Chinese agriculture

Nearly 1/5th of Chinese agricultural land is toxic.  Forget about measured economic growth targets – this is a madness. (125)

Privatising universities & finally killing them off

Non-academics Andrew Norton and David Kemp recommend privatisation of the university system with subsidies paid to private as well as government suppliers. Universities don’t only supply private goods so I am unclear of the motivation here though libertarian thrill seekers will get a jolt of blood through their arteries when they read this proposal. Of course the profit-motive may not drive good outcomes if students cannot easily assess the quality of a supplier and an asymmetric information externality (AEI) arises. That’s typically the case and indeed the rationale for education – people come to learn because they are otherwise ignorant. The AEI is built into the idea of an education – the idea that there are teachers and those taught with the teachers assessing a field and informing those interested in but otherwise ignorant of that field. That’s why academics not K-mart dog food salespeople (or  propagandists from the Liberal Party) should manage university programs. If asymmetric information issues are ignored then “lemons” problems emerge and universities enjoy a competitive race to the bottom that will maximise profitable output at the expense of any semblance of quality.

On the other hand the mock entrepreneurs who dominate the current university system and who rattle on about KPIs and market-determined outcomes are so awful and incompetent that I doubt full privatisation would do much worse in terms of delivering bad outcomes. Maybe quality dog food salespeople will outperform the current pretenders who couldn’t organise a riot! The latter cretinous lot have already substantially damaged the Australian universities so, from here on in, further damage may add little to social costs. When the river is full of shit an extra defecation or two adds little to social cost.


Redundancy bleg

The meaning of an employment redundancy is, I assume, that a position is either no longer required or if an employer is bankrupt. I’ll ignore the second possible reason for “redundancy”.

I assume that a “redundancy” does not arise if a worker on a high salary is replaced by one on a lower salary and the previous work activities continue since, in this case, the position is still required. It is only that it is now being argued that the work can be carried out more cheaply by a less costly worker – for example, by employing a casual or on a lower salary.

Does anyone know if there are laws limiting redundancies from occurring in this latter situation?


Technological unemployment

This thoughtful piece in the Economist examines the prospects for technological unemployment and a continuation of the trend by which income gains go to owners of capital.  Economists have conventionally rejected this idea but recent trends in developed countries – the failure of US wages to grow for 4 decades – suggest that economic theory needs to consider some of the secular unemplyment possibilities considered by Keynes.This signals to me a case for increased investment in education, a redistribution of ownership claims on capital, a much more comprehensive social welfare system that offers a guaranteed minimum wage and shorter working hours for the workers who do choose to work and earlier retirement ages. Society should not be worse off as improved technological options become available. (756)

Sophie Mirabella

SM is to join the University of Melbourne as an instructor in politics – the practicalities of public policy.  I’d like to write something smart-arsed and cutting about this appointment but I am lost for words.  ”Disgraceful” will do. (463)

Powerful university people

Important administrative people in universities  (Vice Chancellors, Deans and their lackeys) often don’t need to argue sensibly.  Their authority gives every remark they make significance no matter how banal, wrong or tautological (“we will do what is appropriate” etc.).  Their inability to connect with those over whom they rule suggests an aura of power, authority and wisdom. But the arguments administrators provide would often be dismissed as nonsensical verbiage if a first-year student presented them at a tutorial.   Administrative authority provides a means of escaping from normal laws of logic.  To some extent the same criticism applies to senior theologians, politicians and those corporate high-flyers with their fingers up their arse.  They all breathe power but  deliver little. Indeed delivering little that is useful, but taking a lot of time to do this, is a reflection of their power.

Academics are a patient lot. They gulp down horse shit from their senior administrators for quite a while (they ARE busy teaching and doing research) before eventually suffering indigestion. They then get angry and exasperated. Eventually resignation to the deep-seated administrative irrationality sets in and alienation,  as well as a “what the f—“ attitude, takes over. Not a good outcome since the core areas of the university, where productivity does matter, deteriorate.

Those who conduct teaching and research should primarily run universities through university senates and councils that should consist almost entirely of practising academics.   The current grey flannelled-suit brigade can strut around like geriatric peacocks and talk about “market-determined” programs and KPIs but please, don’t ask academics to listen. We already suffer from indigestion.

