefs as more widely shared than they are as naïve realism. Naïve realism has implications for gift-giving, negotiations, principal agent problems and so on. It can also lead to cultural conflict. For example, Australians see Japanese consumption of whales as barbarism.

Sympathy for the Great and Rich. Finally, while there is a prevalent sympathy to sympathize with those less fortunate there is also a propensity to sympathise with the great and the rich:

‘When we consider the condition of the great, in those delusive colours in which the imagination is apt to paint it. it seems to be almost the abstract idea of a perfect and happy state. It is the very state which, in all our waking dreams and idle reveries, we had sketched out to ourselves as the final object of all our desires. We feel, therefore, a peculiar sympathy with the satisfaction of those who are in it. We favour all their inclinations, and forward all their wishes. What pity, we think, that any thing should spoil and corrupt so agreeable a situation! We could even wish them immortal; and it seems hard to us, that death should at last put an end to such perfect enjoyment. It is cruel, we think, in Nature to compel them from their exalted stations to that humble, but hospitable home, which she has provided for all her children. Great King, live for ever! is the compliment, which, after the manner of eastern adulation, we should readily make them, if experience did not teach us its absurdity. Every calamity that befals them, every injury that is done them, excites in the breast of the spectator ten times more compassion and resentment than he would have felt, had the same things happened to other men. It is the misfortunes of Kings only which afford the proper subjects for tragedy. They resemble, in this respect, the misfortunes of lovers. Those two situations are the chief which interest us upon the theatre; because, in spite of all that reason and experience can tell us to the contrary, the prejudices of the imagination attach to these two states a happiness superior to any other. To disturb, or to put an end to such perfect enjoyment, seems to be the most atrocious of all injuries. The traitor who conspires against the life of his monarch, is thought a greater monster than any other murderer. All the innocent blood that was shed in the civil wars, provoked less indignation than the death of Charles I. A stranger to human nature, who saw the indifference of men about the misery of their inferiors, and the regret and indignation which they feel for the misfortunes and sufferings of those above them, would be apt to imagine, that pain must be more agonizing, and the convulsions of death more terrible to persons of higher rank, than to those of meaner stations’. (TMS, p. 51-52).

The fascination with the lives, deaths and clothing of celebrities is an instance of this. Smith saw it as a moral mistake but one that is necessary to maintain the stability of an elitist social structure:

‘This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages’. (TMS, p61-62).

Thus while people suppose that average citizens don’t seek to tax the wealthy at very high rates because they expect to become rich themselves it might also be that they also target the welfare of the rich

4. Final Remarks. Economics has had success as a field of scientific inquiry because it's been able to develop tractable models with strong predictive capacity; in other words, it simplifies the complex phenomena of human decision-making, interaction, and exchange into its barest form and makes predictions based on those. This has meant that economists have often had to sacrifice realism for tractability. Only recently has the field of economics advanced enough to have the tools to reincorporate the factors that Smith and others had always felt were important in human interaction: our caring about each other and about fairness, our difficulties with aligning our long-term interests with short-term pulls and so on.

Smith’s economic actors are realistic human beings. They have emotional and more rational sides to their character. They weigh out-of-pocket costs more than opportunity costs, have self-control problems and are overconfident. They have erratic attitudes of sympathy but are more consistently concerned with rationality and fairness.


N. Ashraf, C.F. Camerer & G. Lowenstein, ‘Adam Smith, Behavioral Economist’, Journal of Economic Perspectives, 19, 5, 2005, 131-145.

I. Bohnet & B. Frey, ‘The Sound of Silence in Prisoner’s Dilemma and Dictator Games’, Journal of Economic Behavior and Organization, 38, 1, 1999, 43-57.

S.F. Brosnan & F.B. M. de Waal, ‘A Proximate Perspective on Reciprocal Altruism’, Human Nature, 13, 1, 2002, 129-152.

C.F. Camerer, Behavioral Game Theory: Experiments on Strategic Interaction, Princeton University Press, Princeton, 2003.

S. Frederick & G. Loewenstein, ‘Hedonic Adaptation’ in D. Kahneman, E. Diener & N. Schwarz (eds), Well-Being: The Foundations of Hedonic Psychology, Russell Sage Foundation Press, New York, 1999, 302-329.

J. Heinrich, R. Boyd, S. Bowles, H. Gintis, E. Fehr & C. Camerer, Foundations of Human Sociality,: Ethnography and Experiments in 15 Small-Scale Societies, Oxford University Press, Oxford, 2004.