Those in central administration should be paid high salaries, given generous expense accounts, provided with huge staffs of administrative assistants and encouraged to fly business class to exotic holiday destinations and other important international meetings in order to recharge their batteries.  Separation of them from the real concerns of a university is important. But when on campus they should otherwise remain rather quiet and, as a wildly optimist might hope, learn to listen. (1086)

Innocent Bystander Syrah 2012

I am always a bit put off when Aussi shiraz producers call their wines “syrah” but in this case the description is accurate.  The wine has a lot in common with those of France.  It is soft, slightly peppery, with an immaculately perfect shiraz finish.  It won’t rip the tartar off your teeth and at 13% alcohol is at the low end of the alcohol scale – at least compared to the Barossa and McClaren Vale monsters that often get given to me.  It is from the Yarra Valley a region not known for producing great shiraz.  I really enjoyed this perfect shiraz – the best I have had for months.  Yes Australian shiraz can be produced which has a bit of subtlety and sophistication.  Yummy.  I bought it from vineyard post free for $25 per bottle. A bargain. (1395)

EPA rejects review of WA shark cull

There has been much uninformed criticism of the WA cull. Similar culling practices already occur in NSW and Queensland.  But the EPA also gets it wrong. The EPA boss says that public opinion is irrelevant to issues of environmental protection a statement that is entirely false.  In fact the way most environmental protection measures are conducted is to use an approach such as “contingent valuation” to find out by how much the community values the object of the protection. Maybe the EPA boss was quoted out of context but even so this language is most misleading.

The EPA justify the view that the cull causes no environmental harm because it claims no shark species is threatened with extinction as a result of the cull.  That in itself is an extremely narrow basis for making such environmental valuations.  I find the idea of a cull morally abhorrent because it supports the idea of killing sentient beings in their wild state purely because they exist and may prove an inconvenience to people.  It would be hypocritical to criticise tiger hunts in India or rhino hunts in Africa on the grounds that the continued existence of such species might cause harm to humans.  These concerns arise even if the resulting hunting does not lead species to be endangered.  It is just morally wrong.

It is also inconsistent with the views of the 23,000 people who signed a petition objecting to the cull. The EPA’s boss view that the views of such people are irrelevant to public policy decision making is a total outrage.  Who wants civil servants with such attitudes?  He didn’t have to agree with the petitioners – there may be other arguments – but their viewpoints were decidedly not irrelevant.




A carbon capture & storage (CCS) success story

This New Scientist article is worth thinking about.  A CCS plant in Canada (Boundary Dam) is about to become a working coal-fired power station with 90% of its CO2 emissions captured.  It will be the first commercial scale CCS power station.  A second plant in Mississippi that utilises coal gasification will test another energy source.  Finally a CCS plant is being designed in the UK that is gas-fired.

Saline aquifers in the US are being judged as capable of storing 100 years CO2 emissions.  The North Sea has the capacity for 100 years European CO2 emissions.

The hurdle for CCS is cost. The chemical scrubbers on a CCS power plant absorb 20% of power so the cost of CCS is relatively high. CCS costs are about that of wind energy.  Research is continuing on ways to reduce such costs.

CCS can vanish gigatonnes of CO2 emissions annually.  No other technology can do this in a world where we know coal use will continue to be important. (955)

Trolley Problem

I have been reading Thomas Cathcart’s, “The Trolley Problem or Would You Throw the Fat Guy Off the Bridge”.  This is one of two popular book length accounts of this well-known problem in ethics.  It’s a fun read that taught me a lot about utilitarianism and its problems.  Many books on moral philosophy are dull and dense – this isn’t that.

Philosophy asks unanswerable questions (the answerable questions become science) but in this moral mine-field progress can be made in understanding issues even if the final analysis falls short of definitively answering them. One of the nice things about philosophical discussions is that no-one need win! Continue reading Trolley Problem (1009)

Katie Herzig

At the Fillmore singing “Songbird”.


Daft Coalition Policy #10: Unwarranted drought assistance

The move by the Abbott Government to provide $320m to farmers experiencing drought is terrible, not merely inconsistent, economic policy.  The move undoes 5 years of reforms to drought assistance arrangements initiated by previous governments although the Gillard Government did some equally daft things.  Australia experiences regular “droughts” as a part of its normal climate.   It is essential that farmers come to internalise this fact particularly given that, with climate change, we can expect more droughts and more severe droughts.  Most of the $320 million is in the form of low interest loans which have the moral hazard consequence of reducing the incentives of farmers to prepare for drought.  It also discourages de-stocking in the face of drought which has adverse environmental consequences.