D. Kahneman & A. Tversky, ‘Prospect Theory: An Analysis of Decision Under Uncertainty’, Econometrica, 47, 2, 1979, 263-291.

S. Knack & P. Keifer, ‘Does Social Capital Have an Economic Payoff? A Cross-Country Investigation’, Quarterly Journal of Economics, 112, 4, 1997, 1251-1288.

D. Laibson, ‘Golden Eggs and Hyperbolic Discounting’, Quarterly Journal of Economics, 112:4, 1997, 443-477.

E. A. Lind & T.R. Tyler, The Social Psychology of Procedural Justice, Plenum Press, New York, 1988.

E.A. Lind, J. Greenberg, K. Scott & T. Welchans, ‘The Winding Road from Employee to Complainant: Situational and Psychological Determinants of Wrongful-Termination Claims’, Administrative Science Quarterly, 45, 3, 2000, 557-590.

G. Loewenstein, T. O’Donoghue & M. Rabin, ‘Projection Bias in Predicting Future Utility’, Quarterly Journal of Economics, 118, 2003, 1209-1248.

S. McClure, D. Laibson, G. Loewenstein& J. Cohen, ‘Separate Neural Systems Value Intermediate and Delayed Monetary Rewards’, Science, 304:5695, 2004, 503-507.

J. O’Doherty, M.L. Kringelbach, E.T. Rolls, J. Hornal & C. Andrews, ‘Abstract Reward and Punishment Representations in the Human Orbitofrontal Cortex’, Nature Neuroscience, 4, 1, 2001, 95-102.

A. Postlewaite & O. Compte, ‘Confidence Enhanced Performance’, American Economic Review, 94, 5, 2005, 1536-1557.

L. Ross & A. Ward, ‘Naïve Realism in Everyday Life: Implications for Social Conflict and Misunderstanding’ in T. Brown, E. Reed & E. Turiel (eds), Values and Knowledge, Lawrence Erbaum Associates, Mahwah, N.J. 1996, 103-136.

D.A. Small & G. Loewenstein, ‘Helping a Victim or Helping the Victim’, Journal of Risk and Uncertainty, 26, 1, 2003, 5-16.

A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, R.H. Campbell & A.S. Skinner (eds) Liberty Fund, Indianapolis, 1776 [1981]. Available online at

A. Smith, The Theory of Moral Sentiments, D.D. Raphael & A.L. Macfie (eds) Liberty Fund, Indianapolis, 1759 [1981]. Available online at

S.E. Taylor & J.D. Brown, ‘Positive Illusions and Well-Being Revisited: Separating Fact from Fiction’, Psychological Bulletin, 116, 1994, 21-27.

Saturday, June 17, 2006

Life & other contingencies

I’ve been out of town for the last few days. I went to Sydney to visit a relative who has had a serious health scare. The scare alarmed me because I care about this person.

A concern that occurred to me while visiting came from awareness that my particular concerns for this person – or indeed, at the other end of the spectrum, for being joyful about the prospects of a new life – are only a drop in the ocean of events – there are lots of deaths and births out there. This is quite apart from the fact that eventually, as a non-believing atheist, I will face mortality concerns myself and eventually drift off into the universe as a finite set of unguided molecules – in my view, increasing entropy denies the possibility of Nietzsche’s eternal recurrence so, regrettably, these molecules won’t get together again.

Today there are 6,522,735,778 humans on the planet – if you really want to be fastidiously up-to-date go here. Population is growing by 130,860,569 births annually and depleting by the 56,579,396 deaths - even with demographic transitions, population is still surging ahead with twice as many babies born as people dying. In total, 74,281,173 extra humans are added net annually. To be specific these figures mean about 4.1 births per second, 1.8 deaths so 2.4 net extra people per second. (I include the estimates to the last person not because I have any respect for such spurious accuracy but because I might be the 6,522,735,778th!).

These are stunning large numbers. More than two September 11 attacks worth of deaths every hour and more than a holocaust of Jews each six weeks. Yet we do attach significance to particular deaths and take our own lives and those close to us seriously. Will I get that promotion? Will Pamela Brown go on a date with me?

My nihilistic thoughts will disintegrate as my current depression concerning this ill relative subsides. I will reintegrate as a functioning, nonreflective human who sets aside adolescent existential concerns, brushes his teeth and gets on with the biggest act of all.

You are right! It hasn’t been a great couple of days.

Hooray for the Wikipedia

Information is a public good which should optimally not be priced for use. I am a big fan of the Wikipedia and use it all the time. I use it as an online encylopedia and, sometimes, simply as a dictionary.

I always keep my eye open for nonsense on it but, for the most part, find it a valuable and self-critical resource that openly flaunts its own imperfections and limitations. This NY Times article argues that the community of about 1000 young individuals comprising the bulk of the Wikipedia contributors, will enjoy less freedom to modify content in the future. Maybe this is essential to guard against Wikipedia vandals but I hope it does not deflate the idealism of the dedicated Wikipedia workers - the problem itself reflects the strength and value of the Wikipedia.

Friday, June 16, 2006

Abu Bakar Bashir

Bali was God's will: Bashir

Let us hope that the release of this hateful, venomous hypocrite who applauds killing innocents while proclaiming the virtues of a religion does not damage the fragile relations between Indonesia and Australia. It is worth repeating, given the emotions being stirred at present, that most Indonesians - and most Muslims - find the rantings of Bashir as disgusting as will the relatives of those who died in Bali.

Prime Minister Howard is applying the right kinds of pressures with respect to Bashir but sending out confusing signals with the proposal to process asylum seekers offshore.

We need to find the right balance - to recognise the difficulties President Yudhoyono faces - but to be an independent voice of reason that does not display Keatingesque subservient adulation.

Thursday, June 15, 2006


I have a long-standing interest in sleep and have posted on it before. I was pleased recently to find the website of the Australian Sleep Association. The ASA is a group of medical practitioners and researchers concerned with sleep problems. As an economist I am interested in the 2004 study by Access Economics, ‘Wake Up Australia, The Value of Healthy Sleep’ which is posted here. I was also interested in the Fatigue and Transportation report there. Fatigue is an occupational health and safety issue, a major cause of traffic accidents and fatalities and a major health problem.

The Australian provided a good overview of the issues and provided some summary statistics on the cost of sleep disorders to the Australian economy from the Access Economics report:

  • Sleep disorders cost the Australian economy $10.3 billion.
  • 1.2 million Australians suffer from sleep disorders.
  • 10% of work accidents are attributable to sleep disorders.
  • 7.6% of non-work vehicle work accidents are attributable to sleep disorders.
  • Cost of treating sleep disorders is $2.7 billion.
  • Cost of treating sleep-related depression $100 million.
  • Cost of lost production from sleep-related absenteeism and low productivity $79 million.
  • Lost earnings from job losses due to sleep disorders $1.57 billion.
  • Annual cost of sleep disorders per capita $310.
  • Annual cost of sleep disorders a sufferer, $5175.

We are also acting as if we are a nation of tired people with rapidly growing sales of caffeine and guarana-enriched soft drinks as well as use of more harmful stimulant drugs such as ice.

What is interesting are the connections between untreated sleep apnoea, obesity, high blood pressure and heart disease. For example, there is clear evidence that among young people sleep deprivation increases insulin resistance, the condition that leads to Type 2 diabetes. Among infants there are developmental problems associated with poor sleep. The major risk factor for apnoea is definitely obesity. About 2 out of 3 people with diabetes die from heart disease or stroke. And about 2 out of 3 people with diabetes have high blood pressure.

Diabetes has reached pandemic proportions in Australia as have obesity and sleep problems. They combine to be potent killers through their effects in driving heart disease and stroke. The message seems to be try not to be obese by watching your energy intake and doing sufficient exercise. And try to get a good night’s sleep. If you don’t sleep well visit your doctor and find out what is happening.

Wednesday, June 14, 2006


James Joyce's novel Ulysses describes the minutiae of a day in the life of Dublin, June 16, 1904. This Friday Bloomsday (after the main character Leopold Bloom) is celebrated around the world as the anniversary of that imagined day. Many cross the world to enjoy the day in Dublin itself but, if you can't do that, celebrations are in Melbourne here and Sydney here.

An attractive justification of this annual 'Ode to Joyce' is in today's Australian - with emphasis is on Joyce's early writings - Dubliners and Portrait of the Artist as a Young Man.

I have been interested in Joyce for the few years and posted on the subject when I opened this blog. I have never been able to understand anything of Finnegans Wake but listen to Ulysses regularly via the Jim Norton spoken-word CDs. And listening to CDs is about all I'll get to do this Bloomsday as I have a ***** meeting to attend most of Friday. The concept of opportunity cost is appropriate here. I'll try to make it to Melbourne's Bloomsday that evening.