In its report on drought assistance the Productivity Commission recommended abandoning all drought assistance or (if assistance was to be retained) tightening the “exceptional circumstances” motivation for it.  I agree. (643)


I enjoyed and (I hope) personally profited from Roy Baumeister & John Tierney’s Willpower: Rediscovering the Greatest Human Strength.  The link gives a better book review than I could hope to write but this a special book.  It analyses our ability to say “no” to temptation (to use heroin, to eat excessively, to fritter our lives away on pointless internet searching, to procrastinate etc etc.) and to work and play effectively.   It is a popularisation of a stream of work in psychology that rescues that quaint old-fashioned idea of “strength of will”.  It is, the authors’ claim, the single most important personal strength to develop.  Moreover, you can strengthen your endowment of this resource which, however, remains in finite supply so use it wisely.  I liked the discussions of Eric Clapton’s alcoholism and Henry Morton Stanley’s treks through the Congo*.  This is an academic “self-help” book that can improve every aspect of your own life.  An enjoyable well-written work as well.

B & T link the supply of willpower to glucose supplies that power the brain.  A reasonable question is whether diabetics experience particular self-control issues. Eating (and sleeping) well augment your willpower. Ignoring small willpower depletions and concentrating the focus on major one’s reduces willpower depletability and makes you more effective. Self-control capabilities are the single most important determinant of capabilities in kids and hence strongly condition the way we should raise them.

* An amazing man whom I had always treated as a caricature of what he was.  I want to read his biography. (910)

Chinese home buyers

It is incorrect to simply say (as Clive Hamilton does) that Chinese purchases of Australian homes disadvantage Australians because local consumers have to pay more for their homes.  The error lies in considering only the consumer surplus losses to local consumers but not recognising the gains in seller surplus to local sellers and the latter must be larger.  (A bit of price theory shows that the gains in seller surplus exceed the losses in consumer surplus).  It is true to say that wealth is distributed away from local home buyers to local home owners but there is an increase in total local wealth.  What is true is that if it is the case that foreign buyers are driving up home prices that Australia can do better than allowing free trade in housing by imposing an optimal tariff on home purchases by foreigners – an optimal export tax that reflects Australian monopsony power in its property markets. Hong Kong has a 15% tax on purchase by mainland Chinese and this has this “optimal tariff” type of effect.  Another reason for introducing such a tax might be to insulate Australia from the effects of a collapse in the prices of substitute Chinese housing assets which often seem to be caught up in a property bubble.  But this will limit the current windfall gains locals get from Chinese paying too much for Australian properties.

Whether you want your housing stock in the hands of foreigners is not really the issue.  If a Chinese pays a huge price for an Australian home then that can be used to build another home and, if the Chinese owner does not become a resident the first purchase will be most-likely be placed on the local rental market reducing rental costs in that market.  Whether Australia wants many more Chinese immigrants is, of course, an issue for immigration policy.  It is disconnected from the issue of whether we should have free-trade in our housing assets. (632)

Costs of alcohol

I am going to a talk organised by ACIl Allen Consulting tomorrow on “Counting the Costs of Alcohol”. The main point made in their initial discussion paper is that some people believe the gross costs of alcohol should be targeted while others think that only the external costs should be included.  This is a very old debate so I hope something new comes out.  As a matter of fact governments do target reducing the gross costs of alcohol – these include, for example, the health costs that people pay for themselves.  The external costs of alcohol consumption (and for that matter cigarette consumption and gambling) are low relative to the gross costs and to the taxes that governments collect. My attitude is “so what?” Consumers make many irrational decisions when they consume addictive and mind-altering alcoholic products partly because decisions are taken by the very young who have enormous discount rates that moderate substantially as they move into their twenties.  To be fair ACIL Allen do recognise that people do incur costs that they don’t recognise – what most of us call “internality costs”. But the rational addiction model that provides a point of reference for them is a crock of nonsense – the theory is deficient (the optimal control techniques Becker and Murphy use are wrong) and the idea that agents internalise all costs of using products over their lifetime is a priori nonsense of a scale that only Chicago-bred economists could ever believe. (833)

Worsening droughts with climate change

Tony Abbott might be correct that climate change is not responsible for the current drought but he would be irresponsible to assert that future drought patterns will be independent of climate change.