Papers for dope fiends

Our ARC project, Harm Minimisation Policies and the Economics of Controlling Illicit Drug Use put three new papers on its website today:

Harry Clarke & Svetlana Danilkina, Talking Rationally About Rational Addiction.
Suren Basov & Svetlana Danilkina, A Theory of Boundedly Rational Addiction
Lee Smith, The Australian Heroin Drought

Comments are welcome here or direct to the authors.

Thoughts on Harry Harlow

The Four Corners show ‘Monkey Love’ on Monday night left me thinking again about the issue of animal rights and welfare. The program focused on the work of the American research psychologist, Harry Harlow, who performed controversial experiments on rhesus monkeys in an animal laboratory. Because monkeys could experience the emotions that humans feel, Harlow believed we could better understand how to raise human children by looking at how baby monkeys responded to alternative approaches to upbringing – this was superior to insights based on ‘rat-driven’ psychology since rats did not have these human capabilities.

Early experiments involved separating infant monkeys from their mother and providing surrogate ‘wire’ or ‘soft-cloth’ mothers. The infants preferred the soft-cloth mothers even though the wire mothers had the food supply. Harlow concluded that infants need ‘contact comfort’ as well as milk. He also experimented by placing baby monkeys in new or even frightening environments – those monkeys with a ‘soft cloth’ mother adapted better to such environments and having this sense of security even emboldened them to explore such environments.

Harlow’s work was useful in suggesting to human parents that physical contact (‘hugging’, ‘security’) were as important as providing food. It also promoted the role of motherhood and maternal love and nurturing. These precepts seem obvious today but this was not so in the 1940s and 1950s where the conventional wisdom was not to turn infants (particularly male infants) into ‘sooks’ or ‘sissies’ by comforting them if they cried or were unhappy. The experiments carried by Harlow to demonstrate these points clearly had damaging psychological and social consequences for the young monkeys – they seemed callously cruel - but there was a social payoff for humans in terms of better understanding the upbringing of children. .

But as Harlow continued his work he himself became subject to person problems. His first marriage collapsed and he became an alcoholic. He suffered depression, extreme 'status anxiety' and embarked on a new series of almost sinister experiments. The Four Corners program notes summarise the main idea:

‘On Harlow’s ‘Rape Rack’, disturbed female monkeys were forced to breed against their will. In his ‘Pit of Despair’, baby monkeys were left in total darkness for up to two years. With his ‘Iron Maiden’, infant monkeys were drawn to a placid surrogate mother that began suddenly to tear at their flesh.

Why? Bizarrely, it was all done in the name of love. Harlow was on a quest to understand the nature of love, especially the unique bond between mother and baby. Harlow believed that to understand the heart, he first had to break it.

Harlow’s defenders say that he brought love into science, and warmth into the way we parent our children; and that he influenced crucial policies that operate in today’s child welfare and birthing sectors.

But did he have to go to such extremes with his experiments? What are the limits to a scientist’s right to hurt animals? Was the animals’ suffering worth the knowledge we gained about raising children today?’

Harlow at times seemed almost to hate the animals he was experimenting on. ‘The only thing I care about is whether a monkey will turn out a property I can publish. I don't have any love for them. I never have. I don't really like animals. I despise cats. I hate dogs. How could you love monkeys?’ Indeed Harlow’s bizarre later experiments, that explored the depths of depression in animals by ‘breaking their hearts’, occurred while Harlow himself was severely depressed. One positive feature of these ghastly experiments is that they led to the animal liberation movement in the US and to thinking of ethical issues involved in human interactions with animals.

These ethical issues remind me of classical paradoxes in utilitarianism. Assuming that primates do experience pain in the way that humans do and that they have moral rights to be protected from the deliberate inflicting of pain, is it reasonable to make them suffer so that humans can derive what is claimed to be a great benefit? Primates are selected for these experiments because they react as humans might – they feel the same types of physical and emotional pains as humans.

From the viewpoint of pain and suffering inflicted, it is impossible morally to distinguish the case for using primates in such experiments rather than humans. Putting it even more starkly the moral problem here is close to the ‘ticking bomb’ problem – do humans have the right to torture a small group of humans to provide information that will provide great benefits such as preventing mass deaths due to a terrorist attack?

I was disturbed by Harry Harlow’s experiments though I recognise that child-rearers learnt a lot from them. I am not convinced that many of the insights were not rather obvious – that social animals, like monkeys, become psychotic when placed in a ‘pit of despair’ for two years is unsurprising. I also just empathise with the sufferings of these sentient beings. I am also disturbed by the bland approach that some psychologists take to the work of Harlow – consider this or this for example.

Finally, I was interested in the portrayal of Harlow as an aggressive, entrepreneurial, academic who was embarrassed by his own Jewish-sounding name and so changed it (he wasn’t Jewish). While preaching the value of motherhood and the love of children, he showed very little of it to his own children. His hatred of feminists and animal rights supporters became pathological and his collapse into alcoholism, depression and Parkinson’s Disease was a tragic conclusion to a strained and difficult life. His biography is Love at Goon Park: Harry Harlow and the Science of Affection. I ordered it today.

Beazley flops again

The leftwing online newsletter Crikey got it at least partially right for once:

Kim Beazley is acting like a 'leader', according to the spruikers of his weekend announcement that a Labor government would abolish Australian Workplace Agreements (AWAs). The Opposition Leader argues that AWAs have reduced working conditions and flexibility, and increased productivity is best achieved through collective agreements.

Really? But what about people (including Labor voters) who want their own personalised industrial agreements? And what about the flexibility all companies need in a volatile and globalised economy? And in pandering to the trade union arm of the ALP is Beazley likely to attract the voters of the growing army of once-traditional Labor voters who are now contractors or members of the entrepreneurial working class? Kim Beazley is right to attack the harsh excesses of the Work Choices laws. He's right to argue for changes to protect workers' basic rights and wages. But if he thinks that abolishing all AWAs is the right policy solution, which also happens to be good Labor politics, he's likely to find himself wrong on both counts. Which will raise even more questions about his own employment arrangements and workplace

Tuesday, June 13, 2006

Mid-week review

I've been a bit slack with posts recently because of a generalised laziness that has crept over me - probably related to the rather cold weather in Melbourne recently - and also simply because earning a living has regrettably intruded again into my life. I am not teaching at present but the first law of any bureaucracy is that bureaucratic tasks rise to fill any half-empty time interval and I have been mega-busy.

I am interested that most of my readers seem to log onto this site during working hours Monday to Friday so I assume that some of you are slacking off too. Tut. Tut. But great minds think alike!

I am completing work on the economics of obesity and of alcohol for conferences later this year. The work drags a bit when generalised laziness takes over. But it is going OK.

The weather really drives me crazy. Its the worst aspect of living in a beautiful city like Melbourne. I prefer extreme heat to moderate cold.

I hope you are dealing with the cold better than I am and welcome your comments here on your week. I am also interested in your ideas on the optimal degree of sloth and of being industrious. What is a good balance assuming you have some choice?

And, if you can work that one out could you try to think about something that troubles my ornithological mind: Why don't birds get pregnant?

Monday, June 12, 2006

FRB of NY online research

The Federal Reserve Bank of New York are one of many groups that are making economics readings for University educators available online. These articles are clearly exposited and accessible for a wide range of audiences. Examples are given below:

Popular Course Readings

What Drives Productivity Growth?Kevin J. Stiroh
The Economics of Currency Crises and Contagion:An IntroductionPaolo Pesenti & Cédric Tille
Viewing the Current Account as a Capital InflowMatthew Higgins & Thomas Klitgaard
Inflation Targeting: Lessons from Four CountriesFrederic S. Mishkin & Adam S. Posen
The Yield Curve as a Predictor of U.S. RecessionsArturo Estrella & Frederic S. Mishkin

Recent Articles of Interest

Two articles on the gains from trade:
U.S. Jobs Gained and Lost through Trade: A Net MeasureErica L. Groshen, Bart Hobijn & Margaret M. McConnell
Are We Underestimating the Gains from Globalizationfor the United States?Christian Broda & David Weinstein

Two articles on housing prices:
Assessing High House Prices: Bubbles, Fundamentals,and MisperceptionsCharles Himmelberg, Christopher Mayer & Todd Sinai
Are Home Prices the Next "Bubble"?Jonathan McCarthy & Richard W. Peach.

Definitely worth a look. One can also search for relevant articles by course type. Their mathematical complexity is indicated.

Sports mad Melbourne

I am not a sports fanatic or mad-keen Australian Football League fan. This often leaves me out of lunchtime conversations here in the sports capital of Australia (and perhaps the world) Melbourne.

You must experience the Melbournian routine of lunchtime postmortems on the AFL Monday-Wednesday and forecasts of forthcoming matches, Thursday-Friday, to appreciate what I am saying.

Melbourne’s reputation for its bizarre weather is deserved – each season of the year in one-day – but the domination of its cultural life by sport madness has to be experienced to be believed.