There is, in fact, evidence published by our own Bureau of Meteorology that El Nino effects – and hence droughts – will have increased intensity under climate change.  While studies from the UNSW Climate Change Research Centre suggest severe drought events will occur twice as often with climate change.

In the past various groups have been skeptical of the climate change-drought severity link – although the likelihood of a link during the Millennium Drought seemed strong – but the evidence is now becoming clear. (710)

Water shortages

I get The Guardian weekly and, over recent months, it has run an excellent serious of articles on global water (especially groundwater) shortages.   I know a bit about the situation in China and India but the problems faced by California and the Middle East are also huge. The situation is grim and could lead to military conflicts.  Food security is a major implied difficulty but simple issues of access to safe drinking water are already issues – one global citizen in 7 already has no access to safe supplies.

Generally if you are interested in environmental issues The Guardian is a good read.


Solow versus Mankiw on the 1%ers

Bob Solow comments on Greg Mankiw’s defence of the “1%” ers and Mankiw replies.  I think Solow wins the day – most of the big fortunes these days stem from the finance sector and from trading.  It is not from super-marketing, deal-making types like Steve Jobs (Mankiw’s hero) although even there are spivy oh so American traits.  But my real gripe with Mankiw is covered in the first few lines of Solow’s letter.  Why does Mankiw feel the need to come to the defence of this highly privileged lot?  His blog does this sort of thing all the time.   Why not defend the interests, at least occasionally, of the worst-off?  My own view is that Greg Mankiw is a highly skilled technician and expositor of American-stylle modern economics.  He sees this as economics.  I tend to think of the Mankiw view as  more of a selfish American aberration that gets the logic mostly right but the ethical priors mostly wrong.




Sugary lies

In the current issue of NewScientist it is reported that in 2013 the US Sugar Association applied pressure on the US Congress to drop US funding of the WHO because its new food guidelines included strict suggested limits on the role of sugar in the diet.  More information is in this Guardian report.  Sugar is a nutritionally useless commodity – unlike fats, proteins and other components of food it is nutritionally redundant.  There are strong beliefs however that it is addictive and hence fosters the global obesity problem as well as nasty metabolic diseases such as Type 2 diabetes.  I have not intentionally added sugar to my food for 40 years.

The nasty lobbying here is yet another example of the way corporations suppress knowledge to promote profits.  The cigarette companies lied their heads off for 60 years and large fossil fuel energy companies spread lies about climate change links with carbon fuel-based consumption.  Groups such as the IPA and the Libertarians help to spread such lies – typically campaigning in ways that reflect the lies/marketing efforts fostered by corporate interests – we still have doubts, it is unproven, smoking is a “freedom of choice” issue etc.

A more trivial but still nasty episode was revealed again today when it was found that the Coalition’s Fiona Nash and her chief-of-staff Alastair Furnival pulled down a new “health star” rating site that provided ratings of different types of foods.  Alastair Furvival is married to a lobbyist for the junk food industry.  The Public Health Association and Choice have condemned the decision to take down the site.

OK maybe it is a coincidence but I am suspicious.  Also I am becoming increasingly paranoid about the role of corporate interests in manipulating information flows that affect our health and well-being but which deliver private profits. (956)

Thailand facing civil war

What is happening in Thailand comes close to open class warfare – it can spill over into full-blown civil war rather than just sporadic gun fights unless the opposition Democrats back down and reengage with the political process.  They refused to engage in elections yesterday because, even though they oppose the current government, they know it will win. The argument is that those who voted for the Government are deluded in supporting a corrupt government.  The government has the support of the majority of Thai’s and particularly those poor farmers living in the north and north east of the country.  The relatively wealthy Bangkokians have never had much regard for the lumpen-proletariat living in the countryside – the so-called “Issaan” but the latter are smart enough to make choices that improve their lot.  Members of the Thaksin government are not angels but the obligation of the opposition is to point this out, to argue the case and not just refuse to participate.   The elections themselves will not resolve Thailand’s difficulties.  Results will not be known for a month because many could not vote yesterday so new polls must be held. The longstanding problems will persist for at least a month unless the Democrats reengage.

A country that has had sound economic development now faces real problems.  Multinationals that dragged huge amounts of foreign investment into the country are threatening to leave and tourism is drying up. (988)