I am not really anti-sports and not a member of Keith Dunstan’s AFL (Anti-Football League) - although I could be – you don’t have to dislike the game - just be generally disinterested in it. Indeed, I do watch live an occasional game of AFL football – sometimes Essendon, sometimes Collingwood . I just cannot manufacture the sustained enthusiasm of the fanatics.

These thoughts about sport occur today because after 31 years and 11 months Australia’s soccer team (the Socceroos) are competing tonight in the 2006 World Cup. In a coup SBS Television are screening the matches – the Australia/Japan match this evening at 10-30 pm. The diminutive Japanese warriors are already playing a ‘dirty tricks’ campaign, claiming the Aussie Socceroos play ‘rough’. They are also complaining of height differentials – the little Japanese buggers are only 179 cms high compared to the more statuesque Aussie heights of 184 cms. – the Aussie coach Guus Hiddink sees these claims as strategic moves to influence the Egyptian referee. Given that the differential is only 5 cms we should offer our little comrades platform boots.

If you believe one tipster our chance of winning the WC final is 180:1 or about the same as throwing three sixes in a row with a dice. If you bet with Centrebet today you will get $81 for a $1 outlay which suggests, if you believe the tipster, that Aussie punters are a bunch of dummies. Centrebet was also (at 1pm) paying $2-30 for an Australian win tonight and $3-20 for a Japanese win so the Aussies are clear favorites.

Will I watch tonight? Probably – it’s the first soccer game I will have watched in more than a year so it has novelty value. But, no I won’t become a fanatical supporter of the Socceroos even if they do Nippon through to the finals. By the way, via Andrew Leigh, here at Rank and File is a good run down on the game of soccer from the viewpoint of an AFL supporter.

Sunday, June 11, 2006

Record low unemployment

Even with the qualification that the basis for measuring unemployment has changed over the years, the fall in the Australian unemployment rate to a 30-year low is a considerable achievement – 4.9% measured unemployed, while still high, is indeed ‘a beautiful number’. An extra 56,000 people won work in May and the overall workforce participation rate increased.

Several lessons can be learnt. (i) To reduce unemployment to this level we have not needed lavish government-funded job creation schemes of the type funded by Labor in the early 1990s. (ii) The decline in trade union power has not hurt workers – they have never been better-off in terms iof wages or employment levels. (iii) The new WorkChoice laws can be expected to further eliminate the constraints that inhibit the ability of employers and employees to arrange mutually beneficial wage-output deals, thereby further reducing unemployment.

For economists the myth of a natural rate of unemployment that would need to be maintained in the long-run to prevent excess demand and consequent inflation can be finally discarded. It is good to see that the RBA’s Governor Macfarlane rejects it - it is not based on solid economic theory or post-war economic history and it promotes unwarranted policy pessimism in addressing unemployment issues. For most of the 1950s and 1960s Australian unemployment was below 2% - it was a scandal for the Whitlam Government in 1974 to have it rise to 3%!

We still have unemployment doomsayers. Indeed it is amazing how the fall in unemployment is pounced on by the press as bad news - interest rates will have to rise , the economy risks overheating and so on. Others see the decline in unemployment as due to the commodities export boom – this is not supported by the facts - the biggest decline was in the relatively resource-poor state of NSW.

The significant residual problem is the 712,000 people on the Disability Support Pension and those on single parenting payments. While 1.8 million jobs have been created by the Coalition since 1996, non-dole social welfare receipients have increased by about 60,000. Again some are treating the high level of DSP as a type of giant fudge of the unemployment outcome – it isn’t – but these people need to be encouraged back into the workforce with both ‘sticks’ and ‘carrots’.

Tax reforms that reduce the effective marginal tax rates of up to 60 per cent that apply to people when they switch from receiving social security to joining the workforce. These high marginal tax rates provide disincentives to work and it should be a simple matter to redesign benefit schedules so that extra work is possible while higher levels of benefit are retained. This redesign comes comes to a negative income tax – a low enough very basic level of benefits is provided to ‘non-shirkers’ (nor surfies who elect a non-working lifestyle) with extra earned income always then always being subject to non-punitive loss of benefits and taxes.

Job subsidy schemes are likely to outperform work-for-the-dole schemes which should mainly be directed towards the hard core residual ‘work shirkers’. But the major way of reducing unemployment will be via retraining schemes which help our workforce to adapt to a changing economic structure and to technological unemployment.

The challenge is to reduce unemployment much further.